HL Deb 25 October 1966 vol 277 cc213-84

3.23 p.m.


My Lords, I do not think I need to remind this House of the events which led to the announcement of the Prime Minister, repeated by myself, on July 20. The Government at that time decided it was necessary to call for a standstill in prices and incomes for a period of six months to be followed by a similar period of severe restraint. I am afraid we had to ask the House to adopt an unusual procedure in order to pass the amended Prices and Incomes Bill before we rose for the Recess, and I remain most grateful to this House for the manner of the response. We were at least enabled to have two full days for our discussions on the Bill and the issues arising. The Government made it very clear at that time that Part IV would be introduced only if we were convinced that it was strictly necessary. Since then, as we are all aware, the Government have judged it necessary to bring Part IV into force and it has been brought into force by Order in Council with effect from October 6, 1966.

Part IV was designed to give statutory support to the general standstill on prices and incomes. It does not impose a general statutory standstill on all or most prices and wages: it operates only in particular cases where voluntary co-operation has not been forthcoming. To- day, here and in another place, the Government are seeking to secure the necessary approval of Parliament for that Order in Council. I do not propose to detain the House very long this afternoon, or I hope it will not seem very long. The noble Lord, Lord Shepherd, will reply to any detailed or technical points or other points raised in the debate.

The need for this standstill stems basically from the general scramble for increases in incomes which, as the House is well aware by now, has been carried to impossible lengths. In the twelve months ending April, 1966, the average hourly earnings rose by nearly 10 per cent. whilst the rise in national production over that period was only about 2 per cent. during the year. The Government had set in train a number of long-term measures to increase productivity, but they had not yet borne fruit. This scramble for increases in incomes totally unjustified by productivity made the standstill inevitable, and I would venture to say with confidence that this has been recognised throughout the country. The Government, I should make it plain, have been gratified by the response of the community in general to this request for a standstill on a voluntary basis, in spite of many anomalies and hardships which certainly one is not trying to under-estimate.

As we are aware, Part IV of this Act did not come into force immediately the Prices and Incomes Act was passed. The Government were determined to try the voluntary method first and there has been considerable success. But some recent developments have shown a clear danger of this broad degree of voluntary co-operation being undermined. Some small groups have seen fit to challenge the requirements of the voluntary standstill: they have refused to agree to the deferment of existing commitments and in some cases there has been recourse to the courts. The Government, I hasten to say, have greatly regretted being compelled to ask for the deferment of existing commitments. We recognise that a number of people, maybe a large number of people, are placed in difficulties. But at the time the standstill was announced something like a quarter of the working population was covered by existing commitments, and to have exempted them—this whole quarter of the working population—would have jeopardised the standstill, indeed would have wrecked it from the outset. It would, of course, have been most unfair and would have borne hardly on those not fortunate enough to be covered by forward commitments of this kind.

The Government thought it right to ask the parties to all these commitments to re-negotiate them to secure a six-months' deferment and this has in fact been achieved in a large number of cases. But there have remained a few people who sought to do better for themselves or their groups than the great majority of the population. The actions of those groups have made it necessary to bring Part IV of the Act into operation. The Government would certainly have been open to very well-justified criticism if they had let those cases go by default, if those too clever people had, as it were, got away with it. I would just say in passing in case there is any misunderstanding—and I cannot say it too often—that the powers now provided in Part IV of the Act are no substitute for the voluntary system. It is not a question of bringing the voluntary system to an end and turning over to the compulsory system. They can only serve to reinforce the system at its weakest places. The provisions of Part IV, in other words, do not impose a general statutory standstill on prices and incomes.

The Government do not intend to use the powers in Part IV to impose blanket controls: they intend to apply them selectively where they are needed, but only where they are needed. To go further than was strictly necessary would be highly undesirable in a free society and it would undoubtedly be bound to cause a great deal of damage. The aim, in other words, is to bring pressure to bear where it is needed, but only where it is needed, and to introduce an element of fairness without which a small minority would be exploiting the patriotism of the community as a whole.

As all noble Lords are aware, I expect, the Government have given notice of their proposal to make Orders under Section 29 of the Act in respect of certain employees of Thorn Electrical Industries, workers in newspaper printing and in newspaper distribution. The intention in these cases is to ensure that the workers concerned are no better off than the great majority of their fellow countrymen whose pay increases are being voluntarily deferred in accordance with the standstill.

As to prices, the Government will not refrain from using the prices powers under Part IV of the Act if that seems the right course, once again to reinforce the voluntary principle. The essential factor here is that these powers should be to hand so that swift action can be taken when circumstances come to light which suggest that one cannot delay. There has recently been one occasion to make use of this power. Last Friday an Order was made requiring most laundry and dry-cleaning charges to be held at their present level. Until further notice no increases in these charges, which have been the subject of a substantial volume of complaint, can be made without the consent of the President of the Board of Trade. Whether or not it is necessary to issue any directions in respect of increases since July 20 in laundry and dry-cleaning charges depends on the outcome of the investigation of complaints that is still proceeding.

The reasons for taking the temporary powers in Part IV of the Prices and Incomes Act, as an emergency measure, were fully debated by both houses before the Recess. I myself am convinced from all the evidence available that the country is in favour of the action that the Government are taking. It is possible always to hold two views on these matters, but the evidence is in my eyes solid, that this is the general desire of the country. If we pay any attention to Gallup polls that is so, and even if we do not, it seems to me still that all the evidence suggests that the country would have criticised the Government, and rightly would have criticised the Government, more severely if they had not acted in this way.

If one can find some little consolation in the need for these drastic steps it lies surely in a large measure of self-education that is going on in the country now. There has been at least one teach-in and other forms of mutual education, which seem to me to be bringing the country, perhaps for the first time, to an understanding of the great problems that arise here, and this is surely something which has been gained. It is necessary, of course, to remember that Part IV is purely temporary and that none of the powers it provides can be exercised after August 11, 1967. At that date, any Orders that have been made and are still in force will automatically lapse.

Before I sit down, let me repeat, or let me make clear, if I have not done so already, that there is no question of looking upon this as a final solution. The standstill provides, as I have said, an essential breathing space to allow productivity to catch up a little with excessive increases in incomes. That is the main object of the standstill as related to income, and in the same way to prices. But whether we succeed or fail as a country depends to a large extent on whether we make use of this opportunity. There is no question here of dictating. There is a question of entering into elaborate consultations with employers, the representatives of employers, trade unionists, and of course public men in both Houses of Parliament and at national and local levels: indeed, every citizen has a chance now to make some contribution to a great debate which is beginning to take place.

However, I should like to stress my own conviction that we have got to find ways of proceeding to agreed solutions to these problems which have not existed hitherto in our country at any time in the past. But that lies in the future. The position of the Government at the present time is absolutely clear. Where the standstill on prices and incomes is being maintained on the basis of voluntary co-operation the powers available under Part IV will not be used. The Government have no love of the powers as such, and have brought Part IV of the Act into operation only with reluctance. The evidence of voluntary support for the incomes policy has encouraged the Government, and we shall proceed with the utmost determination.

I ask the House, therefore, bearing in mind that these are interim solutions but indispensable solutions, to approve the Prices and Incomes Act 1966 (Commencement of Part IV) Order 1966 which brought Part IV of the Prices and Incomes Act into force on October 6, 1966. My Lords, I beg to move.

Moved, That the Prices and Incomes Act 1966 (Commencement of Part IV) Order 1966 be approved.—(The Earl of Longford.)

3.35 p.m.


My Lords, the Motion that the noble Earl, Lord Longford, has just moved is one which I think everybody in this House will agree we all hoped would never have to be before Parliament. I am not enormously impressed by the regrets and reluctance that the noble Earl has expressed this afternoon and I am content at the end of to-day not that this Order should be judged on its own but that it should be looked at as part of a train of events in the economic progress (if so it be) of this country under the present Government. My noble friend Lord Drumalbyn will deal with some of the wider economic points on the Order itself, but it seems to me that this is such a milestone along a slippery path that the nation has embarked upon, and so unique an interference with freedom, that a little study and a little putting into perspective of the Order we are now discussing would be repaid.

I am impressed in reading the debates that took place a few months ago, when Part IV of this Bill was itself being discussed, by one of the attitudes, at any rate, that was taken among those who supported Part IV. They said, "It only contains powers. They are powers that last for only twelve months. Of course, it has got to be put into operation, if it is going to be used at all, by an Order in Council, and then that will be the time when we can exercise our consciences and see whether we really ought to go forward with this step."

Today, we are presented with this situation. The blame is put on certain small groups of people, and again I think that the country in due course may be able to judge whether of not that is really where the blame lies. But we are being told that everybody supports it, we must have it in order to get the Government out of the situation in which they find themselves, and really no great appeal to conscience at all appears to be made by those who promote this Order. I have no doubt that the Government will get their powers, but I have the gravest misgivings about the whole trend, of which this is the latest step, about the powers themselves, and about many of the details of Part IV which is now being brought into force.

No one, I think, objects to the idea of a prices and incomes policy as one of the weapons in the armoury of the Government to deal with the economic situation of the country and to keep it running smoothly: but I think it is its aggrandisement and the prominence which it is now given as one of the foremost weapons by this Government, let alone the compulsory aspect of it, that require a certain amount of examination. Of course, the compulsory aspect of it has until so recently been anathema to all Parties. One would remember, if indeed it had not been recalled to our attention by speeches in another place, the warnings that the right honourable gentleman the Prime Minister gave about the hazards of interfering with bargains already concluded, hazards to industrial peace and to our exports. That was said at the time, in 1961, when my right honourable friend the Member for Wirral was introducing something much less terrifying than we have to-day. One remembers the same right honourable Prime Minister's remarks during the last Election: how monstrously unfair it would be to think of the idea of freezing all wage claims, salary claims, dividends and rents: and, indeed, his famous remark on only July 20, that it is not the Government's intention to introduce statutory controls over incomes and prices.


My Lords, may I interrupt the noble Viscount to say that I would gladly say the same to-day. That is still the Government's position. The noble Viscount is smiling, but let him take this seriously: that the Government's position is still the same as the one that he has quoted.


My Lords, the more the Government's attitude is the same the more it appears to change. We shall no doubt see—and again this must be a matter for history and for the electorate in due course to see—how "same" the Government's attitude turns out to be in the end. But certainly the Party to which I belong does not support compulsion in this sphere.

The timetables—I do not want to go back over the details of this—add a little to our understanding of the position as well. A Bill on Prices and Incomes was promised this time last year. A White Paper was issued in November, and the Bill was introduced last February, but after the Election it was not reintroduced until the beginning of July, nor read a second time in another place until the 14th. Then there was the great Statement of the 20th. After that, one was left to rush through these most important and complicated provisions at very great speed indeed. I say this without in any way attempting to detract from the immense subtlety and courtesy which the noble Earl, Lord Longford, and the noble Lord, Lord Shepherd, managed to summon up in trying to give this House a chance to do its best to examine this legislation. I do not wish to detract in any way from that. Nevertheless, it was the most terrible rush. The volte face that the Government displayed on that occasion has led to a situation where we really have not properly considered at all what it is we are now bringing into force.

This business of a last-minute volte face has been somewhat illuminated by a speech in September made by the right honourable gentleman the Leader of another place, Mr. Crossman. He said: Economically the case for drastic intervention of this kind was as strong two years ago as it is now. And that the Government …waited until very nearly the last moment before announcing the freeze and taking the reserve powers because we shared a national reluctance to make a major change except in the face of the gravest emergency. I have no doubt that that is so, but it does not appear from the timetable of which I spoke just now that they considered that prices and incomes were a matter of any urgency at all until some time in July last year.

The right honourable gentleman went on: The voluntary system achieved some genuine successes —and so it did— particularly in the realm of prices—but by last Summer the inherent defect which we all had clearly foreseen was proving nearly fatal. We decided, therefore, that the minority's licence to wreck that the majority accepted could not longer be tolerated". I am not sure whether the Press cutting is quite right there. It is the minority on which the noble Earl has dwelt so much this afternoon. I suppose, in passing, one might remark that it is not surprising that some people thought that it was not just the right moment to comply with the Government's exhortations when, as a result of the measures introduced on July 20, the regulator, and the introduction of the selective employment tax, prices of food and clothes and so many other things had risen, and risen considerably, while at the same time they were being asked to keep to the same wages as they had had before.

Mr. Crossman went on to say: We realise that in this new measure we are discarding yet another of the rusty old tools of laissez-faire economics and fashioning for ourselves new powerful instruments of social planning. That is profoundly true, but they are the instruments which people of the calibre of the right honourable gentleman the Member for Nuneaton have described as not socialism but dictatorship, and I have a feeling that his views are something to which we should certainly listen. Then Mr. Crossman continued: That is why we have been so careful to subject our new Prices and Incomes Act to the full rigours of the Parliamentary process, to leave the Opposition untrammelled rights of criticism, amendment and delay, and to welcome the frankest debate and the fullest test of strength in those two great parliaments of Labour, the Trades Union Congress and our Party Conference. So far as Parliamentary scrutiny is concerned, I have already paid tribute to noble Lords opposite for what they did, but I do not think that some of the remarks made by the noble Earl this afternoon about what this Order does not do would have been necessary if Parliament had had more chance to examine what in fact the Order and Part IV itself achieve. I believe that many people consider that that introduces blanket control, and that for a very large part they have been working on a totally false basis in accepting what the Government has been putting forward, under the supposition that, simply by the introduction of Part IV alone, the whole statutory process would become enforceable by courts of law. The noble Earl has now done something to put that right.

When we were discussing this matter last summer in Parliament, we might, I feel, have thought a little more deeply about the principles and consequences of all this. Does it really redound to the credit of any Government, in a nation which has always so conspicuously stood by the rule of law, that Her Majesty's Government should encourage and threaten people to break contracts into which they have entered and then, when they discover that the courts will not uphold this, finally force them to do so by Statute? Naturally, if the Government consider it essential that people should break their contracts, then, when the effort is found to be inevitably failing because of the courts, I suppose it is logical to come along to Parliament and say, "We must have this made enforceable by Statute". Her Majesty's Government cannot say they were not warned about this. My noble friend Lord Cones ford told the noble and learned Lord, the Lord Chancellor, and the Lord Chancellor agreed with him, about the dangers inherent in court actions—this was on the day when the Bill was being dealt with in all its stages in the House—and the noble and learned Lord said then that he did not think that an employer who paid in these circumstances could probably in any way be blamed.

