PRICES AND INCOMES (No. 2) BILL [H.L.]

HL Deb 27 June 1968 vol 293 cc1564-640

LORD BESWICK

My Lords, I beg to move that this Bill be now read a second time. First, I should like to thank the Opposition for their co-operation in using this somewhat irregular and admittedly unsatisfactory procedure of a No. 2 Bill in order to make possible the consideration of the Prices and Incomes Bill within the timetable dictated by circumstances. It would be difficult to call this a popular measure. Indeed, if ever there was a case of a Government determined to do their duty, as they see it, in the interests of the nation, and regardless of electoral consequences, then this is such a case.

But although there is this sustained opposition, and bitter opposition, to certain parts of the Bill, it is also true to say that the basic purpose of the Bill commands widespread support; and, moreover, the Government readily admit that the policy behind this measure cannot succeed without the voluntary cooperation of all concerned. Moreover, all experience so far suggests that this voluntary co-operation will be forthcoming. After all, this is not the only feature of our political and social scene which depends entirely on voluntary support for its success though provision is made for statutory penalties.

Every motorist in this House, I imagine, stops at a red traffic signal. We do so voluntarily. No one is physically compelled to pull up. We accept this retriction on our personal liberty because we know that by so doing we enjoy a wider freedom. But co-operation is much more readily forthcoming because we know that the occasional anti-social character will be punished if he does not co-operate. My Lords, let us face the fact that the courts just could not cope unless the overwhelming majority were prepared to play fair. This Bill is intended to give the vast majority encouragement and confidence that their cooperation with this part of the Government's economic policy is not abused by a minority. It sets out to do what is socially just as well as economically right by covering prices, dividends and rents, as well as pay.

My Lords, let me now outline how the Bill seeks to achieve these objectives. The recent White Paper on Productivity, Prices and Incomes policy pointed out that, unless renewed by Order in Council, Part II of the Prices and Incomes Act which empowered the Government to require statutory notification of increases in prices and incomes, would expire on August 11 of this year. Similarly, those parts of the Prices and Incomes Act 1967 which extended the three months mark-time period for pay or price increases to a six months period, if the National Board for Prices and Incomes found they were against the national interest, would also expire.

This Bill seeks first to maintain those reserve powers until the end of 1969 and to reinforce them for the same period in five ways. First, to lengthen the maximum period of delay on pay and price increases from the present seven months to twelve months, subject to a reference to, and adverse report from, the National Board. Each period includes the initial month during which the Government are allowed to examine particular proposals. Secondly, to make Wages Councils' and Agricultural Wages Boards' decisions subject to a similar maximum period of delay, again in the context of a reference to and report from the National Board; thirdly, to require reductions in existing prices where the National Board recommend they should be cut; fourthly, to require the notification of increases in dividends and to prevent excessive distributions; and, fifthly, it sets out to moderate and fix increases in house rents.

That is what this Bill, which has caused so much controversy, is about. Turning to the new powers, three are proposed in relation to incomes, as distinct from dividends. First, as I have already indicated, to extend the maximum period of standstill to 12 months, subject to a reference to and adverse report from the National Board; secondly, a transitional power to make an amending Order in respect of a standstill under the 1967 Act that might still be in operation when this new measure becomes law; and, thirdly, a new provision in relation to Wages Councils' and Agricultural Wages Boards' Awards. I should like to say a little more about this provision because of the concern that has been aroused.

From the beginning the Government's productivity prices and incomes policy has always been especially concerned with the position of low paid workers. Historically, this was the purpose of Wages Councils. But they hive no obligation to take account of the consequences of their recommendations on other workers whom they cover who may not be low paid. And not all workers covered by Wages Councils are low paid. The First Secretary is, however, statutorily bound to accept their proposals and to enforce them by law. Thus what this Bill seeks to do for its duration is to avoid a situation in which the Government have to enforce decisions of Wages Councils and Agricultural Wages Boards, even though they may not be in line with criteria applied to other pay claims outside the Wages Councils' field. The Government will still not be able to amend the proposals of these bodies, but they will be able to refer them to the National Board for examination and, only when the proposals are subject to an adverse report, will the Government be able to delay their implementation. It is not expected that this is a power of delay and reference that will need to be used often.

The rest of the Bill deals with prices, dividends and rents. On the prices side there are two new powers. The first, as I have already indicated, extends the maximum period of standstill, as in the case of incomes, to 12 months—again subject to a reference and report from the National Board—and the second requires the reduction of an existing price, again subject to a positive recommendation from the same independent body.

My Lords, I think that it is proper to pay tribute to the voluntary cooperation of manufacturers in the field of prices, including the deferring or reduction of price increases as a result of consultations with Government Departments under the early-warning system. But it is right also to take into account the fact that there may be cases where prices ought to be reduced—as, for example, where great technological advances are being made and productivity is rising rapidly. But I must emphasise that this power is not exercisable at the whim of Government, but only after the process of the independent advice of the National Board for Prices and Incomes after a thorough examination.

Part II of the Bill deals with company distributions and provides a statutory backing for the application of the 3½ per cent. ceiling to increases in dividends. This complements the powers in relation to wages and salaries. The voluntary scheme of dividend restraint which has been operating since March 19 is working well. The Government intend that it shall go on working in this way, on the lines of the published guidance to companies which has been given in the White Paper and in statements by the Treasury. The powers set out in Part II of this Bill are reserve powers only; they will not be used unless the voluntary system appeared to be breaking down, and the Government have given assurances that there would be consultations with representatives of the company sector before the first exercise of any of these statutory powers.

The essential reserve power is in Clause 6 of the Bill. In the unlikely event of the need arising, the Treasury could make orders or directions requiring companies not to distribute higher ordinary dividends than in a past year without first obtaining consent. The guidance which has been given on the voluntary scheme makes it clear that there could be circumstances which justified increases in the amounts of distributions of more than 3½ per cent. above last year—for example where new subscribed capital had been introduced, or where a company was recovering after a fall in profit and distributions.

The greater part of Part II is then taken up with spelling out the various definitions which would be necessary to make the basic power workable, and with straightforward provisions for the mechanics of orders and directions and offences and penalties. But the wording of Part II of the Bill does not in itself alter the essential present voluntary scheme of dividend restraint.

My Lords, Clause 9, in Part III, gives the Government power to make regulations subjecting certain increases in rent to a scheme of staging, or moderation, for a limited period. The rents concerned are those of certain tenancies given protection by the Rent Act 1965 and known as "regulated tenancies". Fair rents can be fixed for such tenancies by rent officers and rent assessment committees, and in some cases—for example where a rent fixed several years ago comes up for review on the expiry of a tenancy agreement—there can be sharp increases in the maximum rent. The Government do not propose to interfere at all with the way in which fair rents are fixed, but they think it right, at a time when incomes are subject to restraint, to require that sharp increases in rent of this kind should be reached by steps, and not in one jump.

The scheme, which will be incorporated in regulations, provides that where registration of a fair rent takes place between the coming into effect of the Bill and its expiry at the end of 1969 then the maximum increase in the year following registration shall be 10s. a week. If the Bill is still in force at the end of that year, and there is a significant balance of rent increase still to be made, that increase will be spread over two instalments, so that the full fair rent will be reached, at the latest, at the beginning of the third year after registration. There will be exemptions from staging for increases due to the rise in the cost of services provided by the landlord, and for rises in rates that he bears. The regulations will come into force immediately the Bill becomes law.

If private rents are to be regulated in this way, it is surely only fair that local authority rents should also be moderated. The Government are not, however, taking powers to set rent levels. They are solely concerned that increases should not be steeper than necessary. The Government are, in effect, saying that local authorities will continue, as in the past, to decide the level of rents for their tenants, but that if the new level is very much higher than the existing level they must get there in stages and not in one fell swoop. Housing Ministers have already announced that they will not normally accept rent increases averaging more than 7s. 6d. a week in any one financial year, or more than 10s. a week for any individual house. Ministers recognise, however, that where housing costs are rising, some rent increases are necessary and reasonable.

Clause 10 deals with rent increases taking effect after enactment of the Bill. Clause 11 deals with rents that were increased between April 1, 1968, and the date of enactment, and also with rents referred to the National Board for Prices and Incomes even if the increase took effect before April 1 last. In practice, the story here again is one of voluntary co-operation. Most authorities are expected to co-operate voluntarily with this policy. The formal use of statutory powers to compel authorities to reduce rents will probably be required only for a relatively small number of cases where the authority refuses to fall into line with the majority.

My Lords, the policy behind the Bill is not a formula for a wage freeze and certainly not one for economic stagnation. Provided that we can hold down, or reduce, unit costs, then increased earnings are welcome. Of course, productivity is the key to this. Noble Lords in all parts of the House, not least those with long experience in trade unions, are well aware of the practical problems involved in the negotiation of worthwhile productivity agreements. But it is greatly encouraging to see the efforts now being made in industry to tackle these problems. The Government are anxious to respond effectively. This is why the First Secretary is pressing ahead with the new Manpower Planning and Productivity Division in the Department of Employment and Productivity. This Division will unite the Department's long experience and expertise in industrial manpower matters with those from industry, under the direction of Mr. George Cattell, who has been seconded to the Department from Rootes.

I ought to refer again to the duration of the Bill, which is dealt with in Part IV. The Government hope that it will not be necessary to ask Parliament for a renewal of the powers they are seeking in this Bill. But as the Prime Minister has made clear, they cannot responsibly give an absolute assurance that they will not be renewed. The Government have, however, given an assurance that any renewal, should it be judged to be necessary, would not be done under the Expiring Laws procedure.

It would be idle to pretend that there will not be difficulties in the next 18 months in applying this policy. It would of course be much easier to sit back and let pay claims take their course. For a time in the public service increased wage costs could be met by increased taxes; local authorities could meet higher wage bills by higher rates; given present demand, most of industry supplying the home market could recover extra costs in higher prices. All have a short-term remedy save the exporters, and the manufacturer who is competing with imports. And of course it is precisely the success of this sector of our economy that will decide whether we sink or swim as a nation. There are to-day encouraging signs. One industry after another is proving by results that our competitive position abroad has improved.

My Lords, I think it would be an act of supreme folly if we let slip this opportunity to get our economy right because we failed to keep down unit costs. We all know in our hearts that a Bill along these lines is needed. I hope your Lordships' House will discuss it constructively—and pass it decisively. I beg to move.

Moved, That the Bill be now read 2^a.—(Lord Beswick.)

4.19 p.m.

LORD ERROLL OF HALE

My Lords, it is my pleasant duty to thank the noble Lord, Lord Beswick, for having given us such a concise and clear description of the Bill now before your Lordships' House. It is a long and complicated Bill and I should like personally to congratuate him on having given us the essential points with clarity and brevity. I must say that we are in a rather artificial situation this afternoon, since we are discussing a Bill which will be no more on Monday and for which there will be substituted another Bill from another place. Furthermore, we were assured when this procedure was adopted a year ago that it would never be done again. We had a bit of fun with the Bill on that occasion. We called it a "White Bill", and I think it became known in the end as "Shepherd's Pie". This Bill I can only describe as "Beswick's Breakfast"—eaten quickly and soon forgotten, to be followed by a more substantial meal on Monday with the real Bill that is going to come to us from another place.

