PRICES AND INCOMES ACT 1966 (COMMENCEMENT OF PART II) ORDER 1967

HL Deb 05 July 1967 vol 284 cc657-701

3.58 p.m.

Debate resumed.

LORD HENLEY

My Lords, may I bring your Lordships back from that statement on defence to the prices and incomes policy? First of all, may I congratulate the noble Lord, Lord Shepherd, on having so skilfully brought together the three things we are talking about to-day—the Order, the White Paper on the Government's No. 2 Bill and the Motion to take note of the Government's policy on prices and incomes? We are having what in fact is a Second Reading debate on the Prices and Incomes (No. 2) Bill, but we are able to range far and wide and discuss not only what is in the Bill but what is not in it.

May I start off by saying a word or two about the Order and the No. 2 Bill which we shall be getting shortly? First of all, Liberals accept the machinery that is in this Bill and in the Order. I do not go entirely with the noble Lord, Lord Erroll of Hale, as to the previous history which led up to this state of affairs; nor can I go with him any way in his chief criticism of the Bill, which really is that it should contain no sanctions. It seems to me that there is nothing incompatible in having a voluntary system and, at the same time, having an ultimate sanction to prevent those clever boys who think that they can get away with things to their advantage from doing so. Any voluntary system must have sanctions of this kind. After all, a social club has sanctions, and that is a voluntary association, if ever there was one. If a member of a social club chooses to behave in an outrageous way to the detriment of his fellow members, then an ultimate sanction comes down on his head. This is what the Bill is doing, and it seems to me to be reasonable. It applies not only to the employers, but also to the unions.

I do not feel that the Bill will be a dead letter. I thought that the noble Lord, Lord Erroll of Hale, in his admirably racy speech, was a bit rough. It is, after all, a piece of machinery. The noble Lord may disagree with the Government for having got into the jam which necessitated them taking this action in the first place; but the Government having taken the action, I disagree with the noble Lord's version of the history. This is a piece of machinery, and it seems to me to be a perfectly reasonable piece of machinery. As I think one of my honourable friends in another place said, it is a perfectly civilised piece of machinery. I say that in spite of the fact that the noble Lord, Lord Shepherd, said that he moved the Bill with some reluctance, and even went so far as to say that he moved it with some repugnance. I do not think he need have felt that. It seems to me, so far as it goes, to be a perfectly well balanced piece of legislation. It is adequately safeguarded.

I welcome Clause 5, particularly subsection (7), as probably most of us do. I do not see why the noble Lord, Lord Shepherd, should have any great regret or repugnance about it. It is a fair and reasonable piece of machinery for what it is supposed to do, which is to provide the transition from the stringency of pre-last year, as a result of the Government's prices and incomes policy, and as such, it seems to me all right. But—and this is where I think we on these Benches feel a certain uneasiness, and indeed a disquiet—we feel that we are still getting nowhere in the whole problem of pay structure. Pay structure is really the central problem of the two things we are discussing; namely, the Order and the Bill.

On the other aspects covered by the noble Lord, Lord Erroll of Hale, such as the Government's own expenditure and the rise in prices, I should prefer to talk about those when we come to the Finance Bill in a week's time. I want to talk now about our disappointment at the fact that we do not seem to be getting anywhere with regard to this central point of pay structure. I say, also with regret, that getting nowhere seems to be one of the things which happens so much with this Government. So many people who voted for this Government expected certain things to happen which just are not happening. That is exactly the case with regard to this problem of pay structure. The Government have taken action in a number of different ways, but all the actions that they have taken—mostly small ones—seem to us on these Benches to have distorted the economy and shown no evidence anywhere of increased productivity.

I think it is reasonable to claim—and this is what the noble Lord, Lord Shepherd, said—that the Government's prices and incomes policy has so far done well, in that it has weathered this storm of crisis of July, 1965, and I think it is too early to expect the sort of results which we on these Benches wished and are disappointed have not been achieved. On the question of pay structure, and the matters that go with it—balance of payments, inflation and productivity—I think a case can be made for saying, as the noble Lord said, that it has proved itself. It has been highly effective, and some progress has been made; and some of the statistics which the noble Lord, Lord Shepherd, put forward as to prices, as well as support for the voluntary system, impressed me. Nevertheless, we on these Benches feel that the Government have, in effect, merely bought time, and that they do not seem to know what to do. It might be asked whether any of us know what to do. The problem is extremely complicated. The attempt which the Conservative Government made earlier was even more of a failure than they suggest this Government's attempt may well be. So it is not a problem that is easy to solve; and I should be the last to suggest that we on these Benches would solve it better than anybody else. But what one is doing is trying eventually to hammer out some way of getting to the bottom of the problem.

This Bill is said to be the beginning of a return from the necessary compulsion of last July. I accept that that compulsion was necessary, although I am not sure how far some of my noble friends would go with me in that respect. Nevertheless, one can cover oneself by saying that the Government should not have got into this position in the first place. Therefore, I can say that I think the Government did the right thing last July.

The noble Lord, Lord Shepherd, asked for an orderly 12 to 24 months, which is what this Bill is designed to cover, and he pointed out that support for the severe restraint has been widespread. Indeed, his figure of 14 Orders really shook me. It is a remarkable thing; I had no idea it was so small. But, again, this is a transitional policy; it is a stop-gap. The noble Lord, Lord Erroll of Hale, says: "Here we are with the No. 2 Bill; next year we shall have the No. 3 Bill." I hope he is not right or, at any rate, that when the No. 3 Bill comes along it will show the sort of wider strategy to the whole problem that we need. The Government assure us that their prices and incomes policy is not a substitute for this wider strategy, and that this Bill only prepares us for the return to the point the Government's prices and incomes policy reached last July. I hope that this is true, because if the noble Lord, Lord Erroll of Hale, is right, that this is going to be one among a whole series of Prices and Incomes Bills, this would not be what we want to see. We want some sort of wider strategic policy.

The Government want this scheme to be voluntary and effective. So do we all. The noble Lord, Lord Shepherd, said that there had been an overwhelming response in this direction. I agree with him; I think there has been. I believe that it should be voluntary, and I disagree with the noble Lord, Lord Erroll of Hale, in saying that there is incompatibility in the voluntary system having a sanction. Nor—and I say this with some backward glances to my own Benches—is "voluntary" in any way synonymous with a free-for-all. A free-for-all really is something which I feel only the dinosaurs want. I would also go further, in the context of dinosaurs, and say that the voluntary system is not synonymous, either, with the ganging up of the employers and unions to milk the public. I think the Government have this in mind, and have very strongly in mind that there is a third partner in any negotiations: not just the unions and the employers are involved, but also the public.

As regards a voluntary system (and this is where we are getting down to the problems that bother me so much, because I do not know the answer, and one can only pose the question), can an effective voluntary system be devised which prevents this aspect of negotiations, which seems to me to be a built-in part of the inflationary spiral? I refer to this collusion between the employer and union to milk the public. I cannot help the feeling, reading between the lines, that this is exactly what the employers and the union delegations do when they confront the Prices and Incomes Board. I say, "reading between the lines" because I have no evidence of it; but that is how it appears to me sometimes. It is rather like the medieval barons carving out the fiefs among themselves: the over-mighty subjects confronted by a powerless king. I know that the Government are fully aware that there is this third party. Whether the Prices and Incomes Board is the powerless king, or whether the public is the powerless king, I do not know. But, somehow or other, these two over-mighty subjects have to be got under control; and until that happens this inflationary spiral—and they are the chief cause of it—will continue.

That, of course, is the central argument against the old free collective bargaining system: that it is not, in fact, bargaining between equals, but a collusion between employers and unions to hold the public to ransom, and a collusion also in fact to present a united front to the Prices and Incomes Board. As I say, I think the Government are fully aware that this is a very important point. I suggest that it is a central point of the inflationary spiral.

The question then arises, how to devise a system which can overcome this. The Government have put forward a system which I suppose is called one of central direction. There are so many difficulties in the problem of a system of central direction that quite a number of people, who are not necessarily dinosaurs, have rejected it. The difficulties are really technical difficulties: difficulties as to whether in fact it is impossible to devise a kind of national grid for wages. There are so many different complexes coming in that this cannot be done. There is the difficulty of collusion beforehand. There are all the pitfalls that appear in trying to devise productivity agreements. Productivity agreements sound so easy—and we on these Benches are always talking about productivity agreements—but when it comes to trying to negotiate a productivity agreement all sorts of apparently insuperable problems, as noble Lords opposite will know only too well, begin to appear. I do not mean the obvious problems like devising some scheme of "blackmail" vis-à-vis a restrictive practice which ought never to have cropped up, or problems as to who deserve productivity bonuses and who do not, and the difficulty about making a straight estimation of what the future is going to be. Problems like this are all very difficult. Trying to devise a national grid for wages is also so difficult that some people have almost despaired of it.

One can swing slightly towards the central direction system; and, without being a dinosaur, one can swing slightly towards the other system—some sort of half-way house in which the old system of free collective bargaining is not left as a free-for-all, but is modified and safeguarded in such a way that it might still go on working. I think that although a very strong case has been made out against the old free collective bargaining system, it has not been totally demolished; and in so far as it has not been totally demolished there may be scope for reforming it in some other way which might well be better, and possibly more elastic, than a central direction system.