Therefore, is not this retrospectivity wrong in principle, and particularly when it affects the productivity agreements on which so much emphasis has been laid? If there is one thing above all that must be dealt with as a priority in the second six months, under whatever criteria may come forward, it must be these productivity agreements. I was horrified to see a threat in one speech in another place that perhaps even the full freedom to make productivity agreements might never again be allowed to those concerned lest the benefit of productivity were all reaped by those directly involved, while this took so much of the share of the increase of gross national product that others who were not able fully to make any productivity increases themselves, people in the public services, could not share it. The realms in which productivity increases and agreements are going to be allowed must be worked out very fully and speedily indeed.

What are we doing by bringing Part IV into force? Under Section 30 of the Act we are giving a defence to an employer for breach of contract if he gives his week's notice and then refused to pay more than he was doing on July 20.


My Lords, may I correct my noble friend, for that is not so. It was not the July 20 wage but what he was paying immediately before the Order bringing Part IV into force.


I am much obliged to my noble and learned friend, but I believe he has not in fact spoken of half the technical difficulties which may arise under this particular provision. A great many minds are at present working on the complicated facts in individual cases to see whether or not a defence is available, or whether or not there would be the threat of criminal proceedings if certain steps are taken. This was never stated in detail in Parliament and I believe it should be, but, of course, one has to choose between two evils here. Is one to give a statutory defence to a person, an employer, who would like to give his employees the increase which he has bargained with them but feels that he cannot; or is one to leave it to that extraordinary prospect that the noble and learned Lord the Lord Chancellor talked of in our debates last summer, of the employer refusing, being sued by the courts, losing his case and leaving the employee to distrain on the office furniture? What more two undignified prospects could a Government put before the House? And I suppose we have to choose between the two evils.

The power to freeze charges, the one that has already been introduced, has been mentioned by the noble Earl. It is an extraordinary document and has produced a wild outcry at what appears to have been a lack of consultation in its preparation. Indeed, it goes so far, according to the newspapers this morning, as to put in jeopardy the whole co-operation of the Confederation of British Industry with the Government in this matter—again not a very happy result of the bringing into effect of Part IV. It seems that we have got down to the ultimate in absurdity, when we have to list those articles for which you may not charge more than you did before, such as handkerchiefs and towels and blankets—not I think the blanket Control Order which the noble Earl was talking about—but leave out cushion covers and bedspreads. You can put up the charge on those by 2d. and you are not breaching this Order at all. It is the realm of complete lunacy, when you get down to matters of such petty detail.

The Wage Control Orders which have been published in the London Gazette must be ad hoc, and I hope that the promise which the noble Earl has made this afternoon, that these will never be used except where they are absolutely necessary, will be most rigidly adhered to. I say that because I can see nothing more disastrous than a flood of petty, personalised Statutory Instruments emerging from the maw of the Government machine and dealing with all sorts of individual situations which, so far as I know, have never been the realm of Statutory Instruments or legislation before. That is the fear that I have of that particular process. I think, therefore, the threat perhaps arises of what we did not envisage; that is, the opening of the way to another festoon of Socialist controls for which the previous Socialist Government was so justly famed.

This all leaves out the fantastic discretions which are given to the Ministry of Labour about what "normal working hours" means under Section 25(8), or "the same kind of work" under Section 28(2). It also leaves out—and this, I hope, is a vain threat—the possibility of employees "taking or threatening to take action" towards a strike in the terms of Section 16 as it is now applied by Section 28(4). This is just the time when many employees feel that the whole principle of Part IV is wrong, and I wonder whether some of them may not put themselves in danger of fines or imprisonment in order to support their principles.

Then what of the future? The noble Earl said that this is a solitary incident and that the Order runs out next August. To listen to the right honourable gentleman the Leader of another place, this is not so at all. This is just a little glimpse of the Promised Land. He said that the July measures were not a last ditch defence of Government policy, but a last minute dash for freedom; a breakthrough into new patterns of industrial relations, and new experiments in co-operation between State planning and collective bargaining.

What is this going to lead to? Is there really going to be any firm set of criteria which can be established for the second six months, and which will then lead gradually to a relaxation of these controls, or shall we still be in much the same mess in another nine months' time? I feel, and I fear, that this Order will be a precedent which will make a repetition of it that much easier for the present Government; and that we are not, in fact, looking at something of a temporary nature at all. Again, this is something which only history will be able to see.

I dislike this Order. I do not see it as an individual instance at all: I see it as one step—at this moment, at least—in the train of the Government's policy on economic affairs. It is the result, I think, not of any few minority members of society who have deigned to defy the Government, but of the inherent weakness of this Government to do the right thing at the right time. They have not made themselves credible abroad. They have not, in fact, used the prices and incomes policy as a right and proper part of the armoury in dealing with the economy. They have promoted it too high, and they have promoted it at exactly the time when it had the very least chance of success as a voluntary measure, just because of the other measures which were brought in simultaneously.

In those circumstances, I do not think that I would recommend those who sit on these Benches to divide against this measure, because it cannot be looked at by itself. It is something which is only one step in a long train. The Division will, I think, come, and come properly, when the whole of this Government's policy on economic affairs is clear and can be judged by the electorate.

3.55 p.m.


My Lords, I was very interested in the speech of the noble Viscount, Lord Colville of Culross. I heard the advice which he was giving to his colleagues, but I can only say that it does not fit in with the words tittered by the Leader of the Conservative Party, as when they come to "the Great Divide", they do not. I was hoping that we might have the pleasure of their company in the Division Lobby this evening, because we certainly missed them when we divided on that very important Conservative Amendment on which they abstained and on which we voted on August 11.

I suspect that the Government are not exactly falling over themselves with enthusiasm in bringing this measure before the House, I think largely because they do not know how they will implement it—and I do not blame them. On August 11, when we took all the stages of the Prices and Incomes Bill in one day, my noble friends and I made our views on the Bill abundantly clear, and we gave our reasons for our opposition to Part IV. Everything that has happened since then has confirmed our belief that the blunt instrument of a statutory freeze is not only the wrong answer but, in its present form, likely to do very serious damage to the prospects of achieving a sensible and workable incomes policy. We believe that there should be an incomes policy: we believe that it should be a sensible one, and that it should be workable. Let there be no mistake about it. In our view, the Government are still fooling themselves into believing that an inflexible freezing of incomes constitutes an incomes policy. It does nothing of the sort.

I do not rule out the need for an element of compulsion as a last resort, provided there is a sensible all-round policy being pursued and, where necessary, a final sanction. But there is no such all-round policy being pursued. Not only is there no policy, but in March the Government themselves, as the noble Viscount, Lord Colville of Culross, said, condemned the very action which we are now invited to approve. The Prime Minister said on "Election Forum": As to the idea of freezing all wage claims, salary claims, I suppose dividends and rents…I think this would be monstrously unfair". I am perplexed as to why something which is unfair in the Spring is the height of virtue in the Autumn. Is there something seasonal about the Prime Minister's morality in politics? I do not know. But it does require an explanation.

The mandatory freeze must be seen against the present economic background, in which the Government are deliberately creating unemployment, with farcically small facilities for retraining men and women, and with a pitifully inadequate system of matching redundant workers with the vacancies which we are told exist in industries of prime importance. If one wants a pertinent measure of this failure, one has only to realise that unemployment is now about 500,000, and that the places for retraining number only 12,000 a year. This background is vitally important if one is to try to implement a sensible incomes policy.


My Lords, would the noble Lord not agree that the main responsibility for the training of workers must clearly lie within industry? It is for them to train their workers, and for the Government to seek help. Surely, the main responsibility lies on industry.


My Lords, I have no doubt at all that industry will be very willing to accept its responsibility. But the noble Lord knows very well that there is no adequate machinery for showing where the vacancies in industries of prime importance actually lie at the present moment. Indeed, this could be the subject of an entirely separate debate, because we are not getting redeployment: we are getting unemployment. I thought we had all decided that this was not the right way to get increased productivity and efficiency in the country.

The real difficulty here is that Part IV freezes not only wages, but also productivity and efficiency. Combined with rising unemployment, it will bring to the forefront of men's minds the fear of insecurity which, in the past, led to one restrictive practice after another. This has happened just at the moment when we were beginning to make some progress in getting rid of restrictive practices and the kind of things which cause inefficiency in industry. It also undermines confidence in collective bargaining. I have no doubt that the noble Lord, Lord Citrine, will deny that, but I think it must do that when the Government come in, as they have come in, with the powers contained in Part IV. I am concerned because I think it will put back for years the long-term contracts which were beginning to become more acceptable and were designed to give greater stability to costs in industry.

There are other serious objections to Part IV. One of those to which we drew attention on August 11 is that it completely by-passes the Prices and Incomes Board. In fact, the Board, which is given statutory respectability in the early part of the Act, is not even mentioned in Part IV. Instead, everything is handed over to Ministries, which are quite unsuited to make the sort of judgments which will be required in this period of severe restraint if sensible decisions are going to be made. I do not believe that the Ministries concerned in Part 1V have the staff, the department or the expertise to make these judgments. The only thing they can do—and perhaps civil servants are trained to do this—is to say "No" during the period of the next twelve months. I believe that this transfer of function from the Prices and Incomes Board to the Ministries is bound to undermine the authority of the Board itself: and this is going to happen at the very moment when the Board was becoming increasingly accepted as a most valuable part of the system for bringing some sanity into the problems of productivity, prices and incomes.

A further danger which I foresee is that the longer this negative blunt instrument of a freeze continues, the greater are going to be the pressures which will build up, and the more formidable will be the task of establishing an ordered incomes policy in the middle of the inevitable explosion which will take place. This is something which is very worrying indeed. If I may say so, it has been the hall-mark of this Government that they never really look far enough ahead, and the danger now is that they will take so long to find a workable incomes policy that the dam will burst in August and overwhelm them.

Now I believe that the Government are determined to have this blunt instrument. I have given the reasons why we oppose it. The alternative, in our view, is not to do nothing: the alternative is not to have runaway inflation. The alternative is to bring in those measures which, taken together, will constitute a sensible incomes and prices policy, and then to seek from Parliament the residual powers which are needed, if they are needed to ensure that that policy works.

Before I deal in more detail with the sort of measure we would support, I want to say this to the Government. Having once embarked on this freeze, it is essential that it should be lifted selectively. Otherwise, we are going to get into difficulties. It is our contention that certain parts of it should be raised immediately. For instance, there should be no restriction on credit for exporters or for projects genuinely designed for import saving. For the same reason, genuine productivity bargains ought to be encouraged straight away, and implemented. This, in itself, will release some of the inevitable pressure which will be building up during this particular period.


My Lords, is the noble Lord suggesting that at this present stage we should make it easier for firms to import unnecessary merchandise?


No. What I said was that there must be credits designed to increase our ability to save imports—import saving. This, again, is something which can be done immediately. In the same way, genuine productivity bargains, if you like, certified as in the public interest by the National Prices and Incomes Board, should be implemented immediately. This, in itself, will help to relieve the pressure, and will direct the country along the right road. But, having said this, I doubt very much whether, having embarked on the type of freeze on which the Government have embarked, it will be possible to lift the whole thing in August of next year without some frightful consequences. That is why it is so important to start the selection and the release on pressures at the earliest possible moment at which it can be done in the national interest.

I return to the real alternative, and to a comprehensive wages policy instead of this piecemeal approach of panicking in July and freezing everything in October. I do not believe, as the noble Viscount, Lord Colville of Culross, said, that a prices and incomes policy can be divorced from the rest of our economic problems. As I have said before, there ought to be a vigorous new attempt now to get real competition in Britain. This, again, is the background of a proper incomes policy. Selective tariff cuts to-day would provide a salutary jolt to some of the businesses in this country. Monopoly practices which exploit the public should incur servere punishment, and higher priority should be given to measures like this than the Government are contemplating. I think the Government should use their powers to stop these "across the board" wage increases which give an increase right through an industry and right through the nation at any particular time, because what happens in fact is that they are taken by people locally, on top of that you get a wage inflationary drift and, before you know where you are, you have just the opposite to productivity.

I believe that, where efficiency can be measured, plant bargaining ought to be encouraged, and it ought to be encouraged now. The whole retraining system should be looked at afresh, and some imagination should be used. Not only should there be a crash programme of adult retraining, but the trainees should receive full pay and generous allowances while they are on a course. The nation would get this money back in full measure from the greater efficiencies which would result from it. In the long run, I believe this Government should undertake discussions with the trade union movement to see whether we cannot get some form of rationalisation, to see whether we cannot get less unions to deal with in this country. I would far rather see a smaller number of strong, rich trade unions entering into contracts which were enforceable at law than to have to depend on the dictates of Government Departments which have no final responsibility at all for seeing that the contracts are in fact fulfilled.

I believe that a statutory freeze for twelve months is a totally wrong way to deal with our problems. Instead, we ought to be encouraging greater efficiency for higher rewards. We should place the responsibility squarely on the Prices and Incomes Board to protect the public interest and to set the guidelines which the country can afford, although as a last resort the Government may have to have the power to apply a final sanction or veto if there is a case which outrageously offends the public interest. But all this can work only if the Government are creating an atmosphere of confidence and competition, and if our manpower is being used to its best advantage. We have no confidence that the Government know how to deal with these background problems which are so absolutely vital to a workable incomes policy, and I would say to my noble friends that we should not grant to the Government the powers they seek.

4.7 p.m.


My Lords, I have listened with great attention to the speeches of the noble Viscount, Lord Colville of Culross, and the noble Lord, Lord Byers. With regard to the noble Viscount, I agree with him on two points. The first is that no one could object to a prices and incomes policy, and the second is that we are not here dealing merely with a temporary problem. With great respect to the noble Lord, Lord Byers—and nobody admires his vigour in debate more than I do—his arguments were directed against the Act as an Act, and not against the Order. His arguments tended to traverse—and understandably so—the broad economic situation, and to suggest measures, some of which may have great merit. But they were measures which certainly could not be operated very quickly, and the examination of which would probably be taking place while something was required to be done to control inflation.

