WAGES AND INFLATION.

HL Deb 30 September 1942 vol 124 cc415-58

LORD GAINFORD rose to ask His Majesty's Government, what is their policy in regard to further wage increases during the war period, and for the prevention of inflation; and to move for Papers. The noble Lord said: My Lords, I do not think I ever have been unsympathetic with the cause of labour and I do not think that I am now. Of course, I realize that some things I may say to-day may be attributed to an absence of generosity on my part. But I should be very ungenerous if I did not refer to the way in which the labour representatives and all wage-earners in this country have been contributing to our national war funds. We read, or rather we hear from the broadcasts every week, of some £10,000,000 savings having been secured by the wage-earners—some, of course, in the Post Office Savings Bank, some in the trustee savings banks and some in War Savings Certificates. In addition to that we have been informed by the Chancellor of the Exchequer that the savings of the people for the assistance of our war effort, have amounted to £1,500,000,000. When you remember that there has been an increase of the Income Tax in the first half of this year, 85 per cent. of which has been contributed by the working class and by the workers of the country who have £500 or less in their pockets, it is clear that this is a great contribution to our war effort. But these figures do show that there has been a margin of profit over and above what is necessary for maintaining the standard of living and the ability of the people to buy what they can either in the way of clothes or food.

It is surprising, however, to learn from the Chancellor of the Exchequer that the sum of £500,000,000 is now being received by our people which is in excess of the value of the goods purchasable in the country. A certain amount of that money, no doubt, is spent in travelling, in visiting—much of it, I believe, unnecessary—and a good deal in the way of recreation. I take my figures from Whitaker and I see that the Entertainment Tax two years ago brought in £7,000,000 a year. This year the Chancellor of the Exchequer has estimated the amount which is going to be spent on entertainment subject to tax at £28,000,000. Now I am one of those who always believe in play as well as work and in recreation throughout the country. Everything has been restricted except wages—even travelling. We have been advised not to travel; fares have been put up, and only yesterday the Green Line omnibuses, which have been covering 16,000,000 miles a year, were taken off the roads. I understand that 3,500,000 miles a year are still to be covered by these omnibuses, but that is all.

I am not one of those who think that rates of pay ought now to be reduced. I think that the wives of men in the Forces who have children are grossly underpaid. The men of our Fighting Forces who are risking their lives should not be begrudged the money which they receive, and certainly the brave men in the Merchant Navy are not overpaid for what they have done and are doing. My thoughts are directed not to the way in which people are now spending their money, but to what will occur if this prevailing increase in wage rates goes on. I am afraid that we are tending towards inflation, and this will before long, and certainly immediately the war is over, have its effect on the workers of this country, who will suffer far more terribly than anyone else if inflation comes about. I believe in the small capitalist, and I welcome all the contributions which individuals have put into savings funds and investments, because the greater security of the community is encouraged thereby.

The value of labour, however, depends upon the services rendered, the quality of workmanship, the skill shown, the time occupied and the amount of work performed. It is quite impossible for us to attempt to equalize wages. At present—and this will be the theme running through all that I have to say—workers are asking for more pay only because others have obtained it. The munition workers receive such high wages, as compared with those who are risking their lives in the mines and in other dangerous occupations, that in spite of the miners, with their strong organization, saying that they did not want any increase of wages beyond what would cover the increased cost of living, they were forced by these more or less extravagant payments to munition workers, and to workers in factories generally, to demand an increased wage for themselves. To achieve equal wages seems to me to be impossible, and it also seems to me impossible to adjust wages so as to secure fairness all round. My experience in endeavouring to arrange wage-rates with different classes of work-men has always been—and I have been doing this for the greater part of my life—that the moment one increase is given some other inequality is created to adjust which immediately an attempt has to be made.

Last week I procured a copy of the Labour Gazette, because I wanted to see what changes were going on. There were nineteen changes in wages. There were slight reductions in the textile, tobacco and contracting industries, amounting to less than a penny a day. In basket-making there was a reduction of 1 per cent.; in the film industry—the only other industry where there was a reduction—the reduction was only a halfpenny a day. In the coal-mining industry there was an increased flat rate of 2s. 6d. per shift, and a minimum wage of £4 for every adult man. There was a great number of other applicants who had received increases in wages. Although there was an increase in the miners' wage, the miners did not appear to be quite satisfied, and the basis rates in South Wales were increased by 6s. a week for coal-face workers and 5s. for hauliers. The coke industry applied for an increase similar to that given to the miners. At a meeting of the Durham miners, I had to agree that they were entitled to the same increase of 2s. 6d. that had been given in an adjacent industry. In the brick-making industry adults receive 1s. 6d. more per shift and boys 1s. more per shift. In addition to all that, we have the increase which has been announced in the pay of the Forces, of £43,000,000 a year, to which I am not demurring. A short time ago the railway-men received an increase of 4s. 7d. per week. The locomotive men received 4s. in a subsequent application, and tire clerks asked for an increase of £26 a year, and received and accepted an increase of £10 a year. The engineers are applying for increases which they estimate to be equivalent to an addi- tional £100,000,000 a year, or 35s. a week for 1,500,000 workers.

There is no suggestion that these higher wages are to result in increased war production. Increases are being asked for merely because they have been received by others. The women employed in engineering works are asking for 85 to 100 per cent. of what the men are going to get. The men employed in the iron and steel industry are asking for an increase in their wages. My own firm received last Friday applications from four different sets of workers whom we employ. The first was from workers in the iron and steel trade, who claim an increase in the melters' sliding scale from 67½ to So per cent., an increase of 12½ per cent., or 10d. per shift, in the base rates. They attached to their demand a memorandum which includes a summary of the wartime increases in wages in other important industries, such as engineering, shipbuilding, coal-mining, building, civil engineering and so on. I never saw a franker avowal of the reason for asking for a wage increase—namely, because others have received it. Because others have received it, they claim that they deserve it, although they are not necessarily going to produce anything more in return. Then my firm got an application also from the National Union of General Municipal Workers, asking for a new sliding scale. All the men employed at our blast furnaces asked for an increased overtime rate. The North-Eastern Coast bricklayers' labourers asked for a further increase.

These increases go on day by day. You pick up the newspaper and almost every clay you read of new applications for increases in wages—always put forward on the same ground that somebody else has got an advance. The position was very well summarized in The Times on Monday week, when it pointed out that in the last five months of last year the increases had been £30,000,000 a year, and in the first seven months of this year the figure had risen to £57,000,000 a year. I see in the Scottish papers that an application is being made for public assistance, and grants have already been made. Public assistance hitherto has been very largely based upon the standard cost of living and, as your Lordships know, the standard cost of living has not risen; it has recently even fallen one point. In certain places in Scotland they are getting from 2s. to 3s. a week increase. In July of last year the Government stated their policy in regard to wage increases and they urged that wages and employees' remuneration "should be retained at a reasonable level by improvement in the efficiency of production." My case against the Government is that whilst they have laid down that policy they have not carried it out. That is my complaint.

I received a letter from a correspondent saying that he had written to the Chancellor of the Exchequer, on the 8th September, I think, pointing out the danger of inflation and of these constant increases in rates of wages and asking the Government what their policy was. I see that the Chancellor of the Exchequer replied in another place yesterday to a similar question, but this was what the Government wrote to my correspondent—it came not from the Treasury but from the Ministry of Labour: The policy of the Government on wages in war-time was defined by the White Paper Cmd. 6294— to which I have just referred— and that policy relies on the continued operation of a normal wage-fixing machinery supplemented by arbitration in the last resort. They went on to say that "no practical alternative has been put forward that would not mean in effect full control' of wages by the State." That does not meet my view at all. I think the Government, without controlling wages in one sense or altering them, can restrict wages exactly in the same way as they restricted every other commodity except wages which we have been accustomed to enjoy.

My criticism of the Government is that they appear to be afraid either of the Trades Union Congress or of the voters, if they interfere, and they are relying upon arbitration. Arbitration is a most, excellent way in which to settle disputes when all other means have failed, and the Government are relying upon that. But anybody who has had any experience of arbitration knows that if other people are getting higher wages and you go to an arbitrator he is bound to make a concession and give some increase. When he gives an increase it only encourages somebody else to make another appeal, and that goes on. I think that this reliance on a settlement by the existing tribunals and by arbitration is a method whose value in the interests of the country has been exhausted. Therefore I submit that it is time the Government took steps to stop these applications for an ever-increasing rate of wages.

Trade unionists, though they have great merits, are not very great students of history, and I have little doubt that, if left alone, they would say they were not in favour of any stabilization of wages. But what I want to draw attention to is the danger of inflation, and the trade unionists, not being very much up in the history of economic law, do not realize the sinister effect that inflation will have on the community after the war. The White Paper said that increases of wage rates will defeat their own object unless inflationary tendencies are kept under control. But they are not being kept under control. Look at the value of the sovereign to-day as compared with paper money. If a person wishes to buy, say, eight Savings Certificates, at 15s. each, he has only to put up £3 in gold to pay for them. It seems to me that inflation has already begun. The Americans realize that inflation is the great danger and the President to-morrow is going to stop it, and apparently is going to check the wage increases as well if Congress does not do it automatically to-day. Wages are soaring in every direction in America, just as they have been doing in this country, but the Americans think it necessary to stop it. Why does not our Government follow suit?