Some of my colleagues have suggested that there might be bargaining in two ways. It might be possible to have the basic wage negotiated at industrial level, where agreement reached would apply only to people on the minimum: there would be no straight increase across the board for people not on the minimum. But fringe benefits, variations in pay, overtime rates, and all matters of that kind, would be negotiated at plant level. I have no experience of this kind of negotiation, and I do not know whether it would be possible; but on the face of it it does not sound unreasonable. Indeed, if it were adopted it would cut out some of the very strong inflationary pressures for these rather over-simple straight increases across the board. That would deal with the inflationary aspect of it.

As to the other aspect, the prevention of collusion between the employer and union, I think again that one might build into this reformed form of the old free collective bargaining system some kind of anti-social practices court, which would run on the same sort of lines as the Restrictive Practices Court—something with teeth, which would effectively prevent this sort of collusion; and, at the same time, one might have some kind of supervisory board representing the public interest. The Government themselves would possibly help in providing research on the statistical side of the labour market, which would be of very great assistance.

The Government may say, and supporters of the central directive system may say, that this is just as easy to do in a central direction system. I do not know. I think that my colleagues are swinging the other way. They would prefer to try to reform the old system, with safeguards. Most important, so far as social justice is concerned (I am inclined to think that this comes into using the free collective system instead of the central one), you can probably achieve what you want in regard to social justice by means of taxation and security payments, rather than by straight wage increases across the board, large amounts of which go to people with no dependants and no very great responsibilities. So much for the egalitarian side of social justice. So far as the qualitative side of social justice is concerned—what is the value of this job as against that, and what is the value of so-and-so's contribution?—all I can say is that this is so difficult a problem that it rather reminds one of what Hamlet said in another context: "If we all got our deserts, which one of us would escape a whipping?" So far as trying to assess the value of anybody's qualitative contribution is concerned, it is so difficult to do that I think perhaps one should leave it alone—it is not something that would fit into a national grid—and try to get the same result by removing obvious injustices.

So much for the two possible ways in which one approaches that central point of the prices and incomes policy, which really is wage structure. You can look at it either way. You can probably make either of those systems work, with good will. But both of them must have teeth. So far as "taking note of the Government's Prices and Incomes policy" is concerned, as the Motion asks the House to do, what we feel (in spite of all the kind things, I hope, that I have said about the Bill, so far as it goes) is that we are very disappointed that the Government have not in fact got farther than they have done. We have had an admirable Statement of Intent, and we have had a bit of stop-gap tinkering; but I think the Government have been in long enough now to get back to something rather better.

4.20 p.m.

LORD CHAMPION

My Lords, at the beginning of this debate we had an excellent and informative speech by my noble friend, Lord Shepherd, which gave the House the information necessary for a serious consideration of the matters that are before us to-day. Then we had from the noble Lord, Lord Erroll of Hale, the delightful "cheeky chappy", frothy sort of speech that we have come to expect from him, always entertaining to listen to but seldom having very much body in it, rather like the froth on a very poor glass of beer. Following that we have had the speech from the noble Lord, Lord Henley, which I thought certainly was quite sensible in parts. I did not quite follow him in his reference to the free-for-all and the dinosaurs, but if the dinosaurs did have a free-for-all, they expired—they are no longer on the earth—and I imagine that if we, in our society, attempt to get back to anything like a free-for-all we, too, shall expire.

Criticism of the Government's incomes and prices policy seems to me to come ill from those who, in a long period in Government, failed to solve this problem—and it is a very serious problem—the problem of incomes and prices. I do not blame them for their failure. The simple fact is that no advanced industrial country in the world has yet been able to solve completely this great problem—and it undoubtedly is a great problem. I recognise, of course, that it is the job of the Opposition to oppose, but I think in addition to opposing and making the sort of speech we heard to-day from the noble Lord, Lord Erroll of Hale, it is their task to put forward serious alternatives that will stand up to examination, and I honestly do not think that the suggestions made by the noble Lord in the closing paragraphs of his speech would for a moment bear serious consideration.

What I am going to say to-day will have greater reference to the income, or wages, side of the problem than to prices. I rather hope to hear from my noble friend, Lord Sainsbury, on that aspect of the policy which we are now considering. Twenty years ago, in a paper written for a Labour Party group in the other House, I said: There is an urgent necessity for a recognition of the need for a short-term and a long-term policy which will ensure overcoming our immediate maldistribution of labour and will provide a means of solving the labour and wage problems that are the inevitable concomitant of full employment. Re-reading that, I realise that it was hardly a notable example of good English, but the sense of it was just about right, for the problems of full employment are vastly different from the problems in a situation where there is massive unemployment.

The twenty years that have intervened since I wrote those words have proved beyond a shadow of doubt that I was right: that full employment brings problems—problems of discipline in industry, problems for the employers, problems for trade unions—which we scarcely dreamed of in the years between the wars. This is something that we are attempting to tackle. I know that in the period 1945 to 1950 Sir Stafford Cripps, by a combination of the force of his personality and using the allegiance which the unions felt they owed to the Labour Government, did, for a period during the post-war Labour Government, succeed in checking the wage-price spiral. Inevitably, under the pressures which every intelligent observer understands, eventually the walls of restraint burst and we were back in the inflationary spiral. This is not only a wage-price spiral; it is also a wage-wage spiral. Perhaps I should explain that the wage-wage spiral is the leapfrogging which takes place when one union jumps over the back of another union in securing wage concessions, and the other then has its turn; and this leapfrogging can, and does, take place quite apart from the pressures imposed by the upward movement of prices.

Since 1964 the Government have, by their prices and incomes policy, made a brave attempt at solving what has up to now proved to be an intractable problem. I make no pretence, and I am sure the noble Lord, Lord Shepherd, would make no pretence, that the Government have solved the problem, but by the Declaration of Intent of 1965, the setting up of the Prices and Incomes Board and the Prices and Incomes Act 1966, and especially the drastic powers contained in Part IV of that Act, they have given us a pause. It is only a pause. But it was not only those powers that held back the flood, because the powers were taken at a time when the general public was heartily sick of the existing situation, and so there was a general social consent, besides which there was also an act of self-discipline by the unions.

Here I would completely disagree with the noble Lord, Lord Erroll of Hale. There was an act of self-discipline by the unions, despite the fact that the Government had taken reserve powers. That self-discipline was amply demonstrated by the noble Lord, Lord Shepherd, this afternoon, when he said about Part IV, that Fourteen orders only have been made dealing with pay covering some 36,000 workers out of a total employed population of some 23 million. The general atmosphere prevailing and the courageous Act of 1966 enabled trade union leaders to resist the pressures which understandably build up behind them—and just how great those pressures can be is known to everyone who has ever held a responsible position within a trade union. Here I am sure my noble friend, Lord Cooper of Stockton Heath, who holds such a position would agree with me. I think that my noble friend Lord Shepherd was right to claim on behalf of the Government that up to now there has been a fair measure of success flowing from the Government's policy. But from the Declaration of Intent to the Order in Council which we are considering to-day is very much in the short term only. To bring about a generally accepted and demonstrably long-term solution of the prices and incomes problem is the task facing us all to-day.

Freezes are usually followed by floods. I am not sure whether the noble Lord, Lord Drumalbyn, used those actual words when we were discussing this matter once before, but he certainly used words very similar to those. I agree with him absolutely that there is always the danger, when we have had this sort of thing, that eventually, when there is a thaw, there will be the sudden flowing of waters leading to floods. The question at this moment is will the dam of trade union restraint burst under the pressures already building up and will our condition soon be as bad as, or worse than, it was before the measures to which I have already referred, came into being? Now the real test begins. Within our sort of society compulsion of the kind contained in Part IV of the 1966 Act can be used for only a limited period, and I think the Government were right to recognise that fact and to act in the light of it. We have had a pause, but where do we go from here?

The T.U.C. is in process of developing its own system for securing notification and the vetting of wage claims. I wish the T.U.C. well in that great task, but one wonders whether the channels of general consent within the individual trade unions which make up the T.U.C. have been dug deep enough to enable that body to exercise the necessary authority. We have to remember in this connection that the Trades Union Congess has no power whatsoever to instruct the individual unions affiliated to it. The T.U.C. can provide the central leadership, but it cannot control the policies of the individual unions. I am hoping that out of this attempt by the T.U.C. at securing a rational wages policy will emerge not purely an advisory body, as it is at present, but one with a much greater degree of real authority. I understand that the T.U.C. does not favour the implementation of Part II of the 1966 Act, but I should have thought that the little additional time and discipline provided by the Order in Council, and the powers under the Bill which will eventually come to this House, will give the T.U.C. and the individual unions a little more time for doing what I have called "digging the channels of consent" a bit deeper than they are at the moment. I hope, too, that the T.U.C. will be able to help to develop a pay structure, the sort of pay structure mentioned by the noble Lord, Lord Henley. This is a wages policy. A wages policy includes and must, of course, contain a rational and generally accepted pay structure within it.