I am sorry that while the noble Lord was kind enough to pay some tribute, to the Opposition for tolerating this position, I must protest against the extreme inconvenience this change of timetable has caused to noble Lords. Not only have those of us interested in this Bill had to prepare ourselves much more rapidly than we had intended, but a great deal of inconvenience has been caused to noble Lords who wished to debate the Transport Bill to-day and now find that they are going to have to do it on Monday instead. There has been insufficient time for us to prepare ourselves for a proper Second Reading. I regard it as a great honour to speak from this Box to your Lordships, and while my speeches may not be very good, I do try to prepare them as thoroughly as possible. I set aside this coming week-end for that purpose. Only on Monday afternoon I learned that the Pill was to be on this Thursday. I am not prepared to cancel every other engagement I have during a busy week in order to prepare for a Bill whose timing has been changed purely because of the Government's inability to organise their own timetable. My noble friend Lord Dundee, who is winding up, was planning to go back to Scotland tonight—not a very easy thing to do, thanks to the co-operation of British Rail with Government policy. He has had to cancel his sleeper and hopes to get air transport to-morrow. The planes will be overcrowded, because there are going to be no rail services working over the week-end. It is fortunate that he is not trying to fly to Scotland by B.O.A.C., because that would be impossible.

While trying to keep my mind on the subject of the Bill and how I should address your Lordships, I find all the time that the newspapers are full of what is going on in another place regarding this very Bill. While one is trying to think in terms of a Second Reading one is unavoidably caught up in the Report stage—I think it is Report stage that they have got to in their discussions, but it is hard to tell—in another place. That is not the way business should be conducted in your Lordships' House. The whole purpose of our Chamber is that when a matter has been discussed in another place we should be able to look at it dispassionately after a decent interval of time and form our own mature opinions. That is not possible on this occasion and I regret it very much, particularly because the noble Lord, Lord Beswick, and the noble Lord, Lord Shackleton, whom I should like to congratulate on his new appointment, has steadfastly refused to tell your Lord- ships why this Bill is so urgently required.

As they have refused to say it in public and similarly refused to tell me in private, I shall be delighted to tell your Lordships why they are in such a hurry. It is because unless they get the Bill on the Statute Book by a certain date there will be a gap between the present powers and the new powers which this Bill will give the Government; and they are so "windy" of their trade union friends, because they know they would use that gap to push through some pay increases which they otherwise would be prevented from doing, that they are determined to get the Bill on the Statute Book to avoid that gap. That is the reason, and I think your Lordships should know why we are being hustled in this undignified and unnecessary way. We are told that the Government know how to run the country, but they cannot even run their own legislative programme.

LORD BESWICK

My Lords, before the noble Lord gets too much satisfaction out of this disclosure, may I say that apparently he was not in the House earlier this week when my noble friend Lord Shackleton said much the same thing in somewhat different words.

LORD ERROLL OF HALE

My Lords, I was in the House earlier this week, though not due to any spirit of cooperation from the noble Lord the Leader of the House who, although he knew I was in charge of the Bill, failed to let me know that he was going to make a statement on Monday. But I was here and I listened to him. I read it and reread it in Hansard and thought it was so obscure that it was necessary for me to give a more precise and clear explanation to your Lordships. I am going to get on with it, as the noble Lord, Lord Shepherd, says. I am sorry that when I was making reference to my Shepherd's Pie I did not say that I am delighted to see him back from Nigeria. I hope that his Biafran Beefsteak has been more successful.

LORD SHEPHERD

My Lords, if the noble Lord will permit me to say so, I wish I could reciprocate.

LORD ERROLL OF HALE

My Lords, I should like to say a few more words about the general proceedings to-day. I recognise that this Bill is considered by Her Majesty's Government to be a central feature of the Government's post-devaluation policy. Therefore it would be very proper for us to have a wide-ranging debate over the economy. Indeed, if any noble Lord so wishes, I am sure there is nothing to prevent it; but I am not going to set that example this afternoon. I am going to limit myself to discussing certain features of the Bill and I am not going to take up your Lordships' time by outlining the constructive alternative of the Conservative Party. So I hope that noble Lords opposite will not afterwards criticise me for not being constructive. The Conservative Party's alternative was extremely well explained by my honourable friend Mr. Robert Carr on the Second Reading of the Bill in another place and it is all there on the record. So in confining my remarks, I hope you will please not think that I am not capable of offering a constructive alternative.

In my opinion this is an extremely badly constructed Bill, because it makes reference back to other Acts. It may surprise noble Lords opposite to know that companies and other organisations do read Government Acts with great care and try to operate in accordance with their provisions. Therefore it is of importance that though legislation should be couched in correct legal terms, it should be possible to understand it without having to refer back to a lot of other documents. When I came to read the Bill, I found that Clause 1 says So long as this section has effect, sections 7 to 22 of the Prices and Incomes Act 1966 shall continue in force… So I was not able to do any more homework on that clause, because I did not have the 1966 Act with me. I went on to Clause 2 and I found there that For sections 6(3) of the Prices and Incomes Act 1967 there shall be substituted:— (3) Sections 1 to 3 above shall cease to have effect at the end of the year 1969,… So before I even turned the first page of this new Bill, I had to have in my possession two earlier Acts. It was typical of the efficiency of the Printed Paper Office that I was able to get them within a few seconds and was able to refer back to what is laid down in those two Acts. It makes for very hard work on the part of all those whom the Government hope are going to co-operate voluntarily with them in their policy. It is a badly constructed Bill, quite apart from the rest of its contents.

A great deal was made by the noble Lord, Lord Beswick, of the fact that these were only reserve powers in the main and that it is going to be a voluntary system. He had the temerity, if I may say so, to make the analogy of the red lights at a traffic intersection. I rather like to use analogies and comparisons myself, but I find it a dangerous practice, and the noble Lord certainly made a bad analogy in this case, because it is an offence to cross an intersection when the lights are at red. It is not just a matter of obeying voluntarily. So it is in fact with this Bill. While we are being told that it is a voluntary affair, we are told that if we do not play ball, we are "for it"; we shall be sent to the headmaster's study and given the cane. This is not my idea of a voluntary system. What we are witnessing, if this Bill goes through—and this happened in the other two Bills—is a completely new meaning being given to the word "voluntary". Voluntary means "by free and willing consent". There can be no case at all for saying that the things that are going to be done in future to carry out this prices and incomes policy will be done freely, willingly, voluntarily. If you do not do them, you are going to get smacked—smacked by the reserve powers is this Bill.

I want to mention two general points in connection with this Bill. The first point is the revision of principles. I think it is a very dangerous thing, in a Bill which is to have only a limited life, as the noble Lord was good enough to explain to us, that the Government can at arty time within the 18 months period of the Bill, by means of an Order subject only to the Negative Resolution procedure, vary the criteria by which the proposed changes in income, prices and charges are o be judged. If we are to have this sort of system, let us at least have a criteria fixed for the period of operation of the Bill.

Secondly, I am rather concerned about appeal procedures. Under this Bil1 the various Ministers have a great deal of discretionary power. They can select A, B or C and put the claim, the firm or the individual through the hoop, or not, as they feel inclined. I think that when such a wide discretionary power is being provided for in the Bill, there should be some right of appeal in respect of those who are unlucky enough to be selected by the Government as their particular targets. We shall refer in terms, of course, to these two general matters in Committee, when we may well propose Amendments which I hope Her Majesty's Government will see fit to accept.

In the Bill there are a number of important features. I propose to refer to prices, incomes and dividends. As regards prices, I should be the first to agree with the noble Lord that the so-called "Early warning system" has had a certain effect on the slowing down of the rate of price increases of those 147 items (I think it is) which are subject to the "Early warning system". But this is only a small minority of prices which are involved in the daily economy of this country. There are hundreds of thousands of other prices which the Government cannot hope to control, and which it would be impossible for them to try to control.

I think that a much more potent way of getting the co-operation of the community would be if the Government themselves set a good example. Everybody has to keep prices down, but the Government are allowed by their actions to force prices up. I will give just two examples. First of all, by putting up purchase tax so savagely in the last Budget a large number of prices will inevitably have to go up by a considerable amount. The Government may reply that these increases are not on necessities. But who are the Government to decide what is a necessity and what is a luxury? To most young women, and older ones, too, cosmetics are far more of a necessity than bread, meat and milk, and many a young woman will go without her breakfast—even Beswick's breakfast—for the sake of having enough money to buy herself a lipstick. These prices are going up because of purchase tax.

The Government's savage increase on the selective employment tax, due to come into operation in September, will certainly force up prices on a wide range of products and services quite unnecessarily. And these increases will be passed on to the customer. Indeed, it is common form now in many nationalised industries providing catering services to put at the bottom of the bill: "5 per cent. surcharge for S.E.T.". And it is now accepted that everybody has to pay. Why cannot the Government set a good example in this field of price restraint, instead of aggravating what is an already difficult situation?

Secondly, the Government are taking an elaborate power to reduce prices. They can act only if they have a recommendation from the Prices and Incomes Board. The Bill itself will last only 18 months, and it will be some months before they have discovered some price which ought to be reduced. They will then have to decide whether they will refer it to the Prices and Incomes Board; the Prices and Incomes Board will deliberate and recommend, and then the Government will think again, and by that time the Act will no longer be extant. I suggest that this Part of the Bill is nothing more than window-dressing, and will be completely ineffective. I am not suggesting that noble Lords should reject it on the Committee stage. I would only remind noble Lords that I think this Part of the Bill is a complete and utter waste of time.

Turning now to incomes (and I want, if possible, to match the noble Lord's brevity and not keep your Lordships for too long), let us be quite honest about this. The earlier legislation has had relatively little effect in keeping down the increase in incomes. The interesting thing is that during the period when we did not have any income restraint incomes of all sorts generally rose rather less than during the periods of operation of the 1966 and 1967 Acts. I met a distinguished industrialist the day before yesterday who is at the present time engaged in a rather difficult wage negotiation with his workpeople. He told me that he is having to concede more now, under the present White Paper, by way of wage increase than he has ever had to do before in the history of the company. The answer is quite a simple one: the maximum becomes the minimum, and when he could have secured a smaller increase in a truly free negotiation, he now has to start off on the basis of accepting that the maximum is the minimum.

I am a little disturbed by the fact that Wages Councils and Agricultural Wages Boards are to be subject to the provisions of this Bill. This is a matter to which I prefer to return on the Committee stage, but I do not go along with the noble Lord, Lord Beswick, in his statement on this matter. It is a difficult situation, I appreciate, but I think the Government are being unnecessarily harsh on the Wages Councils and the Agricultural Wages Boards.