The present Government are grappling with a problem which has been before the country for many years: we all know that. But how was it handled by the previous Government? The previous Government trembled on the brink many times. They wanted an incomes policy, but they said very little about prices. They certainly talked in terms of a wage restraint and implied that that restraint should be applied to other incomes: although never quite so specifically as I have just put it. That policy, although frequently enunciated and debated in this House, cannot be said to have succeeded. Inflation went on all the time, getting worse and worse, and the country's difficulties became so apparent that we had what was, in substance, the crisis of a year or so ago. The demand abroad and at home was for decisive action by the Government. I remember chiding the Opposition in this House, with some diffidence, for the impression they were creating abroad that the Government had not the determination really to carry through decisive measures to deal with this problem. From the newspapers one could not be oblivious to the fact that, day after day, there was a demand for firm action by the Government. They were not united about the precise form of the firm action, but that they wanted firm action I do not think anyone could doubt. The Organisation for Economic Co-operation not only said that Government policy up to date should be continued—and I quoted this in your Lordships' House—but said that they might have to adopt even more severe measures.

My Lords, this Government have brought in some very severe measures, severe in the sense that they disrupt many of our preconceptions as to the way in which our affairs should be continued: that they introduce an element of compulsion which is foreign to the concep- tions of most people in this country. But I think it would be true to say that what the Government have proposed and what the Government have carried into law must generally be looked at against the economic background—as, in a slightly different connection, the noble Lord, Lord Byers, said. The Government have handled the situation by their broad economic policy and also by the Prices and Incomes Act. With regard to the general policy, it would have been easy for me to stray into a discussion of that which would have traversed all that we have done many times in this country, but I do not think it would have carried us very far.

Many of what I might call the troubles that have arisen recently, particularly in the sphere of unemployment, have been strongly objected to. This is a natural thing, but nobody can doubt that an effort to control inflation had to involve a certain measure of unemployment. Is there any economist or Statesman who could deny that some measure of unemployment was a natural consequence of trying to avoid and control the inflation that was taking place? I should have been interested to hear the argument—which may yet be put in the course of the debate—that unemployment, or the troubles that flow from it, can be attributed to this Act. The incomes freeze is not responsible for the slowing down of the motor industry: other measures have done that. Therefore, I do not propose to traverse those measures in a debate which should be confined to the question of the Order. We have passed this Bill. With very great respect to the noble Lord, Lord Byers, his arguments were directed to what we have already done. He is personally consistent in that, as it was his Party who courageously voted in this House against the Bill and against the subsequent Amendments.


My Lords, the noble Lord surely would not deny me the right to keep on telling the Government that they are wrong.


I recognise the noble Lord's right: but I do not think any Government would be shaken by his convictions on this point. The fact is that advice has been given from a great many sources, from the trade unions and from other people, too. I asked the question in a debate on August 11 whether anybody believed that we could secure, for example, a wages freeze without legislation, without compulsion. I do not believe anybody thought that we could: for the voluntary method has been tried over a long period and with comparatively little success. No one in this House could hate compulsion from the Government over the trade union movement more than I do, but if there are alternatives—and I have heard no real alternative put forward—thatcould be applied where the time element would permit the suggested measures to become effective, I should welcome them. Therefore, I support the legislation, and I support the Order for the same reason.

My Lords, I sometimes wonder where the major Party opposite stand in this matter. Their Leader, on the eve of the Trades Union Congress, I thought politically very unwisely, put forward certain proposals for the Congress to adopt, for the trade unions to operate. I have never claimed any measure of political skill, but I am sure that if there was one thing that could have counted towards the acceptance and against the throwing out of the policy the Government outlined, it was the speech of the Leader of the Opposition. Does anybody believe that trade unionists as a whole believe that Mr. Heath is really desirous of building up a strong trades union movement? I do not. I know there has always been lip service to the trade union movement—when it was strong enough to look after itself—but I doubt the sincerity of the statements made from the platform which would have taken us back to the "free-for-all" before this measure was introduced.

Compulsion and freedom are opposites. The idea of compulsion is that of some power residing somewhere to get you to do what is considered to be the right thing. A "free-for-all" would have led us hack to the inflation which has taken place, as we all know, in the wages field as well as in incomes generally. Personally, therefore, I was not a bit surprised when the Trades Union Congress did not follow the advice given to it by the Leader of the Conservative Party. The policy has been accepted, with a great many misgivings, by the Trades Union Congress and, so far as I am aware, the unions who subscribed to the resolution endorsing the Government's policy have not in any way departed from the attitude they took on that occasion.

Now, my Lords, I come to something which causes me a good deal of concern. In the last day or so I have read in the newspapers about the attitude of the Confederation of British Industry and their protest against the so-called non-consultation by the Government. There was one newspaper in which I read more details about this, that is, the Financial Times of yesterday. It said that the protest was that the leaders were not "fully" consulted. I do not know whether that word is journalese, or whether it is significant: but it could mean quite a lot. I do not believe that this policy can succeed without consultation with industry: and the Act envisaged that. If there has been a slip-up, perhaps it is due to inexperience in some quarters of the Government: perhaps to a feeling that the issue is not sufficiently important. Of course, Ministers can be experienced and still make very bad mistakes. Over a period of years we have seen some of the consequences of those mistakes, although they have not been made by Labour Ministers. I think most of us recognise that. It is a matter of judgment. I can hardly imagine that any Minister, charged with the difficult task of carrying through this policy, would deliberately go out of his way to antagonise the organisations on which so much of the success of the policy rests. I cannot believe it. There is some explanation that I have not yet heard. But when the Confederation of British Industry take the unprecedented step of walking out of a conference which was considering what the position should be when the freeze comes to an end and the period of severe restraint takes its place, they are setting an example which could be very dangerous indeed. It is so contrary to their normal actions that I wonder what has taken place.

I welcomed the formation of the Confederation of British Industry and said so publicly, as I have done for many years, believing that a central organisation of employers was a necessary corollary to a central organisation of the trade unions. So I am not a late convert: I am a person who believes that the Confederation marked a step forward. But when we hear talk of their withholding their co-operation and of their calling a special meeting of some 300 people for the purpose of considering whether that policy should be adopted, I say that that is a very serious step indeed. I can share their feelings of being affronted, or of imagining that they are being affronted, but I do not know what are the facts. I do not know the circumstances. I do not know whether anyone else here can help us to an understanding of them. I do say, however, that it may have very serious consequences, unexpected consequences, if the Confederation of British Industry withdraw their co-operation from the Government in this sphere. It may have the effect of consolidating the trade unions more firmly behind the Government's policy than ever before. As a trade union officer I have been through the period right from the formation of the earliest central federation, the Federation of British Industries. It is a little difficult to keep the distinction in mind, because, of course, the present body is a Confederation, which means, in the main, a federation of federations.

The Federation of British Industries was not quite in that category, but I remember when—I think it was in 1919—the Federation of British Industries was formed, the intense suspicion in the trade union movement about the real purposes of that Federation. It seemed to us (and I include myself) to be a massing of capital after the war, the formation of the strongest possible organisation to offer its resistance to trade union advancement. That is how it seemed, and although nobody took the trouble to look at the constitution of the Federation and to find out exactly with what powers it was endowed, that suspicion carried on to the point when it was thought they had power simply to order employers, subsidiary employers and members of their Federation, to do almost anything under the sun.

It took years to dissipate that suspicion—years, not months. I made myself very unpopular at times by pointing out that we were more likely to get statesmanlike deals through a confederation or a federation of size than we were from separate confederations of employers. I still believe that. Whether that feeling has been completely dissipated I do not know, but I am convinced that, if the Confederation withdraw their co-operation from the Government, it may mean they will find that they have done a very serious thing, and struck a blow against the development of the good relations we all wish to see between the central employer bodies and the Trades Union Congress and their constituents. They have a very progressive director, a man in whom I have the utmost confidence: a man with a much broader view, in my conception, than many of his predecessors in similar organisations. Therefore, I hope most sincerely that nothing of a dramatic character, such as the withdrawal of co-operation, will eventuate into something which may be an unfortunate and a regrettable step, but an understandable one.

Consultation right through is a continuing process. I do not know how far the employers' organisations or the T.U.C. are equipped to carry on consultations which may be necessary under this Act. There may be so many consultations: in all probability there may be many specific orders. I hope that will not be the case, but it may be. So I foresee a big strain on the organisations in cooperating with the best of goodwill with the Government, and I hope that nothing will happen to make the attempt to do that less promising than it is now. On the other hand, I hope that the Government will not be deterred in their policy. I hope that the Government will not be intimidated in their policy by the withdrawal of co-operation or anything of that kind. British people are not constituted like that: and the trade union movement and the Labour Government are composed of ordinary British people—although perhaps with rather more talents than some of their opponents. But consultation must not be carried to the point of paralysing decisive action. That is an old game. Anyone knows that you can give lip-service to co-operation and, by devious devices, delay it until the decisive moment passes. I know enough about life and organisations to know the possibility of that. I hope it will not be the type of consultation which will drag out unnecessarily decisions which are urgently needed.

I said at an earlier stage that without co-operation between the T.U.C., the Confederation of British Industry and the Government, the Act could not succeed, and I believe that. But if it comes to the issue and a struggle takes place, I am sure that the Government will carry this policy through, however imperfect it may appear, and however many gaps and inconsistencies there may be. I have said before, and I repeat, that the Government are trying to achieve, in a matter of months, something which in normal circumstances would take years: that is, a complete revolution in the system of collective bargaining. It is not, I believe, a revolution which will shake the confidence of people in collective bargaining: it is anew kind of collective bargaining, where the powers of employers and trade unions are concentrated for the common interest of the State. That has never happened before, but I believe that we are marching into that era. There will be all sorts of mistakes; there will be shortcomings and losses of temper, and all that kind of thing. But I believe that if we are impressed with the need to re-establish this country in an era of prosperity, which is what we all long for, we must all work together to that end. Therefore I support this Order.

4.28 p.m.


My Lords, this House always listens with pleasure to the noble Lord, Lord Citrine, who speaks with so much experience on some of the matters with which we are concerned. Hence, I think, we have so often spoken in the same debate. I propose to confine myself to two or three main questions. I agree with the noble Lord, Lord Citrine, that on this occasion we are not concerned with all the matters with which we were concerned during the passage of what was then a Bill, but is now an Act on the Statute Book.

My Lords, the first question about which I would say a few words is purely a legal question, whether the Order which we are being asked to approve has been validly made. The doubt on this question has been publicly raised by my noble and learned friend Lord Dilhorne in a letter in The Times last Friday. Perhaps I may tell the House that I myself had been struck by the point earlier in the week and mentioned it to some of my friends, including my noble and learned friend Lord Dilhorne and the noble Lord, Lord Stow Hill, who I am glad is to intervene later in this debate. I also thought it right to send a note to the noble and learned Lord on the Woolsack saying that I was going to raise the point, because I thought that it might be his wish to give some helpful information to the noble Lord who will be winding up this debate.

It would be absurd for me to elaborate the point which has been made with so much more authority by my noble and learned friend Lord Dilhorne. I completely agree with him that the point is certain to be raised when some of the matters under Part IV are contested in the courts. Therefore, I think it was useful to raise it. My noble and learned friend, as a person holding high judicial office, was careful, of course, not to express any view on the merits of the point or whether it would be likely to prevail in the courts. But, being a person whose views carry no authority on legal matters, I might inform the House—because I like to inform the House when I come to a conclusion, however tentative—that my own view is that, if this matter is raised in the courts, the courts will not think it a good point.

My reason is simple. By a well-known canon of construction the courts seek to interpret a document to make sense, if it is in any way possible to do so. The matter is summed up in the Latin legal—tag they seek to bring it about ut res magis valeat, quam pereat. I feel that, if this matter is raised, the point that the Order was invalid would not prevail. On the other hand, I do not think that some of the simple answers that have been given are necessarily conclusive. I think that there is more to he said for the point than has been said in some of the arguments. Perhaps your Lordships have read the admirably clear letter of Mr. Anthony Cripps, Q.C., that appeared in The Times on the 24th of this month. He raised three arguments which he thought answered the point completely. With the second and third, I find myself in general agreement. The example he gave in the first is, I think, not wholly parallel to the subsection which occurs in this Statute. For reasons which I think the noble and learned Lord the Lord Chancellor will appreciate, I think that it is possible to draw a distinction between a case where the Statute says that an Act or part of an Act shall come into force when a Minister does some particular thing, and a case where the matter has to be effected by an Order in Council, and the power under which the Order in Council purports to be made does not appear to be in force at the time. I am not going to enlarge upon it. I think that the point would fail, but I think that it is desirable for the Government spokesman to say something about it.

I now pass to the merits of the Order. In considering these, I think that we can distinguish two quite different questions. First, is the economic policy which the Government are pursuing wise or foolish? Secondly, in so far as they are determined to pursue it, should we prefer them to respect the rule of law or show contempt for the rule of law? On the first question, I do not propose to address the House this afternoon. I was fortunate enough to be able to take part in the economic debate on August 1, and the views I then expressed are the views which I now hold and I do not propose to trouble the House with them. I would only say that everything that has subsequently happened strengthens my view of the Government's incompetence in the sphere of economics. They are always surprised by the obvious. I suppose that everybody could have foretold, as the noble Lord, Lord Robbins, and such humble people as myself foretold, that one of the consequences of the Government's economic measures would be the discouragement of investment. That has taken the Chancellor of the Exchequer by complete surprise. They are always surprised when any action they take has its natural and probable consequences. Nothing could surprise them more.

I shall have some more to say later in my speech on the subject of dividends, on which they are showing complete defiance of the rule of law, because they have taken no powers of any kind to control dividends, either under Part IV or anywhere else. They are seeking to bluff company directors into obeying their whim. In so far as they are successful in this, if it is really to be the policy of Her Majesty's Government, though unenforceable by law, that a company in the position to declare an increased dividend shall not do so, do the Government really think that that will encourage investment? Why on earth should shareholders wish their companies to invest, if the consequences of failure can be perfectly disastrous and the consequences of success that the shareholders will receive no benefit? That seems to me to be obvious, but it has taken the Government, as usual, by complete surprise.

The main subject with which I wish to deal is that second question: in so far as the Government are determined to pursue their economic policy, should we prefer them to respect the rule of law or to show contempt for the rule of law? I hope that I am not too biased as a lawyer and as a lover of the Constitution to say that I respect the rule of law and that I wish the Government to respect the rule of law. Nothing has disgusted or alarmed me more than the increasing disregard of the rule of law in the actions of Her Majesty's Government.