In the meantime the criteria for incomes behaviour set out in Command 3235 and the guidance on productivity agreements given by the Prices and Incomes Board appear to me to be just about right. But in connection with the productivity agreements I would utter this word of caution. Everyone concerned must always take into consideration the fact that not all works or industries can raise their productivity and so their wage packets, by work study, work measurement, work standards and the like. In certain types of industry the raising of productivity is comparatively easy, given the right atmosphere; but those engaged in other types of industry and the services cannot be expected to stand idly by when others are leaping ahead in their living standards—their living standards leaping ahead, that is, as a result of productivity agreements. I recognise that we have to take other things also into consideration. The demonstration, as mentioned by the Prices and Incomes Board, that a part of the result of the productivity agreements is being devoted to lower prices or the maintenance of existing prices will not be enough to keep those not directly affected quiescent. They just will not stand idly by when they see others' standards of living leaping ahead.

It is true that Article (vi) of the guide lines of the Prices and Incomes Board says: An agreement covering part of an undertaking should bear the cost of consequential increases elsewhere in the same undertaking if any have to be granted. That is excellent, as far as it goes; but the consequential increases elsewhere will stretch out far beyond the individual undertaking. To take that into consideration must somehow be the task of a body, such as I hope the T.U.C. will develop into, or perhaps the Prices and Incomes Board. That is to say, there must be a body capable of considering the effects as a whole and having the power to keep such advances under some sort of control.

I must briefly mention the fact—I suppose it is so self-evident that I scarcely need to do it, but I feel I must—that if we do not somehow manage to resume a reasonable rate of growth in our economy, the task of securing an accepable wages and incomes policy is going to be rendered well-nigh impossible. I need not overstress this. The noble Lord, Lord McCorquodale of Newton, shakes his head.

LORD MCCORQUODALE OF NEWTON

My Lords, I nodded my head.

LORD CHAMPION

My Lords, I should have said that; I should have said it was a friendly, acquiescing nod, which I welcome from the noble Lord, having regard to his knowledge of this whole matter. I hope I have put that right.

LORD ROBERTSON OF OAKRIDGE

My Lords, would the noble Lord allow me to intervene with a question? Bearing in mind what he has just said, does he feel that the prophecy that has been made by the Government with regard to the rise in wages during the coming year, which is at least twice as large as the prophesied rise in the rate of productivity, has been a helpful thing for the trade unions?

LORD CHAMPION

My Lords, it inevitably raises difficulty for the trade unions. I am not at all happy about it, I must admit. But I would also agree with something which I heard the noble Lord, Lord Boothby, say in this House recently: that a moderate inflation is inevitable, or seems to be inevitable in a situation in which there is prosperity of the whole country. I hope we shall get over that eventually, because inflation is so disastrous for certain people. I think our experience in the past is that a moderate degree of inflation has always accompanied prosperity in any country. But I just do not like it and hope we shall be able to find some means of avoiding any inflation because of the difficulties it brings.

The Government have undoubtedly suffered in popularity as a result of their incomes and prices policy. If they do succeed in this policy, even if they lose the next Election as a result, the country, in my opinion, will still owe them a great debt of gratitude, if we can solve this seemingly intractable problem. I end by wishing the Government well in this difficult task to which they have set their hands.

4.38 p.m.

LORD MCCORQUODALE OF NEWTON

My Lords, if I may say so, the whole House is indebted to the noble Lord, Lord Shepherd, for the admirable way in which he explained this measure and the reasons behind it, which the Government have announced in so many different bits of paper that it was difficult to gather them all together. We then had what I thought was a delightful, amusing and very "meaty" speech from the noble Lord, Lord Erroll of Hale. But as he seemed to be in a matter of some collusion with the noble Lord, Lord Champion, about when to leave this Chamber I do not think I had better pursue that further.

We had from the noble Lord, Lord Henley, criticism of the Government because they had not got anywhere, but then (I say this without wishing to cause any offence) he himself did not seem to get anywhere in his speech either, except to ask quite a number of questions to which he gave us no answers. I would take him up on one point. He made much If fear of collusion between the trade unions and the employers to rob the general public. But who are the trade unions and the employers? They are the general public. The trade unionists and their wives and families are, I suppose, 20 million or 25 million—more than half the population. There are I do not know how many shareholders in public companies in this country—one million or more with their wives and dependents. Indeed, they are the public. I think this nonsense about the collusion between the two sides of industry to sweat the public should be condemned once and for all. I have been in industry for forty years, and in my opinion it is quite nonsense and I have never heard a single substantiated case of it. I am sorry to get slightly hot under the collar, but I do object to industry being slandered in this way.

LORD HENLEY

My Lords, will the noble Lord allow me to interrupt him? What I stressed also—and possibly this was the more important part—was that although I had no evidence, I suspected from reading between the lines that there is a tendency for employers and unions to get "in some sort of cahoots" between themselves to decide what exactly they were going to say to the Prices and Incomes Board.

LORD MCCORQUODALE OF NEWTON

Well, my Lords, the noble Lord may have quite a bit of information about that. I have none. But from what I know of the behaviour of the British Employers' Confederation, in the old days, and the C.B.I. now, and the T.U.C., although we do agree on many important matters they are largely agreements in common sense and are not agreements to sweat or persecute any third party.

The noble Lord, Lord Champion, made one of those attractive, reasonable speeches which this House has come to expect from him, and which I think everybody enjoyed. I should have liked to be able to criticise it, but I cannot really find anything much in his speech with which I did not cordially agree, and I hope that it will be studied and read in certain quarters because it gave both management and trade unions some wise advice as to the future.

The White Paper on Prices and Incomes which the Government presented in March is, of course, the basis of this debate. The Government told us about the Orders and the Bills that provided the background for our proceedings, and I must confess at once that this statement was largely platitudinous, although many of the platitudes were quite unexceptionable. But even if I say that I think that Mr. George Woodcock was too hard on it when he described it as, "a plaything, a bauble". I think it has some substance in it, though possibly not so much as the Government hoped. Nevertheless, the White Paper was a useful guide for this next year; and I hope, as I think we all do, that some effect in steadying and moderating any excesses in demand both in regard to prices or incomes may be the result of it. If it does that, then it has my modified blessing.

But if I may say so in passing, there is one phrase in this White Paper to which I take exception. I think it deserves close attention. Possibly it slipped in by mistake, but I think it needs criticising and considering. On page 5 of the White Paper (Cmnd. 3235), which was presented in March, and which is the subject of this debate, paragraph 19, talking about incomes, says: … the continuing objective of the incomes side of the policy is to develop effective arrangements for ensuring a closer relationship between the overall growth of money incomes and the growth of national output"— of course, we all agree on that— to raise productivity and efficiency"— which I think goes without saying. Then it says: and to promote social justice". That at first sight sounds quite reasonable, but I think we should look into it a little more closely. Social justice in relation to wages and salaries has, I would suggest, almost a sinister ring. Surely history shows that in this connection social justice all too easily means the superseding of a pattern of economic rewards resulting from the play of markets courses and the efforts of people, by a pattern which is dictated by the preference of politicians. For who else is in a position to judge, and to enforce what they think is social justice?

I consider that this might be a most important step, if it were seriously undertaken, towards what has been well described as that most tyrannical of societies where all social values are dictated and subscribed to by politicians. I think that when the Government put this in, they were thinking about people on very low incomes. But social justice is not something that can be established by law in regard to wages and incomes, and yet remain a free country.

It will be recalled that the Prime Minister at the General Election, I think on March 10, 1966, said: I don't think that you can ever legislate for wages increases … once you have the law prescribing wages I think you're on a very slippery slope. It would be repugnant, I think, to all parties in the country". The Prime Minister makes some sensible and pregnant remarks. I think the great criticism, if one criticises these things, is that they so often do not get any further. But in this case I am quite sure he is right; yet three months later we had, and had to have—I am not denying it—the squeeze, the freeze, and all the unpleasant things which the economic crisis compelled upon us.

But now that we come to another stage I think we should clearly distinguish between the freeze, the stop and the period of severe restraint. What we are coming to now I would call perhaps the minimum freeze, or the minimum restraint, or, as is perhaps the popular phrase in these days, the mini-restraint. As I say, I do not myself criticise the Government for taking drastic measures last July. If criticism lay, it lay of course in permitting conditions to get so out of hand that the emergency came about.

I agree most sincerely with the noble Lord, Lord Shepherd, that the trade unions, the employers, manufacturers and industry generally, played their part in the freeze, to a large extent voluntarily, and in the way that we would expect everybody in this country to behave in a state of emergency, because whatever the Government, when we are in an emergency the country really does its best to put it right. But the period of restraint and the activation of Part II which these proposals bring about exactly contradict what the Prime Minister had in mind. They set out to fix and to legislate for State-administered wage increases, which the Prime Minister specially singled out as being impossible. We shall have such a system with us for another year. It is going to be very difficult. I am not going to condemn it, because anything which could introduce moderation must have our support; but I do not think it is a very good idea. I believe that it promotes injustice in the name of social justice. I believe that it bites arbitrarily, unevenly, and I am not sure that it is going to do anything like the Government hope it will do.