Prices follow costs, and costs follow wages. Just as the night follows the day, so wages, costs and prices follow one another. Here we are during the war trying to keep down the cost of living by subsidies. These subsidies, which at first were comparatively low, have steadily increased, and prices are being kept down only by subsidies for the purpose of keeping down the cost of living. I got the figures the other day from the iron trade. I find that during the war wages have on the average gone up 25 per cent. in all the production of iron and steel. The gross price to the customers has risen by 47 per cent., but the wages have only gone up 25 per cent., and the gross price receivable by the producer up to the present has only gone up 18 per cent. Thus customers who buy iron and steel are being mulcted to a much greater extent than wages and costs have gone up. I shall give your Lordships a recent illustration from the coal trade. Wages were put up by 2s. 6d. a shift for every miner. Immediately the price of coal went up by 3s. a ton.

The Government try and stop the working of the ordinary economic laws by subsidies, which have risen from £50,000,000 in 1940 to £125,000,000 now. In this way they keep down certain prices, but the Government have been trying to stop people getting an increased price for their commodities because they have to pay more for coal. The Gas Light and Coke Company applied for permission to increase the price of gas to the consumers because they had to pay so much more per ton for their coal. Electrical utility companies asked exactly the same. Water companies asked exactly the same, because their pumping expenses had to go up and they must charge more to consumers. What do the Treasury do? The Treasury try to hide it, and they are doing what seems to me to be a roost reprehensible thing. They are trying to prevent the economic laws from operating by saying to these utility companies and water companies which are independent of municipalities, "If you have got reserves you must spend your reserves first, and then apply to the Government for power to increase your prices."

In other words, they are putting a premium on the firms who have not got any reserves, who have to go to the Government to get help, while those companies which are being conducted on sound financial lines are to be interfered with and are told they have to use their reserves which they have kept for purposes which are absolutely essential to the maintenance oil their business. A water company wrote to me the other day and said. "How hard is this on us in competing with municipal water undertakings who have their increases sanctioned because the municipal people have not got reserves. The moment their costs rise, if they are told they are not going to be allowed to increase the price of their commodity, they at once attack the rates, and therefore the ratepayer has to pay although the consumer is not going to pay." That action on the part of the Treasury seems to me to be a step in the wrong direction, and I hope that the Treasury, after mature thought, will alter this system and allow the economic laws properly to operate so that, if a commodity such as coal has to go up in price, those who produce commodities such as gas, electricity, and water shall be allowed to increase their charges to the consumer. That is the only fair way in which business can be carried on.

I shall not at this hour go into the history of the evils of inflation, but I do want to bring home to the British public that inflation is a real danger. In the sixteenth century land rose in this country 6,000 per cent. The landlords of this country became very well off, but the sufferings of the masses of the people were terrible. In 1718–1720 paper money existed in France. Riots occurred everywhere, and the misery was indescribable—all due to inflation. We have the history of Germany after the last war when, as your. Lordships will remember, a million mark note was of no value whatsoever, and the sufferings of the masses of the German people were indescribable. It is because I want to avoid the dangers of inflation that I am asking the Government to adopt a different method in regard to their policy of trying to maintain a normal rate of wages throughout the country.

May I just refer for one moment to the coal situation in which we are all interested? To me the Essential Works Order and the way in which the increase in wages was recommended to the Government by the Greene Committee were on the wrong lines. The increase ought to have been associated and linked up with increased production, and the Essential Works Order was applied by Mr. Bevin without any consultation with the owners who understood the miners and could have got very much better results out of them if we had had to apply something in the nature of the Essential Works Order between ourselves so as to get the men to do their utmost. The men have resented the Essential Works Order. They have accepted the increase in wages, which is only natural, but they have not worked in accordance with the increased amount of money they have received. The owners informed the President of the Board of Trade that if this money was given without being linked up with increased production, the inevitable result would be that the men would work less. I want to give credit to the large majority of the men who are doing their best to get coal, but there is a large number of young fellows—more young fellows than old men—who are not doing their best, and absenteeism is very considerable.

If absenteeism is only decreased by 2½ per cent.—and it might be decreased by 5 per cent. quite easily—and if the men would only produce 21 cwts. per shift when they used to be able to produce 23 cwts. per shift, the whole gap between production and consumption would be filled, and we should be able to keep our home fires burning and be warm during the coming winter. It was Mr. Lloyd George who, on one occasion, said that coal was a very great enemy, but a very warm friend. We have to try and secure the co-operation of the miners to do better work. We have tried a great many influences. Up to the present time I believe that to a large extent the absenteeism has been psychological. The miners have been working hard for two or three years, and the position has been very depressing from the military point of view. But I believe if there were a large number of casualties you would see the miners respond to their duty and at once work with a new spirit. Whatever the cause may be, it is unfortunate, because everybody is doing his best in the management and trying to overcome the lack of discipline which exists among many of the young fellows in our coalfields. It is deplorable, but that is the position, and I blame very much the Government for having accepted the method by which increased wages have been given to the miners without consultation with the owners and those who understand the men and have worked with them all their lives.

I do not think I have anything more to say on the subject. What I do feel is that the Government have been drifting; they have allowed this wage question to drift. It is possible for them to take action, and I believe that so long as men were not given any increase of wages in any industry and no salaried person was given a bigger salary for the same work that he has been doing, the country would accept a decision of the Government to stabilize wages where they are at present. It is because I want to avoid the terrible suffering which I foresee in the event of this wage increase continuing, as it has been doing, that I do press the Government to take action and do something in order to prevent the danger of inflation which I foresee. I beg to move for Papers.

LORD ELTON

My Lords, I suspect that the subject which the noble Lord has introduced may be the most important which your Lordships have had brought to your consideration for many months past, important partly because, for one thing, everywhere by all classes and with increasing perplexity and irritation it is being canvassed and almost nowhere being frankly discussed by politicians; and that is a state of affairs which is very unnatural and therefore very dangerous in a democracy. Important also because in the long run I think that there may be more danger of losing the war through the wage muddle than through any other muddle for which the Government have, as yet, been responsible. After all, our other failures have been in the main due to lack of preparation, or lack of foresight, whereas this failure has been due, primarily I think, to lack of courage; and of all public failings it is probably lack of courage which costs a nation most dearly.

As to inflation, I do not claim for a moment to be an expert. There are many noble Lords present, including the noble Lord who has just spoken, and the Lord Chancellor who will reply, who are well qualified, as I most certainly am not, to advise your Lordships as to the danger that the mounting spiral of quite unregulated wages may eventually breed so disastrous a degree of inflation that first that great central economic stratum of fixed salary earners who, I sometimes think, are the moral mainstay of the nation, and then the whole of every class may be irretrievably ruined. As to the technical aspects of inflation, I would not venture to address your Lordships, nor do I frankly think that, formidable as they may be, they are the most serious aspects of the question which your Lordships are now considering. I think that the moral aspects of the unrestricted wage increase will, in the long run, be likely to prove far more dangerous even than the admittedly formidable threat of inflation. As to inflation, therefore, all I would venture would be to remind your Lordships, as an example of the temper in which the Government have handled the whole affair from start to finish, that as long ago as February, 1940, the noble Lord on my right, Lord Balfour of Burleigh, introduced a Motion warning us of the danger of inflation, to which the Government, through the mouth of the Lord Chancellor, replied that in effect there was no serious danger of inflation.

THE LORD CHANCELLOR (VISCOUNT SIMON)

I was not Lord Chancellor in February, 1940.

LORD ELTON

I beg the noble Viscount's pardon, I was not suggesting he was. The Lord Chancellor of the day said that there was no serious danger of inflation. Then in July of last year the Government issued a White Paper which said in effect that there was a serious danger of inflation, but that they did not propose to take any particular action to protect us from that danger. And indeed, for all the notice which has been taken of the White Paper, even by the Government themselves, it might very well have been saved for the paper salvage campaign. It is not in my view wage rises that matter so much as unregulated, unplanned and unco-ordinated rises, and during the twelve months that followed the issue of the Government's White Paper in July, 1941, the entirely unregulated, fortuitous, unco-ordinated rises would probably, if overtime and other contributions to them were counted in, be nearer £150,000,000 than £100,000,000 per annum. And that during a period, as Lord Gainford has pointed out, when the cost of living has remained relatively stable, and has in fact, during the last month or so, slightly decreased.