I propose to take two examples. The first was one which I raised in the debate on August 11 and which my noble friend Lord Colville of Culross mentioned this afternoon. In that debate, I pointed out what would be the position of the employer, if he sought to carry out the Government's wishes, but Part IV of the Act had not been brought into operation. I pointed out—and it will be remembered that at that time there had been no legal decision—that if an increased wage was contractually due to the employed person because of an earlier agreement, then what the Government were asking the employer to do was to break his contract, even though the possible result of his doing so would be that he would be sued by the employee in the courts, and the judge would undoubtedly be compelled to find in the employee's favour. The judge would be bound to say: "You have your contract. It is the policy of the courts to enforce lawful contracts, and the fact that the Government have made a statement saying that they wish the employer to break his contract is not a good defence." I ventured to say that that would be the position.

Let me say at once that the noble and learned Lord on the Woolsack, who replied to the debate, most kindly told the Committee that I had my law right, and that the position was as I had stated. But I am appalled that any Government should publicly say that they want any body of citizens to break contracts. It is morally and legally shocking, and it is a terrible example (I am sure the noble Lord, Lord Citrine, will follow what I say in this respect) to set to the trade union movement. I do not think that trade union law is by any means perfect, and many improvements are needed. But the improvements needed should encourage a greater regard for the sanctity of contracts, and not say that it is right, on grounds of public policy, to break contracts.

In order to show that I am not in any way being wise after the event, perhaps I may read a short passage from what I said on August 11: As long as we have the rule of law, can the Government seriously suggest that employers ought to obey their request not to give a rise in wages, though the law of the land says that a rise in wages is due and will enforce that right if that employee goes to the court? Is it their conception of the rule of law that the employer ought to obey the Government's request and ignore the law of the land? I have read everything that was said by the Solicitor General in Committee in another place and by the Attorney General on Report, and I am left completely mystified about what it is that the Government wish the employer to do. I would ask whether they agree, first of all, that under our Constitution the employers must pay regard to the law of the land and not to any request by Her Majesty's Government that may conflict with it."—[OFFICIAL REPORT, Vol. 276 (No. 52), col. 1877; 11/8/66.] I stand by every word of that, and I hope I have said enough to show why I think that in this matter the Government have set a shocking example to those who would advocate that we should remain true to the rule of law.

Since then we have had the decided case of Allen v. Thorn Electrical Industries Ltd., which was tried on September 30. Now the bringing of Part IV into operation may do something to end this constitutional indecency. At least, in the future there may be some connection between the law of the land and what it is the Government are asking employers and employed to do. But the Act is by no means without its difficulties in this respect, one of which was the cause of my intervention during the speech of my noble friend Lord Colville of Culross—namely, a matter of difficulty pointed out by Professor K. W. Wedderburn (who is certainly not a lawyer belonging to my own Party) in a letter to the Sunday Times on October 16 and in an earlier letter to The Times.

If I may remind the House of what the difficulty is, under Section 27 the Government can make an Order really putting back the wage to what it was last July.


Not the wage; the prices. I think Section 27 is prices.


Perhaps I should have said Section 26. Anyhow, the penal section applicable goes back to the July figure, whereas what the employer can do under Section 28 is to write a letter to his employee saying that he does not propose to pay a higher wage than was applicable at the time the Order bringing Part IV into force was made.


I am sorry to interrupt the noble Lord again, but I still think he has his sections wrong. I think he is still referring to Sections 26 and 27.


The noble Lord is perfectly right.


I only intervene in order to get the Record correct.


I am grateful to the noble Lord. Perhaps noble Lords will forget all recent references to numbers. I am obliged to the noble Lord, Lord Shepherd, for interrupting with his usual good sense and generosity. The sections to which I should have been referring are Sections 29 and 30. Section 29 is the section under which I think a draft Order has now been made—it is now available in the London Gazette, but it is going through its preliminary stages—which restores the figure to the July figure. But under Section 30, which is the section most often considered as giving protection to the employer, it only goes back to what was being paid at the day when the Order bringing Part IV into operation was made.

Professor Wedderbum goes on to mention some of the difficulties which may arise. The employer will be under a penal sanction if he disregards the Order made under Section 29, but he is not helped at all by what he can do under Section 30. Let me say at once that I think the Act in this respect is not necessarily hopelessly bad, because I think the answer may be what I ventured to give in the earlier debate—namely, that the Order under Section 29 may make the subsequent payment an illegal payment and, therefore, the contract may be frustrated as from the date of that Order. I only point out that Professor Wedderburn has indicated the difficulties that may arise. But on this whole question of contracts I say that I am all in favour of encouraging the observance of contracts and all against giving an example of the compulsory breaking of contracts.

I now come to my second example of disregard of the rule of law. It is, I think, quite an amazing disregard, which for some reason the Government have almost completely got away with, scarcely anybody noticing it. The first published notice I had seen of it (there may have been others) is in a paragraph in the City column of The Times to-day under the heading "Is Dividend Freeze Legal?" Let me just remind the House of the position about dividends. There are no powers whatever in any part of this Act to control dividends. The only provision in this Act dealing with dividends—and this has not yet been brought into force, so far as I know, in the case of any company—is Section 12, which is the one that enables the Government to get particulars of company distributions.

I referred to this when this Bill was going through Parliament and was mildly, but charmingly, rebuked by the noble Earl, the Leader of the House for talking nonsense (I think the accusations were mutual), because I talked a lot about the folly of limiting dividends and he said, accurately, that this was not what the section did. So we are at least in agreement that there is nothing in this Act which prevents a company from declaring any dividend that the ordinary law of the land allows: nothing whatever. The only other matter that is relevant is paragraph 31 of the White Paper which gives the Government's wishes about the standstill but which, of course, has no force of law whatsoever.

Now, my Lords, both by the answers that Her Majesty's Government give in Parliament and by the speeches that Ministers make in the country the impression has been given that any board of directors that declares an increased dividend is doing something legally improper. That is completely untrue. At the time that the Distillers Company said they had considered the matter and they were going to pay their larger dividend, I remember, I think, hearing on the wireless, as well as seeing in the Press, that it was not thought that the Government would prosecute. Of course they would not, because there had been no breach of the law of any kind whatsoever. But, my Lords, there was an answer in the House of Commons as recently as last Thursday, when one Member was asking what watch was being kept on dividends, and so on, and the Treasury Minister answered. As I am not sure that this was a declaration of Government policy I do not know whether or not I am entitled to read the Minister's reply.


The noble Lord is entitled to do so.


The Chief Secretary to the Treasury said that this freeze was being generally observed, and then he said that there were a few cases that showed an increase. And this was his conclusion: As investigation has established that the increased dividends were paid under a misunderstanding of the precise effect of the standstill policy in their individual cases, no further action is proposed."—[OFFICIAL REPORT, Commons, Vol. 734 (No. 78), col. 74; 20/10/66.] With the strong implication that some further action would have been possible. Of course, laws may be introduced of which we know nothing but at the moment no further action could conceivably be taken.

My Lords, I object to government by threat as being wholly inconsistent with the rule of law. It is said, are not boards of directors entitled, or is it not their duty, to consider the public interest? Let me say a word about that. They must certainly not assume that the public interest is more accurately conveyed by the request of a Minister than by the provisions of the law of the land. In this particular matter the duty of the directors, in my submission, is to obey the Companies Act and the cases decided under the Companies Act and what the judges have said, and so forth, and to see what their duty is under the law. If the Government's request conflicts with that duty they should prefer their duty under the law to the request of the Government.

Some noble Lords may well remember—I remember it very well for a reason which I will give in a moment—that a good deal of discussion arose in the year 1954 on the Savoy case, where the Savoy attempted to save one of their subsidiary companies threatened with a takeover, by action which they believed was in the public interest but which almost certainly, in the view of many people conflicted with the requirements of the law. I happened to be directly concerned at the time in dealing with these matters in debate in the House of Commons because I was then Parliamentary Secretary to the Board of Trade. The result of the Savoy's action was the Milner Holland inquiry and the Milner Holland Report. I think the Milner Holland Report is treated in legal circles (and I should think also in Government circles) with the highest respect, though I do not know how far it may contain dicta which have not yet been decided by the courts: but what Milner Holland made quite clear was that your view as to what the public interest might be did not justify you in disobeying the law, and what I say is that it is exactly the same with directors to-day. They may certainly consider the advice of the Government that the Government do not wish to have an increased dividend paid, but it is their duty to see whether it is a matter determined by law, and, if it is a matter on which they have freedom, it is their duty to decide, bona fide, where the public interest lies. In my submission they have not the right, still less the duty, blindly to obey the request of Her Majesty's Ministers.


My Lords, for the sake of interest, because the noble Lord is pursuing an illuminating line of argument, may I ask him whether in the first place he objects to the Government's calling on businesses in general to refrain from payment of dividends? I gather not, but perhaps he could explain that because he appears to be arguing that the Government has no right even to make such a request.


My Lords, in the earlier debate, to which I have referred, I pointed out why I thought that the request to a company not to pay a dividend which it was in a position to pay was an economic idiocy. By all means let the Government make any request to anybody that they think advisable: what I am criticising is people blindly obeying the Government's request without making up their minds whether the Government's request is sensible and whether it conforms to the law of the land.


My Lords, I promise to interrupt only this once more this afternoon, but perhaps the noble Lord would explain why he is criticising the Government. He began by saying one thing and now he appears to be on another point.


My Lords, may I say one thing to the noble Earl the Leader of the House? I would remind him of Keynes's remark: the rate of investment depends upon the expectation of profit. He made that remark again and again. There are a great many people in this country who think that the investment in productive industry is more important than anything else, and there are a great many employers who might reasonably take the view that to be discouraged from making profits would discourage investment in industry and put us behind the rest of the world. That is the argument I think my noble friend is making.


I am more with the Leader of the House than he thinks, because the very next item on my notes was to say what I thought of the directors who complied with the request they thought to be wrong, and then went on to give their reasons. I do not confine my criticism in this part of my speech to the Government. It may be well known to the House, but otherwise I will make it quite clear, that no company has ever asked me to be a director. The reasons for that may be very clear and obvious, but I can only say that if I were a director of a British company, my goodness! I would make a nuisance of myself when the board was about to act against its own sense of what was right and proper because some Minister had asked it to do so, though not with the slightest pretence that the Government had law on their side.

I will now come to an example. I must make it clear that I am not attacking the noble Lord whom I am about to name: I am going to attack his argument, but if I were going to attack him I should, of course, have given notice I was going to do so. But I only came across this letter on working in the Library last night. The noble Lord, Lord Renwick, who is the managing director of a well-known company, wrote a letter toThe Times about the case of his company's dividend. They had declared an increased dividend for 1965–66 which the noble Lord thought perfectly right, reasonable and proper. The Government, whose wisdom he denied, and whose policy he thought wrong, requested the company to cancel the rise and declare a dividend at the old rate. In the City of London transactions in the shares of this company had taken place on the basis of the increased declaration, and of course those who had indulged in those perfectly legal transactions would suffer loss if the dividend rise was not persisted in. Nevertheless, in deference to the Government's request he lowered the dividend, and this was the reason publicly given at the conclusion of his letter.

What was the principle in deference to which he cancelled the dividend rise? "The overriding constitutional principle of recognising the authority of Government as such". My Lords, there is no such constitutional principle in England. I have no doubt that that sort of attitude was most welcome to Mussolini and to Hitler, but what would have been thought of it by Hampden? Which of our great Parliamentarians has ever said that it is a constitutional duty of an Englishman, or a body of Englishmen, to obey not the law of the land or even their own common sense or even what their own reason leads them to: it is their duty to obey the dictates of a Government, though those dictates have no basis in law whatsoever? I may be alone in objecting to what I regard as this feeble response of industry to defiance of the rule of law, but I believe in the rule of law, and the sooner belief in the rule of law spreads among my fellow countrymen, and not least in the City of London, the better for our future.

5.5 p.m.


My Lords, I am tempted to intervene shortly in this debate largely because of the reference to me which the noble and learned Lord, Lord Conesford, made in the course of his very interesting and analytical speech, and it would be my intention to confine myself to the point that he raised, about which he kindly talked to me some time ago. The compass of this debate, I should have thought, strictly was a very narrow one. We have all of us, I suppose, been brought up in the wholesome democratic tradition that every Government of every complexion always does everything wrong. As I listened to the polished and elegant speech of the noble Viscount, Lord Colville of Culross, I was forcibly reminded of that very wholesome maxim, and I thought how admirably the noble Viscount lived up to it. What I did not gather from his speech or from the speech of the noble Lord, Lord Byers, or from the speech of the noble Lord who has just spoken, was what they thought the Government should have done in July, faced with a run on the pound of really very serious proportions, than what they did do. I followed the controversy in the newspapers, in this House and in another place as carefully as I could. Very rarely have I seen any attempt to answer that question. If I may say so to the noble and learned Lord, Lord Conesford, I do not think he departed in any sense from the practice of attacking the Government without suggesting what they should have done other than what they did.

I believe the Government were fully justified in the measures which they took in July, in a situation of crisis: not of new crisis—it is not the first run on the pound that we have encountered, not the first run on the pound that the Conservative Government encountered. It is, I suppose, a risk from which a high-spending economy is never immune, and in the long run economic units such as our own must keep within the limit of what they, putting it quite loosely, can afford. I listened to the noble Lord, Lord Byers, and I listened to the proposals that he made, but they were long-term proposals. He indicated that he could see some place for an incomes policy. I should have thought that the effort made by the present Government to construct an incomes policy was prodigious—the Statement of Intent, the agreement on norms between unions and management, the Prices and Incomes Board, they are the machinery upon which an incomes policy can be made to function.

It has become part of the fashion to write down the efforts of the Government in that regard. I profoundly disagree with those who say that those efforts have turned out to be valueless. They have not produced the results hoped for. As the noble Earl, the Lord Privy Seal, said, incomes increased during the year to April, 1966, by some 10 per cent., as against output which increased by some 2 per cent. Admittedly the incomes policy has not achieved the restriction in incomes which was hoped for. It was hoped that as production increased so incomes would run in step with it and not run far ahead of it. But that is no reason in the world, in my judgment at any rate, why one should write off the incomes policy. That is the long-term answer that the Government offer to the problem of inflation.

