§ 2.44 p.m.
§ LORD SHEPHERD rose to move, That the Prices and Incomes Act 1966 (Commencement of Part II) Order 1967, be approved. The noble Lord said: My Lords, I beg to move that this Order be approved, and in doing so may I also move the second Motion standing in my name on the Order Paper:
§ "That this House takes note of the Prices and Incomes Policy of Her Majesty's Government."
§ My Lords, I have always sought to be frank with your Lordships. Some weeks ago I drew attention to the congested state of business for July, and I think it was generally agreed that this was usually so in July, though some occasions were worse than others. I am quite frank when I say that this year congestion is particularly bad. I hope that we shall have completed some 102 Acts of Parliament this Session, and this will, of course, be a great credit to the House, and particularly to the noble Lords who will sit out the late hours during July. I commence with this explanation to explain why we are taking this Order this afternoon, and why I issued a House of Lords Paper detailing the Prices and Incomes (No. 2) Bill which is at present before another place. Both the Order and the Bill need to be passed by the Summer Recess, since Part IV of the Prices and Incomes Act 1966 lapses on August 11.
§ Apart from that, there are other important Bills yet to come. I hope to persuade the House not only to take the Order to-day but also to have a wide-ranging debate on the Government policy in the field of prices and incomes, and in particular the proposed legislation. I hope that, by so doing, we may perhaps agree that when the Bill comes to your 631 Lordships' House we can take the Second Reading fairly formally. And since the details of the Bill are now before the House in the form of a White Paper, I hope that it will then be possible to take the Committee stage fairly shortly after the Second Reading.
§ Certainly we will use italic notices in our daily Notices and Orders of the Day so that noble Lords may be well informed of the proposed dates, and I hope to make a Statement some time next week. I think I should also say that if noble Lords wish to put down Amendments on this House of Lords White Paper they can do so, and the Amendments will be printed and distributed in the usual way. If this course is acceptable to the House—and I sincerely hope it is—it will be possible to phase other business, and we can make the most use of the available time between now and the end of July. In concluding this explanation I think I should make it quite clear that the Order stands by itself, and that, while the Bill is closely related, in that it strengthens Part II of the Act which is activated by this Order, I am not asking the House in any way to approve the House of Lords White Paper.
§ Almost a year has now elapsed since we discussed the prices and incomes policy. That was before the enactment of the present Act. The need for legislation applying to prices and incomes was being considered in the shadows of a deep, severe national economic crisis, with very heavy pressure on sterling. Your Lordships were mindful of the problems that confronted previous Governments in trying to deal with inflationary pressures. Everyone was well aware of the surge in prices and incomes during 1964 and 1965, and of course in previous periods. The policy of prices and incomes pursued after 1964 was not intended to be a short-term policy from which one could expect immediate or large results. It represented the initiation of a longer-term effort, in the closest consultation and co-operation with managements and the unions, to develop an effective policy on a voluntary basis which was bound to require important changes of attitude.
§ This is not to say that the results of the tripartite co-operation were fruitless. The machinery for a voluntary early-warning system was worked out and has proved itself under the strains of the 632 past year of standstill and severe restraint, although one must recognise that the Government have had the wide reserve powers of Part IV of the Act. The Government, management and the unions have been able to hammer out agreement on the considerations relevant to prices and incomes behaviour. But, of course, in the application of these considerations progress was far from satisfactory, and the increases in incomes particularly were out of line with the trend of growth of real national output.
§ The twin aims last July were a reduction in the inflated level of demand and the obtaining of a breathing space from the unduly rapid rise in money incomes. The series of economic measures has achieved the first of these aims. I need hardly reiterate the results in terms of improvement of our balance of payments, including the progress made towards repayment of our external debt, but I may say that whereas in 1964 the deficit on visible trade alone was some £543 million and in 1965 some £269 million, it was reduced again in 1966 to some £110 million. For the first quarter of 1967 the deficit was some £19 million, seasonally adjusted, as compared with the average quarterly deficit in 1966 of some £28 million.
Turning to the response to the call for a standstill, I cannot help but recall the words of the noble Lord, Lord Erroll of Hale, on August 3 last year, when he said:
It is still very much in the balance whether there will be this degree of voluntary cooperation."—[OFFICIAL REPORT, Vol. 276 (No. 48), col. 1338.]
Few noble Lords, few who were concerned, would have disagreed with the noble Lord at the time. There were some 6 million workers who, under settlements already made, were expecting an increase in pay or a reduction in hours, or both, during the twelve months after July 20, 1966. These workers were being called upon to forgo the implementation of their agreement for some six months.