Sir Walter Citrine said, early in the war, that, whatever happened, the wage-earners must not suffer from a rise in the cost of living. Well, that is a claim which will no doubt awaken a sympathetic echo in most of our breasts, although there may be two opinions about the wisdom of the way in which it was uttered, and indeed of the likelihood that in a war of such magnitude and duration we are likely to survive without sooner or later every class, except the very poorest, making at any rate its proportionate contribution to the economic sacrifices of the war. However that may be, the argument then advanced by Sir Walter Citrine is no longer relevant since the cost of living has, for some while, been relatively stable and, as Lord Gainford has made abundantly clear, the reason advanced for all the great recent increases in wages, and still more for the enormous pending claims for wage rises, has been not the state of the cost-of- living index but merely the fact that somebody, somewhere else, has obtained an advance in the totally unregulated scramble which now seems to be impending. The effect of this unregulated scramble, on the verge of which we now seem to find ourselves, is—and this is really the main point which I wish to submit to your Lordships' consideration—most dangerous to the national morale and may in the long run prove, I believe, disastrous to the nation's war effort.

Its effects, of course, are various. Those who see the wage scramble without taking part in it naturally concentrate their attention mainly upon the more exceptional and extravagant anomalies—upon the soldier's wife receiving her few shillings a week while the semi-skilled worker in the aircraft factory can take home £25, and sometimes a boy of sixteen may earn £6 a week. The noble Lord, Lord Gainford, has spoken some very weighty words about the effect which such a spectacle has on, for example, miners doing their dangerous and arduous and highly skilled work for a fraction of that reward. I would like to tell your Lordships of what, though a trivial, is, I think, a very striking example and a characteristic example of the effect upon the national morale of this sort of quite unregulated, quite fortuitous and quite unplanned anomaly.

Only last week a member of a savings group with which I am associated astonished me by saying he proposed to discontinue his contributions. Now this particular backslider was one of that kind of citizen who always has been, is and always will be, the backbone of the English nation; a skilled worker, not in a special war industry, drawing now, I suppose, probably £4 or £5 a week; intelligent, industrious, widely respected and trusted in his neighbourhood, the backbone of every local good cause and effort. I could hardly believe my ears when this man, of all the members of this group, who had done so much to foster it, told me he proposed no longer even to subscribe himself. Then he explained. He said "Do you know in this town there are young women we know, I and my friends, in their early twenties, with practically no experience or skill in industry, drawing £11 17s. a week and spending every penny of it at night in drink, dancing and amusements? Does the Government, which is always asking us to save, expect us to go on pinching and scraping and saving, as we have done, while it utters no clear word in public about this riot of waste which is going on under our very eyes?" He went on to tell me that he knew of at least a dozen of his friends and neighbours—and knowing him I have no doubt they were of the same moral and social calibre as himself, admirable citizens—who had also resolved, and for the same reason, to discontinue their contributions.

Of course they were entirely illogical, as I hope I have succeeded in convincing these particular friends of mine and by now some, if not all, will, I hope, have repented of their hasty resolve. But whether they have done so or not, my point is that this incident is characteristic of the sort of insidious effect upon the national morale which is bound to be produced by leaving, as the noble Lord, Lord Gainford, has said, wages as the one element in the national economy which is totally exempt from any sort of Government control or interference. I would like again to repeat that the burden of my complaint, such as it is, is not that wages rise. It is that because nobody plans the rise you get these admittedly exceptional but far too frequent anomalies, and approach the maelstrom of inflation. The objection, at any rate so far as I am concerned, is not to seeing working people get more money. I believe in the old Socialist maxim that if you plan anywhere you should plan everywhere, and I do not believe you can have a really healthy economic life when this vast area of it is totally unregulated and unplanned. The bewilderment and resentment of these good people arises also because their local Member of Parliament has never spoken on this issue in Parliament. He is afraid to speak frankly. This attitude of mind will continue if we leave the nettle ungrasped. The taxpayer is bound to become increasingly aware that his already heavy burdens are being swollen all the time by high costs due to these, in some cases, extravagantly high wages.

This sort of unregulated anomaly has an effect not only on the morale of those who watch it and do not take part in it, but of those who themselves share in its so-called advantages. One of the official advertisements recently issued by the National Savings Committee which appeared in the Press last August began on that somewhat unctuously colloquial note which is so often struck by these Government announcements. "Lots of people round our way are earning more than they have ever earned and chucking it away on luxuries." That is an official view and undoubtedly within limits it is very true. The moral effect of unregulated wages is visible also, I think, in the fact that it is precisely those war factories in which extravagant and exceptionally high wages are most frequent as to which reports circulate in the greatest number as to the lateness or absenteeism or indifference of the workers in the factories. The tragedy of the whole spectacle is that it is entirely unnecessary. Once again, the Government have underrated the moral fibre of the nation.

Of course, if there are high earnings to be got it is only human nature to get them if you can, and we should, every one of us, do the same—perhaps we are, for all I know, in our own private affairs. After one hundred years of unregulated scramble for profits you cannot be surprised if, when opportunity arises, there is an unregulated scramble for wages. It is no good blaming human nature. But if the Government had ever asked the country in the interests of the war effort to accept regulation of wages—and regulation of profits and dividends and every other form of income into the bargain—then undoubtedly the nation would have overwhelmingly responded. Supposing that at the beginning of the war, or better still after Dunkirk when the latent threat to our existence had become palpable to everybody, the Government had appealed in a united and decided voice to the country to accept the principle of regulation and co-ordination of wages, combined with a much more effective regulation of every other form of income, I have not the slightest doubt that the nation would have responded. Suppose the Government had adopted that fine old Socialist slogan "Service before profits." After all, "profit" is a word which really covers every form of individual self-seeking: whether a man is trying to get higher salary or profits or wages or dividends it is really all the same principle. And the Socialist maxim of "Wages before profits"—when can it have been more appropriate than at the outset of a struggle for our existence?

Suppose after Dunkirk the Government had decreed with a united voice that nobody in any class, employer, rentier, salary earner, wage earner, nobody except the lower paid wage-earners, should be better off in real income because the nation was fighting for its life. Or suppose they had even not gone so far as that but had simply said, "Nobody shall be better off, no employer, no salary earner, no rentier, and as regards wages, though they shall rise, it shall be on a co-ordinated and planned and regulated system": surely the nation would have responded. In 1931 when, rightly or wrongly—and whether rightly or wrongly is entirely irrelevant to this argument—the Government asked the nation for economic sacrifices to meet a much less exacting crisis than this, the nation overwhelmingly responded. I cannot help wondering how, if there had been a powerful Socialist Party in this country as distinct from a Labour Party, it could have missed that unique opportunity of claiming to put into practice two of its oldest and most honourable maxims: Service before profit for everybody; and Government regulation and planning instead of the higgledy-piggledy, fortuitous private bargaining of the individual market.

Is it too late? Is it impossible even now for the Government to appeal authoritatively to the unions, not for wage reductions, but for some sort of stabilization and co-ordination in the future? Of course the unions will reply, and very rightly, "What about profits?" Well, in the Excess Profits Tax the Government have at any rate recognized the principle that profits ought to be restricted. It is said that there are many, too many loopholes in the machinery of that tax and that no one but an honest man need pay it. Let us have the machinery tightened up 100 per cent. Would it not be possible, too, for the ingenuity of the Inland Revenue authorities—and the ingenuity of those authorities is proverbial—to arrange that the rentier paid 100 per cent. tax on the dividends in excess of what he was receiving on the same capital before September, 1939? Now if it were manifest to everybody that no other economic class was receiving more because the nation was fighting for its existence, that the loopholes had, to the best of the Government's ability been stopped, surely then the unions—with all their wage advances behind them—would respond to an authoritative appeal for co-ordination and regulation of wages in the future.

My Lords, and this is my last word, what we really want is a Winston Churchill on the Home Front. Some of us thought we had found him in Sir Stafford Cripps. I wonder whether your Lordships remember the thrill of response which ran through the country—I met it, and I am a person who receives a very large amount of correspondence from strangers in every class—that thrill which ran instantly through the country when Sir Stafford Cripps made his first speech asking for greater austerity all round. And we really thought we had got a leader who was going to give us a lead for greater austerity everywhere—not in the wage-earning class only but everywhere, nor excepting the wage-earning class but everywhere. Unfortunately we have not heard very much from Sir Stafford Cripps lately. But is it too late for us to hope for some other leader before too long, and I would say before too late, some other leader with courage and conviction who will summon employers, salary earners, rentiers and everyone of us to service before profit?

LORD MONKSWELL

My Lords, as one who on various occasions before the present war broke out endeavoured to direct your Lordships' attention to the dangers of inflation, I should like to say a few words. I am afraid that at the root of this trouble there lies complete ignorance on the part of the great mass of the voters of the simplest economic facts. Practically the whole population regards an increase in their own incomes in terms of money as pure gain, no matter what the economic repercussions may be. That inflation is the natural and inevitable result of any increase in costs of production, unless it is accompanied by a parallel increase in the volume of production, is to them unintelligible. Everybody goes on to the bitter end doing all he can to increase his own income in terms of money. This is bad enough in times of peace when the relative values of the work performed by different classes of people are more or less stabilized. When war breaks out and the demand for the various kinds of production sud- denly undergoes violent changes the situation is bound to become chaotic unless a large measure of control is at once imposed.