There is one new development which I think should be mentioned, in passing—and I do not want to make too much of it this afternoon. It is the question of salary increases to what one might call the higher paid workers; namely, the chief executives, chairmen and managing directors of large companies. This topic has been rather highlighted by the development in the last few days in regard to a particular individual. On Tuesday, May 28, the chairman of a merchant bank, Mr. Hambro, announced, when the accounts were published, that his company were giving £10,000 this year to the Conservative Party, as against £1,000 in the previous year, and he added by way of comment—and I quote from the Yorkshire Post: I believe we have the worst Prime Minister of this country since Lord North. It is in the best interests of our shareholders et cetera.

Whether one agrees with what he said or not is not for me to argue to-day. But on June 24—last Monday—a BackBencher in another place asked a Question as to whether the increase in salary of this particular chairman should be referred to the Prices and Incomes Board. The reply was given by the Parliamentary Secretary to Minprod., who said (OFFICIAL REPORT, Commons, col. 33): My right honourable friend is having this particular case investigated. Well, Minprod. can do what it likes—and I am sure will, without any advice from me. But what I should like to point out to Noble Lords opposite, and particularly to Her Majesty's Government, is that this is the first case in which the remuneration of a single individual has been brought in for investigation.

I want to ask whether it is the Government's intention to refer the salaries of single individuals, whether they be engine drivers or company directors, to the Prices and Incomes Board at the behest of a Back Bench Question in another place. I would point out that it was an unfortunate case for the Government to choose, because there have been other increases of greater magnitude in the last few months which have passed without any investigation being announced. Have Her Majesty's Government been actuated by political malice?—that is what is being widely said. Personally, I do not think so.

LORD CARRINGTON

I do.

LORD ERROLL OF HALE

I bear a voice behind me say, "I do". I should much prefer it if they were actuated by political malice, because then we should know where we stood. What I think has happened is that they are just plain stupid. It never occurred to them that they were doing something stupid by referring this case of all cases. By all means have a few chaps along and investigate them. But why take for your very first case the one where you can be accused of being actuated by political malice? Why choose the one which will, of course, do the Conservative Party funds a great deal of good? A lot of people will say: "Look here, the Conservative Party"—but I need not go on to that side of the argument. But this strikes me as another case of Government stupidity.

That is why I hope that when the noble Lord, Lord Shackleton, comes to reply we shall have a proper answer to this particular matter. Are individuals to be hauled up? If they are, are the Government going to publish the result of their investigations into individual salary increases? Have they the power to do so? I tried to find out by reading the Acts, but of course they are all interrelated and it is practically impossible to find out whether there is power to do so or not. I should be grateful for the assurance that there is in fact power to do so, and for the actual references in the relevant Acts.

I am not suggesting that there should be any exemption for directors or company chairmen as a class from the provisions for this legislation, but I suggest to Her Majesty's Government that if they think an investigation is necessary it should be to investigate the class of chief executives or the class of managing directors, and individuals should not be singled out for separate and individual treatment. If they do so decide to investigate a class—and they will have the opportunity to do so as regards public companies because the accounts now being published show what these salaries are and what the increases are—I suggest they should appreciate, and I hope they will, that such increases to company chairmen are irregular and usually very late in the day. It is unusual for a company chairman to get a salary boost every year. He is usually the last person in the whole company structure to get a rise; it is usually only after about four or five years. And here I am not arguing the merits of the Hambro case or otherwise; I am arguing the general case. It is usual for a company chairman to be the last to get a rise, and then only when his colleagues say, "Look here, we think it is about time that your services to the company were recognised".

Then, as regards the amount, I should like to point out to Her Majesty's Government that while the growth figures may seem very large in respect of increases, when these increases are net of income tax and surtax they are very, very much smaller; and they should have regard to the net value of the increase, in the case of the engine driver and in the case of the company chairman. I will not say more about the subject at the moment because I do not want to over-exaggerate its importance, but I look forward to receiving a satisfactory answer from the noble Lord, Lord Shackleton, when he comes to wind up.

As regards dividends, I think that this is probably the only part of the so-called policy which will be fully observed, for two reasons: first of all because companies will as collective enterprises do their best to follow the policy; and secondly, because this is the only part of the policy where approval is required in advance. In prices and incomes one goes ahead and may be hauled up later; but although it is called "a voluntary dividend-limitation policy", in actual fact one is asked to consult the Treasury before announcing a dividend increase, and so if one carries out those consultations one is effectively stopped from making the increase thought to be necessary in advance. So it will be effective. One naturally expects the Government to be toughest of all on dividends because they do not like dividends; they do not understand them. But do not let them claim credit for its being a voluntary policy.

I do not want necessarily to be personal this afternoon, but it so happens that I am on the board of a company which had decided its dividend yesterday, and knowing that, as from 4 p.m. to-day, I was going to speak within 24 hours on this subject, I thought it would be interesting to watch how one particular company did finally determine its dividend. The company (and I do not mind mentioning its name if anyone wants to know) had raised its interim, as it was quite entitled to do, and it was therefore made clear that, assuming the profit trend continued in the same way, the final dividend would also be raised. There is a very good case for an increase in dividend.

The chairman of the company wrote to the Dividends Division of the Treasury and put forward an extremely good case, and got a very quick answer—I must say that for the Dividends Division: one does get an answer—and the answer was, of course, "We must ask you not to put up your dividend". The result was that it was put up by only the requested maximum amount of 3½ per cent. There was no question of this being a voluntary action on the part of this board of directors. They were not acting voluntarily. That is a point I want to come back to. I think we must get away from the use of the word "voluntary" in this context. There was nothing voluntary about the decision of the board of directors, of whom I happen to be deputy chairman. We complied with the Government's request because we know that, if we did not comply, when this Bill became law we should have retroactive orders made against us. That is why we complied.

We had also (this is perhaps not such an important matter), in making the announcement of the dividend, to go to no fewer than 3 places of decimals to convert 3½ per cent. of a 1 per cent. increase two years ago into the exact decimal equivalent. I am glad to see that the noble Lord, Lord Fiske, who is Chairman of the Decimal Currency Board, is here this afternoon. He loves decimals and so he is probably very pleased; but it makes it very difficult when announcing a final dividend if you have to go, while we are still on £ s. d., to three places of decimals. This is what we are having to do, and at any rate one board regard it as a compulsory act which we must perform, and there was nothing voluntary about what we did.

Of course, it also leads to a lot of fun. Crosby Spring Interior Limited, recommended a dividend for 1967–68 of 28½per cent., a distribution of about £61,500 and an increase of about 3½ per cent. Well, approximations are not good enough for the Dividends Division of the Treasury. On the direction of the Treasury—and I call it a "direction" because that is what it is—the company had to reduce its distribution by £81, out of over £61,000. The company now has therefore paid out in dividends £61,479, which is a figure that is precisely, to the last recurring decimal place, 3½ per cent. over last year's. The gross dividend per share is thus reduced by 0.01 pence per share. Great fun, all this! Think of the amount of work it causes, when we are told to consider productivity, for the sake of £81. But then, of course, we have to accept that we have a Government who do not like private enterprise, do not understand it, and think dividends are dirty and profits are worse; and so we have to put up with this kind of thing. But do not at the end of the day tell us that this is a voluntary policy, because it is not. A noble Lord behind me says it is the road to serfdom. However beastly the Government get, we are not going to cave in to them: I can assure my noble friends of that.

I have tried to deal with several points, and I have taken my time. There is much more I could say, but I think I have given a general impression of the attitude of my noble friends towards this measure. Noble Lords will have gathered from what I have said that we on this side of your Lordships' House are opposed to the Bill, and that is indeed correct. It is clear that Her Majesty's Government have no electoral mandate for this, its third Prices and Incomes Bill since the last Election, and we should be fully entitled to vote against the Bill which is coming to us on Monday next on that ground alone. But were we to defeat Monday's Bill on Second Reading it could not be re-presented to your Lordships for a number of months. Rightly or wrongly—wrongly in my opinion—the Government have made this Bill the cornerstone of their economic policy for the immediate post-devaluation period. They have persuaded foreign Governments to lend Britain money on the assurances that prices, and particularly incomes, would be kept under control. Whether the Bill will achieve that is another matter, but the fact is that overseas confidence in Britain would be profoundly shaken if this Bill failed to become an Act, and we must take into account the consequences of what we contemplate doing.

There has been a good deal of political commentary on our attitude, as it might be, to this Bill. Political franc-tireurs, if I might so describe them, have suggested that a defeat on this Bill would force the Government to resign, thus bringing about a General Election, which the Conservative Party would then win. My Lords, I do not think that that is realistic reasoning. In the first place, we do not suppose that the Government would resign however many of their Bills we rejected on Second Reading. They are so deeply wedded to office that it would take much more than that to bring them to a confrontation with the British people.

In the second place we believe that rejection of this Bill, the provisions of which are already being honourably observed by responsible organisations in this country, could, given the unpretty pass to which this Government have brought our economy, cause sufficient further disruption in the present working of our economy to bring about damage to Britain's immediate future and, more particularly, a loss of confidence in Britain abroad, with serious consequences for the pound sterling. Constituted as our House now is, it is the duty of your Lordships, I suggest, to weigh in the balance our dislike of this Bill with the consequences for the nation of our having rejected it. Having deeply and carefully studied the whole question I must, regretfully but unhesitatingly, advise your Lordships to accord the "Monday" Pall a Second Reading.

4.51 p.m.

LORD HENLEY

My Lords, the noble Lord, Lord Erroll of Hale, made, as usual, one of his splendid, racey speeches—"great fun", in his own words, and I agree; I always enjoy it. But except for what he said at the end, that he was not going to advise his noble friends to vote against the Bill, I am not sure that there was really very much in it. It started off with five minutes about the Government's conduct of Business. I always enjoy this; it is splendid. But we have had so much of it from the Conservative Party in the last few weeks that it shows how very thin their opposition is. The noble Lord then went on to explain why the Government are in such a hurry about this Bill, that is, to prevent a gap into which the trade unions can pop a quick wage claim. His honourable friends in another place on Tuesday night did their best to enable such a state of affairs to take place. Then he drew attention to his honourable friend's admirable speech, I thought, on policy on Second Reading of this Bill in another place, and he explained why he did not intend to go into details about the Conservative philosophy. I am sorry he did not do that, at any rate in some measure, because it seems to me that at Second Reading stage this is something we want to hear about.

The noble Lord then went on to say what a badly constructed Bill this was, and in many respects I agree. Then we had a defence of Mr. Hambro, at some length, and a defence of a board on which the noble Lord sits. I am not complaining about this; it was a good speech, lively and entertaining, and I think we all enjoyed it although, as I have said, I do not consider there was anything in it. What there was in it, particularly about the difficulties of the Bill being made to work, I am bound to say that in no small measure I agree. There is much in the Conservative criticism of this Bill and its ethos with which I could go along, but I can only go along with it if the premise on which it rests is still acceptable to me, and it is not. The premise on which the whole Conservative approach to this Bill and what lies behind it rests, is that competition works. I think this is an illusion; it no longer works. It may have done once but it does not now, and as I and my noble friends see it—and indeed as the Government see it—some measure of direction and intervention is necessary.