Both the Confederation of British Industry and the T.U.C. pressed the Government, when the crisis was over, to get out of the way and let the T.U.C. try out their brave vetting system, and to let manufacturers, commerce, and the like, restrain dividends and prices, so that the Government themselves could concentrate on creating the proper economic climate, under which these things might work. I say most sincerely that the T.U.C. deserve considerable credit for pledging themselves to do their utmost to make this voluntary vetting system—and it is a most difficult task—a success. It has got off to a good start, and I hope that it succeeds.

May I digress for a moment to say something about my own experience and pass to more controversial ground? When I came back to Parliament just after the war I was privileged to have many conversations on these subjects with my old war-time chief, Mr. Ernest Bevin, for whom I had the highest regard. He passionately believed in free negotiating machinery between employers and trade unions, to which of course he had given a great deal of his life. As many of your Lordships know, one of his proudest boasts was that he had never in the whole of his industrial life gone back on any agreement he had made.

He saw quite clearly that after the war, in conditions of full employment, to which the noble Lord, Lord Champion, has referred and to which we all subscribe—and nobody in his senses wants to go back to the pre-war conditions, which some of us knew in our constituencies in the 1930s—the trade unions were going to be much stronger from a bargaining point of view than the employers. He feared that this strength, if wrongly used, might wreck the system. Indeed, he strongly urged me, when I left Parliament, to do all I could with the old British Employers' Confederation to strengthen the employers' side in their bargaining power with the trade unions. He saw the danger which is at the root of a great number of our economic troubles at present: the imbalance between the great strength of the trade unions—a strength which they have rightly built up, especially in the war—and the employers, in times of full employment. But while we have full employment and the T.U.C. and the trade unions are above or outside the law, it is very difficult to combat this danger.

I have come to the conclusion, having studied the question over many years—and I believe (though I have no inside knowledge) the majority of the Royal Commission are likely to come to a similar conclusion—that the trade unions must come under the law and be legally responsible for their actions in these modern times. We are not back in the old Taf Vale days, in the year 1906. We are now surely in an adult world in which the trade unions are one of the strongest forces in the land. I do not believe that they need any longer to be in this exceptional position, as if they are frightened of the law. I believe that they should be legally responsible for their actions and that their collective agreements should in equity be legally enforceable by both sides in the industrial world. I believe that we are the only industrial country in the world where the trade unions are in this position vis-à-vis the law. I am convinced that, in practice, the legal framework would be a help, not a handicap, to both sides in achieving sensible, honourable, voluntary relationships in industry. It must encourage more thoughtful and responsible actions by both sides or both parties to any bargain. At present, no less than 90 per cent. of the stoppages in this country are unofficial. Powers of this sort under the law by the trade unions might enable them to deal with the stoppages in a way which they cannot at present.

Speeches by senior Ministers and the relaxations in this Bill have tended to suggest that our financial and economic crisis is past, or almost past. This is not so. If Mr. Stewart's estimate of a 6 per cent. rise in the scale of wages and earnings over this year is correct, then, coupled with all the difficulties overseas, in the Middle East, in Rhodesia and in other parts of the world, which cause pressures on our balance of payments, I believe that we are not yet by any means out of the wood. I urge the Government to take the necessary steps in time to see that we do not drift back into the position from which the freeze and the squeeze has just brought us clear. If and when we do get through these troubles—and we shall get through in the end; this country always does—I am quite sure that the Government's duty is to maintain the proper economic climate in the country and to allow the trade unions and the employers, both under the law, to return to a system of voluntary industrial negotiations which has served us well in the past and, with it proper understanding that education has given us, will serve us well in the future.

4.59 p.m.

LORD COOPER OF STOCKTON HEATH

My Lords, I, too, should like to pay my tribute to the noble Lord, Lord Shepherd, for the manner in which he introduced this complicated matter. But, as a practising trade union officer, I cannot help but take note of some of the advice we have had and to comment upon it. The noble Lord, Lord McCorquodale of Newton, referred to the strength of the British trade union movement. I do not really see how one assesses this strength; I think that the public are getting a little confused on the matter. We are certainly nothing like as strong as the Swedish trade union movement. We do not represent much more than 50 per cent. of the work-people in this country. I should like to see the unions much stronger, so that they could be more representative of work-people. The real point is not the strength of the trade unions, but the social aim to which all Parties pledged themselves during the war—to do all they could to provide full employment. There is an indirect strength which flows from that, but it is not the organised strength of the trade unions.

The noble Lord, Lord Erroll of Hale, referred to the "new deal" for the unions. That is a little wide of this debate, and the time to talk about that will be when the Report of the Royal Commission comes up for consideration. But, so far as I can understand it, the "deal" that the noble Lord wants to give us would be a case of encumbering us with his help. I do not think the trade union movement is asking for any help in this direction. The question of responsibility was referred to, but under any examination the trade union movement will prove to be a very responsible body indeed. I can elaborate that point. In the post-war period of full employment we have had an indirect power. A trade union cannot be in a better position to negotiate than when everybody is employed, and anybody who has had the experience of negotiating when there are 2 million unemployed will understand the point. So we have been in a very strong position. But centrally—and this is the important point—we have had enough sense to know that when the ball is at our feet we shall bring the whole economy down if we kick it too hard. We fully understand this, and during the whole of the post-war period we have behaved in a very responsible manner.

In this debate we are asked to take note of the prices and incomes policy of Her Majesty's Government, and therefore I should like to refer to the Command Paper which was published in March where the immediate aim of the Government's policy was set out in paragraph 4. The Paper states that the first objective is: to create conditions favourable to sustained economic growth and to avoid the 'stop-go' cycle. I accept the warning, which has just been uttered again by the noble Lord, Lord McCorquodale of Newton, that it is already estimated that by existing commitments earnings will go up this year by about 6 per cent., and that a 3 per cent. increase in productivity is hoped for. We now have this very real difficulty in the Middle East, and there is the trouble about oil which could easily seriously affect our balance of payments. It may well be, as the noble Lord, Lord Erroll of Hale, says, that this can cause future difficulty for us, but it is not of the Government's making. This is one of those outside, fortuitous things which happen and which have a serious bearing on what trade unions and employers ultimately have to negotiate about.

For a short time I belonged to what is referred to as "the other place". What went on there was cut-and-thrust, but here—there are ladies here, so I cannot say that we are gentlemanly, but the kid gloves are on. Now and again there is the odd aberration here, and colleagues who were in the other House are sometimes as political as ever they were. But I am sure that this is the value of the Lords. We are gradually getting more trade unionists in here, which is a good thing in establishing a balance. I see captains of industry on both sides of the House, and this is all to the good. But there is a difference in the confidence of the politician as to how he is going to sort things out.

I think our position in this country, if we can only rally and organise ourselves, is absolutely marvellous, because there is a willingness on the part of both the T.U.C. and the C.B.I. to do all they can to get this country economically viable. But when you start talking about how to do it—I was sitting on "Neddy" this morning, and the day before we had a joint meeting with the C.B.I.—you come up against difficulties. As we all know, in recent years we have had two plans, and other plans are being considered now, all with a different basis. How are we to do it? The noble Lord, Lord Erroll of Hale, alleges—I do not know whether it is true—that the export market has moved in our favour. Nevertheless, British industry—and it is British industry which in the last resort sells the goods—has done a good job. If it is quite as easy as the noble Lord suggests, we should have done a lot more. But we do not want to be critical about this matter. British industry has done a marvellous job on export growth in recent years, but not good enough to get over the awful trouble of having these balance of payments crises from time to time.

The next objective of the Government, as set out in paragraph 4 of the Command Paper, is: To work as quickly as possible, consistent with the considerations set out in (i), towards the operation of an effective policy on a voluntary basis in agreement particularly with the Confederation of British Industry and the Trades Union Congress. Set against that—and this is the subject upon which I want to spend my time—is the attitude of the trade unions, and the T.U.C. in particular. There is no doubt about where they stand; they want "voluntaryism", and they want it absolutely. This has been made quite clear and is understood, and the wish of the Government that we should work towards "voluntaryism" has been well expressed in speeches by the Prime Minister and by the First Secretary of State. The Government have paid tribute, as has also been done this afternoon, to both sides of industry who have worked and given every endeavour in support of the whole policy. I think I should pronounce here that it is not just an incomes policy; it is a productivity, prices and incomes policy.

LORD McCORQUODALE OF NEWTON

My Lords, I wonder whether I may interrupt. I hope the noble Lord will agree with me that in spite of this working together there has been no collusion to "sweat" third parties, as was suggested.

LORD COOPER OF STOCKTON HEATH

My Lords, I understood the comment of the noble Lord, Lord Henley. This is a new situation, and this is the trouble when we are moving into new situations all the time, especially on this subject. When the Prices and Incomes Board—and they are feeling their way—set up about six to eight hurdles over which you have to jump before you can get a productivity agreement approved, it forces employers and work-people almost into a straitjacket of negotiations, because though they may negotiate freely they know that ultimately they may well have to go to the Prices and Incomes Board to justify that agreement. Therefore, they have to look into factors of justification to which they normally would not have regard, and about which there may be great merit. This is not a plot against the community, but it is rather interesting. This is my theme. As I see industry, employers and labour are coming together more and more, as they must do, and we appreciate that they must do, if we are to get out of our difficulties.