Obviously if a new industry of munition production springs into existence the work-people in which are allowed to earn much higher wages than skilled workers in established industries, if agricultural labourers are offered double their regular wages to forsake the fields and work on a new aerodrome, if boys and girls can sometimes get £5 or £6 a week for their unskilled work, it is unreasonable to hope to avoid trouble. The remedy is to impose control all round and not to leave wages as the one glaring exception to the rule that binds every other phase of human activity. Men and women are conscribed, rationed, ordered about, their money is taken from them to any extent that the Government think fit. The one and only important exception is wages, and this in the teeth of the fact that in the last war most of the hideous political troubles which were not far from landing us in irreparable disaster were due to this very matter. With their eyes wide open and with experience to guide them the Government at the outbreak of war deliberately abstained from taking the most important economic step of all for maintaining the financial equilibrium of this country.

Unfortunately, inflation, like other economic terms, may be taken to mean a number of different things. Exactly what constitutes inflation is treated as a highly controversial subject. My own feeling is that it is a perfectly simple one. Any increase in the cost of production unaccompanied by a parallel increase in the volume of production is by its nature recurrent. It is therefore calculated to start a vicious spiral, and so far as I can see can properly be described as inflation. However this may be, there is no doubt that inflation is a capital levy laid directly upon one kind of capital only—fixed-interest-bearing securities. These are exactly the securities in which thrifty people invest their savings, and therefore exactly the securities which the Government ought to do everything in their power to protect. They include the national debt and war savings. Every turn of the inflationary screw is, amongst other undesirable features, a capital levy upon all the small savings which thrifty people contribute to the war effort, amounting, we have heard, to some £10,000,000 a week. These investments can be plundered by a stroke of the pen; a capital levy can be imposed upon them by mere inaction; and, as a capital levy is the one thing; above all others, that whets the appetite of the ignorant voter, these investments fall an easy prey. They have no security behind them beyond a mere promise to pay, and so depend upon good faith—a very poor protection where Governments are concerned.

A capital levy on other forms of property is a very different matter. At least nine-tenths of other forms of property in every civilized country consist of fixed assets—houses, roads, fields, docks and so on—which are useless, or nearly useless, for any purpose except that for which they were designed. What Governments want is liquid cash. The only way of converting fixed assets into liquid cash is to find purchasers who are willing and able to buy the fixed assets for liquid cash. The present liquidation of capital by people with large commitments is probably near the limit that the capital market can stand. Moreover, there are remarkably few people who will buy confiscated property which they cannot remove, and which is therefore liable to be confiscated again. The politicians' dream of recasting the world by means of a levy on capital, which is really at the bottom of all the demands for swollen wages, very quickly boils down to the confiscation of the savings of every thrifty person in the country and the disappearance of liquid capital, the absence of which prevents improvements and developments in living conditions from being made and is the principal cause of unemployment. Liquid capital is the life-blood of civilization and progress. I need not occupy your Lordships' time by dilating further on its importance. At this eleventh hour let the Government act and do as nearly as is now possible what they should have done three years ago. The difficulties are great, but the penalties of inaction are greater.

THE LORD CHANCELLOR

My Lords, I am very grateful, and I am sure that your Lordships also are grateful, to my noble friend Lord Gainford for raising this most important and difficult subject in frank and open debate. If it were the case, as I think that one of your Lordships who has spoken thought, that the Government have avoided the opportunity of explaining the policy which they are following on this subject, your Lordships' House gives some opportunity to correct that to-day. There could not, of course, be any question which is of more importance and gravity. It is a question the mode of dealing with which fundamentally affects, as has already been pointed out, the conduct, and it may be the issue, of the war, and it is a question upon the proper treatment of which our national unity in war may very likely depend. I shall not, in the remarks which I am about to make, attempt to deal with the detailed illustrations which have been mentioned, especially by my noble friend who spoke first. Naturally, illustrations can be taken which are of a very pointed character; but the real question here is the broad question of method and of policy, and it is mainly to that question that noble Lords who have spoken have directed their remarks.

If I may trespass on your Lordships' time, I propose to do two things. I propose first to make a statement as to what is, and has been, the policy of the Government, and to explain the grounds on which that policy is, as we think, justified and preferred. I also wish briefly to examine, as well as I can, the only alternative method of treating wage questions in war-time which might be suggested. I have listened most closely to what has been said, to see whether some more concrete suggestions would be made to-day as an alternative, and I beg leave to point out how serious, to say the least of it, are the risks and disadvantages that might attach to the alternative. Let me take those two matters in order, and deal first with Government policy, which has been so liberally trounced by noble Lords who have spoken. My noble friend Lord Gain-ford, I was glad to see, did not adopt the shallow and ill-informed criticism which one sometimes hears from quarters outside, to the effect that "the Government have no wage policy at all." I shall show, if I may be allowed to do so, with how much care that policy is in fact studied and followed. It is a policy for which the Ministry of Labour are primarily responsible, but it is, of course, a matter for decision by the whole Government, and a matter of responsibility for every member of the Government.

In order that we may approach this matter as I think it should be approached, I will ask your Lordships to forgive me if I first mention a fact well known to your Lordships, and which was a fact before the war began. The policy in regard to the relationships between employers and employed, in the matter of wages, conditions and many collateral things, which was established in this country after many years of controversy, but which was followed on the whole with great success in the period before the war, was one of the use of industrial self-government as far as that could be employed. It was not always the case that collective bargaining received the general approval which is given to it to-day, and I can even imagine some who would now certainly assert their recognition of its value having in time past doubted whether on the whole it was a wise system. It was a system the adoption of which was strongly urged by the Whitley Committee which considered industrial relationships at the end of the last war, and for many years before this war broke out it was found to be, in times of peace at any rate, a method of the greatest utility, productive of industrial agreement.

In addition to that there was the constant practice of wages and conditions being negotiated and settled by means of voluntary organizations of employers and workers. There is also an addition to that not to be overlooked. Where there was no sufficient organization to enable that system to operate Parliament had set up statutory machinery in the trade boards, the first enactment of them being in the time of the Liberal Government of which my noble friend Lord Gainford was a member in 1909. In all this machinery the principle of adjusting difficulties by a process of self-government has been maintained on the basis of placing responsibilities—for it turns on responsibilities—for fixing wage rates and the like on the representatives of employers and work-people in their organizations, and supplementing that with a great system of conciliation and of voluntary arbitration. Broadly speaking, it is right to say that the system has worked with marked loyalty to the agreements made on the part of those concerned.

I apologize for going back into these things, but it is really necessary to see what was the true industrial structure of this country at the time when this immensely important question arose, as my noble friend Lord Monkswell says, at the beginning of the war. That was the system under which industrial peace had been, with some very unhappy exceptions, promoted in this country; and if industrial peace is necessary in time of peace, it is still more necessary in time of war. The question then arose—I quite admit it was a question for the Government, and critics are fully entitled to make their criticism if they do not agree—whether every effort should be made to maintain and make use of that system under war conditions. I have listened to what my noble friends have said with great respect, and I have not gathered from them with any great precision what they regard as the alternative. My noble friend Lord Gainford said the Government should take action. I will show that it has taken a great deal of action, but in the direction of supporting, and not destroying, this policy.

My noble friend Lord Elton I think thought, and plainly implied in his very straightforward speech, that there should be Government control and fixation of wages. That is, I agree, the alternative, and I state it perfectly fairly and perfectly bluntly when I say here is the choice: Should one supersede our old system by entering upon the Government regulation of wages? "Why," we are asked. "do not the Government fix wages? What a cowardly, shortsighted Government this must be which hesitates to undertake the business of fixing wages." That is one view. The other view is that responsibility has been placed on this self-government in industry in the past with, upon the whole, great success. Should we not rather call upon them to exercise those responsibilities, engaged in industry as free citizens with all this long experience behind them, while giving to the traditional system of this country, as we have done in the war, further buttressing and support by a whole series of regulations which have been made under war conditions?

May I just briefly state, as a matter of fact and information to your Lordships' House, the objections that were felt, and are felt, to the first alternative? I will not enter into any subject of political philosophy, though I agree with, I think it was Lord Elton, when he said that what he was indicating would mean the application of something far more drastic than any Labour Party would tolerate, but would be on the contrary the most extreme form of Socialist regulation. He might have called it totalitarian while he was about it. The first thing to consider—and it is not unimportant—is this. Every Government in this country endeavours, of course, in deciding these very difficult questions of internal industrial policy, to consult and get the help, and if possible co-operation, of the leaders of industry on both sides. The fact is that the employers' organizations and the trade unions—both sides—were approached, and advised against the scrapping of joint machinery in war-time. They advised that this machinery should be continued, but it should be supplemented by two new provisions. Nothing has been said about these, as far as I remember, in the debate, but they are very important.