High Tories have recognised this in the past. It is part of the high Tory tradition. It has been high Tory doctrine ever since the end of the 17th century that even if it was too paternalistic for old-fashioned Whigs—and I cannot understand why this High Tory doctrine has disappeared from the Conservative Party—this was part of the old difference between Whig and Tory, that the Tories believed in some degree of intervention and direction, and it has vanished. I cannot help feeling that the low Tories (if I may say it, although not in a pejorative sense, of course) have taken over the Conservative Party, and I think this is a pity. They are men who want a free-for-all in which the weakest go to the wall, and it seems to me that in our complex society if we have a free-for-all it may end up with all of us going to the wall.

The Liberal Party supported the first Prices and Incomes Bill (this is the third) because we felt the situation demanded some measure of State intervention on incomes, and because we do not believe that untrammelled collective bargaining is sacrosanct. My honourable friends voted against the second Bill, which has been referred to as "Shepherd's pie"—which is a good name to remember it by—because we thought it feeble. I use the word "feeble" in the schoolboy sense of the word: it was irresolute. But we did not vote against it because it was interventionist, as the Conservative Party did. We come to this Bill to-day —"Beswick's breakfast" Bill, to give it the convenient name again, invented by the noble Lord, Lord Erroll. We are not happy about this third Bill either, any more than the Conservatives are; and in fact my honourable friends in another place voted against it. We do not like the prices section of it at all, and we look with a great deal of doubt on the dividends section. The noble Lord, Lord Erroll, pointed out that this was the one section that would be obeyed. It will be obeyed by the payers of dividends because it does not do them much harm. This money finds its way into reserves in one way or another. But from the point of view of the wage earner it does not give a very good image. How to get over this problem I do not know; it is an extremely difficult problem.

Thirdly, we are not very hopeful of the way in which the Government will use the incomes part of the Bill. As the noble Lord, Lord Erroll, said, it is a muddle. I suppose it could be less of a muddle, but this is one of the difficulties of trying to resolve this situation. It is something which has not been done much before, and probably we are all feeling our way and learning. Nevertheless, when that is said the Government are trying to get wage negotiation at plant level instead of nation-wide increases across the board, and I think that is to be commended. As I say, it is dubious how the Government are going to use the incomes part of the Bill. However, they are trying to go on the lines on which we in the Liberal Party think they ought to go; namely, to get negotiation at plant level and try to avoid the nation-wide increases across the board, which is much the same as a monopoly price ring. If you get the two of them together, a nation-wide increase across the board and another increase at plant level, this is where you get a wage drift which can get out of control.

We accept the penal provisions in the Bill, although I am sure the noble Lord does not. As a matter of fact, they are not very penal anyway, are they? The penalties seem to be remarkably small, and my honourable friends voted with the Government on Tuesday, against the Opposition, who evidently, under the leadership of the Labour ultra Left Wing, moved an Amendment designed to de-dare unequivocally that trade unions are above the law; and hence eventually, and by extension, big business, too. At least that is the only reason I can presume why the Conservative Party should have fallen in behind the leadership of the ultra-Left Wing of the Labour Party.

We have always stood for the control and regulation of great aggregations of power, whether it is the over-mighty State or the over-mighty subject, and we maintain that positive Government intervention on pay and productivity, backed by realistic sanctions, is the proper price for full employment. Anyway, we do not see why wages and salaries should be an exception. If there is going to be regulation for other things why should there not be regulation for salaries and wages as well? And of course this goes for Mr. Hambro, too.

The Labour Party have been unlucky, but remember what Napoleon said about unlucky Generals: he would have none of them; they were accident-prone, as we would say. I think that if the Government from the beginning had been bold and resolute none of this succession of unfortunate Bills would have been necessary. We might have got the kind of State intervention, the kind of wage negotiations, the kind of growth for which we are all so desperately seeking now. This has not happened. The Government lost their nerve.

My honourable friends opposed the Bill on Second Reading with disappointment and with regret, and, although they have not told me so, I imagine that their regret must be even greater since the Tory Party followed the utterly irresponsible lead of the Labour Left Wing on Tuesday. We do not oppose Bills on Second Reading in your Lordships' House—at any rate, not very often so may I invert, as it were, and welcome the Bill, but also with some disappointment and some regret.

LORD BESWICK

My Lords, may I just say this, in order to avoid misunderstanding? The noble Lord, Lord Erroll of Hale, referred on a number of occasions to the "Monday" Bill. I ought to say that the original understanding was that if the Bill came here from the other place to-night it would be given a First Reading this evening, and we should have a formal Second Reading to-morrow—Friday, not Monday.

LORD ERROLL OF HALE

I am most grateful to the noble Lord, I thought it was to be Monday. I shall have to alter all my diary engagements yet again.

THE PAYMASTER GENERAL (LORD SHACKLETON)

My Lords, the noble Lord is always so busy thinking of witticisms that he does not listen. He told us he was in the House, and we announced in the House that it would be on Friday.

LORD ERROLL OF HALE

My Lords, the Bill has not yet been through all stages in another place, and it may not be available for transport from one end of the Palace of Westminster to the other to-day. I think the noble Lord is being unduly optimistic.

LORD SHACKLETON

My Lords, in that case the noble Lord should be very careful what he puts in his diary.

5.5 p.m.

LORD BLYTON

My Lords, I listened to the noble Lord opposite, speaking on behalf of the Conservative Party, and I was nearly in tears at the terrible plight that he portrayed of his business associates: I hope they do not land on the National Assistance Board in the near future. He also referred to Mr. Robert Carr, speaking on behalf of the Shadow Cabinet in another place in the debate on the Second Reading of the Prices and Incomes Bill. Mr. Carr said, speaking on behalf of the Conservatives: We are convinced that the people will never tolerate the degree of compulsion required to make the Socialist planned economy work. For that reason, we base our policies on freedom, incentive and competition, and that is why we reject this Bill."—[OFFICIAL REPORT, Commons, 21/5/68, col. 328.] All my life I heard that philosophy and I suffered under it. One would think that this doctrine will give us the Promised Land. What freedom had we under this doctrine over the years? Always two unemployed men looking for the job of the man inside the factory. And this corrective in our economy was to see a large unemployment market as a stimulus to prevent the employed man asking for more wages, irrespective of what his firm was earning. The freedom we had was to accept low wages or unemployment. What we are being asked by the Conservative Party to do now is to go back to where we were in the 1920s and 1930s when this doctrine operated, with all the inevitable misery that arises from it—people out of work and those in work poorly paid.

What do the Conservatives mean by incentives? Is the incentive they have in mind a margin of unemployment sufficiently high to keep trade unionists not only in a state to fear the loss of their job but to be content on low wages? Competition is another of their cures. I know that the more monopoly there is the less competition there is; and that is the main purpose of monopolies. Under this doctrine of competition the working people had their wages pulled down to a very low standard, on the basis that costs of wages had to be reduced to allow us to compete in the international world. We had well over a million unemployed; unemployment benefit was reduced; means tests were introduced; sons left home so that their parents could get some assistance. As trade unionists we were crippled by the Conservatives under this policy, and we were very weak. The whole State apparatus was used against us, and the repugnant Trade Disputes Act was brought in against us.

So, my Lords, I say to my trade union friends outside the House, "Do not be misled by the Conservatives' sudden interest in you to-day; you will know about it if they get power, which is all at the present time they are concerned about". So far as I can discover, the Conservative policy on trade unions will be more severe than anything proposed in this Bill. You will probably find that a man going on unofficial strike will be penalised, and in some cases, if damages are awarded in the courts, trade union funds will be attached.

It must also not be forgotten that the Conservatives operated a wages freeze when the right honourable gentleman Mr. Selwyn Lloyd was Chancellor of the Exchequer. There was no free negotiation then. Nobody got anything. There was a real clamp-down on wages. In the public sector those running the machinery for increasing wages were told by the Government of the day (the noble Lord opposite, I believe, was a member) that the Government would not pay any increased award made by the machinery. And I never forget the nurses, who in those days were poorly paid, demonstrating in the Central Lobby and being offered 6d. per day. They had done wonderful work for the nation, but the Tory Party gave them no sympathy. In the private sector, employers followed the Government's lead. Unrest followed, and unemployment reached a high level. So to all trade unionists my advice is: do not go back with the Tories with their free-for-all policy, or you will find, like we did, that the weakest—that is the lower paid man, and those on fixed incomes, like old-age pensioners—will go to the wall.

The Government to-day are attempting to maintain full employment and at the same time bring about the economic survival of the country and end the crises we have faced since the end of the war, no matter what colour the Government may be. The increased benefits we want for our people, and their social wage can come only from increased productivity. We all know that it can come only from that, and also we know that we cannot afford huge increases in wages if we do not earn them nationally.

In a free-for-all the strong unions will get the wage increases while those who are not organised will be at the end of the queue. At least this Bill tries to bring a little order into that position. I believe that this Bill will give the lowest paid workers a chance, where possible, to close a little the gap in industry in the margin between the highest paid and the lowest paid.

For years, our Party has believed in planning. Planning does not mean just control of industry, the location of industry or regional development. It means also having a policy and having a plan, and having an attitude to dividends, profits, rents and to prices and incomes. We cannot divide prices from incomes—they are inter-related. If prices are kept level then the demands for wage increases will be fewer. I am pleased therefore that the Bill intends to deal with prices.

The Bill is intended to deal with unnecessary price increases. One of the strongest arguments for the powers of the Bill is that for the first time the opportunity is given for the Government to require price reductions as well as stabilised prices. I know that there is great feeling in the trade unions about the powers of the Government under this Bill. I have some sympathy with their views, and I understand their feeling. They say that the T.U.C. shares the aims of an incomes policy, and that they should be left to operate their voluntary policy without any reserve powers by the Government.

The T.U.C. cannot give an assurance that its vetting machinery can work, and certainly would not claim that it can make unions accept what they do. One remembers at the Conference of Trade Union Executives at Croydon the size of the majority in favour of the Economic Statement and the size of the opposition to it. This does not give any absolute assurance that the T.U.C.s policy of voluntary vetting can be made to work properly in the circumstances. Until assurances can be given tint the policy can be made to work, the Government's view is that statutory backing is required.

The Bill is to apply for 18 months. It is my sincere hope that the T.U.C. vetting policy will be successful and that the statutory powers contained in the Bill will not be needed. But we hive to face the fact that the T.U.C. machinery is not yet strong enough to work without these powers, as some unions reject T.U.C. vetting policy. After all, since 1964 under the Incomes Bill there have been no prosecutions, there have been no fines and no one has gone to prison. I regard these powers as reserve powers for minorities who can make it difficult for the majority.

How can trade unions deal with anyone who goes astray on their vetting policy? Again, I heard the noble Lord opposite poke fun at the voluntary system of the Bill. Surely he must know that a policy of this kind cannot work if the people involved refuse to operate it. Therefore, we must be dependant upon the support, the good will and the cooperation of the trade unions. Most trade union leaders will seek to expand real incomes and go for a stable economy. The powers, therefore, are to ensure that, because the Government need the support of the trade unions, and the acceptance by them of these powers, leap-frogging by unsympathetic minorities is dealt with.