As a measure of the way management and work-people have worked together on restraint, we find that wages hardly moved at all during the period of the six months' standstill, and during the whole of 1966 dividends were just less than they were in 1965. This gives us a reasonable measure of how genuine the effort has been. But throughout this policy the T.U.C. have said that the restraint can work only on the basis of consent, and they have always resisted legal provisions. When the first restrictions came in, in, I think, September, 1965, the T.U.C. accepted the equivalent of Clause 2, but the argument now is that, having had long experience, they feel that it is better to be completely free and not to have this reserve legislation.

The main preoccupation of the T.U.C. in regard to the incomes policy, however, is with the development of a long-term policy. Generally, we take the view that few people now argue against having a productivity, prices and incomes policy. Although I appreciate what the noble Lord, Lord McCorquodale of Newton, has said about his town in regard to collective bargaining, I do not feel that either the employers or the trade unions in this country can take pride in the post-war achievements in negotiation. Because, as the noble Lord, Lord Henley, has said, it is not happening just now; it has been happening since 1945—a distorted wage pattern; and with every phase of wage increase that wage pattern has become more and more distorted.

This may well seem self-criticism, but there is much more to it than that. Because of full employment, as everyone knows, we have had areas in this country in which there has been an excessive shortage of labour, with the inevitable result that without the trade unions' lifting their hands wages in those areas have gone up; and we have had other areas where there has been excess labour and where, therefore, the wages have not moved. I have often said—I say it without fear of contradiction, and it can be confirmed by a little search—that often it is the case that a man's wages are dependent on where he lives, and not on what his job is. In this country, for the same job there can be £5 a week difference in wage, according to the geographical area in which a man lives. I call that a distorted wage pattern; and I would say that under a voluntary system neither the employers nor the trade unions can get out of that. This is the market controlling the situation. "Leapfrogging" has been referred to, but in many other ways it would be difficult, unless you can get comprehensive control, national control, over collective bargaining. That is the only way.

LORD HENLEY

My Lords, would the noble Lord agree that we might have the best of both worlds by having the basic rate agreed at industry level and fringe benefits and all other minor changes negotiated at plant level? This, of course, would get over what the noble Lord has been saying about the regional differences.

LORD COOPER OF STOCKTON HEATH

For many other reasons I think we are going to turn back again and move from the centre to the plant level. But, again, we cannot talk of British industry wages like this, because if we take one industry, such as engineering, with perhaps 3½ million people, we see that their basic rate did not mean anything, and everything was negotiated on the shop floor. On the other hand, if we take other industries, like the chemical industry, we find that they had a pretty tidy pattern nationally, and therefore the shop floor became less significant. But it is very difficult to generalise. But I will just proceed on the objectives of the T.U.C., which I think the House will find of interest because it gives an indication, at least, of how people are thinking. Whether it is the perfect answer, whether it is going to work, is another matter, but it is an indication of how people are thinking.

First of all, the T.U.C. were able to get approval for their proposed scheme of dealing with wages at a conference of executives of unions held in March of this year; and it was approved by 90 per cent. Roughly, this is their positive approach to this problem. The T.U.C. would want, in the autumn of every year, to have discussion with the Department of Economic Affairs—and this, I think, is about the place where community interests can be brought into consideration. They would also wish to have discussions with the C.B.I.; and the purpose of these discussions would be very similar to the exercise that takes place in Sweden every other year, I think it is—namely, to try to make a reasonable assessment of what the economy can afford by way of incomes distribution. They would not take any power away from any of the unions from the point of view of collective bargaining. All they would expect the unions to do would be to behave in a civilised manner and conform to the collective view of what is reasonable from the point of view of the economy—and they want to operate this system without any form of legal sanction.

As I have said, they would give this consideration in the autumn of the year. They would take their views for collective consideration to the whole of the executives of the unions, as they have been doing lately; and this would be in the following spring. Then, if that was approved by the unions—and this is the control—if the unions, collectively through their executives, accepted the assessment worked out by the T.U.C., then the T.U.C., through its Incomes Policy Committee, would endeavour to implement this kind of arrangement.

I do not want to go into a lot of detail, but in this there is a great prospect for the social justice that was referred to by the noble Lord, Lord McCorquodale of Newton; and, in fact, it can be demonstrated that in the standstill and in the period of severe restraint the lower paid have been catching up. For instance, the Prices and Incomes Board have issued a report on Government manuals which is rather a dramatic thing and which has now been implemented. It will mean considerable increases for those who have up to now been regarded as low-paid workers. They have also issued a report with regard to municipal employees and gas, water and electricity employees. They are very interesting reports, and show very good and positive work by the Prices and Incomes Board.

To come back again to the policy of the T.U.C., they would envisage, first, a conference in the autumn, followed by a meeting of executives in the spring to approve what they have decided. Now this policy, which has been accepted by the trade union movement and therefore will be attempted, will give an indication only this coming autumn, and will be approved only in March of next year. I am not making a clever point, but am simply saying that without the proposed legislation we are in No-man's-land. There is no T.U.C. policy. We are trying to carry out the Prices and Incomes Board's standard through the T.U.C. but, if I may say so, with much more flexibility, because I believe that our General Secretary is absolutely right when he says that we understand this job better than anybody else; we have been doing it for many years. People must not minimise the detail of difficulty that exists in the industrial scene; and this will never be done by legislation.

On the other hand, my personal view is that I go with the T.U.C. collectively 100 per cent. for "voluntaryism". I would fight to the last ditch for "voluntaryism". However, there is this problem. I thought Part IV had been activated only five times, but I think it was said to be fourteen times; but it is a very small number, affecting only a very limited number of people. So again the voluntary system did extremely well. I think the object of the Government has been made clear: that in activating Part II they feel they are contributing to a long-term solution by putting a prop underneath the T.U.C.'s policy during the period when the T.U.C.'s policy is finding its feet.

I have referred to the dangers of inflation in the present year, and it is going to be a great problem to hold the fort, if I may put it that way. It would be a tragedy if, after the wage standstill, or the incomes standstill, and then the period of restraint, the whole thing "bust" and we went back to square one. If we did, we should probably have to start the process all over again, and that would be awful. So my view—and I say it very sincerely—is that no well-conducted union has anything to fear from Part II. The policy the T.U.C. are operating now is a policy that any trade union can easily be made aware of, because it means this at the present time. If a trade union wants to promote a case, it first puts that case to the T.U.C., who make a judgment on it. If the union gets approval by the T.U.C., it has nothing to worry about. But if it does not get approval and ignores the T.U.C., and goes ahead with an extravagant claim, what is to be done in face of that kind of behaviour? In my view, this is a form of anarchy which we cannot afford in our industrial situation at the moment. Therefore, while the T.U.C. go for absolute "voluntaryism"—and, after all, we are a negotiating body, so we still keep a little bit up our sleeve—nevertheless, for my part, I do not feel strongly against the Government for taking and providing this reserve power.

I have spent most of my time describing the endeavours of the T.U.C. in what is a dramatic revolution in thought and action in relation to wage determination. I appreciate all that the noble Lord, Lord McCorquodale of Newton, has said, but I firmly believe we are moving in very considerably changing times. If we are to give our workpeople full employment and security, I think the community are entitled to expect in return that the workers should accept a measure of restraint—not that they should be pushed too far, but that they should be willing to accept improvements which are relevant to the need to increase production. If we stick to that principle, then I think there is a chance that we shall get through our difficulties. In this brave new world I would fight, as I have said, for consent and the voluntary principle; but should this fail, I think the Government, any Government, are entitled to powers to make their intervention possible.

5.21 p.m.

LORD SAINSBURY

My Lords, in a debate such as we are having this afternoon it is difficult not to mention points that have been covered by previous speakers. I therefore apologise for so doing. Further, I am very conscious of the fact that I follow my noble friend who is one of the great trade union leaders of the present time and that, in my turn, I am followed by the noble Lord, Lord Citrine, one of the great trade union leaders of an earlier period. Therefore, I have a sense of humility and the feeling that perhaps I should not talk about a wages or incomes policy at all.

My Lords, I strongly support the Government's prices and incomes policy; I believe that such a policy is essential if we are to eliminate our balance-of-payments deficit and to achieve a steady economic growth. As has been pointed out several times during the course of the debate, the prices and incomes policy has three phases: first, total freeze; secondly, severe restraint; and, thirdly, the phase we are now entering into, one of moderation. The first two phases, in my opinion, have achieved considerable success. The noble Lord, Lord Erroll of Hale, whose speech was aptly and very kindly referred to by my noble friend Lord Champion, tried hard to show that the prices and incomes policy so far has not brought any real results. In spite of his usual debating skill, he did not make out a very convincing case—and this is not really surprising, because the facts are not on his side.

What are the facts? They are that between July, 1966, and May, 1967, prices rose by less than 2½ per cent. in spite of the effects of increased taxation, compared with approximately 3½ per cent. in the previous corresponding period. Earnings in the same period rose by less than 1 per cent. Let us turn our minds back. How different a picture is this from the one that faced us in the debate on the July measures! Then, hourly earnings were up by 10 per cent., and prices by 4½ per cent. But statistics are only part of the story. I believe that on both sides of industry there has been an acceptance of the need to restrain inflation and a constant willingness to try to work out, with the Government, the best means of achieving this end. The deterioration in industrial relations, so frequently predicted by opponents of the prices and incomes policy, did not materialise. This is vividly illustrated by the figures showing the numbers of days lost through strikes between July, 1966, and May, 1967, as published in the Ministry of Labour Gazette.