The first thing was that there should be, by law during the war, a prohibition of strikes and lock-outs—mind you, from the point of view of organized labour that is a very serious proposition indeed, for the strike is their ultimate resource—but, in return for that, there should be established in this country for the period of the war compulsory arbitration on wages and conditions. And there exists—I have not heard a word said about it in this debate so far—the National Arbitration Tribunal, staffed by a very distinguished High Court Judge, with his assessors, before which there can come, and constantly do come, questions in controversy about wage changes or other things, with the result—which was never the case before the war—that the award of that tribunal has binding and statutory effect. And not only that, but with this further provision in the whole scheme that, whereas in many industries there have been establishments and undertakings that were outside the employers' federation and went their own way, just as there have been workmen who have not taken part in the collective settlement secured by trade unions, we have provided by law for the period of the war that settlements thus arrived at and approved are to be binding—legally binding—in every establishment and in respect of every workman who is engaged in that branch of industry.

I think what I have said will show that it really is a misapprehension to suppose that the Government have simply thrown this thing on the table, taken no interest in it, and let things slide. Right or wrong—in the end, of course, a certain judgment can be pronounced—but, right or wrong, the steps that have been taken in this regard have been taken quite deliberately as a result of a great deal of consultation and consideration, and in the belief that, while under war conditions no system can give perfect results, this is the system which is far more likely to produce what is essential than the one and only alternative.

It is so easy to write a pamphlet and say that the Government regulate prices and therefore they should regulate wages. Consider, my Lords, what is involved in that proposition, if you mean it. Government fixation of wages inevitably involves Parliamentary discussion, House of Commons controversy, on the rates of wages in every trade. You have a proof of it at this very moment. There is one form of pay which at this very moment is exciting discussion in the House of Commons—it is the pay of the soldier. That is precisely because the Government have to take the responsibility of saying "That shall be your pay, no more and no less." Just imagine what is going to be the result if, over the whole field of industry, without extreme cause, you have a scrapping of the methods which have hitherto been employed, and in. place of that the Government of the day—some strong Government, some Government that is not afraid, some Government that will face these difficulties and act like a man!—say, "Very well, then, we will fix everybody's wages." You would immediately bring this subject into the very centre of the political and Parliamentary arena. You would have bodies of members in another place, if I may presume to speculate, who would feel they had a special duty to a particular industry and who, beyond all question, would criticize and resist the Government's decision in the supposed interests of those concerned. In this rare and secluded atmosphere, where I hope I am safe from contradiction, I venture to add that it is just possible that the critics in the House of Commons would not be so well informed on the niceties of these difficult questions as are the authorized and trusted leaders of the trade unions and employers' federations.

I am one of those who think that the burdens and anxieties of carrying through the war to the end victoriously are so overwhelming that, though we must think and plan for the future, we must not let that move from the front of our minds these instant tasks. But think of the future. If, indeed, we once were led in Parliament to decide that we must scrap this system of conciliation, we should upset and, it may be, permanently injure the system of joint machinery which, believe me, at this very hour is working in hundreds and thousands of cases, settling disputes in the workshops, removing misunderstandings, negotiating a new rule—an immense mass of work which is contributing enormously to industrial peace and which has its authority because, after all, the responsible trade union leader, feeling that he has power in his hands, is able to exercise a restraining influence on the more rash of his colleagues. Another thing—Lord Elton boldly and logically recognizes it, and I should like all your Lordships to recognize it—does anybody really suppose that the Government could undertake to regulate the size of the wages of everybody in this country without the questions arising: "What about salaries? What about directors' fees? What about the return on investments?" I am not saying whether that is right or wrong, but I am quite confident that to introduce these topics without the most absolute necessity along with the fixing of wages in the middle of the war, would be an act of the most extreme and reckless folly.

What is the alternative? I do not say at all that it has worked with uniform success. I recognize that in its working it has many difficulties, but let us see what the alternative is. It has been the policy of preserving and developing this system of collective bargaining machinery for the whole of industry. It has been the policy of impressing in every way—and I venture respectfully to do so here publicly on behalf of the Government—both on combinations of employers and on combinations of work-people, the responsibility which they have—not a sectional responsibility to their own immediate constituents, but a responsibility to the whole community, to the whole State, to the whole effort in which we are all engaged. It involves this, that where differences arise they must be settled. The law requires that they should be peacefully settled, and they are being settled, by compulsory arbitration, and there shall not be and must not be any strike or lockout. I shall say a word separately in a moment on the point that prices and cost of living should be controlled and, as far as possible, stabilized. I must here say one other thing. The system involves a recognition that there may be proper grounds for the adjustment of wages in certain cases, particularly among comparatively low grades and categories of workmen.

If your Lordships have been good enough to follow me in my argument, you will see that what I am saying is this: I do not say that these principles have always been perfectly observed in their entirety, although I think there has been great exaggeration in selecting particular instances and elevating them as samples of the whole. I do not say that there are not great difficulties in working the system. There are difficulties which are the constant preoccupation of the Ministry of Labour; but that is not the point. The question is this: Take it for all in all, is this not a better method to have pursued than the method of what I must call the totalitarian State fixation of wages, which is the only alternative? If somebody will come here and prove to me that there is some third course which combines the advantages of both, I am sure no one would be better pleased than my right honourable friend the Minister of Labour. But the truth is—we are all engaged in a frank and open discussion—that those who do not see we ought to try to work our present system to the utmost are really saying that the State, during the war, must fix everybody's wages. I would only ask your Lordships again to reflect on all the consequences which might ensue.

Let me mention one or two advantages, since we have had some instances where the system has not worked well. Here is an advantage not to be overlooked. It has permitted rates and conditions to be adapted, in most cases, smoothly and quickly to meet the changes and complexities of war-time needs. As I have indicated already, it has enabled innumerable workshop questions to be settled by authorities behind the scenes. I am quite certain that, unless your Lord- ships happen to be connected with a particular trade, you cannot have full knowledge of the number of these instances. I see my noble friend Lord Perry in his place. He holds very strong opinions on the subject of multiplying civil servants. I would point out that under the system we are trying to follow the parties to these innumerable agreements themselves act as policemen to see that they are kept. Try starting the State regulation of wages, and you will have to appoint a mass of inspectors—civil servants—whose business it will be to examine and see that the provisions of the State are duly kept.

It seems to me that there is a lot more to be said for this system than might have appeared earlier in the debate, and when I reflect that if we get through our present anxieties and struggles the time that is going to be the real time of the greatest possible difficulty in British industry is after the war, I must say that I think it takes a bold man lightheartedly to talk of shelving all this immense industrial machine when its authority will be needed so mightily when we come to the real difficulties after the war. Those are the general considerations which have appeared to the Government and they at least show that the matter has been thought about.

But I want to turn to the main criticism made very fairly and very firmly by my noble friend Lord Gainford and others. They say: "Yes, but this policy places no limit on wages; it does not provide uniformity in wage movements; there is a tendency for some to claim because others have got something," and there is always brooding over your Lordships' Chamber that rather mysterious and undoubtedly most formidable economic condition, the danger of inflation. As regards the proposition that this places no limit on wages, that is true, but I return to the point which I have already made. We must make up our minds, is it better to have fixed wages and, if anybody does not like them, to enforce them by fine and imprisonment? I do not suppose anybody thinks we could make people go to work if they refused to do so in such circumstances. I think most of your Lordships, whether we like it or not, are aware that this country has, in its past history, advanced so far on the road to industrial freedom that if a substantial part of the population had a legitimate grievance, strongly felt, there is only one way to deal with it and that is to find a method of remedy and treatment. The truth is that during these years we have been breathing an atmosphere of industrial peace, and we are not conscious of all that it has added to the strength of this country. Industrial peace has sometimes been broken in the past, sometimes with terrible injury not only to those immediately concerned but to the wider community, but do not overlook the fact that in the field of wages the morale and the co-operation of workers and the authority of their leaders have been maintained by this knowledge, the knowledge that they are assured of a just settlement of many legitimate claim.

Now I come to one or two of the things said by noble Lords in this debate. Some have spoken as though the pursuit of this policy up to date has produced great and almost uncontrolled inflation. I speak with humility on such a subject. I have, within the limits of my powers, not infrequently during the years I was in the Treasury spoken of it, and I have ventured to address your Lordships upon it before. I do not think it is the case that the rise in wage rates has been such as to induce inflation. What is the rise in wage rates? In industries other than agriculture, the average rise is 28 or 29 per cent. In al1 industries, if you bring in agriculture, it is between 31 and 32 per cent. I point out at once that that is the rise in the rate of wages, but, of course, in view of increased production and overtime, the actual increases in the earnings are more than that; in fact the increases in earnings are something like 47½ per cent. but that is due to higher production and longer hours.