There is another matter which ought to be cleared up. This is not a Bill to establish a wage freeze or a 'wages clampdown. Paragraph 34(1) of the White Paper makes provision for productivity agreements. Sub-paragraph; (2) and (3) make clear the position where existing wages and salary levels are too low to maintain a reasonable standard of life, and also where there is widespread recognition that the pay of groups of workers has fallen behind. The White Paper at page 9 spells out that there can be above ceiling increases for low paid workers, under a settlement which, through covering a wider group of workers, is within the ceiling. I believe that this will protect thousands of people who, in the past, have always come off worst; namely, the lower paid workers.

None of us who have lived our lives in the trade union movement relish these powers, but one has to ask: can the T.U.C. do it by themselves? The answer is, I think, No; not until they are unanimous that a prices and incomes policy is essential to our economy, and the trade unions themselves will accept the T.U.C. General Council's decisions in relation to vetting policy. The fact that the powers have never been used or invoked, and that it has never been necessary to make an Order requiring statutory notice of a pay or price increase, shows the success in the past of voluntary notification. It is because of this, and the fact that the Government will not, I believe, go out of their way to penalise or cripple the trade unions, that I support the Bill.

It must also be remembered that the Declaration of Intent on Productivity, Prices and Incomes is still valid. It was signed by everyone who had responsibility in industry, trade and commerce. It was signed by the chambers of commerce, the British Employers' Federation, the Federation of British Industry, and the National Association of Manufacturers (as they were at that time), as well as by the T.U.C. and the Government. Up to now, none has repudiated or renounced that Declaration. We know that the Conservative Party did not accept it, although while they had power both Mr. Selwyn Lloyd and Mr. Maudling always said that an incomes policy was necessary to the economy.

No doubt in all this controversy the Conservatives expect to make political capital out of the differences that exist in the trade unions on this issue. I would advise them, "Do not bank on this too much. The trade unionists have long memories of how they were treated by Conservative Governments over the years, and when the Election comes, in two and a half years' time, you will find the trade union ranks will have closed." I can never imagine trade unionists regarding the Conservative Party as their saviour.

The other Part of the Bill deals with powers over prices, dividends, and rents. During the last two years the Government have begun to strengthen their watch over prices. They have had co-operation from manufacturers, and a watch has also been kept by the Ministry of Agriculture over food prices, with some success. But I urge the Government to be more watchful over prices, rents, and dividends. Increased prices and increased rents create demands for wages. And at the same time, regardless of what the noble Lord opposite said, if high dividends are paid while the worker is kept to the ceiling under the White Paper, it will turn him against any idea of cooperation in a productivity, prices and incomes policy.

The choice, as I see it, is whether we should try to have a planned economy, living within our means, and the end of free-for-all in trade union negotiations, or the Tory Party returned to power with its policy of freedom, competition and incentives, which we all have lived under. My choice is to support the Government and not to return to a state of society of years ago, when a person was a hero to live in it, when we had competition, so-called "freedom", on unemployment benefit, hunger, and the incentive of "the sack" if we asked for more wages. I do not believe for one moment that even those in our Party who are critical of the Bill will accept this Conservative doctrine that has been put forward. Because I believe that the Bill is necesary, it will will have my support.

LORD SIEFF

My Lords, before offering my contribution to the debate, I think I have first to declare an interest. For over fifty years I have been connected with a large retail organisation. Throughout this time prices have been my constant preoccupation. Hardly a day passed in which I did not have to wrestle with rising costs and the results of increased taxation. I had to devise ways in which these could be offset by higher productivity in manufacture or distribution.

Now we have heard a great deal about a "prices and incomes policy" and about "productivity". There are people who might be under the misapprehension that these concepts have just been invented. I do not need to tell your Lordships that this is not true. I recall that as far back as April 30, 1930, Mr. William Graham, the Labour Minister for the Board of Trade, introduced a Consumers' Council Bill in the other place. This was to enable the Board of Trade to regulate by Order the prices to be charged for certain commodities, and to investigate all questions relating to the production, distribution, supply or price of any commodity.

I must say that it is to the credit of the Labour Administration that, having learned from the lessons of the war-time and post-war controls, they do not even contemplate a detailed regulation of prices. We are all too sophisticated today for that approach. The Prices and Incomes Bill, which is the third one in succession, has a long ancestry. Like all its predecessors it was born out of temporary predicaments and its life span was always and will always be uncertain. Its temporary powers are certainly very vague indeed.

My Lords, prices and incomes actually control economics and business. It is what they mean. This is what directors, executives, merchants and public administrators are concerned with. Take out this preoccupation with the right price for the right product, with the right reward for the right job for the right man, and there is no real problem left at all. The success of a business, the efficiency of public administration and the economic prosperity of the country depend on the soundness of the decisions concerning mainly prices, incomes and margins. That is true, and it is also true that the public discussion and the legislation we are debating show that there is now a dissatisfaction with the state of our economy. We must, however, be careful to attack the cause of the disease and not the symptoms. We must not upset those parts of the common economic body of the nation which are healthy and working well.

My Lords, who is to decide the right level of prices, incomes or margins? These problems do not arise in a vacuum. Prices which are not related to quality are meaningless figures. Earnings must be taken in the whole context of human relations, welfare and personal involvement. Distributive margins depend on the functions performed by the retailer, both in quality and in scope. In the last four years the official policy towards retailing has been motivated by intellectual prejudice, if I may say so. The theoretical justification of the selective employment tax, enshrined in the Cam- bridge University Inaugural Lecture, has now passed into folklore. But the selective employment tax remains and is to be raised in the autumn, as your Lordships know, by 50 per cent. A new, complementary thesis of cash margins has now been accepted by the Government. This states that the cash margin in distribution should remain unchanged when the price goes up. Of course, the cost of goods for special reasons may rise much faster than that of distribution, but sometimes the opposite is the case. As a general principle there is no more reason for percentage margins to be lowered when prices are increased than for margins to be increased when prices are lowered. In the latter case, the opposite is more likely to happen.

My Lords, even a first-year student of economics does not believe in the concept of "economic man", whose life is motivated by gain. Yet many people who should know better believe in the concept of the "shrewd business man" who will do anything for quick profit. Where these people exist in real life they are not very impressive or successful. The great majority of business people have a long-term business objective; namely, to promote growth. They have to exercise prices and incomes control within the constraints of the changing market situation. They have to ask themselves some basic questions. What do the customers want? How can their requirements as to qualities and prices be met? These are the central problems which face the retailer. As I have said, I have, along with my colleagues, asked such questions and had to find the answers over five decades.

Our approach has been to study the customers' needs for goods where we have mastered special marketing and technical expertise so that we can offer exceptional quality and value. Specifications and costings are worked out jointly with the producers, and are based on large turnovers and continuous production. A high volume of sales, boil for home trade and for export, is essential to generate greater productivity and lower prices. But in almost all cases our technologists and production engineers make further contributions to improved values. Higher costs and taxes are absorbed, and whenever possible prices are lowered and quality value increased.

To be attractive to the customer, the price point must be compatible with the highest quality attainable, and must cover costs of manufacture and distribution. Naturally, the retail margin must take into account the cost of writing down prices where, for one reason or another, goods fail to sell. And fashion, weather and women are notoriously fickle. Allowing for such special circumstances, all goods should make their contribution to profits. No article should be promoted at the expense of others. In fact, the customer decides what is purchased. Indeed, long-term growth of a retailing business is truly consumer-orientated.

There is another important consideration. Margins should be set at the level which, allowing for stringently controlled expenses, will result in the net profit required to provide a long-term and continuous growth of business. Where there is lack of continuity the long-term objectives suffer. Perhaps our debate to-day and the Prices and Incomes Bill are a clear example of this happening before our eyes. I do not claim that all businessmen are following long-term policies and that these are all in the national interest. There is waste and inefficiency in many places. There are businesses which, through inefficiency or lack of vision, are in need of practical advice. Good advice is seldom entirely wasted, though I know from experience that what people need is not norms, ratios or blueprints but the understanding of how to go about their task. Of course it is true that there are businessmen who are not prepared to accept advice.

For instance, the Government could well look again at the area which they directly control: the nationalised industries and the whole of the purchasing in the public sector, accounting for nearly one-half of national products. Are these goods and services well purchased and well distributed? What are the margins, and are they growing? The Civil Service is a kind of margin on national resources. It is costing the nation nearly £600 million in pay bill alone, an increase of 28 per cent. in four years.

The Prices and Incomes Board was established with more manageable terms of reference than the abortive Consumers' Council of 1930. It is to its credit that an impressive volume of reports have been published, and a body of consistent theory which places emphasis on productivity. Yet essentially the problem of regulating prices is as insoluble to-day as it was in 1930, 38 years ago. If I may use a mathematical concept, the Board is still grappling with the answer to an equation with too many variables. Without fixing prices, margins or profits, how can one regulate the relationship between them? If we do not know whether the price was originally too high or too low, how do we know whether the change is justified? If we cannot say what is the right level of profit, how can we justify a change in prices or margins to preserve it? But, my Lords, what is the right price, the right margin or the right profit?

The Prices and Incomes Board, to its credit, has from its inception endeavoured to lay considerable emphasis on productivity rather than get involved in these abstract considerations. A greater understanding of the relationships between productivity, prices and incomes is, of course, important. But to many businessmen who often have to walk a tight-rope between profit and loss words of encouragement, advice or command, as it were from the ground, are of little help and can be a handicap in their balancing act. My Lords, I am in favour of anything which will make our country more efficient and will remove obsolete ideas and attitudes in industry. I believe that in business, as in government or politics, one should put national and community interests first. But it is in our national interest that commercial and technical decisions are taken by men on the spot in the light of their knowledge and experience.

5.37 p.m.

LORD CHAMPION

My Lords, if anything would justify the continuance of this House it is surely the last two speeches to which we have listened, one by an eminent trade unionist who knows the difficult problems from a particular angle, and the other by the noble Lord, Lord Sieff. It is not the first time that I have followed him in debate and every time I have listened to him with the care which the position he holds as the head of a great retail organisation justifies. I can only say that if all businesses and labour relations were conducted as they are conducted in the organisation over which the noble Lord still presides, I do not think that to-day we should be discussing a third Prices and Incomes Bill.

This is the third time we have had such a Bill before us—one each year, as we have been reminded. We have been told that this Bill is intended to run until the end of 1969. Unless a miracle occurs, in June or July of next year we shall again be discussing a Prices and Incomes Bill. I cannot believe that an annual Act of this sort is a good thing for the nation or for Parliament. I believe that the Government ought to have taken the bull by the horns and to have made the decision that a Bill of this sort, when it becomes an Act, should run until at least the end of 1971. Clearly the difficulties which this Bill sets out to deal with cannot disappear by the end of next year. They can disappear only if, by some awful mischance, some great evil, we have sudden, massive unemployment. That is the only way it could change within the period to such an extent as to justify not having some control between now and 1969, the period for which the Bill is intended to run. I believe that the Government could, without any greater difficulty than they have had to face from their own friends and others, have introduced a Bill which would run for at least the period I have mentioned.

