HL Deb 22 November 1966 vol 278 cc148-56

3.55 p.m.


My Lords, with permission, I should like to repeat a Statement that has just been made in another place by my right honourable friend the First Secretary of State for Economic Affairs. These are his words:

"After consultation with the Confederation of British Industry, the Trades Union Congress and other interested parties I am laying a White Paper before Parliament (Cmnd. 3150) stating the principles which should govern prices and incomes in the first half of 1967. Copies are now available in the Vote Office.

"The consultation showed a wide measure of agreement that in this period there must be exceptional restraint on prices, charges and all forms of income.

"Proposals for price increases must be judged by criteria of severe restraint. The criteria set out in the White Paper on the Standstill (Cmnd. 3073) cannot therefore be relaxed, save that there may be exceptional circumstances in which, without some increase in price, the receipts of an enterprise would not be sufficient to enable it to maintain efficiency and undertake necessary investment. It is important that prices should be reduced wherever possible: the removal of the import surcharge will offer some scope for reductions.

"Increases in incomes during this period must be exceptional and severely limited. The criteria for this purpose, therefore, are not invitations to increases but rigorous tests to be applied to any claims. Accordingly, the Paper redefines the original criteria concerning productivity, lowest-paid workers, distribution of manpower and comparability, in much stricter terms. The chief emphasis is on agreements which genuinely increase productivity and serve the national interest as well as the interests of those immediately concerned; and on agreements where sole purpose is to help the worst-off in the community.

"Commitments for pay increases entered into in or before July 20 will have their operative dates deferred for 6 months or until at least July 1, 1967, whichever is the earlier. Commitments for pay reviews to take effect after July 20, where the amount of the increase had not by then been determined, should have their operative dates deferred until at least July 1, 1967, unless an earlier payment can be justified against the severe restraint criteria. This requirement applies to wage and salary increments in the public and private sectors other than those which are of specified amounts within a pre-determined range or scale, or were otherwise exempted under paragraph 18(iv) of Cmnd. 3073.

"The Government consider that the police, whose next pay review was originally due to take effect from September 1966, are in a special position because of their imporance in combating crime. My right honourable friend the Home Secretary is therefore prepared to discuss in the Police Council an increase payable in July, 1967, retrospective to March, 1967.

"The Government have already stated their policy on dividends and are pledged to use appropriate measures to deal with any excessive growth of aggregate profits.

"The Government intend to work closely with the Confederation of British Industry and the Trades Union Congress and look to them to give guidance to their members about the application of these principles. The Government will receive information about individual cases, make the necessary inquiries and consider whether proposals are consistent with the criteria. We intend to make full use of the National Board for Prices and Incomes.

"The retail price index for October was one-quarter of one percent. higher than in June; the wage-rate index was two-thirds of one per cent. higher, nearly all this increase having occurred in July. This restraint could not have been achieved without widespread voluntary support. Statutory powers will be used only after consultation and only to ensure that the support of the majority is not undermined by the actions of a few.

"The first half of 1967 must indeed be a period of severe restraint. This will mean difficulty and sacrifice; but our economic recovery depend son the strict observance of restraint during this period, and on a permanent recognition of the indissoluble connection between productivity, prices and incomes."

4.0 p.m.


My Lords, may I, on behalf of noble Lords in all parts of the House, thank the noble Lord, Lord Shepherd, for his courtesy in reading out the Statement which has been made in another place. It is, of course, a complicated Statement and will require a good deal of study before we can find our way through the many platitudes that are contained in it to the essential truths. In the meantime, may I ask the noble Lord whether he could explain a little more fully about the already deferred pay increases? It seemed that we were to have a pay freeze for six months, but apparently commitments for pay increases entered into before the freeze ever started are nevertheless to undergo another period of deferment for six months, or until July 1, 1967, whichever is the earlier, as from this date or as from the beginning of the pay freeze.

Secondly, the Statement refers to the lowest paid workers. But what about what one might describe as the lower paid workers, the less well off citizens? Is their pay to be frozen until we have the benefit of another Statement in the summer of next year? I have in mind, particularly, the doctors. The Statement refers to the police. But what about the doctors? It would be helpful if the noble Lord could say something about that.