I would not dream of trying to inflict upon your Lordships any long observations on inflation, but I must be allowed to say, at any rate for those who do not claim to know the higher niceties, that I think the main proposition is not very difficult. Conditions of war inevitably produce an immense dislocation in the balances between supplies available to be bought and the sources available to the purchaser. Supplies are cut down by the dangers to traffic over the sea, and still more perhaps by the claim of the Government to take all that they need for the purposes of the war. At the same time, if these supplies shrink, you are likely to find, and you do find, an increase of the wherewithal by which people in this country may, if they are left unrestrained, satisfy their needs. The result is a forcing up of prices, a falling in the value of money, and the beginning of the cycle which everybody refers to in much the same language. But I would observe with very great respect to my noble friend Lord Gainford, that if we really were to adopt his remedy, which is, as I understand it, to let economic laws operate without interference, that would be indeed a magnificent way of producing inflation in five minutes. The whole point is that you cannot allow economic laws to operate without interference in such circumstances. I was a little surprised to hear my noble friend Lord Elton say that a predecessor of mine as Lord Chancellor, at an earlier stage in answer to a question, said that the Government did not propose to take any steps to prevent inflation.

LORD ELTON

If the noble and learned Viscount will forgive me, I did not mean to say that. What I intended to convey was that whoever replied to a noble Lord's Motion had said in February, 1940, that there was then no serious danger of inflation.

THE LORD CHANCELLOR

I am much obliged, I did think my noble friend used the other expression, but of course I must have misunderstood him. I cannot go back to that date, but it is much more to the point to realize, and I ask the House to realize, that after all the Government cannot be blamed for everything and to suggest that the Government, this present Government, have not taken steps to try to prevent inflation and on the whole have not been remarkably successful in so doing, is really to talk in loose language. I do not know what my noble friend Lord Kindersley thinks about it, but what are all these controls if they are not for that purpose? The very object is to provide that only limited quantities of things are to be bought, that many things are not to be bought at all, that people are not to do this and not to do that—very irritating, terribly aggravating and annoying, but everyone of these things is simply part of the deliberate process to stop inflation. If you take the fact, and it is a very important and relevant fact, that the wage trend since the war has put larger sums of money into the hands of vast masses of wage-earners, as it certainly has, it is most relevant to observe that at the same time, partly by taxation, partly by the savings movement, which my noble friend Lord Kindersley has taken such a magnificent part in promoting, we are engaged in getting by far the greatest part of this money back in such a way as does not leave in the hands of the citizen the ability, if he had the wish, to spend these enormous sums as is suggested.

That is all part of the steps taken to prevent inflation. There is in my humble judgment, without wishing to speak as an expert, a certain danger to face because people when they discuss inflation talk as if it was the acquisition of power to spend which created inflation. It is not. It is the actual spending. The Purchase Tax, the Income Tax, the National Savings Movement and other restrictions, all operate to limit the extent to which people can buy, and everybody knows—let us take the household of moderate means—that the lady who is doing her best to provide for her household finds it difficult, not because she has not got money in her purse to buy something, but because Government policy prevents things being bought. I return to the less technical part of my discourse. I say that the prevention of inflation is being covered by a whole wide range of restrictive measures aimed at reducing the impact of increasing wages on reduced supplies. I take the view that we are picking our way along a very narrow edge, but really if we contrast the position to-day about inflation with some of the gloomy prophecies which I remember were quoted to your Lordships' House last year—not of course adopted by your Lordships, but quoted because they were made outside with a great air of expert authority—I think I am entitled to claim without the smallest particle of what is called complacency that the inflation problem has been handled in this country with boldness and skill.

I would just make this further observation which bears particularly on something which was said by my noble friend Lord Gainford. My noble friend is under the impression—he said it very firmly—that the increases in wages which have taken place have led to inflation. I would draw a distinction. It is, I think, very important to distinguish between what has happened up to date and what might happen in the future if wages continue greatly to rise. As far as we have got, the statistical evidence indicates that we have been able to hold the increase in the wages bill up to date without any significant indication of what might reasonably be called inflation as compared, let us say, with a year ago. It is a mistake to imagine that subsidies, which are being paid to meet the additional expenses of shipping and the like and which will buy the most essential food very cheaply, are mounting rapidly. My information is that the figure stands now at this minute at almost exactly the same amount as the figure mentioned by the Chancellor of the Exchequer in the Budget speech earlier in the year. The index of the cost of living has been kept steady. That, of course, is not everything, because people want to buy other things as well, but whilst the prices of articles of non-necessity have gone up a good deal more than the cost of living, as I have already pointed out this partly reflects a deliberate policy of discouraging their consumption. Even so, the upward movement in their cost is not very considerable.

The true view is, I am informed by those who know most about it, that stabilization of the cost of living is being achieved without any additional subsidy beyond the figure I mentioned by a method which is comparatively fresh, the method of "points rationing" (which almost makes me in my domestic circle repeat what Lord Randolph Churchill said about decimals). By that system of points rationing it has been made possible to bring within the rationing system any further articles of food where otherwise the pressure of demand or supply might prove threatening. Take the Black Market. I do not know whether your Lordships have the same impression as I have, but my view, is that the measures now being taken certainly suggest that it is definitely on the decline and the dealings in it less important. The view of the authorities who advise the Government is that it will be difficult to find any indications worth mentioning of a progressive movement towards inflation as compared with a year ago. I do not give that out with any claim of triumph, but it does seem to me that it is comforting to know a statistical fact of that sort.

That does not in the least mean that we can afford to be indifferent or what is called complacent about the future. As I said just now, the system on which the Treasury is working is admittedly a precarious one. They are picking their way, as it were, along the path, seeking to keep to the way that is safe. It may be a very anxious journey; all the same it is better than following the advice of people which may result in producing an avalanche. It has successfully stood the strain which has been put upon it so far. The system of controls seems to have been proved by experience to be a reliable and satisfactory one if too much is not asked of it. I do not ask your Lordships for a moment to take the view that because of that, the consequences of a further significant upward movement of wages would not be more serious. The Government are entirely alive to the point that you might reach a situation where existing methods would not be adequate to avoid danger.

I apologize to your Lordships for having kept you so long, but it is necessary to have the two sides of the matter placed before us. And I would end with this. The present policy which is being pursued, which manifestly has great advantages in contrast to the dangers which alternatively might threaten, depends on a sense of responsibility on the part of both sides in industry. If, as might be indicated, by certain claims for general increases in wages of which we have heard, this position was likely to be endangered, consideration would have to be given to a modification of policy and of the methods whereby a new policy might be operated. Even so, the objections to and difficulties of the alternative would have to be met and provided for. We think that every effort should be made to maintain collective bargaining for wages. We are paying the closest attention to the difficulties and shortcomings which arise. We feel, and I hope I have done something to convince some of your Lordships, that it would be unwise, and might well be disastrous, to abandon that policy without sufficient cause and to throw the direct responsibility for fixing wages on the State and on Government Departments.

The system we are using has been built up for many years. It is almost an integral part of our social and industrial structure. It is not possible at present to say that the wages policy which has been followed and which has produced the manifest benefit of industrial peace to the community, is fit for the scrap heap. We none of us know whether it will survive the strain of a protracted war. I would like every man to make every possible effort to preserve it, to see that it functions fairly in a responsible way, and thereby give the State the benefit of the experience of these men, whether on one side or the other, who, after all, are the greatest masters of a very complicated subject. I therefore have to say on behalf of the Government that we have no intention of light-heartedly abandoning the system or undermining it. We hope very much that this view may commend itself to your Lordships.

I have had the advantage in the last day or two of some very close consultation with my right honourable friend the Minister of Labour, Mr. Ernest Bevin. Like many men who have spent their lives in politics I have always been interested in this subject, but I must admit that I had not the slightest conception of the complications with which he has to deal at the Ministry of Labour until I had the advantage of this greater insight. Let us be careful that we do not allow strong and genuine feeling which we may have formed, perhaps, because of our special experience, to influence us so that we may light-heartedly say we are prepared to scrap this machinery and to ask instead for so novel and so dangerous a system as direct State regulation of wages. I well understand and I entirely excuse those who are tempted to reproach the Government for what they think is want of strength, determination and courage. I must take these rebukes and try to profit by them if indeed there is reason to believe that they are deserved. For my part, applying my mind to this matter to the best of my ability, I am far from being persuaded that it will not turn out in the end that the method which is being followed is the better method. If I may conclude by using a Shakespearean phrase, I would say that I feel it may well turn out that "the gentler gamester is the soonest winner."

LORD ADDISON

My Lords, with my noble friends, I listened with considerable and increasing bewilderment to the speech of the noble Lord, Lord Gainford, and I kept asking myself as he went on "What is it that he really wants?". I waited deliberately until we had had the advantage of a statement from the noble and learned Viscount who sits on the Woolsack—not without very great anxiety as to the character of the answer that he would give—and I confess that I and my friends are greatly comforted by the reply he makes. I wondered if the noble Lord, Lord Gainford, had really appreciated the vista, the terrible vista of discontent and discord which the system that appears to me to be implicit in his complaint would certainly bring upon us. We know of these quite unjustifiable, freakish terms of wage payments that do occur. We all know them. I am myself very well acquainted with what after all is the greatest industry in the country, agriculture, and in that industry we have had great wage agreements loyally observed for some 800,000 or 900,000 workers. These agreements have been brought about by the use of the existing machinery without any fuss and trouble being applied to one of our prime industries. The noble Lord seemed to make it a subject of complaint in his opening remarks that there were £500,000,000 worth of war savings to the credit of working people—I think that was the figure.