§ Although the Government had sought the wide reserve powers of Part IV, it was clear that the success of a standstill would depend on the extent of voluntary co-operation. It is now beyond dispute that there has been an overwhelming response to this call for a standstill and severe restraint. The credit for this lies 633 with management and the unions and the ordinary folk throughout the community. There has been a remarkable recognition of the national interest in a situation where the Government were taking severe measures to restore the basis of viability to our balance of payments. The full statistics for the first half of 1967 are not yet available, but it is clear that support for the policy of severe restraint has been widespread. The index of hourly wage-rates rose between December, 1966, and May, 1967, by nearly 2 per cent. but, of course, much of this increase was in consequence of the implementations of commitments that had been deferred under the standstill. I will return to this point in a moment.
§ It has been said that the standstill has not been applied to prices because prices continue to rise while pay has been held down. The movement of prices and pay should be considered together over the whole period since July 20, 1966. Between July and December, 1966, the retail price index rose by just under 1.5 per cent. and the hourly wage rate index was virtually unchanged. But between December, 1966, and May, 1967, the retail price index rose by under 1 per cent. while the wage rate index rose by nearly 2 per cent. Of course, no one likes to see prices rising while one's pay is stationary, but it is misleading to talk of a failure to exercise proper surveillance over prices. I need not remind your Lordships of the considerations involved in dealing with prices which are determined by world market conditions and by other seasonal factors. The economic measures taken in July included some which led to increases in prices—the purchase tax regulator and the increase in certain postal charges, to name a few. The Prime Minister made this explicitly clear on July 20 when he referred to the criteria for prices under the standstill. Of the 2½ per cent. increase in the retail price index since July, 1966, about 1 per cent. has reflected these measures and the effect of selective employment tax. Much of the remainder has been due to seasonal increases and higher rents and rates.
§ It is clear that the manufacturers have co-operated properly in standstill and severe restraint. Under the early warning arrangements proposals for price increases have been notified and have been fully examined, and in a number of 634 important cases increases have been deferred for some months—for example, in the case of bread, flour and beer—or have been postponed for the duration of the standstill or severe restraint.
§ The charge has been made that the standstill and the severe restraint periods have been wholly negative. I well recall those, in particular the noble Lord, Lord Byers, who expressed their anxiety that there would be discouragement in the field of negotiations to raise productivity. During the first six months, quite naturally, there could be no increases, whatever the circumstances might be; but during the period of severe restraint there was special provision for the implementation of new settlements under genuine productivity agreements, and since January, 1967, some 250 productivity agreements, covering over 100,000 workers, have been accepted under the criteria of Command Paper 3150.
§ Your Lordships will be aware, too, of the valuable work carried out this year by the National Board of Prices and Incomes in the study of productivity and pay. Their Report has now been issued and will no doubt be studied by all those who are interested.
§ There is another vital aspect in which the policy has not been negative; namely, the treatment of the lower-paid worker. It has been our aim to encourage priority for the consideration of the needs of the lowest paid workers, and the practical evidence of this can be summed up in the fact that since the beginning of the period of severe restraint increases in pay have been approved under the criteria for lowest-paid workers in industries employing some 2 million workers.
§ It is clear that the prices and incomes policy during the past year has been highly effective and, above all, that it has commanded widespread support, in spite of misgivings about the nature of the powers taken by the Government. The fact about the extent to which Part IV powers have been used speak for themselves. I give them because we have not had the opportunity of debating the various Orders that have been made by the Government. Fears were expressed in your Lordships' House some twelve months ago about trade union leaders going to prison. Fourteen orders 635 only have been made with regard to pay dealing with some 36,000 workers out of a total of some 23 million workers in this country. I suggest that that in itself is evidence of the widespread voluntary support of our working folk.
§ Part IV will lapse automatically on August 11. There is no question of the Government seeking to extend the Prices and Incomes Act on the lines of Part IV. There will undoubtedly be a testing time ahead now that the period of severe restraint has come to an end, but the policy in the coming twelve months is not intended to be one of severe restraint under another name. But it is a policy for moderation in prices and incomes, with a return to basically the criteria which had been worked out by management and by the unions earlier last year.
§ The important difference is that for this next year the prime interests of economic recovery and the strengthening of the balance of payments require that nobody shall have an automatic right to a minimum increase in income. As the White Paper made clear, the Government accept the desirability of maintaining priorities for encouraging settlements which promote productivity and which improve the relative position of lower-paid workers.
§ The Government believe that it is now right to return to a situation in which any reserve powers over prices and in-comes should be related to the process of examination by the National Board for Prices and Incomes. The powers under Part IV are totally different, because they are exercisable under the Government's own hand outside the process of reference to the National Board. The limited powers which the Government are now seeking are not within this process of reference to the Board.
§ Before I come to the proposals, I should like to say something about the basis of our recent discussions with the C.B.I. and T.U.C., and particularly with the latter, because there are those who have sought to establish that the Government and the T.U.C. are poles apart about the development of a productivity, prices and incomes policy. These discussions have shown that there is a great deal of common ground between the three parties. All recognise the need for moderation 636 in the coming year. The C.B.I. and the T.U.C. have accepted that decisions about prices and incomes should be related to the interests of the community as a whole—the third party to the agreement. There is no question of the Government seeking to impose a rigid policy on management and unions. The Government's aim is to work as quickly as possible towards the operation of an effective voluntary policy—recognising the determination of the C.B.I. and the T.U.C. to play their full part.