Finally, when the Statement refers to dividends and profits, it says: The Government have already stated their policy on dividends and are pledged to use appropriate measures to deal with any excessive growth of aggregate profits. Is that a slip of the tongue for "aggregate dividends", or is the growth of profits—whoreby alone substantial investments can be made—to be discouraged as well as the payment of dividends?


My Lords, the noble Lord is full of the humour this afternoon, but I hope he will not overdo it. I am not conscious that there are platitudes in this Statement.




There is hope. I do not identify that with platitudes. Nor do I find this a very frivolous subject for discussion in this House, particularly for the men and women who will be affected by this Statement. I do not find it in any way an amusing subject.

May I now explain to the noble Lord what is meant in regard to deferment of certain of the agreements? The noble Lord will be aware that there were a certain number of agreements made before July 20, and payment had not been made. Those agreements that were made before July 20, as I understand it, will now become payable in January. There are, however, agreements that were made or were under review before July 20, but there was no predetermined date or amount decided before July 20. These, I understand, will now be able to be paid six months from the date of the agreement. In other words, if the agreement was made for payment on October 30, and it was frozen, then it can now be paid on April 30.

With regard to the doctors, as the noble Lord will know, the Government undertook to pay the doctors the first part of their pay award in April, but owing to administrative problems of making arrangements it was not possible to pay it immediately and their pay increases fell within the freeze. The doctors will now receive payment, in December, of the sums due, but, as has already been announced, it will be back-dated to October. In other words, they will physically receive their money in December, but it will be back-dated to October.

With regard to dividends and profits, the view of the Government is well known. We believe that companies should absorb the natural increases of cost of operation within their own productive capacity. This is bound to reduce profits. It is clear already from the figures available that the profits of most companies are remaining at their previous standard, or are below: in fact, there are few that can report increased profits. If increased profits are made, the Government may well think it a matter to send to the Prices and Incomes Board for review into the whole operation of that company. This was not a slip of the tongue, nor was it a threat; it was merely a repeat of what has been said on a number of occasions in this House on this subject. I do not believe, from the support that industry has given the Government, that we need fear that we shall not have the same support during the next difficult six months.


My Lords, we on these Benches will read with interest the White Paper, and no doubt will have some comments to make as a result of doing so. We are particularly glad that in the Statement to-day the chief emphasis is on agreements which generally increase productivity. Your Lordships will remember that in the debate last August from these Benches we particularly stressed the need to encourage productivity. As to the deferment for six months, this does somewhat depress us, in view of the fact that there is no indication of what is to happen after the six months' period. We are afraid that the whole country, and particularly industry, will feel that it is living once again from hand to mouth. Finally, may I ask the noble Lord, Lord Shepherd, whether his attention has been drawn to the speech made by Mr. Crossman, the Leader of another place, over the week-end, when he (I am not trying to quote exactly what he said) indicated that the freeze had gone quite far enough, if not too far, and that there was a danger of a serious recession setting in?


My Lords, if my memory is right, the Lord President said that we must be careful that the deflationary measures taken by the Government do not lead us into a severe depression. I do not think he suggested that that position had been arrived at. I am glad the noble Lord welcomes the stress we have made in the Statement on productivity agreements. But I am sure that he and his colleagues will agree that a productivity agreement is something more than a title; it has to be a genuine productivity agreement from which the nation as a whole benefits. I believe that productivity agreements in that class will be welcomed, and that there will be no difficulty in implementing those agreements.


My Lords, would the noble Lord indicate once more that the Government are well aware that disincentive is a very serious thing, and will he try to give some encouragement to incentives?


Certainly, my Lords; but may I say this to the noble Lord? In view of some of the criticisms that have been made of the measures taken on July 20, of which this is part, I may say that we saw the benefit of those measures in the October figures, when for the first time for many years we had a surplus of visible trade.


My Lords, I rise to ask a question on a point of clarification. Did I understand the noble Lord opposite to say that if a company was successful in its exports and in its sales drive, and as a result made more profits, then the matter would be referred to the Prices and Incomes Board?