But our success so far does not mean that we can now relax. We are entering a period of re-inflation, and in these circumstances it is in my opinion important to have an effective long-stop procedure. Only this can ensure that those who co-operate are not put at a disadvantage by those who may not; for if they were, voluntary co-operation by the great majority would be put at risk and the present controlled re-inflation could turn into a run-away boom. As your Lordships know only too well, this would hinder our progress towards achieving a long-term balance of our external account. The Order and the new Prices and Incomes Bill are part of the Government's policy for the period of moderation. This entails, as has been stated frequently this afternoon, a move back to the voluntary system or as The Times said in a recent editorial, the phasing-out of compulsion.

My Lords, I need not go into the proposed procedures to halt increases, but the National Board for Prices and Incomes has the key role to play, and it is opportune now to pay tribute to the valuable work that they have already done. As the Economist states in its latest issue: One of the most promising institutional creations of the last three years is the Jones's Board. Its reports have begun to instil more realism into at least some thinking about wage claims. Obviously, no incomes policy can succeed without the confidence of the trade unions. To retain this confidence, the incomes policy from now on must be consistent with a reasonable annual rise in money incomes; but that rise must not be such that it endangers the competitiveness of British goods in foreign markets. And a rise in money incomes will endanger the competitiveness of British goods in foreign markets unless we get an annual increase in productivity. We shall not get this increase in productivity if we do not have the confidence, not only of the trades unions, but also of industry. It is only when industry has confidence in the future that private investment grows. Investment incentives help, but they do not do away with, or in any way lessen, the importance of business confidence.

We also have to consider the other side of the coin, which is the general stability of prices. This is a different, and perhaps more difficult, problem than that of incomes. To my knowledge, no Government spokesman has ever suggested that under the prices and incomes policy no prices would go up. What they have said is that there has to be sound justification for increases. I believe that the compulsory notification system has been effective in preventing unjustified increases. Certainly in respect of food, about which I claim to have some special knowledge, there has been a long period of stability, with increases balanced by decreases, so that the average housewife's shopping basket differs very little in cost from a year ago.

In conclusion, my Lords, may I say that we must never lose sight of the fact that the prices and incomes policy is part of a much wider economic policy, which includes the work of the Monopolies Commission and the Restrictive Practices Court; changes in the industrial structure brought about by the Industrial Reorganisation Commission; special help for the Development Areas; the work of the little "Neddies", and the work of the Ministry of Technology. These are all aspects of this wider economic policy and I believe that profound changes are taking place that bode well for Britain's industrial and economic future.

5.32 p.m.

LORD CITRINE

My Lords, while the debate has been continuing, and in the light of what other speakers have said, I have been busy tearing up the notes I had prepared. The very thoughtful speech from the noble Lord, Lord Sainsbury, to which we have just listened, is an indication of what I would call the depth of the matter which we are discussing to-day. I am going to try to concentrate on two main points. The first is the need for the Government's reserve power, and the second is whether this is, in effect, a purely temporary expedient which can be abolished in the course of a few years. We have known the basic problem certainly since 1951, with the warning that Mr. Gaitskell, then Chancellor of the Exchequer, gave to the T.U.C. that we were paying ourselves more than we were earning and so were causing inflation and rising prices. This has been reinforced many times by statesmen and Chancellors of the Exchequer, and various expedients have been used to try to secure some measure of restraint on those who were pressing for higher incomes unaccompanied by a corresponding increase in national production.

I remember the "Three Wise Men" appointed by the Conservative Government. They were men experienced in their own particular professions and from time to time they issued what in my opinion were reasoned, intelligent reports. They were trying sincerely to grapple with what, up to now, has proved a problem almost impossible of solution. I did not notice any marked effect upon any section of the community from any of the various appeals and warnings that were issued over the whole period—as I say, certainly since 1951—including the reasoned statements from the T.U.C. as to the dangers caused by the absence of restraint and the continuation of inflation. The trade unions certainly exercised more restraint as an organised body than was discernible among income receivers in other quarters; but, none the less, it cannot be argued that a system of completely voluntary restraint, without any kind of power in the possession of the Government, has succeeded.

After thirteen years of attempts by the previous Government to grapple with this problem without very much success we had a change of Government. The new Government recognised right from the beginning that they could not rely on the effectiveness of a purely voluntary restraint and that they would have to have some power. They did not want power to exercise rapidly or arbitrarily but to use if the necessity revealed itself. They took power in reserve, and the question is, has that succeeded? I believe the answer is that it has succeeded in retaining a better balance between national production increase and increases in incomes to a far greater extent than was expected. I do not say that it has eradicated the differences, but certainly the progress in that direction was greater than with any previous policy. I do not speak now with any idea of securing political kudos or anything of that kind, but after looking at the matter as a purely social and economic problem.

My Lords, I declare my faith, such as it is. I do not believe any policy of any Government of this country can succeed in maintaining the balance about which I have spoken unless some power resides in the Government. When the Government exercise that power we shall be able to judge whether it is an evil thing which ought to be stamped on by the community, or whether it is an essential and wise thing to possess.

In any community there is an unresponsive—I was almost going to say an anti-communal—body of people. Sometimes they are organised. It is for that type of person and that kind of organisation that this power is so clearly needed. All this has been stated in White Papers, and goodness knows! where, but at the same time it does not appear to be fully appreciated; and the assumption is that the Government somehow want power for its own sake. I do not believe that at all. I understand the objection to compulsion. No one likes compulsion. No one in any community, either as individuals or as members of an organisation, likes being told what to do; or that there should be the power to compel people to do certain things which they may dislike. Employers do not want Government interference, but do they believe that this problem can be solved without some measure of Government interference? Trade unions do not want Government interference, but at least they have created a voluntary system which so far has worked reasonably well.

I would not pin my faith on any voluntary system in this connection, but at least some attempt has been made, and we should be able to judge its effectiveness in the next year or so, or possibly within the next few months. I am satisfied that without the Government possessing power in reserve—and I emphasise in reserve—this system could not possibly succeed. The Government want a voluntary system, and they will do everything they can to work towards a voluntary system; but they cannot abandon their intention of having some power in reserve.

As to my second point: is this a purely temporary expedient? I do not suppose that any of us can say with authority "Yes" or "No" to that question. I cannot escape the conclusion that we are somehow groping for a solution to this problem; nor can I believe that any single measure such as this can be wholly and completely effective in dealing with a major problem and those that arise from it.

I sometimes wonder by what mechan ism we can effectively control incomes and prices. Reference has been made to this by the noble Lord, Lord Sainsbury. When I think that in two world wars Governments failed to keep prices in check as they thought they should be, I ask myself the question: is this a possibility? What size of organisation do we need? Can the Prices and Incomes Board, with its present staff, which I think is not much more than a skeleton one and which so far has done some useful work, deal with the whole range of prices that exist over all the various commodities? The best it can do is what accountants do with balance sheets of big companies: make tests and operate on those. I am puzzled on this question of how far this machinery or any others can become effective in the realm of prices.

Can we all be sure that we can surmount our temporary difficulties unless we find the good will in all quarters of the community? Are we sure that we are not entering on a system which may have all the ingredients of permanence, of a system of collective bargaining and of regulating the income of the community? I am not sure of it. I cannot see that for all time we have settled the balance-of-payments problem. I cannot see that we can sacrifice some means of ensuring that increases in national production and in income are kept in proper balance. Therefore, while I hope that it will not be necessary to introduce the battery of measures to deal with this problem that was mentioned by a speaker in another place during the debate there, I am by no means convinced that that is not the case. We may have to go far more thoroughly into this general problem than anything we have done up to now. I am not talking for the purpose of frightening the trade unions or anybody else. I am simply trying to point out that this is a profound problem which, in my judgment, will be with us for a very long time. Therefore, I would not encourage the assumption that this is a purely temporary expedient. We are probably at one stage in a much longer range policy.

While I have had sufficient connection with politics in the course of my life, and while I have been a firm adherent of the Labour Party all these years, and have believed basically in its measures, I cannot understand why we are all so polemical about this problem and approach it from a purely Party point of view. It is basically an economic problem, a social problem, and I hope that we shall find some means of facing these things free from the trammels of Paryt politics. I have not seen much signs of it. I have seen some attempts to capitalise the prejudice that exists among trade unions against any form of Government intervention. Perhaps we shall reform some time. I have assumed that this House is more of an objective body than another place, and as a Member of your Lordships' House I congratulate myself on that. But I think that we are dealing with the imponderable. As I said earlier, we are groping. Nobody knows the answer, I am sure of that. Time will be needed, and perhaps trial and error on a large scale will be necessary before we have found the means of dealing with what seems to me to be a most intractable problem.

5.45 p.m.