We are to-day discussing something that is the accompaniment of a great good namely, full employment. On the wages and salaries side—and I shall deal chiefly with that side—it arises from the tremendous power that full employment places in the hands of the trade unions. For at least a century these trade unions have been extremely important bodies, but in conditions of full employment they have in some ways become the most powerful bodies in the land. It is surely a truism to say that these powerful bodies have a responsibility to society as a whole at least equal to their responsibility to their members. That is a nice easy phrase, which embodies a truth which is capable of complete acceptance when it applies to the other trade union officer or his union, but it is far from easy of acceptance or implementation when you or your union are involved. Only those who have experienced the pressures that build up behind trade union leaders, officers, executives, know how hard it is to resist those pressures. They come from people who pay them. They also come from people whose future depends on you and whom you are determined to help.

I believe that the time is certainly here when we have to do again what the First Secretary of State said, and that is to assist the trade union officers in the work they have to do by a Bill of this sort, which is a checking Bill. As Mrs. Castle said, it is a matter of statutory underpinning. Without something of this sort, some element of compulsion, the leap-frogging, the playing off of one union against another and one industry against another, will inevitably continue unchecked. This is what our experience has taught us. Surely everybody who has ever looked at this subject from any angle, and knows something about it, realises this. So no one should make any mistake about its importance and about how understandable it is that trade union officers find it difficult to work a wholly voluntary system.

I think of what my attitude would be it I were a railway driver at this moment, imposing certain restrictions on the use of me and my time by my employer—your Lordships will notice that I do not use the term "working to rule", because I am firmly of the opinion that railway-men ought always to work to rule, and if the rules are wrong and by working to them the system becomes inefficient then they should be changed. Incidentally, when I was a railway signalman I always worked to rule so far as it was humanly possible, simply because I realised that the rules were devised and designed to protect the people who were temporarily in my care when they were passing my box or approaching it. But, as I was saying, if I were a railway driver responsible during long periods of my working; day for the lives of 800 or 900 people behind me, I could not remain unaffected in my attitude to my wages when I see that B.O.A.C. pilots are said to have turned down a wage increase of £1,500 a year and that the lowest paid of them gets some £100 a week. I am bound to say that I should be asking myself, "Why should I be content with a 3½ per cent. increase provided that I accept a productivity agreement?"

I am not saying it is right for the N.U.R. and A.S.L.E.F. to be taking the action that they are taking at this time, but I can understand it. I can understand the pressures, the feeling of "Well, if they are getting this, why not me? Why can't I get a bit more?" Incidentally, the noble Lord, Lord Erroll of Hale, talked about the Hambro's £4,000. I should think a little about that, too. Of course it is bound to come into my consideration. I do not care whether it is Hambro's or whoever it is. If these things are happening, why can I not share in them? That is the attitude adopted by most trade unionists that I know, and understandably so. Much of what I have just been saying is perhaps by the way, but it is all part of the problem posed by our discussion of the Prices and Incomes Bill.

I cannot accept the saying which is popular in some parts of the Labour movement that an incomes policy is imposed upon us by our creditors, the so-called "Gnomes of Zurich". The fact is that the restraints of an incomes policy are imposed upon us by the hard irrevocable fact of our economic relationship with the rest of the world. In that relationship the root of our problem is not that our wages and prices have risen faster than those in any other industrialised countries, but that output and productivity have risen slower in this country than in most comparable countries. I believe that we could become a very high wage economy if our production were brought up to the best in the world.

I prepared these words yesterday, but when I read this morning's Press I was glad to find confirmation of them in the statement taken from a book by 11 distinguished economists of the United States and Canada, in which they told us that our industrial efficiency is low compared with that of our competitors. The striking figure to support their charge about us is that if American efficiency is rated at 100, these economists rate British efficiency at 66. If we could only close that 34 point gap, what a vast difference it would make! We should not be worrying about the policy that is before us at the moment. We should be enjoying the fruits of it, or at least those who do the work of the country would be enjoying the fruits of it. Given an improvement in managerial standards and real co-operation between management and men, a really high wage economy is capable of achievement in a few short years. That seems to be very much what the White Paper and this Bill are saying to trade unionists and others; that is, "Demonstrate clearly that you are prepared to make a real and not a phony productivity agreement, and the money will soon be in your wage packet". That is how I understand it.

I was going to talk about the two systems of negotiation mentioned by the Royal Commission in its Report; that is, the informal system and the formal one. I shall not speak at any great length upon this subject, except to say that it is quite clear from the Report that the informal system of collective bargaining, as they call it, is to some extent causing the runaway of earnings that is causing some of the difficulty which we are talking about to-day; not so much the formal, nation-wide agreements, but the agreements that are taking place at shop level. I would only say about this, and I say it to my noble friend who is going to reply and to the Government, that they must watch this aspect of the matter. Those of us who work in industries which have only nation-wide agreements are not for ever going to be content to see other industries and trade unionists getting very much higher earnings, purely as a result of this informal system of bargaining.

I should just like to mention the dividend point, which was referred to by the noble Lord, Lord Henley, and the noble Lord, Lord Erroll of Hale. I know that this is something which is worrying some of my trade union colleagues. Speaking of company distributions to shareholders, Mrs. Castle said at column 312 of the Commons OFFICIAL REPORT on May 21, 1968: That is why the Chancellor announced in his Budget speech that the 3½ per cent. ceiling for increases would apply to dividends as much as to wages and salaries". What we as trade unionists see is this: that if a possible dividend increase is withheld by a company in one year the money is either ploughed back into the undertaking, which has the effect of increasing the value of the shareholders' property, or it is placed in such a position that it can be distributed when the climate is a little kinder. That is felt by many of my trade union colleagues to be so unfair as to cause them to say to themselves: "Why should we, when they don't? If I am deprived of a wage increase for 12 months it is lost for ever; but if a dividend increase is withheld and it is ploughed back into my undertaking, then, as a shareholder, I shall get it eventually, either as a capital distribution or as a cash dividend when the time comes".

There is much more that one could say about this Bill, but I am bound to end by saying that, despite expressing some doubts about some aspects of the policy that we have before us, I see no alternative to it at the present time—and here I completely support my noble friend Lord Blyton. We in the trade union movement know of the difficulties of some of these things when they have to be explained at branch level; when we have to explain away some of the things I have been talking about. There is no alternative at this time, and I join with those who have given this Bill a welcome and hope that it will succeed as it ought to succeed.

5.52 p.m.

LORD MOLSON

My Lords, I think that the Government are right in claiming that this is a very courageous measure intended to give effect to their economic policy, but I was very glad that two spokesmen of the trade union movement, Lord Blyton and Lord Champion, looking at it from the trade union point of view with an enlightenment which I think is becoming widespread in that movement, are coming to realise that it is in the interests of the workers themselves that there should no longer be a complete "free-for-all", with those who are in the strongest bargaining position obtaining the largest increases. When the criticism is made that compulsion runs all through this Bill, it seems to me to be reasonable to have compulsory powers in reserve, even though one recognises that if it is to work satisfactorily it is essential there should also be a voluntary system.

My noble friend Lord Erroll, when he was speaking and deprecating the compulsory powers that apply as regards dividends, complained that if he or any company was not prepared, as he said, to "play ball" there was the compulsory power in reserve. My Lords, surely that is eminently reasonable in dealing both with wage negotiations and with dividends. If it is possible to get agreement, well and good; but it surely would be most unfair that those who are willing to "play ball" should accept the disadvantages of this policy and those who are not prepared to "play ball" should get the advantage. Therefore, much as I dislike in theory the idea of compulsion, and fully as I recognise how far preferable a voluntary system is, I can see nothing at all unreasonable in underpinning a voluntary system with compulsory powers. Indeed, I would say that it would be impossible for any voluntary system to last for long unless there were compulsory powers.

In the very remarkable speech that we heard from Lord Sieff, with his 50 years of experience of business and, as other speakers have said, his responsibility for an organisation which has been of immense value in raising the standard of living of everybody in this country, he expressed his natural doubts as to how effective these calculations could be. I am quite sure that he is right in expressing doubt whether it is possible for anybody, however wise Mr. Aubrey Jones and his colleagues may be, to arrive at anything which is theoretically perfect, but I believe that it may very well be useful for there to be some independent body which looks at matters front the point of view of the consumer. I think we must entirely reject the idea that the benefit of the nation is necessarily going to be assured if there is bargaining between capital and labour. There is only too much evidence in the last fifty years that when capital is organised, on the one hand, and labour is organised, on the other, it is possible for them to come to arrangements which provide for high wages for the workers and high profits for the employers but that that is obtained at the expense of the public as a whole.

I have for long believed that it would be necessary for the Government to intervene in the general interests of the consumer as a whole, and in a few words I should like to say why it is that I feel that what you might call the classic economic system of Ricardo, even if it worked 150 years ago, cannot be ralied upon at the present time. There is in fact at the present time no free negotiation with regard to wages. There is never a reduction in wages: there is never even a reduction in earnings. The monolithic organisation of the trade unions means, as the noble Lord, Lord Champion, pointed out, that in a great many cases you have exactly the same wage all over the country, and that has had a great deal to do with the creation of depressed areas, where the costs of production may be higher than they are in other places. In the classic economic system, that was taken into account by the wages that were negotiated. At the present time the same wages are being paid in, for example, Northern Ireland as are paid close to the great markets of England, and it is largely for that reason that there is so much unemployment in Northern Ireland.

We all are resolved that there shall never be a return to the high unemployment that there was before the war, but that does not mean that it is possible to run an economy without a sufficient reserve of unemployed labour to provide the labour that is needed for new enterprises and for expansion. If, every time that there is a new enterprise and new expansion, labour can be obtained only by inveigling it away from existing concerns, there will be the same kind of spiral of wages which has been taking place ever since the war and which, with the rigidity of the cost system in this country, was the real, underlying cause of devaluation.

To what extent are we taking advantage of devaluation? I am bound to say that, some six or seven months after devaluation, many of the symptoms are extremely alarming. One would have thought that after devaluation of nearly 15 per cent. the pound sterling would be pressing against a new ceiling. Instead of that, the day before yesterday it reached the lowest point at which the pound sterling has ever been, and unless there is a great and sudden improvement, which we all hope for, then indeed the outlook for the future is extremely serious. I hope and believe that this Bill which the Government have introduced is a clear indication that they are prepared to take a firm line in order to try to ensure, not that wages shall not go up—we hope that with increasing productivity they will go up—but that the costs of production of what we have to export shall not only not rise but (and this is essential if we are to pay off the vast debts that we have contracted during the last few years) shall come down.

I believe that this Bill cannot possibly be one hundred per cent. effective in its administration; but I believe that it is of the utmost importance that the Government and Parliament should indicate that this is the policy which is going to be adopted. There are already indications, in the case of the railways and of B.O.A.C., that the Government are taking a firm and, I believe, a thoroughly wise and statesmanlike line. Even more serious than these matters is the claim, already in the pipe-line, for a great increase in engineers' wages; and engineering, after all, is the basis of the greater part of the exports on which we all depend. I therefore believe that, in its general principles, this is a necessary and wise Bill, and for my part I shall certainly support it.