I certainly did not mean to take that line. Obviously companies should make profits. We wish to see companies make profits, since it is only from profits that investments can arise. There is no dispute in this matter. But, clearly, if profits are made and they are distributed by way of dividends, in the present circumstances the Government may well consider it right. If the success of the company comes about by reason of increased productivity, production and exports, it would have nothing to lose in the matter being examined publicly.


My Lords, surely this cannot be right. The Government must make up their mind whether they are to control dividends or profits. Up to now, rightly or wrongly, they have controlled dividends. If they are going into the field of profits, it is an entirely new departure which would warrant a debate.


My Lords, does the noble Lord realise how much, by this statement of policy and earlier statements of policy, the Government are discouraging investment? Does he realise that, or will the further discouragement of investment strike them with complete surprise?


My Lords, it is true that investment is a matter of concern. I would ask the noble Lord to recall the circumstances in which this Government took office—the circumstances at July 20. I do not believe any noble Lord in any part of this House would disagree that the Government had to act for balance-of-payments reasons, and that the actions they took are now having an effect. The point the noble Lord has made about investment is well taken. It is a matter for concern and certainly a matter for consideration.


My Lords, apart from productivity agreements in industries like mining, where men are getting £10 per week, shipyard labourers who are taking about £9 a week, and dustmen under local authorities who are taking about £10 a week, am I to assume that there should be a wage restraint on these men because they cannot increase their productivity?


My Lords, I am glad that the noble Lord from this side of the House has raised a subject other than dividends and profits. If the noble Lord will look at my Statement he will see that we have made special reference to those who are on the poorer side of our community. This is a matter which is subject to investigation by the Prices and Incomes Board. A number of references have been made to this matter to see whether we can establish some criteria. It is certainly being looked at, and is very much in the mind of the Government.


My Lords, I can quite understand that the Minister is glad to be asked a question which does not refer to dividends and profits, but, as I understand it, the fact of the matter is that his statement with regard to profits contradicts the passage that he read out from the First Secretary's Statement. It deals with a very important point which, so far as I understood it, involves a complete departure from previous policy. If I and other noble Lord sare wrong in this, would it not he prudent for the Minister to consider it and explain the proposition in greater detail than he has been able to do up to the present, and at a very early date?


My Lords, the noble Lord will appreciate that I speak under some difficulties, in that I am not a Minister of the Department concerned. I am not aware that what I have said is either new or departs from previous Government policy. For the benefit of the noble Lord and any of his colleagues I will repeat what was in the Statement. It said: The Government have already stated their policy on dividends and are pledged to use the appropriate measures to deal with any"— and I stress this word— excessive growth of aggregate profits. There is nothing new there, and I do not believe it should create special concern at this stage.


My Lords, it may not concern the noble Lord, but it certainly concerns those of us on this side of the House. I must say that I find his explanations most unsatisfactory. I realise the difficulty he is in, and I do not want to press him, but the words he has used seem to me to go much further than anything we have heard before, and they cause a good deal of alarm on this side.


My Lords, may I say to the noble Lord that I am not conscious that I have departed from previous policy, and I stand by all that I have said. If the noble Lord wishes to raise this matter, there are occasions which no doubt can be arranged so that the matter can be elucidated for the benefit of the whole House.


My Lords, may I ask the noble Lord to make it quite plain whether this question of increase in incomes includes those salaries which in- crease annually by increments, such as the teaching profession on the Burnham scale and so on.


My Lords, I gather that those salaries are subject to review and fall within the second part of the Statement I gave to the House. These reviews can take place, and no doubt will take place, and each of them will be judged on their particular merits.


My Lords, would the noble Lord not agree that the proper course for Members of the House is to await the publication of the White Paper and, having studied it and its language, to raise the matter then?


My Lords, once again the noble Lord, Lord Citrine, speaks words of wisdom and advice.


My Lords, on the profits issue, does the White Paper not state that profits shall be no more in the next six months than in the first six months of last year?


My Lords, I am sorry to correct my noble friend. It refers to dividends: that dividends should not be more than in the previous twelve months. I do not think it is possible to control profits to that extent.