LORD GAINFORD

There was no complaint. I was merely quoting the figure given by the Chancellor of the Exchequer.

LORD ADDISON

Yes, but it was intended to illustrate the fact that they were receiving bigger wages than they ought to get. But what did it really mean? It meant that the efforts of the Government to prevent inflation are being successful; it meant that people are not able to buy. Clothing coupons prevent people spending a great deal of money on clothes, and all sorts of other ingenious devices in the form of coupons, points and so on prevent people being able to spend. I think that we are greatly indebted to the noble Lord, Lord Kindersley, and many others because as the result of their efforts the surplus has been diverted into savings. It is evidence of the success of the endeavour to prevent inflation, for that is what it is preventing. Therefore I wondered what relation it had to the noble Lord's complaint. It seemed to me to have no relation except that it establishes a certain case for the Government. The real question is, what is the alternative? I wonder how many cases there are like that quoted by the noble Lord sitting opposite in which an unskilled worker in an aircraft factory is getting £25 a week.

LORD ELTON

A semi-skilled worker.

LORD ADDISON

A freakish case of that kind cannot be taken as being in any way representative of what is happening in the country. That is a matter to which the Government have got to attend. Then I wonder about those young women of whom he told us, who receive between £10 and £11 a week, and who, after their day's work in the factory, go out and spend their money on drink, dancing and amusements. I am not a man who spends much money on drink myself, so I do not know much about it, but I wonder what those young women find to buy? I understand from people who are accustomed to buying drink that it is very difficult to obtain. I wonder what these young women buy? It is not wines I am sure. I should suspect that it is not whisky or gin—I understand that they are going to restrict supplies of gin now. On what do these young women spend their money? I think the noble Lord ought to pursue his inquiries a little closer into this case.

LORD ELTON

My Lords, if the noble Lord will look at the report of my speech to-morrow, I think he will see that it was not a complaint on my part as to how these young women spend their evenings. I merely brought this to your Lordships' notice as an illustration which I was given of the effect on the fellow-citizens of these young people and on the savings movement in their vicinity. It may be that quite a wrong impression was received by their neighbours, but my complaint was not about the way they spent their evenings. I was speaking of the effect it had had on the war savings group in their street.

LORD ADDISON

As the complaint was mentioned in the noble Lord's speech I naturally assumed that he made it. I suggest that the noble Lord should have pursued his inquiries into the complaint a little more closely. If the facts were inquired into, he might find that there was a girl or two of whom this man had complained, and probably quite justly complained. There are foolish girls, and there always will be—and there are foolish men too. But we are considering Government policy, not what a foolish girl does in Oxford: and I suggest that the noble Lord is maligning the working classes by bringing up instances of that kind as if they should be guides to Government policy. They have no relation to the realities of working life. The majority of people who spend a day in a factory want to take their shoes off when they get home and sit down, and they would be very glad if they had a nice fire to sit by, which is not always possible. They certainly do not want to spend the evening, after a day in the factory, in drinking, dancing and amusement. A few may do so, but not many are even physically equal to it.

What we have to ask ourselves, I suggest, is what the noble Lords who have spoken really want us to do. What they really want is State regulation of the wages of the individual worker; if they do not mean that, they do not mean anything. We admit that there are all kinds of irregularities and imperfections in our existing system, as the noble and learned Viscount on the Woolsack has explained, but what we have to ask is this question: What should we put in its place? Noble Lords have suggested that we should introduce State regulation of wages. I myself well remember the discussions which went on at the end of the last war, and which led to the formation of the Whitley Councils. I was Minister of Reconstruction at the time, and it is only those who obtain an insight behind the scenes into the bewildering complexity of what happens inside industry who know the multitude of things that are settled by these organizations. It is not a question of wages only; wages are but a part of the conditions of life and work. The State could not enter into the individual determination of wages without entering into the individual determination of the conditions of work, which are almost as manifold as the stars, and which vary in different works and in different towns. It means a universal scrutiny and an application of the means test throughout the whole population. That is what State regulation of wages means, and it does not mean anything less than that. It is a glorified universal means test. I think that the noble and learned Lord Chan- cellor was extraordinarily moderate in indicating to us what would be the tribulation which would immediately arise if a system of the State regulation of individual wages was instituted. Talk about discord! I wish that noble Lords would consider what it would really mean in the middle of a war.

There is one other consideration about which I had hoped that the noble and learned Viscount would say a little more, but which he did touch on, and that is the situation with which we should be confronted at the end of the war if this proposal were adopted. Let us suppose that the prescription of the noble Lord who moved this Motion was adopted, and that we scrapped the whole of the existing machinery and instituted a State system for regulating wages. What would be the position at the end of the war? We should undoubtedly be confronted with a loud outcry for the abolition of all manner of controls, and it is then that the danger of inflation would arise. It is of the first importance that we should establish, during the war, a system for managing these matters which we can continue sufficiently into the postwar period, because it is then that there will be a much greater danger of inflation than there is now. If these controls are taken off the danger of inflation will arise, and therefore we must build up, during the war, a system of managing these matters which can reasonably be continued into the post-war period, so as to prevent the dangerous reactions which would otherwise occur. I cannot imagine anything more impossible to prolong into the post-war period than the Nazi system of the State regulation of individual wages. I and my noble friends were greatly comforted by the reply made by the noble and learned Viscount on the Woolsack, and I sincerely hope that your Lordships will not support the Motion before the House.

LORD BALFOUR OF BURLEIGH

My Lords, I had not intended to intervene in this debate, but in view of the fact that a Motion which I had the honour to present to your Lordships some time ago has been referred to, I ask permission to say a few words. My noble friend Lord Elton inquired whether my Motion on wages and prices was brought forward in February, 1940, or in February, 1941. I regret to have to confess to your Lordships that there were two Motions, one in February, 1940, and the other in February, 1941, and both dealing with the same subject as that which we have been discussing to-day.

I am bound to tell your Lordships that I cannot feel satisfied with the reply which we have had from the noble and learned Viscount on the Woolsack. If I may refer to the speech which has just been delivered by the noble Lord, the Leader of the Opposition, I should like to say that I think he entirely misrepresented the tenor of the remarks made both by the noble Lord who moved the Motion and by my noble friend Lord Elton. It is unfortunate that he should have accused the noble Lord, Lord Elton, of maligning the working classes; I feel quite certain that when he reads the debate in the Official Report to-morrow, he will find that that accusation is quite unjustified. I was struck by the moderation of the remarks made both by Lord Gainford and by Lord Elton, and by the care with which they both safeguarded the position which they were setting up in order to prevent that very accusation being made. I should almost have thought, listening to the noble Lord opposite, that he had not been present when Lord Elton spoke, but from what he said I assume that he was. I am quite sure that the noble Lord, Lord Addison, who is very fair-minded, will, when he reads the speeches in the Official Report to-morrow, realize that what he said had no justification whatever.

In my opinion the antithesis which has been put before us in the form of the alternative of scrapping the whole wage system and having a complete State regulation of wages is an entirely false one. It is entirely unfair to put that before your Lordships as the choice with which we are faced; there are innumerable intermediate steps which could be taken. I am bound to say that the fault which I have to find with the Government is their failure to induce a sufficient sense of responsibility in the country with regard to the dangers with which we shall be faced if these unregulated wage increases continue to be given.

I listened to the noble and learned Viscount on the Woolsack with great disquiet until he came to the end of his remarks, when I was comforted by his statement, which puts the matter in a nutshell, that this is a matter of a sense of responsibility. My feeling is that the Government have not made sufficiently clear the dangers ahead of us in such a way as to foster that sense of responsibility. The Government say that they are relying on this system of conciliation to settle wage questions. One of the phrases of the Lord Chancellor was that we were not to suppose that the Government have simply cast this thing on one side and taken no interest in it. Of course they have taken great interest in it, but I think they have cast in on to the shoulders of this conciliation machinery. I do not think that is fair. Surely it should have been the policy of the Government, when the conciliation machinery has to settle these questions, to give a lead and a guide as to the dangers which lie in wait if these unregulated increases of wages go on.

The noble Lord, Lord Addison, said he was greatly comforted by what the Lord Chancellor had said and he spoke of the vista of disaster and discord which would open up if the suggestions of Lord Gainford and Lord Elton were accepted. The vista of disaster on that account is nothing to the vista of disaster which will overtake the working classes and the whole country if we have inflation, which will happen if these unregulated increases of wages continue. The disaster of discord is nothing to the disaster of complete ruin which will overtake us. I cannot refrain from saying that I think the Government fail in their duty, aware as they are of the danger of an avalanche (the phrase of the Lord Chancellor) when they do not bring to the notice of those responsible for this conciliation machinery the fact that public policy demands that spending power shall not be increased without limit and without regulation.