My Lords, I am bound to say that I do not agree with Part III. I think it is quite unnecessary to bring in these restrictions upon increases in rates. I have said that the Government's Rent Act of 1965 was a courageous measure. It has been working well. Answers given to Questions on this subject that my noble friend Lord Kinnoull and I have put show that it is working as well as it was expected to work. I think it a great mistake to interfere, as this Bill does, with the working of that measure. I am quite sure that on a sound rent basis depend not only improvements in the housing of this country but also a limitation on the ever-increasing expenditure of local authorities and of the Government.

I do not in any way criticise the powers that are being taken by the Government to control in some measure what is done by the local authorities in the matter of charging rents. I have tried in the past to persuade Conservative Ministers of Housing to introduce legislation (I see that my noble friend Lord Brooke is in his place: I urged it upon him when he was Minister) which would prevent the subsidising of tenants in good, modern council houses at the expense of the ratepayers, many of whom are in houses which they own and most of whom are in houses that are inferior to those which are being subsidised. It would have been far better if the Government, when adopting this measure, had taken powers also to insist upon a proper increase in rents in the case of those local authorities who choose, as I think most unfairly, to subsidise the rents of the more fortunate tenants at the expense of those whose accommodation is inferior and often more costly.

Generally speaking, therefore, I support this Bill. I hope, however, that it may be possible at some later time for what I regard as the serious defects in this measure to be dealt with by comprehensive legislation.

6.5 p.m.

LORD ROWLEY

My Lords, the economic problems with which this Bill seeks to deal following the Prices and Incomes Acts of 1966 and 1967 are not economic problems which originated three, four or five years ago, or even during the 13 years of Tory rule. I must say that I was a little disappointed that the noble Lord, Lord Erroll of Hale, who made the opening speech for the Opposition, should have marred what I thought was an otherwise constructive speech by having a go at the Government and referring to the pass to which the present Government had brought our nation economically. This problem did not begin in 1964, or even in 1951 when the Conservatives took over: the problem has been with us for more than 50 years.

I am old enough to remember the time when I was a student before World War I. We then had no problem of trade deficits. It is true that our visible imports exceeded our visible exports; but we were able to balance, by the interest we received on something like £4,000 million of overseas investments, our maritime insurance and our freight charges. That was the position prior to World War I. During World War II we had to hypothecate all those overseas investments to pay for the supplies that we needed to carry on our war effort. During the inter-war years we were able to manage, except for occasional crises, without running into trouble on the foreign exchange as a result of a trade deficit.

But, of course, during all this time we were glad to know that the standard of living of our people was beginning to rise. It is true that during the inter-war years the policy was largely one of deflation, with unemployment reaching an average of something like 2,000,000 a year and with social economic injustices throughout the land which none of us would ever wish to see return. Then we went into World War II; and I doubt very much whether we could have carried on from the economic viewpoint if it had not been for the Lease-Lend project that was thought out and put into operation by President Roosevelt.

After World War II, some of us on these Benches remember the £1,100 million loan that was made to us by the United States, and the gift of 1,000 million dollars from the Canadian Government as a token of their appreciation of the great services our country had rendered to the freedom of the world. Ever since World War II we have had these recurring crises which we sought to manage by "Stop-Go" or by loans from the so-called "Gnomes of Zurich", from Washington or from elsewhere. And we have managed to stagger along with these recurring crises.

But, again, since World War II the standard of living of this country has gone up to such an extent that it is probable that we have to-day the second or third highest standard of living in the world. I was reading the other day a speech delivered in July 1957 by the then Prime Minister, Mr. Harold Macmillan, in which he said that most people in this country had "never had it so good". In a sense that was true. There were more motor cars, more television sets, more radios in the homes and more people owning their homes, than ever before. In a sense, therefore, it was true. But I have always regretted that statement, because I consider that it fostered a feeling of complacency and a false sense of economic security throughout the length and breadth of our country. It is true—and I wont to be fair about it—that Mr. Macmillan said in the same speech that the problem of the day was inflation. I agree that it was the problem of the day in 1957; and it is now in 1968. Mr. Macmillan's remedy, as those of us who were in the other place at the time know full well, was increased production.

Well, my Lords, presumably there were industries where, as a result of the appeal of the Prime Minister, there has been increased production. But all along during those years right up to the present time the trade deficit was mounting, until in 1964 it was something like £750 million a year. To-day, in spite of the efforts of the present Government, it is something like £400 million to £500 million a year. That is the problem which our country has to solve. We can have all our domestic arrangements, but we have to face the fact that we have been living, in one sense, beyond our means. I do not believe that we can blame the "Gnomes of Zurich" or Wall Street, or even the City, if we get into these recurring crises. Eventually the responsibility will rest fairly and squarely on the shoulders of every one of us who belongs to this great British nation.

Like other noble Lords I fully support this Bill. As I have tried to point out, I think we have to look at the international position and our vulnerability as an island. Apart from Japan there is no island community in the world which is so vulnerable to the economic tendencies and trends as is this island. We have to import something like 60 per cent. of our foodstuffs and 70 per cent. of our raw materials, and I know of no other nation in the world which is in the same position, except Japan. The United States, Germany, France—none of these industrial countries has the same threat to its standards of living that we have.

I agree with my noble friend Lord Champion that our workmen may be compared with the workmen of any other country in the world. But we read statements made by visitors to this country, and it may be quite right for them to calculate that our industrial efficiency is only 64 per cent. compared with 100 per cent. in America. I believe that it would be possible for us to increase our efficiency and productivity. If we do not, we shall be in a very serious situation.

I understood the noble Lord, Lord Sieff, to be sceptical (and so was the noble Lord, Lord Erroll of Hale; he is not in the Chamber, but I think this was his point) about the possibility of controlling prices because the prices of such a wide diversity of articles are reflected in the cost of living index. He said that the Government could make their contribution by, for example, reducing purchase tax. I would ask my noble friend who is to reply whether the Government are satisfied that the powers they are taking in Clause 4 of the Bill will be adequate and strong enough to enable them to control prices. I do not believe that it is any good expecting the workers of this country and their wives, to accept restrictions on wages if prices get out of control. I refer to all workers, whether by hand or by brain, because it applies to us all. I can think of nothing more likely to open the floodgates to wage demands and increases than an unrestrained increase in prices. With all respect to the Government, I believe that to be the crux of this Bill. Are the Government going to be able to control the prices of everything necessary for the welfare of families in this country? If that is not possible, I think we have a bleak outlook ahead. Time is running short. I believe that the next 18 months will be crucial. I believe that the position for this country will be desperate if we are not able, more or less, to wipe off this trade deficit during the next 18 months or two years, and I earnestly beg my noble friend who is to reply for the Government to reassure us, if he can, that the Government are satisfied with the powers they are taking to control prices.

My Lords, may I say in conclusion that I think we have to put Party politics on one side for the time being regarding our economic future. I believe that the future of our country is at stake and that it is the responsibility of us all, whatever may be our political views, not to stand back, but to do everything we can to strengthen the Government in their attempts to restore our economy. I believe that the historian will pay tribute to the courage and determination of the present Government who, for the first time in the history of this country, have taken an unpopular line. We all know from the by-elections that the Prices and Incomes Policy is unpopular; but in spite of that unpopularity, they are going ahead with this policy because they believe, as I believe, that there is no alternative.

6.19 p.m.

LORD DOUGLASS OF CLEVELAND

My Lords, I should like to take up some of the history from where my noble friend Lord Rowley left off. He went well back, but I shall go back to 1960–66. It was during this period that the need for action was made manifest. Earnings went up at that time by over 45 per cent., and industrial output by under 20 per cent. I say to noble Lords opposite who, I think, are opposing this Bill—I am not quite sure—that this happened during a period when they were in control. If, as Mr. Robert Carr said in another place, they believe in high wages, high profits, high dividends and high productivity—I felt that he was a high-flying man when he went on to all these things—it would have been interesting if they had shown some willngness to take action during those years. After all, profits were high. Dividends were high. And under the Conservative Government of that time they could be paid out. The noble Lord opposite would not have had any bother about it—not even about the 48 or 50 per cent., about which he was talking. But during that time wages dropped to the lowest in Europe. if the Conservative Government believed in high wages, why did they refuse wage demands put forward? Actually, the T.U.C. was asking for wage restraint in order to help the Conservative Government to make a success of the economy. The response was high profits, high dividends and low wages.

When the noble Lord, Lord Erroll of Hale, expressed sympathy with Mr. Hambro, my heart bled for him. I wonder whether that increase went before a vetting committee of the employers, as a wage claim would go before the vetting committee of the T.U.C., and what they said about the question. I hope that in his reply my noble friend Lord Shackle-ton will give the noble Lord the assurance that the next time engine drivers get a £4,000 increase we will submit it to the vetting committee under the prices and incomes policy, whether it is an individual or a collective increase. I thought that the noble Lord brought this debate down to a fatuous level by arguments like that, Indeed, his flippancy was such that I was going to compliment him. I wish he had stayed, but no doubt he has left to appear as a comedian on the B.B.C. No doubt he will be as successful there as on those Benches. This is not a subject for flippancy. It concerns the future of the country, whichever Government is in power.

I have been associated with the construction of this Bill since it started and I should like to have a look at how it started. The Conservative Government had their problems, and the T.U.C. met them from time to time and argued with them about what should be done to get this country out of the economic mess we were in. That was when Mr. Macmillan was saying, "We never had it so good". To say that, when we were battling with a trade deficit and balance- of-payments problems, was the reverse of the truth. If the noble Lord, Lord Erroll of Hale, thinks that this Bill is a "Shepherd's Pie", I think that the idea they had at that time was cold potato. It was the "Three Wise Men", who were to decide what was good in the interests of the nation. But what is the nation? Is it the trade unions or the employers or the bankers, who are doing pretty well at the present time with a 7½ per cent. bank rate? That was what they had to offer the T.U.C. at that time—cold potato.

Then they came forward with a good idea, which was promptly taken up, as are all good ideas from wherever they emanate. It was suggested that we should have a National Economic Development Council, on which would sit the employers, the Government, the T.U.C. and individuals who could be expected to contribute to the discussions and to the solution we were trying to find. The Conservative Government started off the idea that a combined effort should be made by all concerned, irrespective of class, in order to find a common solution to the economic problems facing the country. It was an acceptance of the fact that urging greater productivity had not succeeded in pulling the country out of the mess. Exhortation had come to the end of its tether because it had been unsuccessful.

The question was asked: what do we do? And from the employers came the answer: unless the trade unions controlled wages, unless wages were prevented from escalating as they had been doing over the past ten years, then; was no hope for the economy of the country. The T.U.C. retorted by talking about profits and prices, and we agreed that we would not only look at this problem but deal with it, because we knew there was no future for this country unless we did. These things are not easy to get over to the ordinary man and woman in the street, particularly when the effort to control prices was not responded to from the employers' side. Prices are difficult to control, but would the Government not have been better able to control them if the C.B.I. had set up a vetting committee to give a lead, like the T.U.C.? What lead did they give in the control of prices? They said that it was not possible. If we had had a vetting committee on the other side, we should have had discussions between the T.U.C. and the C.B.I. which would have been much more profitable for the future of the country. If we now must have legislation to deal with prices, whom should we blame? Do we blame the Labour Government or "Neddy", where the idea was first conceived, or do we blame the people who were really responsible?