What we are considering to-day is the narrow problem whether, as a purely short-term measure in a situation which is still in some senses critical, the Government, having been given by Parliament the power contained in the Prices and Incomes Act 1966, should now come to Parliament and ask for authority to put into operation Part IV of the Act. I thought the answer to that must be "Yes". The reasons were stated, I thought very clearly, by the noble Earl the Lord Privy Seal. It is not fair to those who wish to follow the general principles set out in the White Paper on the Prices and Incomes Standstill if some persons do not follow those principles. I am not saying that they do not follow them because of motives which are always unworthy. Many employers find that they are bound by contractual obligations which they think they legally must honour, or with which in honour they feel that they ought to comply. Others perhaps are less right minded in their motives. Others feel genuinely in doubt. As the Lord Privy Seal pointed out, it is a matter of fairness and justice to all concerned that these powers, having been conferred upon the Government by Parliament, should now be used.

The noble Lord, Lord Conesford, whose respect for the law everybody would think of great merit, complained that the Government were overriding the law. The Prices and Incomes Act 1966 is part of the law, and it is that part of the law which the Government is now seeking to operate, and seeking to operate as a measure of justice. If it did not operate Part IV of the Act, I would ask noble Lords to consider what confusion might ensue in the course of a few weeks or months from now.


My Lords, may I put one point on what the noble Lord says? He must have missed what I said in my speech, that putting Part IV into operation does clothe this policy on contracts with some legal decency. I made clear in my speech on August 11, when we were taking the Bill through all its stages, that what I was criticising was their advice under the Act, as it would be without Part IV. I pointed out then that they were asking people to break their contracts when they were certain that, if they did, they would lose their case in the courts.


My Lords, all I can answer is that a properly elected majority of Parliament, supported, I believe, by the vast majority of public opinion, approved of these powers being conferred upon the Government: and it seemed to me that it would be wholly wrong of the Government had it not, in order to protect those who found themselves with genuine difficulties in complying with what they thought, with the Government, was the public interest and as set out in the White Paper, given them the measure of protection which is now afforded by Part IV of the Act. It does not seem to me that that view can properly be regarded as overriding the rule of law. It is not: it is invoking the law.

A good deal of complaint was raised (indeed it was raised to-day by the noble Lord, Lord Conesford) that the Government was, in effect, governing by degree or dictate—I think those were the words he used. As I understood the noble Lord, what he meant was that the White Paper on Prices and Incomes Standstill which the Government promulgated, in effect enjoined certain courses of conduct upon certain citizens of this country. What is now being done is to make the principles of the White Paper susceptible of enforcement by Statute. The noble Lord may not like the Statute: I gather he does not. But, with great respect, I would submit to him that the Government, in asking the House to approve this Motion, are doing precisely what he thinks they ought to do, in clothing their injunctions, as he described them, by the force of a Statute. That is what they are doing: and nothing else.


My Lords, I quite agree that they are doing so in the case of contracts. I said so in my speech. But in the case of dividends they are doing absolutely nothing to give any power of legal enforcement to what they say about dividends in the White Paper.


My Lords, I suppose the conclusion from that argument of the noble Lord is that dividends should have been included in Part IV. He is saying that Part IV should be more extensive than in fact it is. He may be right. No doubt the Government's spokesman who will reply to this debate will give the reasons why the Government limited Part IV so as to exclude dividends. I do not know why this is so. Probably there is good reason. It may be that the noble Lord is right in the view which he is apparently propounding, that they should be included.

I pass from that to go back to my first purpose, which was to deal with the point of law which the noble and learned Lord most kindly raised with me some days ago. I was able to devote a little research to it. The law is the delight of lawyers but of nobody else, and I hope that this House will bear with me if I inflict our pleasures on unwilling ears just for a moment or so, in order to deal with the substantial point raised by the noble Lord, Lord Conesford, to-day and by the noble and learned Viscount, Lord Dilhorne, in the letter which he wrote to The Times.

All I would say—it is not for me to construe a Statute: it is for the courts to do that, as the former Lord Chancellor pointed out in his letter to The Times—is that there are many precedents in other Acts of Parliament where a power to bring an Act, or a Part of an Act, into operation is contained in the Part which that power is to bring into operation. This is not the only such Act. I would direct the attention of the House, for example, to the Legal Aid and Advice Act, 1949, Part II, which was brought into operation by an Order made under, I think, Section 30 of the Act, which itself is contained in Part II. There, I think, is a precise parallel, and the legality of Part II of that Act has never yet been brought into question in the courts, although it has been frequently enforced.

If I might trespass for a moment more on your Lordships' patience, I should like to read out from a reported case. My excuse will be that the language is classic and beautifully chosen, as one would expect from the noble and learned Lord, Lord Tucker, who was then sitting in the Court of Appeal as Lord Justice Tucker. The case is one in which almost exactly the same argument as was advanced by Lord Conesford was propounded to the Court of Appeal in relation to the Town and Country Planning Act 1947. To abbreviate as much as I can, a Part of the Act was to come into force straight away, as soon as the Act was passed. Section 120 of the Act was not in one of those Parts: it was in a Part which it alone could bring into operation. So that the parallel, as noble Lords may think, is really quite close into the instance that we are discussing here.

Lord Justice Tucker, as he then was, said: The sections referred to as coming into force on the date of the passing of the Act do not include Section 120 which is the section which provides for the appointed day, and it is accordingly said that the Minister cannot appoint a day until the Act has come into operation; and the Act cannot come into operation until he has appointed a day, and the result is that the Act can never come into operation. I should have thought that the point could not be more clearly, elegantly and concisely expressed than in that language that I have ventured to read, I hope not too much to your Lordships' annoyance. Then this is how the noble and learned Lord, Lord Tucker, deals with that argument. He deals with it in one sentence, and he says: That ingenious argument does not appeal to me because I think that the ordinary and natural interpretation must be given to the section which itself brings the Act into operation, namely that it must necessarily come into operation with the passing of the Act, which was on August 6, 1947. I feel that if the noble and learned Lord were deciding in court upon Section 25(1) of the Act which we are considering today he would apply to it exactly the same reasoning as he applied to the Town and Country Planning Act, 1947. Again, without citing from the somewhat dry terms of the Act, I would just refer to subsection (2) of Section 25 which, without my reading it, I hope would he regarded by learned judges when they came to construe the section as making it perfectly clear that the power to bring Part IV of the Act into operation is a power which arises as soon as the Act is passed.

That is the intervention which I desire to make in this debate, and it is solely for the reason I gave, that the noble Lord, Lord Conesford, raised it with me. I have, of course, absolutely no authority to speak for the Government: still less have I any authority to speak on behalf of any Judge in any court. That must be a matter for the future. But the point is one of substance. It was raised in a letter in The Times, answered by the late Sir Stafford Cripps's nephew, Mr. Anthony Cripps, a very distinguished member of the Bar, in what I thought was a convincing letter, and I would seek to add my argument to what he said. I hope that the House may think that that obstacle, at any rate, is not one which should be taken into account in deciding whether or not to pass this Motion.

5.25 p.m.


My Lords, it would be very difficult to add much after the most impressive speech made by my noble friend Lord Colville of Culross, so I shall concern myself only with the No. 1 Order restricting the laundry and dry-cleaning prices. Consequently, I must declare an interest in that I am connected with a manufacturer of dry-cleaning equipment which has a 25 per cent. share of the world's market: I have also some interests of my own which are not affected by this Order.

I will be brief, as it does not take long to show how stupid this latest piece of financial foolishness is. This misconceived Order was made without checking the facts and, worse still, without consultation with the industry. The C.B.I. have been treated very shabbily and in such a way that the Government are asking a lot if they expect future co-operation. They have made the twin industries very angry and they have also made the C.B.I. very angry. The noble Lord, Lord Citrine, was rather kind when he said that perhaps there was some inexperience here, but I felt that the points which he raised were somewhat one-sided.

I should be grateful if the noble Lord, Lord Shepherd, could produce some facts about the 300 complaints which the Government claim are the basis for this ridiculous Order. Have all the complaints been investigated? How many were considered to be justified? On what basis were they considered to be justified? How many concern laundries and how many concern dry cleaners? There are five million laundry transactions every week, so on this basis 300 complaints is not a figure which would demand "crash" legislation, even if all the complaints were justified which, on the basis of the Prices and Incomes Board's Report, would not appear to be the case.

To get this into perspective, the largest group of dry-cleaners, with 1,700 shops, as of yesterday stated that they had received only four complaints since July—which is not very many. It is totally unfair for Her Majesty's Government to throw out figures without backing them up with facts. Therefore, we should be most grateful to be given a complete breakdown with supporting facts, and I am sure that this is a request which the noble Lord, Lord Shepherd, who is the most reasonable of men, cannot consider to be too difficult, if the facts are there and available. The Prices and Incomes Board in its very fair Report stated that price increases would be inevitable because of the selective employment tax. The only point at issue was how much these increases should be. Now comes this Order which makes a nonsense of the object of S.E.T. The selective employment tax was brought in as a deflationary device and therefore was to reduce spending by the cost being passed on to the consumer, or presumably was intended to do so. Now this has been stopped.

The Government spokesmen have likened S.E.T. to purchase tax. This is not the case. Purchase tax is put on to an individual sale. In the case of S.E.T., it is a running cost—it is there whether you are trading well or trading badly. Government action is making it impossible for the laundry industry to carry out the recommendations contained in the Report of the P.I.B. They ask for great investment in new plant, but the Government have withdrawn investment allowances. They say that staff has to be reduced, but first you have got to have the new equipment. The ill-fated "shakeout"—which now looks more like a fallout when applied to the laundry industry—can really release only older married women and people who are perhaps disabled. Such people are not going to find other jobs. The only jobs they can do are jobs which are natural to them, and the laundry industry has always provided this work. Many laundries held back their prices for nine months for the P.I.B. Report to come out. In that time there has been an upward wage-drift about which nobody would argue. Frozen as it may be now, this does not help over the previous period. There has been a significant increase in petrol prices: in many areas water prices have gone up (and in fact in one area, the Metropolitan Water Board area, prices have risen from 2s. to 2s. 3d. per thousand gallons) rates have gone up: in some places in Scotland rates have actually been doubled. As well as all these increases, there has been a general increase in material and other costs.

To come back to prices and incomes and the P.I.B. assessment that costs would have to be increased to cover S.E.T., they felt that an increase of 4½ per cent. for laundries would be justified. This in fact is low because on the Government figures the industry employs some 118,000 people, not the rounded-off figure of 100,000 people as appears in the P.I.B. Report. When this is analysed by males and females over and under the age of eighteen, it gives a figure of £4,746,331 per annum as a bill for S.E.T. Apply this to the turnover figure of £81,740,000, which is above the figure quoted in the P.I.B. Report—the P.I.B. Report, in being absolutely fair, quoted a rounded-figure of £80 million—and S.E.T. works out at 5.8 per cent. of turnover. This is 1.3 per cent. up on the P.I.B. recommendation of 4½ per cent. The dry-cleaning industry is not basically in disagreement with the figures which have been produced by the P.I.B. In fact, they feel that it should be nearer 4 per cent. than the 4½ per cent. assessment. Unfortunately, the P.B.I. do not give any basis for the figures which they have published, so one cannot really query them. We should be grateful to know in fact how these figures have been arrived at.

The last thing the twin industries want to do is to put up prices indiscriminately as every increase inevitably means a falloff in trade, but they have to put up some charges, especially in the laundry industry, just to stay in business. It is getting very difficult indeed just to do that. One laundry fails every ten days, and if you look at to-day's papers your Lordships will see that one has failed to-day.

Neither of the twin industries can be considered to have been making exorbitant profits, which is presumably the reason for Order No. 1. In fact, as quoted by the P.I.B., the profits on turnover in 1965 have been 7.4 per cent. for the laundries and 7.6 per cent. for the dry-cleaners. The increases that have been made are not broad scale across all their charges: they have been put only on to selected items. Because the price has been put up on, say, a suit, it is unfair to say that the increase is broad scale. That is not so. The dry-cleaning business is extremely competitive and is becoming more so, and any sales manager of one of these organisations fights an increase in price because he knows that it is going to mean a trend towards one of his competitors who is keeping his prices down.

The business in dry-cleaning is also extremely seasonal. Therefore, the industry can put up its prices only when there is peak demand. It cannot just put them up when it wants to. The trade just does not stand it. The P.I.B. have shown that the industry so far has acted very reasonably. What is often forgotten is that the average cost of cleaning a suit in 1913 was 4s. 6d., whilst the average cost now is 8s. 6d. But the value of money has gone down considerably therefore I think that the industry is being slandered somewhat when it is said that its prices are going up indiscriminately.

As I have said, both industries have acted extremely responsibly. All they have had in return for this is an arbitrary freeze, slammed down on them with no consultation. Her Majesty's Government must be in pretty desperate need of a scapegoat when they push this Order through, especially when it is against the Prices and Incomes Board's advice or, at least, what is stated in the P.I.B. Report. I think they can assume that it is a further case of the Department of Economic Affairs having another brainstorm and laying it at the feet of the Board of Trade to deal with.

This situation is extremely serious for the twin industries and—I am sorry if I have laboured this point too long before your Lordships—they are extremely worried, as in fact the C.B.I. have been worried. This is a time when they can least afford this blow. But, more important, it is the thin end of the bureaucratic wedge that is doing its best to wreck this sector of private enterprise. The service industries have been smeared by the Government's rather Marxist attitude towards them. This is very outdated, when one considers that in America the economy which has the highest productivity rate in the world has the highest proportion of employed people in services. During the war, laundry and cleaning were regarded as essential services. Now it seems that it is preferable for manufacturers of clothes, especially "Op" clothes, to be given S.E.T. benefits, whereas the two industries which are trying to make old clothes last longer are being penalised.

5.34 p.m.


My Lords, I have very strong feelings about Part IV of the Prices and Incomes Act and the policy behind it. I expressed my views strongly in the former debate in your Lordships' House. In passing, I want to mention that I am a trade union member, chairman of my local branch and an executive member of my local trades council, but of course I am speaking to-day as an individual.

I cannot reconcile what I have learned about economics with what our Labour Government are doing. How do short-time, redundancy, sackings, the credit squeeze, unemployment, et cetera, lead to modernizing industry, new plant, new re-investment in industry, greater productivity and increased exports? We have only to take as an example of the effect of these policies the chaos in the car industry to-day. What is the essence of Part IV of the Government's Prices and Incomes Act?—to put sharp, vicious teeth into the Government's new economic wisdom which is the same as that of every preceding Tory Government. But even they never dared produce an equivalent to this Part IV.