LORD REDMAYNE

My Lords, I had not intended to intervene in this debate and I shall be brief. I came down to the House in the hope of hearing more details about prices rather than incomes. I have been disappointed. But prices are only the child of incomes, and it was to be expected that the debate should take that line. My attention has been drawn to this strange story of "price control commandos" which I read in the newspapers this morning, and I think it fair, as nothing was said about this except a passing reference by my noble friend Lord Erroll of Hale, to ask the Government for some information. I admit that it was a newspaper story, but it bears all the stamp of having come from the public relations officer of one or other Department of the Government.

The proposal is that there should be mobile teams to investigate retail price increases on the spot. The Financial Times and The Times had the story in much the same terms. I do not doubt that it has some fairly solid foundation, and has been in the minds of the Government. I should like to know whether there is truth in it, and the details of it. Of course, it could have been put out simply to counter-balance, without much foundation, a statement in The Times on Monday that there was a large number of price increases in the pipeline. Although one does not doubt that that story was well founded, I do not believe—and the noble Lord, Lord Sainsbury, said something of the sort—that a very large number of increases are now in the offing. But if the story is based on some truth, it is fair to ask the noble Lord, Lord Winterbottom, what are the likely mechanics of such a scheme. What does "on the spot investigation" mean? What sort of powers are these teams likely to be armed with? How is it proposed that the price increase of any one article in retail stock can be investigated without reference to a large number of articles of the same class? How would such teams take account of the wide variation of other factors which may force retailers to increase their prices?

I would also ask whether these teams will be sufficiently instructed to take account of the many ways in which Government policy has put retail prices under pressure, notably by S.E.T. and the loss of investment allowances and, in local government, disproportionate increases in rates. If this job is to be done at all, it will need a great number of teams to achieve any effect. It will be interesting to know to what extent that is being planned, or whether in fact this is only a propaganda exercise as a counterbalance to actions the Government are taking in the incomes field and really will not amount to very much at all. On the other hand, these teams could fulfil a useful purpose if they were sympathetic to the retailers' problems, really looked at them with unbiased judgment, and were prepared to take a broad view of the many factors which lead to price increases. The report in the Financial Times stated that the D.E.A. will study this proposition with care in order to be sure that there is no risk of antagonising the C.B.I. I should like to ask the noble Lord what it has to do with the C.B.I., as opposed to the distributive trades. It seems to me that that remark proves that the story came from Whitehall and not from any other source.

I suspect the noble Lord will say that he is unable to give me an answer; and I do not blame him. I know he will do his best. I hope, however, that he will not leave it at that. If I may say so without grave disrespect to the Government, "kite-flying" is one of their major hobbies, and it has greatly increased during the term of this Government. I consider that all Ministers replying to a debate of this sort should be able to say what kites are flying, who is flying them, and why.

I conclude by saying that if there is anything in this story perhaps the noble Lord, if he cannot give an answer, will see that the answer is made known both to me and perhaps to the House in some way very soon. If this scheme is going forward in any form there should be adequate consultation, not with the C.B.I. but with the distributive trades, both through the new consortium of those trades which has just been formed and through the E.D.C. for the distributive trades which has proved a good friend to us. The noble Lord, Lord Sainsbury, referred to that E.D.C. It is, as I say, of great benefit to the distributive trades which I for one should like to acknowledge.

5.52 p.m.

THE EARL OF DUNDEE

My Lords, my noble friend Lord Erroll of Hale has expressed our acceptance of the business arrangements in regard to this measure and subsequent measures on prices and incomes. I think perhaps it should be added that we hope this will not be regarded as a precedent in future, because it really would be better if arrangements could be made to introduce measures of every kind in either House at the right time. However, we accept this arrangement now.

I have often said, both from the opposite side of the House and from this side, that I wish we could discuss this question of prices and incomes and inflation without any overtones of Party politics. And I think perhaps the noble Lord, Lord Champion, was feeling the same thing when he said in his peroration that if the Government could succeed in solving this prices and incomes question, they would have done a great work, even although as a consequence they lost the next General Election. It really is all wrong that Parties should have to discuss this in the context of winning and losing General Elections.

When we brought in our National Incomes Commission, a long time ago, we had a good deal of opposition and no support from the trade unions. The reason given by the trade unions for this was, I think, a mistaken one. They said that the National Incomes Commission was not empowered to deal with dividends and profits, whereas, in fact, it was expressly empowered to deal with dividends and profits in the Statutory Instrument by which it was set up. Now the present Government have had the great advantage of having the support of at least half of the trade union movement. Mr. Frank Cousins and his followers have proved to be in a minority, though a substantial one. I am afraid that even Mr. George Woodcock has recently expressed some pretty disparaging comments about this Bill. But, at least, the trade unions are cooperating in the Government's Prices and Incomes Board, and I think this is a great gain. But we are still heavily handicapped by fears of Party gains or Party losses in connection with this. I do not think it would be unfair to describe this Bill—indeed, it would be only a plain statement of fact—by saying that it is a continuation, which we were told last autumn would not be necessary, of a policy which the Prime Minister said at the General Election would not be adopted. That is about the best you can say for the Bill.

I do not believe that any prices and incomes policy will succeed unless it is accompanied by measures to promote economic growth, by measures to increase competition and make it more keen, and by the elimination of restrictive practices. We must get rid of the idea, which is held by a lot of people—not only by wage earners—that everybody has a kind of natural right, whatever happens, to an increase of 2½ per cent. every year, or something like that, and that if they do well and produce more, they should get more than what is regarded as the normal thing. There is no normal thing. We have no natural right to get an increase of wages or incomes of any kind every year if it is not accompanied by more productivity, which does not necessarily mean more production, or more production, which does not necessarily mean more productivity. It is better to have both at the same time.

I hope the Government will not think that I am mocking them or trying to speak in any irreverent tone when I say that what we need is a National Plan designed to promote economic growth. In the six years when I happened to be in the last Government, from 1958 to 1964, I thought we did quite a lot of rather good planning; and although we were always told by our opponents that industry was stagnating, during those six years our gross national product increased by 25¼ per cent. When our opponents came in, I genuinely hoped that they would produce a good National Plan. I thought that the Plan they produced—and it was produced about eight months after it was supposed to begin—was not very much more than an estimate that we would increase our gross domestic product in the next six years by 25 per cent., which was actually a fraction less than the amount by which it had increased in the previous six years, which we have always been told by the authors of the Plan was a period of stagnation. But for the first year, 1965, the growth was only 2½ per cent., and for last year only 1½ per cent. So now we have had one-third of the time with only one-sixth of the growth.

I think this is all vitally relevant to the question of prices and incomes. You will not be able to keep control of prices and incomes if you do not have growth. You will have to appoint more people to try to prevent rises in wages and prices, until you reach the stage when half of the people will be employed in trying to prevent the other half from getting more money. What you want is more incentives to earn, and less punitive taxation.

As for competition, one thing has been done. We have had what you might call a half Kennedy Round—I think rather more than half, though not quite so much as the late President Kennedy proposed in the last year of his life. Now, at last, after all these years of difficult discussion, this much has been agreed to. Its effects may not be felt for a little time, but when they are felt it will, I hope, produce healthy and salutary competition to a far greater extent than we have now.

But let us remember this. My noble friend Lord Erroll of Hale quite rightly pointed out that the improvement in our balance of trade in the last year or two had been due to improvements in what we call the terms of trade: that is, we have imported cheaper primary commodities, and industrial products we export have earned higher prices. But now, what the great trading nations of the world are all trying to do, in co-operation with each other, is not only to have more competition, which will mean that export prices for our goods will be keener and may have to come down; they are also trying to keep up the prices of primary products like wheat, under the International Wheat Agreement, because our experience has always been that, in the long run, if producers of primary products do not earn enough they cannot buy the exports of the industrial countries, and you have a world decline in trade. So, although it is temporarily advantageous to a country like Britain, in the long run it is better to have fair prices. And that may not be so good for our balance of payments next year.

Finally, on restrictive practices I should like at least to pay a tribute to the Minister of Transport on the stand which she has taken about liner trains, and I hope that she will be successful in getting back the business for the railways. But I must conclude by saying that you will not make a success of your prices and incomes policy unless you have the courage to deal with restrictive practices. That, I think, will need legislation; and it is my belief that compulsory legislation, although it may be unpopular, to bring an end to restrictive practices will do vastly more good to our economy than compulsory legislation to restrict prices and incomes, which is not accompanied by the necessary measures for accelerating our economic growth.

6.2 p.m.

THE PARLIAMENTARY SECRETARY, MINISTRY OF PUBLIC BUILDING AND WORKS (LORD WINTERBOTTOM)

My Lords, I am glad that my noble friend Lord Shepherd has returned in time so that I may add my congratulations to those voiced by speakers from both sides of the House on the very useful framework that he provided for our debate. His speech was a great help to me in getting my thoughts into perspective, and I am glad that the House has also recognised this.

I am certain that the noble Lord, Lord Erroll of Hale, will not be surprised if I start my reply to the debate with a platitude. One of the recurring problems that all Governments, and all political Parties have had to face, and one that has provided political ammunition during the last three General Elections, has been about the means of achieving economic growth without excessive inflation, and without the customary balance-of-payments crises that seem to afflict us when our economy gets on the move. This has all been said before—I admit this—but the problem seems intractable, and has still to be solved. I know that the Party opposite have wrestled with this, with some successes and many failures, and I think the sense of the House is that the problem is not new and very difficult indeed to solve.