§ The main difference, particularly with the T.U.C., has been over the retention for a limited period of reserve powers. The Government have carefully weighed the views of industry, but they remain convinced that some limited powers should remain available in reserve to help to move from the rigorous restraint of the past year to the more flexible arrangements in line with longer term aims of policy.
The Government have warmly welcomed the main steps now taken by the T.U.C. to develop their wage-vetting machinery. This is one of the most notable steps in trade union history and one which reflects a growing understanding of the need for a more effective policy on prices and incomes. I would remind your Lordships of the report by the T.U.C. to their conference of executives last March, when they made it clear that:
Governments are entitled and indeed required to ensure that the attainment of these objectives (i.e. national economic and social objectives) is not jeopardised by selfish pursuit of sectional aims.
§ I will now turn to the Order and to the White Paper containing details of the Prices and Incomes Bill. In the White Paper, Prices and Incomes Policy after June 30, 1967, the Government announced their intention to activate Part II of the Prices and Incomes Act 1966. They are now doing so after consultations with the T.U.C. and the C.B.I. as is required under Section 6 of the 1966 Act. The Order is now before your Lordships' House. It provides for Part II to come into force in a period of 12 months beginning August 12, 1967. That is when Part IV of the Act lapses. The Order is required to be approved in draft by both Houses of Parliament. The new powers conferred on the Government by Clauses 1, 2 and 3 I of the Prices and Incomes (No. 2) Bill, 637 which are designed to provide a limited strengthening of the powers in Part II for a period of 12 months, are also intended to come into effect on August 12.
§ Part II of the 1966 Act gives the Government power to make orders requiring the notification of proposed increases in particular prices or charges, or increases in company distributions, or, in particular, of pay claims or awards and settlements, and for a temporary standstill to be imposed on the implementation of proposed price increases, awards and settlements referred to the National Board for Prices and Incomes.
§ Part II provides for an early-warning period of up to 30 days during which the proposed price increases, awards and settlements can be considered by the Government, and a further standstill of up to three months on the implementation of a price or pay increase which is referred to the Board. A standstill of up to three months can also be imposed on prices and pay proposals which have been referred to the Board but have not been subject to compulsory notification. In either case the stand-still is terminated at once on the publication of the Board's report. There is no statutory bar to the implementation of a price or pay increase regardless of the Board's findings. The Government have made it clear that they intend in practice to rely to the fullest extent possible on the arrangements for voluntary early-warning, and orders will not be made under Part II requiring statutory notification in any sector covered by the voluntary arrangements unless it appears to be necessary to maintain the effectiveness of these arrangements.
§ The purpose of Clauses 1, 2 and 3 and the Schedule to the Bill is temporarily to strengthen the provisions of Part II. The powers conferred by these clauses are fundamentally different from those conferred by Part IV of the 1966 Act. Under Part IV it has been possible by order to prohibit any proposed price or pay increase and, where an increase has been implemented, to enforce a return to the level ruling before July 20. These powers have been available for use by the Government at their discretion over the whole field of prices and incomes, but the powers conferred by this Bill, while they are important additions to the powers of Part II, are tied to the references to and the recommendations 638 by the Board in the particular case involved.
§ Clause 1 enables the Government to delay the implementation in part or in whole of a price or pay increase for a further period up to three months after the Board has reported—and I stress the fact that this is where such further delay is recommended by the Board. The maximum period of standstill under this clause is six months from the date of the reference to the Board, so that in some cases where statutory notification is required the total standstill could be for seven months. The power to extend the standstill after the Board has reported will, it is hoped, help to ensure that the parties concerned will have the opportunity to pay due regard to the Board's recommendation. It is important to note, however, that it will be for the Government to decide, in the light of the Board's recommendations, whether to use these powers. They are free to exercise the powers either in a manner less restrictive than recommended by the Board, or not at all. In any event, by virtue of the provisions of the Schedule to the Bill they cannot take action which is in any way more restrictive than the recommendation of the Board. Under the provisions of Part II, a standstill can be imposed only in cases where a price or pay increase has not already been implemented.
§ Clause 2 enables the Government temporarily to suspend the implementation of a price or pay increase within three months of its implementation, either at the time it is referred to the Board, or subsequently if it has already been referred to the Board on the basis of a voluntary standstill and the parties implement it while the Board is still preparing its report. In either case, the standstill will remain in force until the Board's report is published, or until three months after reference to the Board, whichever is the earlier. But it may subsequently be extended, under Clause 1, if the Board's report so recommends.