For years and years we have heard of the trade gap. To-day, once again, production is being cut down and a vicious wage freeze introduced—more vicious than ever before—along with deliberately created unemployment in order to close the trade gap. But, in fact, there is no trade gap. Trading figures taken over a period show beyond doubt that British exports are more than sufficient to pay for imports. Our economic balance is £300 million and was up 9 per cent. in the first five months of 1966. A trading surplus has, in fact, been converted into a deficit by overseas military expenditure, the export of capital and periodic speculation against sterling.


My Lords, if the noble Lord would forgive me, he is making quite a unique statement. I wonder whether he could quote the figures for 1964 and 1965, to prove the point that he is making that our exports pay for our imports.


My Lords, I am sorry but I have not got them with me. But I can certainly deliver them to the noble Lord.


My Lords, perhaps the noble Lord would take it from me, as the Minister in this House responsible in this field—and perhaps I could pray in aid the noble Lord, Lord Drumalbyn—that what he has said is not accurate.


I apologies, my Lords, if that is the case, and I shall let the noble Lord know to-morrow where I got the facts.

But rather than a change of policy to correct the economic situation, Part IV is now to be enforced so that the ordinary people of Britain bear the brunt of remedying the trade gap. Not only are they to suffer a wage freeze, unemployment and uprooting from their present homes, because this Government insist on carrying on with their "Great Power East of Suez"policy—which is opposed by a very wide section of the British people—and the armaments which go with it, such as the American military aircraft costing hundreds of millions of pounds, all of which have to be borrowed, probably from America itself, but the people are being forced to suffer decreased wages since the Government have not introduced a rigid price freeze. Housewives on their daily round can substantiate this. Prices have risen and are continuing to rise. Although Mr. Stewart has incurred the displeasure of the C.B.I. by his Order concerning dry cleaning and laundry, the Government themselves have said that increases in prices or charges may be necessary because of marked increases, which cannot be absorbed in costs, of imported material, or which are due to action by the Government such as increased taxation.

If Part IV comes into force in this situation, what are the trade unions going to do? There are very loud noises from Government spokesmen, but collective bargaining may be gone for ever. Are trade unionists to bow their heads and abandon their purpose of using their organised strength to fight the employers for advances—and, if so, will people see the point of joining a trade union?

Or should they repudiate the wage freeze and carry on the fight for their members? If Part IV is implemented, they can be fined or have other penalties imposed for carrying out their functions—so where do they go from here? This Prices and Incomes Act, with its Part IV, is no solution to the economic problems of the country. It will not help anyone, and it will not be accepted by the majority of the workers, in spite of what some of their leaders say. It is bound to lead to mass struggle, and no fine or any other imposition will stop it. In the last debate on the Act we were told that the issue was above politics: that it was purely a case of patriotism. But even Lord Collison has put in a wage claim on behalf of my National Union of Agricultural Workers. He says that people must be induced to stop leaving the land because of the offer of higher wages: but the Government want redeployment, and are forcing unemployment in order to get it.

My Lords, there is an alternative solution to these present policies. The Government should effectively control prices, impose selective import controls, tighten up on the export of capital, and make drastic cuts in arms expenditure. We should return to policies which have their roots in the Prime Minister's statement to the T.U.C. in 1964—a statement which lifted the roof in acclaim, giving the people, sick and tired of the "Stop-Go" wage freeze policies of Tory Governments, a real new promise and vision. The Prime Minister said: Every major organisation here today is on record as supporting a policy of planned expansion of incomes relating to the country's rising productivity. A Labour Government will ask for this to be made a reality. Because we do not regard wages as the whipping boy of a bankrupt economic policy, we shall not as a matter of policy hold production down, cripple productivity and then try to cut the wage system to fit it. Nor shall we use unemploy- ment and family hardship as the sanction to enforce a wage freeze". My Lords, I am not alone in echoing this statement or in putting forward the solutions that I have put forward. We heard them loud at the T.U.C. at Blackpool, and at the Labour Party Conference at Brighton, and in another place Members of Parliament are putting them forward to-day.

5.42 p.m.


My Lords, I have listened with interest to what has been said in this debate, and I still come back to one point; What alternative policy is there to that which has been suggested? Nothing that has been said to-day, and nothing that was said previously in connection with the Act itself, has indicated a policy alternative to that which the Government are pursuing. It may be argued that it is a Conservative policy: that what the Government are doing is what the Conservatives have done in the past and presumably what they will do again, because they have not shown us that they would do anything different. So, in so far as that is a valid argument, one would assume the policy to have the support of Members of this House on the other side.

Just in passing, perhaps I might clear up one or two points which were made about S.E.T. being introduced to reduce spending. S.E.T. was not introduced for that purpose at all: S.E.T. was introduced in order that there should be a more efficient use of manpower, and that the people concerned, the firms concerned and the industries concerned should look carefully at what they had to pay for each man and woman they were employing to make quite certain that they were employing their labour to the greatest degree of efficiency. That was the object of S.E.T. It was not that it should just be passed on, although in some cases it might be passed on. What the Government said was that where it was not possible to absorb the whole cost, it might be necessary to pass it on to some degree by way of increased costs. I think we really ought not to be quite so loose in our expressions about the intention of a particular tax. If it does not work out in that way, that does not alter what the intention was. What has been said here this afternoon is that the object of S.E.T. was to reduce spending. It was nothing of the kind. Other measures have been introduced to reduce spending. Therefore, it is unfair that it should be argued in this particular way.

Nor do I follow the argument about laundries making clothes last longer. My wife's complaint is that they last for a good deal less time, which is a fairly general complaint, anyway. Dealing with the same point, I have found that the majority of the housewives to whom I have spoken are very glad that something has been done to check the increases in laundry prices, which have been going on for years and years out of proportion to the increases which have generally taken place in other industries. I am merely pointing out that this is what the housewives say. Housewives have been quoted this afternoon as being the judges of these things. I am quite prepared to accept their judgment.

I was interested in what Lord Cones-ford had to say about the breaking of contracts. You see all the emphasis on the employer who does not want to break a contract. In fact, what the Government have asked, particularly of the trade union side, is that they should forgo their rights under contracts, and it is true to say that, from the trade union point of view, the vast majority have accepted that and have not sought td enforce contracts. It is only in one or two instances that they have sought to enforce contracts, and where it may be suggested that the employer has thereby been encouraged by the Government to break his contract. So, if we were to be even a little fair on this matter and were to get away from the emphasis about the rule of law and the breaking of contracts, what the Government really require is that people should act in the national interest by not enforcing contracts. Because, my Lords, it is not breaking the law not to enforce a contract. That is not breaking the law.

Nor is it breaking the law, or breaking any kind of law, if a board of directors decides not to increase dividends. For there is another angle to this question of not increasing dividends. One of the objects the Government had in mind when asking firms not to increase dividends was that, at any rate to the extent they did not increase dividends, there would be more resources available for machinery and plant, and for investment generally, from the point of view of future productivity. So it cannot be said that it was entirely one-sided: and it is to the credit of the vast majority of companies that they have heeded the Government's advice and have thought it to be pretty sound. It is something that, by and large, they have been willing to do: therefore the question of enforcement has not really arisen at this particular point.

Then, my Lords, if someone tells me that boards of directors do not know what the law is, my reply is that I do not accept that, bearing in mind how very carefully Finance Acts are examined with a view to ensuring that maximum advantage is taken of every point of law. When it is suggested by the noble Lord, Lord Conesford, that these same people are so infantile that they do not know what the law provides they may do legally, I really cannot accept his argument at all. I think he is pushing his luck a little far when he suggests that all these people who have decided to accept the dividend freeze have done it because they do not know the law. I find such an argument completely ludicrous.

I think it was the noble Lord, Lord Byers, who referred to the question of productivity agreements which should have been allowed to stand. My Lords, the great difficulty about a freeze of this particular kind is this. Where it went wrong in 1961 is that it was not an attempt at a wages and prices freeze, or certainly not at a prices freeze. It was an attempt at a wages freeze which froze only the wages and the incomes of those who were unable to do anything about it, and nothing was done (and the Chancellor of the Exchequer at the time admitted that there was nothing he was able to do) with regard to those who were able to get away with it.

It is argued that the present wage freeze is full of inequalities. But, of course, it is not the wage freeze that has created the inequalities: they were there already. All the freeze has done is freeze the inequalities at a particular point. I am not arguing that it is desirable to freeze the inequalities at a particular point, but merely saying that that has been the effect of it: it has frozen them at a particular point. It has not made them greater or less: it has merely said that at this particular point in time wages and incomes, which are similar to wages, shall be frozen at a particular level. Certainly the Government do not argue that there are no inequalities. But they existed before: and I must say that so far as noble Lords opposite are concerned, I have not heard many voices raised about the general question of inequality and what ought to be done about it. Certainly, nothing tangible has been said, no policy has been produced, for dealing with this question of inequality.

Arising from this Order and the enforcement of the Order, I hope that this will be the next thing to which the Government will apply themselves: because it has been truly said that we cannot return to a free-for-all at the end of six months or twelve months. We cannot return to a free-for-all which leaves the poorest section of the community still the poorest section of the community. We must do something which will bring some degree of equality among ourselves or, at least, raise the standards of the lower paid workers to the point where they may live in a degree of comfort which this affluent society ought to be able to provide for them. I hope that noble Lords, and the country generally, will turn their attention to what we ought to do to iron out the inequalities now frozen, so that they do not recur at the end of twelve months. If we were to do so then I think we should be doing rather more service than we are in attacking the policy as it is, and as it is being enforced, at the present time.

I cannot help thinking about the crocodile tears shed over the curbing of the trade unions. The fact is that Conservatives in general rather welcome this. The comment I heard was: "We have got a Labour Government doing our job for us. This is marvellous!" Then they begin to appreciate the other consequences: that curbing prices was certainly not in line with Conservative policy which has generally been concerned with what you can get: the more you can get, the more profits you can make, the more laudable the objective. But when they realised that the Government intended business, that they were not intending just to put a curb on wages and incomes but were intending also to put a curb on prices, the Leader of the Opposition began to realise that his new- found joy in the action of the Government in curbing the trade unions was likely to have very considerable other effects which might be equally lasting, or even more lasting than the curbs on the trade unions. Consequently, we now find a good deal of sympathy expressed for the trade unions. I do not think that any responsible trade union leader will be misled by these expressions. They will be regarded as crocodile tears, whereas the real tears are being shed by the Confederation of British Industry, for example, over the freeze on laundry prices and similar matters.

I cannot help thinking, having regard to the fact that it has been said that, basically, this Order is necessary from the point of view of the law and the enforcement of the law, that nothing has been said which would lead one to suppose that the Government are pursuing the wrong course. They are doing nothing, so far as the Order is concerned, which is contrary to their declared policy. I was one of those who thought that the Order should have been introduced (or, at least, the powers should have been taken) at the time: I did not feel it was desirable to wait until some people starting breaking the voluntary arrangements before bringing in the Order. It would have been better if the Order had been in existence, because it would then have been quite clear that it was undesirable that anybody should attempt to evade what was the clear intention of Government, the clear intention of Parliament, the clear intention of the country. Because, in spite of everything that has been said about the unpopularity of the Government, in spite of the fact that some of the things they are doing are very unpopular, the fact remains that they still enjoy the confidence of the vast majority of the people of this country.

5.55 p.m.


My Lords, we have had a very wide ranging debate on what, as the noble and learned Lord, Lord Stow Hill, has said, is a comparatively narrow issue. I think it is as well to get this into strict perspective from the start. The noble Lord, Lord Stow Hill, put the question as to what would be done by the Opposition, as did the noble Lord, Lord Pargiter. But the noble Lord, Lord Stow Hill, started logically. He asked what would be done, given the present circumstances: in other words (and this is the point that we have to face at the present time), given the degree of co-operation that has been achieved in the Government's policy for incomes and prices, what is the right action for a Government to take at this time? A good deal has been said about alternative policies. I find myself in agreement with a great deal of what the noble Lord, Lord Byers, said as to what the alternative policies ought to be. But that is not what is at issue in debating this particular Order.

There is one thing on which we all appear to be in agreement: that the Order does represent a rather sad day for Britain because, for the first time in peace time, powers to control prices, wages and salaries are taken by the Government. The Prime Minister claimed credit in Washington on July 24for the fact that no other democratic Government, even in war time, had ever taken such steps with regard to prices and wages. Yet I do not think there is a single noble Lord in this House to-day who has welcomed this Order. Everybody recognizes that it is a disagreeable necessity at the best.

My noble friend, Lord Colville of Culross, quoted the Prime Minister as saying on March 10, in a B.B.C. Television "Election Forum" programme, that he thought the idea of freezing all wage claims and salary claims would be monstrously unfair. In the same programme, the Prime Minister said that once you have a law prescribing wages you are on a very slippery slope. He said it would be repugnant to all Parties in this country. My Lords, here we are on the slippery slope. This is what the House must recognise. No dialectics, however ingenious, can disguise the fact that this Order makes it possible for the Government to restrict wages in any industry, in any firm, in any sector of industry, either at the present level or to the level of July 20. In fact, the Government have already given notice that they are considering doing this in three cases which have been referred to.

Many of us recognise, and have recognised for a long time, that we shall never get ourselves out of our economic difficulties so long as we insist on paying ourselves more year by year as a matter of right, whether or not we produce more, or insist on increasing our pay by more than is justified by our increased production. Members of Governments of both Parties have been saying this for a considerable time. It is so important to bring this basic fact home to everyone in this country that if a standstill of remuneration and dividends for six months and a virtual standstill for a further six months can do so, then on balance it is worth trying and supporting in the present circumstances. It is not what we should have chosen in other circumstances: but, in the circumstances that exist, it is worth trying and supporting. In my view, it would have been much better if the lesson had been underlined not only by making exceptions in favour of genuine productivity agreements during the period of the total standstill but by giving them maximum publicity.

But industry in general has been prepared to accept, with varying degrees of reluctance, that the standstill should be complete. The trouble is that in this competitive world you can never stand still. If you are not going forwards and upwards you are going backwards and downwards. My Lords, for the rest of this year at any rate, the Government have set their face against what the country needs most: not only the making but the implementation of agreements to provide for more production with fewer employees.