The noble Lord, Lord Henley, posed questions but said that he could not find the answers. Nevertheless, I think his questions produced a series of suggested answers from around the House which indicated a certain consensus on the direction in which we ought to travel. I will not particularly react to the pleasure of the noble Lord, Lord Erroll of Hale, in twitting us for perhaps not succeeding on every occasion when we tried to do something. But I should like to comment on one point he made, because I think it a serious one and one that is worth discussing. He brought to the notice of the House the fact that the improvement of our balance-of-payment, position is in part due to an improvement in the terms of trade. I do not know what was his source of information. My source, it seems, was probably the same as his own, which was a leading article by Samuel Brittain in the Financial Times.

The author of that article, I think, said that we have moved in the correct direction to the tune of £550 million, of which £300 million came from an improvement in the terms of trade, £100 million from our control of capital movements, and £150 million from the slowing down of the economy. So £250 million of the favourable movement was a result of squeeze policies, and £300 million from the shift in the balance of the terms of trade. I think the noble Lord is quite right to draw this to the attention of the House. We cannot and must not be complacent, particularly when, out of the blue sky, events such as the Arab/Israeli war blow up. We can always run into trouble from factors outside our control, and we must have sufficient reserves within our economy—and reserves powers of the Government—to enable us to face these unexpected difficulties.

In that same article Brittain infers that our prices and incomes policy had overall little effect on the improvement in our balance-of-payments position—which we must all admit is very substantial and very welcome. But I think we should say at this point that it was not without at least an indirect effect. Part of the problem last summer was a loss of confidence abroad in the economy of this country. There had been a long period of rapidly rising wage rates, and rapidly rising prices, and I believe it was the fact that the Government were willing to take very unpopular measures to put this matter straight that had a great effect on confidence abroad and effected a return to this country of substantial funds which had left it for a time. So I think this policy was of real value at that time.

The other aspect of value must be a long-term one. We are really entering into a period of re-thinking and of re-education of both management and the trade unions, to try to adapt ourselves to the economic situation which is creating great problems for us while at the same time bringing benefits. The fact that both management and trade unions, when negotiating for wage increases, now have to think in terms of productivity is one of the very valuable aspects of this policy. Productivity—again, an overused, platitudinous word—increased productivity, is entirely necessary if we are to recover our place among the competing nations of the world. I am certain that the prices and incomes policy has this extremely valuable by-product, in forcing both sides of industry to think about the implications of what we are trying to do.

We have had some extraordinarily fascinating speeches from men who were involved in this business of actually carrying into effect the policies of the Government under Part IV, and who will be doing so in the coming year under Part II. We have had speeches from three trade unionists, from an industrialist, and from the head of one of the largest retail organisations in the country; and I think that there was a very substantial measure of agreement between them all. None of them, I think, really liked Government compulsion. Everybody wanted to get back to voluntary co-operation and collective bargaining. Again and again the question had to be asked: Is this an impossible ideal? Can we really take the Government out of this particular field and, with new procedures devised by the T.U.C. and the C.B.I., leave trade unions and management to hammer out their own incomes and prices policy without the Government intervening?

I think that the noble Lord, Lord Citrine, was the most pessimistic. In his speech he posed it as a question, but the answer he gave was that in the background there must be powers and that we should be foolish to assume that one day those powers will wither away. Some other noble Lords were perhaps a little less pessimistic. The noble Lord, Lord Cooper of Stockton Heath, described the steps being taken for the trade union movement itself in the autumn of each year to relate the possible wage negotiations in the coming year with foreseen increases in the gross national product, and then to have detailed discussions with individual unions in the following spring. This idea is, I think, based on experience—admittedly on the experience of the Swedes—but it is not an idea plucked out of the blue. And it is one which, indeed, might accelerate the departure of the Government from the front of the stage even if, for some time in the future, they still remain lurking in the wings.

If the trade union movement can make this preliminary economic assessment each year there is no doubt in my mind that the claims put forward will be reasonable and much more capable of settlement by negotiation. But even the noble Lord, Lord Cooper of Stockton Heath, was quite certain that the Government had to retain powers during the coming year, until August. 1968, because even if the trade union movement does create an effective organisation within the coming year, the fruits of that cannot be harvested until 1968, and the Government must hold the reins until that time. I think that is generally agreed.

Whether or not by 1968 we shall have a further Prices and Incomes Bill is in the lap of the gods. I would not rule it out; I only hope that the experience of the coming year will make it unnecessary. I have been warned by the noble Lord, and so I will not make forecasts; but I think we shall have done well if experience in the coming year enables us, by the autumn of next year, to rely completely on a voluntary system. Nevertheless, it is worth trying, and, as we have heard to-day, both sides of industry are getting down to the job to see whether there can be a full return to the voluntary principle.

I think there was one measure of agreement in that everybody was agreed that something which the Labour Government had created was not bad; namely, the Prices and Incomes Board. In fact the noble Lord, Lord Sainsbury, paid tribute to the Board, and I am certain that its members will welcome that, because they must have been carrying a very heavy burden over the past year. I think the point made by the noble Lord, Lord Erroll of Hale, about their being overworked may be valid. I think it was the noble Lord, Lord Citrine, who said they were working with a skeleton staff. Perhaps we shall have to put a little fat on their bones, but I feel that in Mr. Jones, assisted by his team, we have found someone with an analytic mind who is trying to help us peer into the jungle which at the moment is preventing us from moving forward.

Also, as again noble Lords have said, it would be churlish not to pay tribute to those many millions of citizens, whether on the side of management or of the unions, who either have positively helped, or at least have refused to hinder, the Government's policies. The statistics given by my noble friend of the number of Orders that have been made and the very limited opposition by industrial action to Government policies reflect, I think, great credit on the trade union movement, and indeed, on the men and women of this country.

I share the view held by the noble Lord, Lord McCorquodale of Newton, and the noble Lord, Lord Cooper of Stockton Heath, that we have great reserves of strength in this country. The fact that both the trade union movement and the Confederation of British Industry are largely agreed on their objectives is surely a very great strength. The argument is about means and not ends, and I believe that it would not be too much to say that possibly the collaboration between the two sides of industry in this country is as close and fruitful as anywhere in the world. We argue freely and strongly, but, after all, that is our custom; and having heard various speakers in the debate to-day I feel that in due course we shall find at least partial solutions to our problems, or at least solutions that will enable us to hasten a little more quickly than we are at the moment.

May I answer a specific point made by the noble Lord, Lord Redmayne? I am rather glad that he raised the question of prices. The only other speaker who touched upon it was the noble Lord, Lord Sainsbury, and I think possibly the reason is that the prices aspect of this policy has gone remarkably smoothly—indeed, surprisingly so. However, when the noble Lord, Lord Redmayne, raised the question of "price commandos", as he saw he caught me somewhat unprepared. Fortunately I can give him a partial answer to-day, and there will be an appropriate time during the debates on the Bill when perhaps he can be given a fuller answer. I have been told that there are no firm plans for any developments on the lines which he has read about in the papers. I am not clear where the Press stories originated, but what is a fact—and I think I can commit the Department of Economic Affairs on this—is that no new arrangements would be contemplated without full discussion with the organisations concerned.

My Lords, we have come to the end of an interesting and valuable debate. We have a lot of work to do at the Committee stage, because although the Bill is a short one I find the clauses are complex and I fear that they will take quite careful explaining. Nevertheless, I think that all these discussions have shown a remarkable unanimity, and I hope that as the work progresses we shall gain experience of how to bring the natural demands of the trade unions and the growth of the national product in harmony, so that the Government can recede further and further from the front of the stage. While I believe that there will always be a place somewhere on the stage, even if only in the prompter's box, for the Government, nevertheless I believe that by the end of next year, if we progress as we have done in the past year, we shall be close to a voluntary system of bargaining and many of these irksome controls will have gone. That is my hope; it is the hope of my colleagues, and if we proceed steadily on the road on which we have already started I believe that that hope will be fulfilled.

6.19 p.m.

LORD SHEPHERD

My Lords, before the Question is put I should like to say that I was in some slight embarrassment when I returned to the Chamber and found that the noble Earl, Lord Dundee, was about to sit down and that my noble friend was about to speak. I should like to express an apology to those noble Lords I have been unable to hear. Unfortunately I find, as Government Chief Whip and as spokesman for the D.E.A., that there is a tendency for the duties to conflict, and I have been at the other end of the building to see whether some arrangement could be made to deal with our heavy programme of business later this month.

I was very grateful indeed to the noble Lord, Lord Erroll of Hale, and the noble Lord, Lord Henley, for their agreement to the use of our flexible rules in this House, as clearly the employers and the unions who may be involved in some difficulty should have their minds put at rest as soon as possible. I hope to be able to make a statement shortly as to the timing and progress of this Bill in your Lordships' House. May I therefore conclude by thanking all noble Lords who have taken part. If I did not hear them I shall certainly read what they said, and I shall certainly make sure that my right honourable friend the First Secretary sees the speeches that have been made this afternoon.

On Question, Motion agreed to.

LORD SHEPHERD

My Lords, in the circumstances I beg leave not to move the Motion on the prices and incomes policy that stands in my name on the Order Paper.