§ Clause 3 enables the Government by order, after publication of the Board's report, to suspend a price or pay increase which does not accord with the recommendations of the Board, provided that the order is made within six months from the date of reference to the Board. An 639 order may impose a standstill for up to three months.
§ Clauses 2 and 3 have been included to enable the Government to rely to the maximum extent on voluntary early warnings in the standstill arrangements. They provide only for powers which can be used to ensure that the working of the voluntary prices and incomes policy is not frustrated by the actions of those who refuse to observe its requirements. They are, in fact, an alternative to making orders under Part II requiring compulsory notification in all cases.
§ The Schedule contains a number of provisions relating to the operation of powers conferred by Clauses 1, 2 and 3. Among other things it provides that orders made under these clauses may not be more restrictive than the recommendations in the relevant report of the Board, and that such orders may be made only after the parties have had an opportunity to make representations.
§ It will be noted that Clause 6 provides that Clauses 1 to 3 of the Bill are to come into force on August 12, 1967. No order or direction can be made or given under Clauses 1 to 3 after August 11, 1968, and there is no provision for the renewal of these powers after that date. However, as was envisaged in the First Secretary's statement in another place on April 17, the Schedule provides that orders made under Clauses 1 to 3 before August 11, 1968, may continue in force beyond that date, subject to their maximum duration as limited by the clauses themselves.
§ Clauses 4 to 5 will come into force on the enactment of this Bill. Clause 4 modifies and clarifies the 1966 Act in a number of respects. In particular, it makes clear that the temporary prohibition on the implementation of awards or settlements under Part II applies in respect of any period before the standstill began, and that any contractual liability to pay an increase in respect of any period of prohibition does not automatically revive at the end of the period.
§ I now come, my Lords, to Clause 5, which I think is of particular interest. The principal purpose of Clause 5 is to give employers a defence against legal actions for the recovery of pay increases contractually due but withheld during 640 the periods of standstill and severe restraint. The success of an incomes standstill has to a considerable extent been due to the voluntary withholding of such increases by employers, and to the express or implicit acceptance of this position by the employees. In this set of circumstances there would be obvious difficulties if some employees sought to secure back payment of increases, after the end of severe restraint, by court action, or threat of court action, against their employer. It is, of course, of national importance that the benefits of the standstill and severe restraint periods should not be eroded, which they might well be if widespread retrospective payment of increases withheld in accordance with the requirements of national policy were to take place.
§ I appreciate that I have already spoken longer than I intended, but in fairness to the House, and in view of the fact that I hope we shall be taking the stages of this Bill fairly quickly, I think that I ought to take a few moments longer to speak specifically about subsection (7) of Clause 5. Clause 5 does not introduce any new principle. Your Lordships will recall that Section 30 of the Prices and Incomes Act passed last year was intended to provide a defence for employers against liability for breach of contract where pay increases were withheld from employees. The protection in that section is, however, available only in certain circumstances. In particular, it is available only in relation to pay due for the period after October 6, 1966, when Part IV was brought into force. Moreover, the protection is available only where the employer has given statutory notice in accordance with Section 30(2) of the 1966 Act. Many employers have, understandably, been unwilling to issue formal notices of this kind when their employees have, in practice, accepted a deferment. But the fact remains that where there is a contractual right to deferred increases, actions for recovery of the back pay can be instituted at any time within six years of the date of deferment.
§ It is important to bear in mind that Clause 5 relates only to the withholding of pay increases due in the period from July 21, 1966, to July 1, 1967, or before July 20, 1966, and not actually paid on that date. The clause does not prohibit 641 the payment of such increases, nor does it give any right of recovery of remuneration actually paid. What it does is to affect the position in relation to contractual liability in relation to what has actually taken place over the last 12 months. It does not alter the situation except to recognise in law the deferments which have already taken place.
§ Your Lordships will have noticed that it is proposed that the protection afforded by Clause 5 should be effective even to the extent of proceedings instituted before the enactment of the Bill. To this extent the provisions contain a retrospective element, but this is subject to two very important qualifications. In the first place, the clause cannot provide a defence in any legal proceedings instituted before June 5; that is, the date of publication of the Bill. Any proceedings started after that date are likely to be with the express intention of "beating the gun" before Clause 5 can be enacted. If there were a rush of such cases, clearly there would be a serious risk of undermining all the benefits about which I have spoken, and it would certainly have serious effects and consequences for the great majority who have loyally abided by the requirements of the policy and would feel that they were put at a disadvantage compared with those who were not prepared to co-operate.
§ The second important qualification is that the clause cannot be effective, even in cases instituted after June 5, where judgment has actually been satisfied in whole or in part before the enactment of the Bill; that is to say, there could be no question of setting aside judgments where the money has actually been paid. The Government regret having to introduce a measure involving retrospective operation on pending proceedings, but, as the House is well aware, there are statutory precedents for this, and it is only in these exceptional circumstances that we have felt it right to do it in this case.