In the debate on the White Paper and the Bill last August, noble Lords opposite claimed that it was impossible to distinguish between genuine and bogus productivity agreements. Yet, my Lords, surely that is precisely what must be done in the period of severe restraint: otherwise what is the period of severe restraint for? Someone must distinguish between genuine and bogus productivity agreements: and if they can do so in the second period, they can do so in the first. Steps must be taken to see that the trade union rank and file understand the need for it. There is a very great job to be done by the trade unions in this field.

I realise that to distinguish in this way may take time and there is perhaps some justification for holding the ring in the meantime. What it is really important to know, and I hope that the noble Lord will tell us, is to what extent this process is going on at present: to what extent plans are being made for productivity agreements: and, secondly, whether the Government are prepared to give their blessing to the implementation of such agreements in the period of severe restraint. It is most imporant that we should know this in the debate to-day. Of course, declining investment does not make it any easier to make such agreements. I suppose the best conditions in which to make them would be when it is possible for a firm to switch employees from one process, whether or not it is being modernised, to another new process which rising investment is making possible. Unfortunately, these are the very conditions in which temptation is strongest to get the maximum negotiating advantage from shortages of labour, especially skilled labour.

We believe that the Government have made a serious blunder in so managing the economy that investment is likely to fall next year. The Board of Trade's own estimate is by 7 or 8 per cent.: the Economist estimates the fall as likely to be 20 per cent., and the C.B.I. as between 15 per cent. and 20 per cent. But we have to take things as they are and make the best of them: and what matters is that a special effort be made now to get rid of restrictive practices which artificially prevent the maximum economic use of manpower, and by doing so increase costs and make it difficult for us to compete abroad. I suggest that it is up to the Government to give this every possible encouragement, in particular by saying to-day that the severe restraint in the New Year will not apply to genuine agreements to get rid of such practices and to concede pay increases in such cases.

The question has been asked: What part is the Prices and Incomes Board to play in this? I hope that the noble Lord will tell us, and that the Prices and Incomes Board will judge whether productivity agreements are genuine or not. I cannot see who else can.

The other weakness in the policy embodied in this Order, as was made very plain by my noble friend Lord Conesford, is that it cuts across contractual arrangements entered into before July 20. At the Labour Party Conference at Blackpool in 1961 the present Chancellor of the Exchequer proclaimed: We have always argued that wage agreements must be sacrosanct when they are reached. Now the Government are not merely overriding them by Order under Part IV, but, what is much worse, they are expecting employers to break their side of a bargain at the mere request of the Government. This is quite different from leaving it to companies to decide on dividend freezes, and what they will do in a case and whether this is a matter that is legal or not. This is a totally different matter, because here the Government can take action themselves by making an Order: but if they do not make an Order, the employer has to decide for himself, in the light of what he regards as in his own interest and the public interest, what course should be followed.

My Lords, if I may say so, I thought that the noble Lord, Lord Milford, was a bit wide of the mark when he talked about trade unions pursuing their own interests. Surely it is now becoming more accepted that there is an obligation on trade unions and employers to pursue not only their own interests but their conception of the public interest at the same time.

There is, of course, nothing wrong in two parties to a contract agreeing together to postpone the implementation of the contract. By and large, both sides of industry have shown themselves ready to do this. To say they have done so voluntarily is to stretch the meaning of the word quite a long way. They have done so, in the main, with reluctance, and often with great misgivings. They have done so because they realise that the Government have the power to enforce their policy. But, as the noble Earl, Lord Longford, said, the policy has been challenged and the Government have responded to the challenge by bringing in this Order. It is unfortunate that the challenge has taken place on an aspect of the policy which we thought was wrong—namely, the refusal of the Government to allow contractual agreements entered into before July 20 to be honoured. Nevertheless, Parliament has passed the Prices and Incomes Act, including Part IV to be brought in by Order, and I would not advise noble Lords on this side of the House to oppose the activation of Part IV by this Order in the present circumstances. But what I think we are entitled to expect is that the powers conferred should be used only against those who are deliberately setting out to wreck the Government's policy.

Had ASSET agreed to postpone the implementation of the agreement with Thorn Electrical Industries the case of Mr. L. H. Allen would almost certainly never have come before the courts: and if that case had not come before the courts, the newspaper proprietors would not have been forced to give way to the printers' unions.

What I find much more difficult to accept is that an Order should be made, we are told without consultation, or without full consultation—I am not sure—against the laundry and dry-cleaning industry, not because it had defied the policy in the White Paper so far as it could be seen: not because of any matter of urgency (which was the point raised by the noble Earl, Lord Longford), but apparently because the Prices and Incomes Board think that it could be more efficiently organised and that the best way of achieving this would be to squeeze its already exiguous profits. We cannot accept that the number of letters received by the Board of Trade, or the Department of Economic Affairs, about prices in a particular sector is a safe test of the justification for clamping a blanket Order, as the noble Lord called it, on an industry in which the Prices and Incomes Board has said there are large variations in size and efficiency and in the quality and type of service given. Yet it is a blanket Order. When the Party opposite were in Opposition we used to hear about the need for "controlling the commanding heights of the economy". Now we are to witness the control of the price of washing handkerchiefs, underpants and socks. Commanding heights, my foot!

It really is nonsense to pretend that, for psychological reasons—and this is what we suspect—each Order on wages must be balanced by an Order on prices. Whether psychological or political, those are bad reasons. Let the Government use their power sensibly and fairly and go after the real wreckers—the strong, and not the weak.

It has been pointed out that this Order does not cover dividends. We have heard dark mutterings about them, though in this debate we have not heard much about dividends. The word must have gone round. I should like the noble Lord to direct his attention to an article which appeared in the Sunday Times on October 16. (This is a little wide of the Order but, because of these mutterings, it seems to have been brought into the general debate by a side wind.) In the Sunday Times Mr. Anthony Weiss wrote that there have already been two glosses placed by the Government on the White Paper which go much beyond the original announcement. The original announcement dealt with dividends in the year starting July 20. Now dividends for the current financial year and for the last financial year seem also to be covered. As the Sunday Times says, this means quite simply that dividends will be pegged for two and a half years, except, of course, in the case of closely controlled companies, where the Government forces the companies to pay higher dividends in order that the Treasury may collect more tax.

Will the noble Lord deal with this problem? What we want to know, and what the country ought to know, is exactly what period is covered—is it the dividend within this year or those in relation to previous or current financial years? If it is all three of them, the Sunday Times is right and the freeze would be two and a half times longer on dividends than on anything else.


My Lords, perhaps I may intervene to save the noble Lord developing this point. He has not given me notice of this and he will know that it is something that I cannot answer immediately. Perhaps he could put it in another way on another occasion, when I should be happy to give a specific answer. To some extent I could answer him now, but not to the extent that he has asked me to go to this afternoon.


My Lords, I perfectly understand the noble Lord's position and I apologise to him for not giving notice, for reasons which I think he will understand. The best thing would be to put down a Question to him.

There is one other point I would put to the noble Lord. What is to happen to Orders made under Part IV when the period of severe restraint is over—that is, presumably, at the end of June, 1967? Will the Orders be withdrawn or will they continue to run until August 12, despite the fact that the thaw has started?

We are told that there will be a period of standstill up to the end of the year and then a period of six months' severe restraint. I realise that Orders may be revoked or varied at any time and that the Order already laid for prices and the Orders for wages which are at present at the notice stage may not last so long as June 30. at least in their present form. But I would suggest to the Government that it would be repugnant to our sense of fair play if firms or industries or sections of industry were to suffer a penalty in time through having an Order or direction made against them: that is, if the standstill were to run on beyond the period of severe restraint. If the Government stick to their White Paper and bring the period of severe restraint to an end on June 30, then the period should end for all in that form. I am not saying that every restriction should be completely lifted right away, but the same rules should apply to all, whether or not there has been an Order laid upon them.

While we shall not oppose this Order, we are bound to point out that, in bringing Part IV into force, the Government have got themselves and the nation on to what the Prime Minister described as "a slippery slope". We on this side have always maintained that prices and wages are quite different and that it is wrong to deal with them as if they were the same. In one respect, however, we believe that they should be treated alike—that is, they are best arranged on a contractual basis without Government interference in the long run. What we want to see in future is that contracts legally entered into are regarded by the parties as binding and enforceable at law, and that the Party which regarded them as sacrosanct when in Opposition will treat them with respect when they are in power.

6.17 p.m.


My Lords, I do not think that this is an occasion when I should follow noble Lords who have entered into the wider aspects of economic policy, unless they reflect directly on the Order which is before us and on Part IV of the Act. It seems only yesterday that we were discussing the White Paper on Productivity, Prices and Incomes and the Bill itself. Yet it is three months since we performed that task.

I think I should say at the outset that the economic measures we took on July 20, many of them unpalatable and repugnant, perhaps more so to my colleagues on this side of the House than to noble Lords opposite, are now bearing fruit. I notice that my right honourable friend the Chancellor of the Exchequer has reaffirmed his belief that we should be able to move into a surplus on our balance of payments during 1967. That was not foreseeable or conceivable in July.

Certainly we are seeing a shake-out of labour—not of unemployment, as it has been described to-day. It may well be that men are out of immediate employment, but we on this side of the House are thinking in terms of permanent unemployment, of men who cannot be re-employed within a reasonable period of time. I have not the figures with me, and speaking from memory I would point out that the regional policy which this Government adopted to cushion the effect on the development areas has meant that, whilst there has been a considerable increase of short-term unemployment in the Midlands and in those areas where there have been high pressures on labour, there has been only a marginal increase in unemployment within the development areas. This is a significant development, compared with what resulted from the financial and economic measures taken by the Party opposite during 1961, when the brunt of their measures fell upon what we now call the development areas.

I will not say that we have not still some concern, but I should like to say to the noble Lord, Lord Drumalbyn, that there is far too much talk of a slump and of our moving into a period like the mid-30s. There are no figures to substantiate this. This is journalese. It is true that we are going through a period when production is not being stimulated. But this was foreseen, because what we are discussing to-day is one of the problems that has faced every developing country. It is a problem that not only concerns us. I have just been in Canada, and it is concerning the Canadians, too. The problem is how to maintain a sustained growth with full employment without getting inflation. This is a problem not only for us. I am sure the noble Lord, Lord Byers, will agree that there are few who can put their hands upon their hearts and say: "We have a solution to this problem".

When I listened to the noble Viscount, Lord Colville of Culross, I could not help but think that he had not really done his homework. He spoke of the situation of inflation that had developed during the period of the Labour Government as though it was something new, resulting from particular pressures and demands, by wages and incomes generally outstripping productivity. I would remind the House of some recent figures—and I give them not to make any Party political point but merely to stress the seriousness of the position that faced us in July of this year. You can have pressure for a time, and balance-of-payment difficulties for a time, but you cannot have it over a sustained and consistent period. In 1961 we had an increase of incomes of £1,300 million, and productivity rose by £800 million. Therefore, for that year there was a balance—an adverse balance, you may say—of£500 million. In 1962, increased incomes were £1,100 million, and increased productivity £200 million. In 1963 we had increased incomes of £1,600 million, and increased productivity of £1,000 million, an excess of £600 million. In 1964, the last year in which noble Lords opposite were in office, we paid ourselves increased incomes of £2,300 million, and the increase in productivity was £1,500 million, a balance in excess of £800 million.

In those four years we could say that we had mortgaged our future by paying ourselves more than we earned by increased productivity to the tune of £2,800 million. That was during a period when I remember the noble Viscount, Lord Hailsham (as he then was),speaking from this Box and stressing the need of an incomes policy. It was not then referred to as an incomes policy, but as a wages policy. There was never any talk at that period that it should be related to prices, rents and the like. But it was a recognition, at least, by noble Lords opposite that one had to relate what is the major cost factor in production to increased productivity.

So in 1964, when we came to office, I suggest that we had three choices. We could have run the economy very much as the Conservative Government had done, on a basis of "Stop-Go": jerking the economy, booming at one moment and deep recession at another. But there was one significant thing: the period between "Go" and "Stop" became shorter, and the period of stop became longer. This was a fact that had to be faced. Or we could run the economy very much as we ran it during the two war periods, where you let the forces of the market prevail, and you ran it with idle machines and mass unemployment of one million or 2 million. Neither sought to create a positive policy.

None of us was under any illusion that we should be able to change deep characteristics of the trade union movement and of workers or of management overnight. But when we think back, we should recognise that we achieved considerable advances and these will stand us in good stead in the difficult months that lie ahead as we try to create and open out a policy upon which both sides of industry can negotiate future wage agreements. We had the Declaration of Intent. I think this is the first time that both sides of industry have come together and recognised that there was a need for a policy. Then later we agreed the methods and criteria of that policy. From those agreements came the National Board of Prices and Incomes, which was to review the individual cases that might he referred to it by the Government and by the N.E.D.C. to look at the general trends.

Here I would, if I may, pay a special tribute to the two organisations that represent management and employers, on the one hand, and the T.U.C., on the other. In my Party we tend to recognise the pressures that bear upon us as a democratic body. The pressures are considerable when you are at the top. This equally applies to the C.B.I. I think we should pay a great tribute to those men and women, wherever they may be, who have played a major role in the form of the C.B.I. and the T.U.C. in their discussions and negotiations with the Government over this policy. But having created the National Board of Prices and Incomes and N.E.D.C., it was recognised that one had to go a stage further, and that there was need for an early warning system. And under this the increases in prices became the responsibility, and was accepted as such, of the C.B.I., and increases in wages became the responsibility of the T.U.C.

In the field of prices, we must give this credit. There has been a marked success. Certainly there have been rises: but in most cases, if the true costs had been passed on to the consumer, the rises would have been infinitely greater than they were. There may have been one or two companies that sought to make a sharp profit. But I think we should recognise that, by and large, industry played its part and acknowledged its responsibilities through the declaration of intent. I wish I could say the same in regard to incomes.

We cannot get away from the fact that during the twelve months to April. 1966, all forms of income rose by 10 per cent. over the previous year: and my noble friend the Leader of the House related that to the increased productivity of some 2½ to 3 per cent. This is a fact that no one in this House, nor the Government, can possibly avoid. The causes were there: the shortage of labour—and we had a great discussion with the noble Lord. Lord Byers, during the year—and the movement to the 40-hour week. The pressures on the economy internally through this and other factors created a serious economic situation in July, which we have already discussed. The freeze, the standstill in wages and the severe restraint for the following six months formed an integral part of the economic measures that the Government thought were necessary on July 20.