LORD PERRY

My Lords, probably the position of the Government in regard to this matter is peculiarly vulnerable from the fact that the conciliation machinery, both on the capital and the labour side of the question, is in the hands of a prejudiced party, the Minister of Labour. I do not think that the noble Lord who opened the debate intended to suggest, or that any sensible person would suggest, that the only alternative to the present policy of the Government is the entire control and regulation of wages by the State. I think no one could contemplate that, and Heaven forbid that I should be a party to it because, as the noble and learned Viscount on the Woolsack reminded your Lordships, it is a particular antipathy of mine that there should be any increase in the bureaucracy which now autocratically rules us.

There is something, however, that the Government might do if they would study the history of the question of the payment of overtime. When the trade unions were doing some useful work they did put their finger upon one great defect in the industrial labour market, which was that bad employers were working their employees for irregular time, and as a deterrent the unions said to them: "If you do not regulate your employment so that a man at the end of the week has a regular amount to take home to his wife and to apply to the meeting of his budget, we shall demand extra payment for overtime beyond a minimum and agreed week's work." That was negotiated and imposed and always practised right up to the beginning of this war. So long as there was a supply of labour in excess of the demand the intention has always been that overtime payment should be a deterrent, a penalty imposed upon the employer by the union and by the man himself, acting against overtime.

When the war broke out we were faced with a very different state of industrial affairs and very different conditions of labour from those through which we had been passing for some time. The demand for labour then exceeded the supply, as it does to-day, until, as you know, we have to recruit to labour women of fifty years; of age and inaugurate all sorts of ridiculous measures to try to make good the shortage of labour. There is now, and there has been since the war began, a shortage in the supply of labour. There is therefore to reason why labour working overtime should be paid a premium for its extra work, none whatever, and among the thousands of regulations which have been issued it would have been a perfectly simply thing—not anything revolutionary at all—to state that if overtime were worked it should be worked at the agreed and proper day rates, instead of double for Sunday and time and a half for this or time and a quarter for that. The saving to the country would have been tens of millions of pounds in the expenditure on muni- tions, and I think the critics of the Government would have been robbed of practically all the anomalies that they complain of—these £25 a week cases of which we hear.

I am rather hopeless about any suggestions made to the Government for attention in this matter, but there is a perfectly simple way of meeting one of the very great difficulties of labour at the present time. It is very much harder, of course, now that you have got a Party man at the head of the Ministry of Labour, who is using his power to consolidate trade unionism to the extent that at this moment there are strike notices posted in the Metropolitan area for no grievance except the refusal to recognize the union. That is, of course, a state of affairs that ought not to be tolerated—that all the machinery of government should be devoted to trying to enforce trade unionism, not only upon employers but upon the men, some of whom very much resent this coercion.

I am perhaps proudest beyond anything that I have achieved to be able to tell your Lordships to-day that I can speak for upwards of 15,000 workmen and women engaged in the manufacture of aircraft and tanks and heavy industry, not one of whom has ever demanded or ever received one penny piece of premium payment for overtime work. They are working fourteen hours a week on the average more than their normal time, some as much as twenty or twenty-six hours a week, but not one of them is getting any premium for that additional work. Someone says, "Shame." I think it would be a shame if they were paid extra to their regular rate, because it is uneconomical in any case to pay a premium for overtime work. There you have genuine war effort on the part of these men. They are not paid a premium for being patriotic. They are working harder than they ever worked before, and they are getting no more money than their regular rate of pay. Their average wage is 2S. 6d. per hour. A statement of this sort is, I think, more worthy to be listened to than eccentric examples such as one reads of in the newspapers of the payment of exceptional wages in, I assure your Lordships, very exceptional cases. A sore thumb always does stick out, and we always feel and talk about it, but there is no such thing as this extravagant payment of wages going on throughout the country if you take the country as a whole. I wanted to say this to your Lordships, and I have taken this opportunity of saying it.

LORD LATHAM

My Lords, I should not have intervened in this debate but for the somewhat extraordinary statement which has just been made by my noble friend Lord Perry, which it is impossible for us on these Benches to allow to go unanswered. It is the suggestion that the present Minister of Labour is using his position as a Minister not to advance the country's war effort but to build up and strengthen trade unionism.

LORD PERRY

I said it was being used to strengthen trade unionism. That is different from saying it is not being used to build up the country's war effort.

LORD LATHAM

Even the corrected form of my noble friend's statement is open to grave exception and is of such a nature that, upon reflection, I think my noble friend will come to that conclusion too, especially when he reads what he has said in the Official Report. He also suggested it would have been a wise policy for the Government in the altered circumstances of the shortage of labour to have discontinued the practice of excess payment for overtime hours worked. I can conceive of nothing more likely to have hampered and hindered the war effort than that a practice which has been honoured by years of acceptance, and is embodied in hundreds of trade agreements, should suddenly be departed from during a war. So far from making for that peace in industry which is essential to the maximum war effort, it would have had an entirely contrary effect. If this is one of the courses suggested as an alternative policy by those who criticize the Government's policy, I take greater comfort in the assurances given by the noble Viscount on the Woolsack that the Government's policy at present will remain unchanged.

I am in a little confusion, especially after listening to Lord Balfour of Burleigh, as to what exactly is meant by the complaint that increases and movements of wages are unregulated. For the most part they are not. For the most part in industry they arise from two types of machinery—most of them from concilia- tion machinery of the Whitley order, which is recognized by both sides and whose decisions are complied with by both sides. That machinery embraces the greater part of the field of industry. I can speak with some knowledge of that because, even outside industry, it operates, and I spend what I sometimes regard as an inordinate part of my day in dealing with Joint Industrial Councils for non-trading services in local government activities. Then there is the other part of the field which is dealt with between the federated employers and the trade unions, and not through established Whitley or conciliation machinery. But both these agencies do regulate. There do not issue from them fortuitous increases of wages; they are discussed and considered and, to that extent, regulated.

If, of course, what my noble friends opposite are seeking is that the regulation should not be through these agencies but should be through the Government, and by the Government, then that is precisely what the Lord Chancellor said would be the pursuit of a policy calculated to land us in extreme difficulty. There is no other alternative except the curious alternative that the conciliation boards, the Whitley Councils, and the joint Industrial Councils should be told by the Government, when they are considering applications, of the dangers of inflation. If that amounts to more than sending them the White Paper, it must amount to a quasi-direction to these agencies, and nothing could be more fatal to their effective operation than for them to think they were being dictated to by the Government. If the Government did dictate to them, that would amount to a regulation by the Government of wage increases. In these circumstances I see no escape from the position that either the present procedure is followed, hoping that wisdom will prevail—and by and large it does prevail through these organizations which exist for dealing with wage increases—or that the Government shall be asked to regulate, and if they regulate they must fix, wages for the working population of this country. It is, I submit, idle to pretend that there is a third course that can be followed, and the Government of the country must weigh whether they will rest with some reliance on established practice or whether they should go into the dangerous and difficult fields of regulating and fixing wages.

LORD GAINFORD

My Lords, I am not sorry that this debate has been raised, but I am sorry that Lord Addison has misrepresented both my attitude and certainly that of Lord Elton. I have not advocated that we should scrap all our conciliation arrangements between employers and employed. I am a member of the Confederation to which the noble Lord, Lord Latham, has referred. I believe in conciliation, and I believe in a settlement by arbitration when we cannot agree; but there are conditions such as have recently arisen in this country to which I thought attention ought to be called. There has been an attempt made by representatives of workmen to make appeals rot in the ordinary way to employers, or federations or associations of employers, which have dealt with disputes in the past by methods that I desire should continue and be developed. Merely because the Government have started paying enormous rates of wages to munition workers—have allowed contractors to pay enormous rates—there has been a tendency for everybody else to feel he has not had a fair deal, and therefore to demand increased wages. It was for this reason I put down this question in order that the Government might make it quite clear in debate what their attitude is in regard to wage policy.

I fear that if the evil to which I refer continues to grow, and the Government do not take any step, there is a real danger of inflation which will fall upon the working classes to a far greater extent than they appreciate, and will cause them a great deal of suffering. It is that which I want to avoid. I believe the Government can do things and take steps which will prevent disturbances such as exist to-day as a result of the constant appeals for higher wages first from one set of workers and then from another. It was with a view of trying to get some indication of that policy announced, that I put my questions down. I have no exception to take to the very full statement made by the Lord Chancellor. He has debated the matter very fully, he has alluded to the dangers, he has said the Government are alive to the situation and are considering it, and that if it becomes worse they may have to take some steps. I do not want for a moment to interfere with the ordinary methods of conciliation between employers and employed. I certainly do not want the Government to set up a system of State regulation for every worker which has been indicated as the only alternative. But there is a method of dealing with the situation which has arisen that I think is open to the Government, and I hope they will take it in due course. All that remains for me to do is to ask leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.