§ Perhaps I should stress that the Government are not seeking to reverse the Court of Appeal's recent decisions in the cases of Griffiths v. The Metropolitan Police District Receiver or of Allen v. Thorn Electrical Industries Limited. Although those judgments were not made until after publication of the Bill on 642 June 5, the proceedings had been pending for many months, and the judgments have already been satisfied; that is, the money has been paid to the employees concerned. I should, however, explain to those noble Lords who may not have followed these court cases that the Court of Appeal's decisions are in fact of very limited application. They affect the interpretation of a minority of the Orders under Part IV of the 1966 Act.
§ My Lords, I hope I have covered this Order, and explained the details of the Bill contained in the White Paper. I get no joy from having to ask your Lordships to accept this class of legislation, and certainly it is repugnant to my Party; but in all the circumstances I do not believe we have an alternative. There are some who say that we should run our economy in such a way that we do not really need a prices and incomes policy, but I think those who have considered the recent past—since the last war, shall we say—will recognise that unless we have some orderly control in our incomes, in relation to our national output, we shall have no alternative but to take other measures which can result only in a much larger number of unemployed than we have experienced this year—perhaps a figure comparable to that in 1962–63; and none of us would wish to see that. Certainly, those measures would have a very savage effect upon those we might call our weaker brethren and those who live on fixed incomes.
§ I believe that if we can gain some 12 or 24 months, moving from this period of standstill to severe restraint, if we can have some orderly progress, we shall then be able to obtain a voluntary, co-operative prices and incomes policy, controlled and organised by management and by the trade unions; and since both those bodies now recognise that there should be a third party—that is, the consumer—within their agreements, I believe we could see a stable development in our economy in that particular field.
§ My Lords, in a few days we shall have an opportunity to discuss, under the Finance Bill, many other aspects of our economic policy. I do not pretend that the prices and incomes policy is the panacea for our economic difficulties, but I do believe that unless we can achieve a solution in this field none of the other 643 steps that we are taking will bring the end that we wish to see. It is with some degree of regret that I move this Order, but I certainly move it with the conviction that we have no other alternative at this present stage. My Lords, I beg to move.
§ Moved, That the Prices and Incomes Act 1966 (Commencement of Part II) Order 1967, be approved.—(Lord Shepherd.)
§ 3.25 p.m.
§ LORD ERROLL OF HALE
My Lords, I am sure that all your Lordships would wish me to thank the noble Lord who has just sat down for an extremely lucid speech and a very clear explanation of the White Paper. I would only say to noble Lords that if we do not understand it now, certainly it is not the fault of the noble Lord, Lord Shepherd, who explained it so clearly and lucidly to us. I should also like to say that I wholeheartedly endorse the noble Lord's proposals for dealing with the Bill when it actually comes to us from another place.
To me, one of the most interesting features of this Chamber, having served so long in another place, is the flexibility of our procedure which, as the Summer Recess approaches, enables us to abandon certain formulae and to compress our business so that we are able to get a move on without having to face the awful prospect of sitting into August, as we did last year. So I hope noble Lords, particularly those on this side of the House, will agree with me when I suggest that we should support the noble Lord's proposal for the expediting of the Bill when it comes our way. The noble Lord told us that something like 102 Bills had been passed through Parliament in this Session.
§ LORD SHEPHERD
My Lords, if we achieve our end, we shall have reached that number.
§ LORD ERROLL OF HALE
Let us say some 90 by now. The noble Lord seemed to take some pride in this fact. I can assure him that we on our side view the situation with the utmost dismay. Of those 102, I would say that at least 100 are bad Bills; most of them are quite incomprehensible, and those which are not incomprehensible are unnecessary.
644 Before I turn to the subject of the Bill itself, I think there is one feaure in the noble Lord's comments on the situation in general that I really ought to mention to your Lordships; that is, the pride which the noble Lord took in the improvement of the adverse balance of payments situation. I would have preferred the noble Lord to have given due credit to a factor which was quite outside the control of Her Majesty's Government; namely, the alteration in the terms of trade from 1964 to April of this year. During that time, export prices rose by something like 8 per cent., whereas import prices rose by only 1 per cent.; the resulting benefit to the balance of payments running at the rate of £300 million a year in Britain's favour.
This is a very fortunate windfall, and the Government, and indeed the country, were fortunate that there should have been a windfall of this size at this time. But do not let the Government take credit for this windfall, because if they do they will only be deceiving themselves. I listened to the noble Lord very carefully, and while I noticed that he did not in fact take full credit for the improvement in the balance of payments situation, I am very afraid that his colleagues in the Government might take the credit when in fact we have gained a windfall benefit at the expense of the less-developed countries who are selling their products to us.