I have listened to all the economic debates in your Lordships' House since then. I have heard criticism of the way in which we have proceeded. I have not yet heard one speech from any quarter of this House that has ever suggested that the Government had any alternative, other than to let it slip, with all the dire consequences not only to the nation itself but to all those who are members of the sterling area, and well beyond them. There has been no suggestion by anyone that there was an alternative to the measures that were taken by the Government then. True, you can make your criticism now, but you could not make it then.


My Lords, I am sorry to interrupt the noble Lord, but I do not quite know what he is trying to say. Of course everybody accepted that on July 20 we were in such a dreadful mess that very serious decisions had to be taken which would deflate the economy. We all recognised that and we agreed that such measures should be taken, but from that moment we on these Benches always said that the introduction of compulsion into the wages and prices standstill was not the way to do it.


Right: but the noble Lord has not suggested that there was an alternative. What he is now quibbling about is whether the voluntary system should have continued, whether it would have worked or whether it was necessary to bring in compulsion. First of all we brought in the freeze. We tried to have it as a voluntary agreement and a voluntary process. I should have thought that 99 per cent. of the country support that policy, except perhaps the noble Lord, Lord Milford, and his Party. However, when we came to the month of September, when a number of individuals and a very small number of organisations were going directly to challenge this view—in other words, to go quite contrary to what, as I have said, was the general view and acceptance of the country—then I would suggest that it was necessary to take powers of compulsion, not over the broad field but only to deal with that small number of people, in order to protect the vast majority. Once this freeze was broken, I think it is quite obvious what would have happened, because it has happened in the past. Past history will show that where one can get an agreement for a period it needs only one person to break it and everyone then says, "Why should we stand back?" I do not believe that, apart from a very small majority—


A small minority.


I am sorry; I must not get the majorities and minorities mixed up at this stage of the evening. My experience among my working friends is that they would have welcomed it if the Government had brought in these compulsory powers at the beginning.


My Lords, may I just intervene for a moment? I think if the noble Lord, Lord Shepherd, were quoted out of context in saying that only a small minority object to the compulsory powers, that would certainly not reflect the view in this country. We all object to the compulsory powers but we do recognise the need, in the present circumstances, for them.


I am glad that at this stage of the evening the noble Lord, Lord Drumalbyn, and I can stand united. He has used words which I would agree with.

I do not want to speak for too long and I am conscious that I have been letting my tongue run too fast and too long, but may I deal with the one point raised by the noble Lord, Lord Milford, because it is something that must be made absolutely clear? There are certain persons like the noble Lord, Lord Milford, who would lead us to believe that trade union leaders and shop stewards overnight, because of Part IV, are going to find themselves in gaol. If the noble Lord, Lord Milford, wants to go to gaol there will be nothing to stop him, but there are various stages which he will have to go through, and if I may I should like to spell them out.

First of all, he has to give a direct incitement to his employer, such as a strike, in order to get his increase. That is the first stage. Then there is a question of consultation. Then there is the statutory period of 14 days for making an Order: then there is the making of an Order, which would be subject to a Prayer in your Lordships' House: and then, before you could take the case to the courts you would have to go to the Attorney General, and I can assure the noble Lord that the Attorney General would look very carefully before he decided to send someone to the court. There must be an overriding case. But if the noble Lord and his friends still persisted there would be a prosecution. He might then be fined and then, if he still wanted to go to prison, he would go there merely by refusing to pay the fine. But I assure the noble Lord that, even if he wanted to be the great martyr in this field, there is a Bill coming along very shortly called the Criminal Justice Bill which will find a way of preventing him from going to gaol and of getting the money from him in payment of a fine.


My Lords, the noble Lord has surely forgotten the final step, which is that it is much easier to escape from prison nowadays.


The noble Lord, Lord Byers, may be right, but he must not cause too much excitement and hope among the prisoners. I gather that if you have a bit of initiative and a large sum of cash there is the possibility of escape, but I do not think we should overstress this. In any case, I am quite sure that if the noble Lord, Lord Milford, really worked hard to get through all these stages into prison he would be unlikely to attempt to escape.

I will now move on quickly to the point that was made by the noble Lord, Lord Conesford, on behalf of his noble and learned friend Lord Dilhorne. I was very interested indeed to see the letter that the noble and learned Viscount, Lord Dilhorne, wrote to the Press. I gathered from the speech made by the noble Lord, Lord Conesford, that he did not think there was much in it. May I say to the noble Lord that he is quite right: there is nothing in it. I would refer the noble Lord to the Interpretation Act 1889, Section 37. I do not propose to read it: I believe he knows what I am referring to. However I cannot resist saying this, and although I am afraid the noble and learned Viscount, Lord Dilhorne, is not here, perhaps the noble Lord, Lord Conesford, would refer it to him to-morrow: I would refer him to the Restrictive Trade Practices Act 1956, Section 27, which says: This Part of this Act shall come into force on the expiration of the period of three months beginning with the date of the passing of this Act. That dealt with Parts I and II of that particular Act, and then we come to Part III, where Section 28(6) says: This section shall come into force on such a date as may be appointed by Order made by the Board of Trade by Statutory Instrument.


My Lords, may I say that the noble Lord is quite right, that I do not think the point would prevail, and I gave my reasons for saying so: but on behalf of my noble and learned friend Lord Dilhorne I would say that I do not think he missed this point and I do not think he was at all unaware of the Interpretation Act. A point of distinction in this case is that it is an Order in Council and therefore I do not think the section quoted by the noble Lord is an exact parallel.


The point I really wanted to pull the noble and learned Viscount's leg about is that when that particular Act was passed he was the Attorney General. I hope the noble Lord will remind him of it. I think I should draw the House's attention to the Report of our Select Committee which refers to the fact that there were representations that the Order might be ultra vires. I have had very careful discussions with the Law Officers of the Government and we are quite sure that all is well there.

The noble Lord, Lord Conesford, also spoke about dividends. He is quite right in saying that the Government have no power in Part IV in regard to dividends. But there are powers within Part II, where the Government have the power, of course, to call for information when dividends are raised. The noble Lord also drew our attention to a reply that was given by the Chief Secretary of the Treasury, and he put, I thought, a rather sinister reflection upon the words that "no further action is called for"—as though action were possible. It is perfectly true that within this particular Act no action could be taken, but I think we should have it quite clear that if it came to public knowledge that certain companies were raising their dividends on a major scale certain questions would arise as to the profits of that company, and from that there might well be a decision whether, in view of the profits and the turnover, the operations of that organisation should not, in the public interest, be sent to the Board of Prices and Incomes. I think I should say that merely to clear up the situation.


My Lords that is a very serious threat. I thought everybody had been saying that the greatest test of efficiency is the making of profit. It would follow that a company making a big profit was proving itself to be very efficient, in normal economic terms, and I cannot see why the representative of the Government is now making threats like that, quite new threats; I have never heard that before from anyone.


I am not making threats. I am merely saying what is the fact; that if a company, through great efficiency, great development, great organisation, develops its operations and has an increase of its profits and is satisfactory, it may well be (and I think this has been generally accepted by the C.B.I.), that there is a case for the third party—and I think this was part of the Declaration of Intent; that companies, through increased productivity, should attempt to bring down their prices. If the Prices and Incomes Board came forward with a report to the benefit of a company there is nothing to be lost.


My Lords, perhaps I may interrupt the noble Lord. He is on very dangerous ground here. He is surely importing into this argument the right of the Government to send to the Prices and Incomes Board the scrutiny not of prices but of profits. This is an entirely new departure, a new policy, and I do not believe there is any possible legal right to do that.


The noble Lord was perfectly right to answer what I said about dividends. I agree with the interventions made by noble Lords on the subject of profits. What on earth has that got to do with dividends? If the profit is too big, how is it affected by what the dividend is, which is a totally different question?


May I say to the noble Lord, Lord Byers, that I was not making any threat or saying that the Prices and Incomes Board would be involved in the question of dividends, because to the best of my knowledge they have no responsibility and no call upon it. I have just received a note which I am glad corrects and puts us both wrong: dividends can be referred to the Board, not profits: so we are really going round in circles. But at least my case is a little stronger. If a company increases dividends it can be referred to the Board. As I have been corrected by the pigeon that occasionally flies across your Lordships' House, whilst profits are not a question for the Board, clearly it is the intention that where a certain organisation's or industry's affairs are not satisfactory they should be sent to the Board.

If I may I should like to say one word about productivity agreements, in which the noble Lord, Lord Byers, is very interested, and which the noble Viscount, Lord Colville of Culross, also mentioned. I would refer the noble Lords to the White Paper, Cmnd. 2639, laying down prices and incomes policy. Paragraph 15(1) of that Paper says: Exceptional pay increases should be confined to the following circumstances: where the employees concerned, for example, by accepting more exacting work or a major change in working practices, make a direct contribution towards increasing productivity in the particular firm or industry. Even in such cases some of the benefit should accrue to the community as a whole in the form of lower prices. I do not know whether the noble Lord, Lord Byers, has read—I will send it to him if he has not—a document produced by the Trades Union Congress on productivity bargaining. There are some very cold words on page 1: Moreover, productivity is notoriously difficult to measure or even assess. In general negotiations take place against the background of changes that have already taken place in a firm or industry. Recent years have however seen a growing number of agreements which take future changes into account; that is to say, in anticipation of improvements in the productivity of the industry agreement is reached on improved earnings, security of employment, hours of work and other conditions. Many of these agreements have been called productivity bargaining but it is doubtful if they deserve that title.


My Lords, the noble Lord will remember that on every occasion I have spoken I have referred to genuine productivity agreements, and I have pleaded that the Prices and Incomes Board should be the arbiter.


As the noble Lord will be aware, the Government did send four productivity agreements to the Prices and Incomes Board, and asked them to go into the whole matter thoroughly to see whether there was not something to be learned from them, so that when we move forward out of the period of standstill to the period of severe restraint, and then onwards, we have something really to get our teeth into. But I think I should say that, whatever productivity agreements are made in the future, they must be properly costed. Far too rarely are these agreements, entered into on both sides, costed in such a way that clearly there is advantage to the worker, advantage to the organisation, leaving the balance for the community. In the Government's view, productivity agreements, particularly for the restraint period, should clearly show that there is a direct link between the productivity and increased pay, and not—and I stress this—payment in advance.

The noble Lord, Lord Redesdale, the noble Viscount, Lord Colville of Culross, and my noble friend Lord Citrine, spoke of the famous laundry Order. In view of the time, I will not go into all the circumstances, but I will say this: that there have been wide and persistent complaints in regard to charges. The noble Lord makes a mouthing operation, asking how many. I cannot see that information in my brief immediately, but I will communicate with him. I am told that there have been wide and persistent complaints. The Order has been made, an inquiry is now being undertaken, and if the case is as the noble Lord says, that you can wear a white sheet, I am quite sure that the Order will be amended.

There has been criticism—this is particularly a concern of my noble friend Lord Citrine—in regard to discussions. I know that there have been complaints by the C.B.I. May I make it clear that there is no statutory requirement for consultation, but there has been built up an understanding between the C.B.I. and the T.U.C. that there should be consultations. I understand that consultations did take place, but in the view of the C.B.I. they were not of such a nature or over such a length of period as to satisfy them as being consultations. I understand that the First Secretary in another place this afternoon has given a clear assurance that in future consultations will be entered into on a basis satisfactory to all parties. He has also stressed—and this I think will meet the general wishes of the House—that the Government's intentions to use powers under Sections 26 and 28 will be used with the greatest selectivity. We shall use them with the utmost reluctance.

I am quite sure that a number of points have been made to which I should have replied. May I thank my noble friends Lord Stow Hill and Lord Pargiter, who I thought made one of the best winding-up speeches I have heard for a long time from our Back Benches, and other noble Lords who have taken part to-day. I will go through what has been said, and if I have not answered any points of strength I will certainly reply to them during the next two or three days.

May I conclude with this word, because one does not want to end on a negative basis. I think it is perfectly clear that the country does not want to go back to the scramble of incomes. Far too many of our people have paid the price for it. Quite clearly, we have to get a new basis, a new agreement on an incomes policy related to productivity and prices. The Government are now in urgent and deep discussions with both sides of industry. We should like to discuss all these matters with all possible interested parties.

As one who may have some influence in regard to what takes place and is debated in your Lordships' House, I would say that if some noble Lord would like to put down a Motion which would give the House an opportunity of

Resolved in the Affirmative, and Motion agreed to accordingly.

7.4 p.m.
Report of Amendments received (according to order).
House adjourned at five minutes past seven o'clock

debating a basis for a future productivity, prices and incomes policy, not on the lines of sniping at one side or the other but of coming forward with constructive ideas, I am quite sure that my noble friend the Leader of the House would willingly agree to provide time for it. In my view, it would be a better debate if it were for Members only, with the Government sitting back and listening to all that is said. Perhaps we could then get a constructive debate, with Party politics being taken out of it. I should hope that we could have such a debate. But there we are. It is quite clear that we cannot go back to the old circumstances; that we need to find a new basis. I think this will come. It has got to come.

6.55 p.m.

On Question, Whether the said Motion shall be agreed to?

Their Lordships divided: Contents, 29; Not-Contents, 10.

Beswick, L. Henderson, L. Phillips, Bs.
Blyton, L. Hilton of Upton, L. Royle, L.
Bowles, L. [Teller.] Latham, L. Shannon, E.
Burden, L. Leatherland, L. Shepherd, L.
Champion, L. Lilford, L. Snow, L.
Collison, L. Longford, E. (L. Privy Seal.) Sorensen, L. [Teller.]
Gardiner, L. (L.Chancellor.) Maelor, L. Stow Hill, L.
Greenway, L. Morris of Kenwood, L. Strabolgi, L.
Hall, V. Pargiter, L. Taylor of Mansfield, L.
Hankey, L. Peddie, L.
Airedale, L. [Teller.] Byers, L. [Teller.] Ogmore, L.
Amherst, E. Glasgow, E. Reay, L.
Asquith of Yarnbury, Bs. Monson, L. Redesdale, L.
Barrington, V.