Now I want to turn to the events which led up to this Bill which we are virtually discussing to-day, because I think it is important to look at the history of events in the last 18 months or so. During the last Election, we had a number of responsible statements made by the then Government on the subject of prices and incomes. Mr. Wilson, in Election Forum on March 10, 1966, said:As to the idea of freezing all wage claims, salary claims…I think this would be monstrously unfair.He won the Election on April 1, appropriately enough, and then we began to see events take shape.
Here, I should like to reassure noble Lords in all parts of the House that when things go wrong it is never the fault of the present Government. I hope that I shall not at any stage this afternoon attach any blame to the Government for things which have gone wrong. It is always 645 somebody else's fault, and, in any case, they never make any mistakes themselves. So, naturally, when in May, 1966, there was a seamen's strike, it was not the Government's fault—it was those naughty seamen who upset Britain's trading position; seamen who, probably in the main, had voted for their own Labour Government. And so we soldiered on into July, and we were assured by Ministers at that time that there was no need to take any further economy measures; that everything was perfectly all right. It was such bad luck for the Government that there were some disgusting people who went and sold sterling forward—and did it on such a scale that even the Prime Minister had to become aware of the situation. The Bank had been coping manfully with the situation by supporting the forward pound, which they had never had to do before in their whole history. It was the seriousness of the forward situation that compelled the crisis and panic measures of July, 1966—which included, for good measure, a backward swipe at the surtax payer in respect of his earnings in the previous year.
So we come to July 21, when we had placed on us both a squeeze and a freeze; and in August, 1966, the No. 1 Bill of this series was passed. A great deal was said at the time about the principle of voluntary co-operation; and I think the noble Lord opposite is not quite entitled to make the claim he has of voluntary co-operation. I have never thought much of the principle of voluntary co-operation if you have a big stick behind you to knock those into shape who do not choose to co-operate voluntarily. It is rather like saying that the speed limit of 30 m.p.h. on the roads is a voluntary one, but that if you exceed it you will be arrested and fined. That was the situation in respect of that Act. There were some who did not co-operate; and what happened? Orders were issued against them. There were no fewer than 14 of them in respect of wages claims and only one in respect of prices—and that in the field of laundry charges. That shows, in fact, how much the Government are really concerned with the relative order of importance of the country's economic affairs. They took a great bang at the laundry industry. That was their contribution towards economic stability in 1966–67. So do not let us believe too much this story of voluntary co-operation. 646 It was voluntary only because the Government had powers of compulsion under the Act and did not hesitate to use them, whenever they wanted to.
We naturally wondered how long this was going to last. We were told it was going to last for only one year and that the Act was going to die in August of this year—
§ LORD SHEPHERD
Part IV of the Act.
§ LORD ERROLL OF HALE
Yes, my Lords, Part IV. But some of us had our anxieties about the next stage, and we looked around and naturally turned to what Ministers were saying at the time. Mr. Wilson, on October 6, on the B.B.C. programme "24 Hours", was asked by Mr. Harris whether there would not have to be a continuation of the powers of the Act. Mr. Wilson answered:In terms of legislative powers, No.My Lords, I know that television is a difficult medium and Ministers, perhaps, should not be chased too much on exactly what they say during such interviews. So let us turn to Mr. Stewart who by then was Minister of Economic Affairs. Speaking in his own constituency, Fulham, on October 17, 1966, Mr. Stewart said:To be exact",the powersexpire on August 11, 1967, and there is no intention of prolonging or renewing them.That seemed pretty definite. So we soldiered on during the winter. The squeeze was operating, industry was despondent, unemployment rose. We were told that the freeze was needed in order to prevent unemployment, but in fact we had unemployment and the freeze and the squeeze as well. Production was stationary or falling; the National Plan was quietly scrapped, embalmed by Mr. Stewart's expert team of embalmers; and the balance of payments was saved by the fortuitous windfall of a change in the terms of trade. Looking back, we see it is clear now that it was the squeeze that did the job and that, basically, the freeze was unnecessary. Even so, it worked imperfectly.
The selective employment tax (a bad device on its own) was nevertheless accepted as being one of the many charges that could be passed on to the customer. 647 Typically, it was one of the nationalised industries who first took advantage of this loophole and put a surcharge on all bills in British Railways hotels, thereby setting a fashion that everybody copied. Also there was the disturbing feature which I might describe as the "side-slip" where employees were leaving one firm to go to another where the rate for the same job was actually higher; and employees in the other firm moved back to the first firm who, in their turn, could offer a higher rate for a new employee. There has been a substantial degree of increased remuneration through this form of job-swapping in categories where particular skills were in short supply, whether shorthand-typists, telephone operators, draughtsmen, or what you will. There has been a considerable degree of salary inflation in that way, with people needlessly changing their jobs in order to get more money.
My Lords, there was a glorious moment of light relief about which I should remind your Lordships. It was in regard to poor Miss Lee and her pay rise that never was. There she was, promoted from being Parliamentary Secretary to Minister of State, confidently thinking she was going to get the rate for the job; which she did not. Noble Lords opposite dissent; but it was quite clear, because it would have been announced at the time that she was not to get the pay rise. But it was only announced 48 hours later, when my colleagues in another place raised the issue. Now that the period of complete freeze is over, I hope that her great, serious and real contribution to culture will be recognised and that she will be allowed to have one of the many flexible rates now permitted for the office of Minister of State.
§ LORD SHEPHERD
My Lords, knowing that the noble Lord is a generous man, particularly where ladies are concerned—and, certainly Miss Jennie Lee does not need a great deal of protection from me; she can quite well look after herself—I think we should put it on record that when my right honourable friend was appointed to the new post she was in the United States, a few thousand miles from London. I think it is on record that she was not consulted; she was merely informed of her appointment.
§ LORD ERROLL OF HALE
I still do not know that that invalidates what I have said; but I will accept what the noble Lord has said.
Having been told that there was to be no further legislation, we now find that along comes the No. 2 Bill which we have to-day in White Paper form—and next summer, the No. 3 Bill. Unlike the No. 1 Bill, this Bill, I think, really does depend on voluntary co-operation, because, at best, it merely confers on Her Majesty's Government certain delaying powers. If I have understood the noble Lord aright, if a proposed increase is voluntarily notified to the Government they can, if they wish, refer it to the P.I.B. and await its judgment. Whatever the P.I.B. decide, there can be a further delaying period only of something like three months. So it is no more than a vessel of delay. It is a Bill whose powers can be used only sparingly, it is not to result in a complete overloading of the work of the P.I.B., a Board which has a relatively small staff and which is already engaged on a number of long-term investigations. But the fact remains that if the Government were to be swamped with applications, they would either have to accept them or let them through, because only a small minority could be referred to the P.I.B., even if its staff were to be increased as rapidly as possibly.
The question therefore arises: how effective is any delaying procedure likely to be? The Times yesterday had a very serious article under the heading "Prices dam may be about to burst". It says:Early signs of a long-predicted across-the-board upward movement in consumer prices were detected yesterday as housewives started their first shopping week since the Government's six-month period of severe restraint came to an official end … A not untypical selection of varied products affected by manufacturers' recommendations of higher shop prices effective yesterday or at the week-end include …Then followed a long list of products with the names of which I will not weary your Lordships, for the list is extensive and detailed. It goes from Vaseline to chocolate biscuits, with a whole range of products in between.
§ LORD SAINSBURY
My Lords, I do not like to interrupt the noble Lord, but could he, for our enlightenment, not read 649 the list but tell us the number in relation to the 2,000 to 3,000 items stocked by the average food store?
§ LORD ERROLL OF HALE
This was only the first list but it included at least some dozen products of every-day use. They include things such as Scott's Porridge Oats; Ocean Preserving; "Epicure" branded pickle products—a complete range, doubtless of great interest to the head of a famous store whose contribution to this debate later this afternoon I am sure we shall eagerly await. The Times goes on to say:There is plenty of evidence that manufacturers generally are preparing for a round of pent-up price rises".I think that answers the noble Lord, it is not just two or three in a matter of two or three thousand; it is a matter of hundreds.
§ THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR COMMONWEALTH AFFAIRS (LORD BESWICK)
My Lords, it is an answer to noble Lords on that side of the House, too.
§ LORD ERROLL OF HALE
Yes, my Lords. So we have the prospect of a prices dam about to burst, with the Government unable to control the situation with the powers that they are about to ask your Lordships to concede to them.
§ LORD PARGITER
My Lords, may I ask the noble Lord whether he is speaking from fact or conjecture?
§ LORD ERROLL OF HALE
My Lords, I am speaking on such facts as are available at this moment; namely, that a number of manufacturers have already announced their increased or recommended prices, and it is known that many others are proposing to do so. I should have thought that fairly reliable evidence of a trend about which we ought to be aware, and which we should take into consideration in studying whether or not this Bill is likely to be effective in its purpose.
To-day, we read that the Government, as evidence of their concern in the matter, are considering setting up a number of prices commandos who are going to rush into the shops and investigate price increases. That surely shows that the Government are taking the matter seriously, 650 even if the noble Lord is not. But what on earth these commandos are going to do when they have had their little shopping spree in various supermarkets and the like, I do not know: they have no power to act at all.
§ LORD SHEPHERD
My Lords, perhaps the noble Lord, Lord Erroll of Hale, can help us, since he appears to be complaining that the Government have not taken powers. With his experience at the Board of Trade, what would the noble Lord recommend we should do in these circumstances?
§ LORD ERROLL OF HALE
My Lords, I was coming to that question, and the answer will probably take the form of my peroration—if I am not too "longwinded". I would also say it is quite plain that the Government have no possible solution, because Mr. Austen Albu, when a Minister, said: "I believe it is impossible to control prices, except for one or two". So the noble Lord, Lord Shepherd, will find that he will get very little support from his own economic Ministerial colleagues, past and present.
We are being invited to-day to discuss, with a view to passing it later, a Bill with no teeth in it; a Bill which can achieve very little and which is merely a façade. It is a sorry little Bill, and I, for one, believe that it is doomed to failure. But I am quite sure that next summer up will come the noble Lord with Bill No. 3, and there will be very good reasons why, although there was never going to be another one, there should in fact be one. This time, of course, the villains of the piece will be the oil prices, and Britain's deteriorating balance of payments. We shall be told it is these that necessitate further measures of economic stringency: next year, maybe, the corner will be turned; but this year we must have a further period of restraint—with voluntary co-operation, of course. Nevertheless, the Government must have reserve powers to deal with those who fail to co-operate.
If I sound cynical, my Lords, or sarcastic, it is because I heard all this before, in the period of the last Labour Government. This was the sort of stuff we heard from 1948 to 1951, and we are now going through it all over again. It is like some of those tired old films we see on television. The only difference is 651 that we cannot switch off this Government until the next Election.
What is wrong? Why have we this sense of lassitude, of ennui, throughout the economy? Why are industrial investments so substantially down, and the forecast down, according to the Board of Trade's own estimates? The fact is, in my belief, that Her Majesty's Government are pursuing the wrong objectives. While they preach expansion they act to stop or hinder people from doing what they want to do. This is the trouble. The Government think that by stopping people from spending their holiday money abroad—to take a light-hearted example—they are going to save money. It never seems to occur to the Government that the maximum becomes the minimum. Someone who would have taken £40 abroad, now takes £50. A businessman who used to go abroad with what he needed now takes the £20 a day to which he is entitled, and probably spends it.
The whole attitude is one of stopping people. Stop them from building offices in London, for all good reasons maybe—but stop them. Stop them from having the investment allowances, which they liked, and make them have investment grants instead. Stop people from making capital gains if they are able; and if they are successful in doing that, take away the money. Let them earn more—oh, yes!—but make quite sure that it is well and truly taxed; and then have the impertinence to tell the recipient that surtax is not a deterrent from further activity! It does not make sense. It is actions of this sort that lead to the sense of lassitude and ennui in the economy, and in the course of a brief speech I can give only one or two examples.
We, as a Conservative opposition, have a clear and constructive alternative, but I do not see why, every time the Government get themselves in a mess, we should have to burn the midnight oil working out an alternative. I remember that at the time when the selective employment tax was imposed people said: "What would you do?" And I said. "Well, we would not introduce the silly thing." That is our alternative in many cases. We have a clear and constructive alternative, but, as the noble Lord said, we are to have a general economic debate on the Finance Bill, so I will reserve for 652 that occasion what I should like to say. However, I would say this now. We believe that it is the duty of the Government of the day to create the right economic conditions, conditions in which people feel that they can get a bit more for doing a bit more and will not have it all taxed away. We believe that there should be more competition, not less; that we should not be afraid to let the inefficient firms go down, and, if necessary, let inefficient workers lose their jobs, for the time being, until they are retrained.
We believe that not only should ordinary savings be encouraged, but people should be encouraged to put their money into risk investment. It is rare to-day to see a new issue of ordinary shares. The Government's fiscal and other arrangements have made it practically impossible for a company to raise money in this way. So there is another channel for the enterprising which has been closed off. We on this side of the House believe that there should be lower taxation both on the individual and generally. Is it fully realised in your Lordships' House that the Labour Government, since they came to office, have taken away from the public an additional £1,000 million in increased taxation? Where has all the money gone? They would find it very difficult to explain where it has all gone, but we know that it has been taken from us—I repeat: an extra £1,000 million since the Labour Government came to office. It has disappeared in additional taxation.
We also believe that there should be a new deal for the trade unions. I accept that they have co-operated with the Government—and so they should: they support Labour Governments, and they ought to co-operate with them. But that should not disguise the fact that a new deal is required for trade unions. This has been detailed by us in our Election Manifesto and in the speeches of my friends subsequently. There is no time to go into that in detail.
§ LORD COOPER OF STOCKTON HEATH
My Lords, could the noble Lord, Lord Errol of Hale, give us some indication? I have read the documents and I find it difficult to understand them.
§ LORD ERROLL OF HALE
No, my Lords; I will not go into detail. I have 653 been on my feet for nearly half-an-hour, and I said that I could only sketch out the alternatives. But a new deal for the trade unions is one of our proposals. Another point is that Government expenditure simply must be reduced; and of that there is no sign. Let the people spend the money as they wish, and not have it taken away from them by the Government and spent as the Government think best.
My Lords, I have done my best to give, briefly, what will be our constructive alternative proposals to the present economic situation—the situation which noble Lords opposite have said necessitates this Bill. All I can say to your Lordships is that I think we ought to let the Government have their little Bill. It will be a dead letter in a few months.