When we are dealing with trade unionists we have a human problem. Most trade unionists follow the lead that is given by the shop stewards and the officials above them. I can remember many years ago, in an enthusiasm for education, arriving at an arrangement with an employer to have an education officer in the works who discussed not only vocational education but anything else he liked, including Communism, and that was written into the arrangement made. After two years I went back one day and asked the employer why he was looking so sad. He replied, "I have just been talking to that gang of steel welders and I put a problem to them. The answers they gave were so foolish that I told them, 'For heaven's sake, why don't you think?'. 'What do you think we pay trade union officials for?', was the reply". That shows the burden which trade union officials, from the shop steward up to the general secretary, are carrying at this time. They have to convince their people that the activities they are engaged in are for their good. That is not easy while we are restraining wages.

In order to learn what was happening on the wages front throughout the world we moved about a bit. I have not time to tell you all that I learned, but I will tell you some of it. I went to Sweden in an unofficial delegation. We met the Swedish T.U.C. and the Swedish Employers' Association and discussed their methods of dealing with economic problems. Quite simply the Swedish T.U.C. decide each year how much they think the country's economic situation will allow for wages, how much will be allowed to go to profits and how much for reinvestment. When they make that decision, that is it; it is accepted. And by using that system over the years they have been able to achieve the highest wages in Europe; by a system of wage restraint, they have achieved the highest wages ever achieved in Europe.

One might think that such an example is to be followed, but life is not quite so simple as that. In Sweden there is a total population which is less than the population of London. There is a T.U.C. which is all-powerful. It is given the powers to deal with these matters, to make decisions and to carry them out. That is possible with a small country like Sweden. I was disturbed to read in the Press some time after I came back that Sweden also had more millionaires per thousand of population than any other country in the world; and I am wondering: are we going to object to having all these millionaires if at the same time we have the highest wages in Europe? That I should have to think about. I am telling your Lordships this so that you do not believe that in Sweden they have the solution to all these problems.

We went into Germany; and I was in Germany on a number of occasions from 1945 onwards. In Germany they do not have the problem because they know the evils of inflation. If we had had a Hitler in this country we should not need to talk about inflation to-day. Everybody would be so afraid of it that they would deal with the matter as we are trying to deal with it to-day; that is, by an orderly method. But they did more than that in Germany—and I pass this on to noble Lords opposite for their consideration. There they said, "Unless we can involve the trade unionists in the management of industry they will never appreciate the problems, and we shall never have an economic success".

They set up what they called co-determination. This means that in a company there are two levels of directors: an executive level of directors, as we have in this country, with precisely the same responsibilities, and, above that, another level of directors who decide policy. Those directors consist of five representatives from the trade unions and five representatives from the employers. Between them they elect a chairman; and sometimes he is a trade union representative. When I heard about this I said, "With a trade union chairman it is six to five that you get your own way". But did it work? The system has gone on, and the people have had a say in the decisions that have been made about policy in the industry. And because they have had a say in the decisions, they have had to take the responsibility as well. That, coupled with the fear of inflation, has made Germany a prosperous nation. In addition, she does not have to carry the burdens that we have to carry, burdens which some of our noble friends objected to our casting on one side just a week or two ago because there are limits to the burdens a country of this size can carry.

But perhaps the most important country that we visited was America, because there you have an economic strength unequalled, I think, in the world. We found that they had their own trade union troubles. I do not want to go into them all, but I must say this. People who feel that an industrial trade union movement will solve our problems must remember this: that in America they have their contracts, which run with one union in the industry for a period from three to five years, and it has become habitual that at the termination of the contract you expect a strike. They stockpiled for the purpose, and the unions collected food to distribute during the anticipated strike, which they expected would last for a month to six weeks. Earlier on I was horrified at this, because I felt that one day this anticipation of a month or six weeks would break down under the stress of industrial relations when a strike was expected. This happened, as your Lordships know, in the iron and steel industry in America. They had a strike which nearly crippled America, with all its strength, and the industrial organisation that some people think would put us right in this country.

The end of that story was that when they had the next contract coming up President Johnson got the representatives of the trade unions and the employers in the White House and, as one newspaper put it, locked them in a room with enough food and drink to keep them going for a month, and dared them to come out without a solution—and a solution within 31 per cent. He popped in from time to time to see if they were getting on all right, and they came out with a 3½ per cent. overall agreement.

What I am saying to your Lordships is that even in a strong country like America they cannot escape the economic necessity of keeping profitability in balance with wages. These stories can be told at length, and if somebody wants to know more about them maybe one day I will write a book; but it may then be too late, because by that time this Bill may have been thrown out and our economic success will not be assured.

When we talk about full employment (and I shall finish on this, much as I should like to go on) we in the trade union movement have always advocated full employment. Now we demand full employment. In America they wanted full employment, but they also wanted price control. They achieved price control for a number of years in America. They kept prices steady, but it was at the expense of a 5 per cent. unemployment figure. And because of pressure—and your Lordships have seen what pressures have been; they do not always stop at democratic activities; violence occurs—they have brought down the unemployment figure to 4 per cent.; and as soon as they brought the unemployment figure down to 4 per cent., prices began to go up. This is the experience of our country, and the reason why this Bill must be supported.

When it comes to the voluntary side, people do not expect men in the workshop to understand that by refusing to take high wages they are going to be better off. In Sweden, they send the shop stewards on courses for a month, full-time. There is not one shop steward in Sweden who has not spent at least a month on such courses in order to learn the economic facts of life and take them back to the people. This is where the T.U.C. have the power to do these things. We are in the process of teaching our people in the trade union movement that to use the power they have is not to be successful, but to use wisdom will bring you sufficient amount of money in the economy that will enable you to get not only high wages but full employment, and also reinvestment in industry in such a way that full employment for the future is assured.

But, my Lords, full employment does not stop at men. Full employment means full employment for money. In this country it did. What has happened is that over the past two years we have been battling for an incomes policy, and it has been tough going, with very little help from either the employers or our Opposition friends. That tough going is resulting in some success. It was early this year that we were told by the President of the Board of Trade that this year engineering expects a 20 per cent. increase in exports; and it is getting it. Chemicals are going up by 13 per cent.; and they have nearly done that now. Beatle building will go up 35 per cent.—and everybody knows of the optimism that exists in the beatle building industry to-day. These are the success stories at the end of the day. In the export credits guarantee, which is helping exports, we have 8 per cent. more money being paid out in loans at the present time than we had a year ago. Many employers are helping us with exports, and helping us well.

The British National Export Council have done a great job so far as exports are concerned. This year they are going into invisible exports. They are setting up a permanent committee on invisible exports with the British National Export Council, which has on it Government employees and trade union members. Invisible exports were 60 per cent. of visible exports. When you remember the effect that invisible exports have on the economy of this country you will see the need for setting up that committee. They have done good work. They have done work which has been of a co-operative character with the trade unions, with the employers and with the Government. I only wish that the reflection of that work could be seen in this Chamber today, and that we could have our Opposition friends talking, not about the weakness in the Labour Government but about the weakness in the economy and the best way of getting it straight.

6.41 p.m.

LORD ARWYN

My Lords, it is not easy to follow my noble friend Lord Douglass of Cleveland with his wide experience. My speech is liable to be something of an anti-climax, especially as I speak as a company director of some forty years' experience whose fights have not been so furious and varied as those of my noble friend. I shall look forward to reading the book he has promised to write. I apologise for having had to leave the Chamber after the first five speeches, and if what I have to say proves to be a repetition of what has been said in my absence, I hope it will be regarded as an emphasis. My right honourable friend the Secretary of State for Employment and Productivity said in her speech on the Second Reading in another place that this new Bill has, therefore, a very different economic parentage from the previous ones". The right honourable lady went on to say: We are no longer asking the people to hold down wage increases as part of an overall reduction in the level of economic activity. We are rather asking them to help us exploit the new opportunities which devaluation has brought to get our economy expanding again—not through a consumer-led boom, such as we had under the Conservatives in 1964, with the disastrous results of which we are all aware—but on a basis which will at last give us the economic independence that we have not enjoyed for half a century".—[OFFICIAL REPORT, Commons; 21/5/68, col. 301.] This is an appeal for a new attitude of mind on both sides, and I have no hesitation in supporting the Bill on that basis.

In to-day's newspapers we have extracts from a 500-page report published in the United States by a team of 11 American and Canadian economists. We are labelled as a country where don and docker alike prefer leisure, tradition and stability to efficiency". We are called "economic failures". We are accused of trailing behind Europe in productivity and efficiency. American companies, we are told, operating in Great Britain have shown profit margins almost 50 per cent. higher than those of British firms. We are rated eighth in Europe, with the United States as top and ourselves 34 per cent. below. My Lords, if this report is accurate, then the need for drastic change in attitude is an urgent matter if we are not to lose the benefits we can get from devaluation.

It is far too late for management to shift all the blame on to trade unions either now or in the past, or for trade unions to put all the blame on management. There may be as much fossilised thinking among trade unionists as there is, I believe, among boards of directors. My noble friend Lord Douglass of Cleveland has indicated how defossilisation can proceed. Before we can phase out old technologies and policies, a new attitude is absolutely essential. The tragedy is that new attitudes require confessions that the old ways and patterns of thinking are wrong, and their continuance is fatal for the welfare of our country. Most of us in your Lordships' House have experience of resistance to change among colleagues on boards or at trade union meetings. Too many have an in-built inability to confess they have been wrong to continue a policy which has been a failure, and legislation of this kind can provide a release and a "face-saver". It can also provide an adequate reason for more enlightened colleagues to rid themselves of the obsolete and stubborn in their midst.

We must either accept the need of a major industrial transformation and change in our attitudes in every facet of industry, or justify the label now tagged on us that we are all alike, preferring tradition and the old methods, whether we are trade unionists or executives in industry. I sincerely hope that these epithets which are hurled at us from across the Atlantic will make us all see ourselves as others see us, although they might be a little exaggerated.

The powers being sought in this Bill are to last for a period of 18 months. There is a provision for renewal, thank goodness!, because the 18 months is brief enough time to change ingrained attitudes. This Bill is urgently needed. There are parts of it, I agree, to be swallowed with difficulty. Let us accept it as a bromide, and not refer to its restrictions and penal clauses or the wide powers of ministerial discretion and hindrance. Legislation in some form is needed. I have little faith in any voluntary system of restriction regarding prices and incomes. Like my noble friend Lord Blyton, however, I am much more concerned about our low-paid workers than the emoluments of company directors, of whom I happen to be one. My Lords, let us accept this Bill as an opportunity to discard our old prejudices. Once we do that the problem of prices and incomes could very well settle itself. If your Lordships' House is to set a pattern, let it be one which embraces the need to adopt new tolerant attitudes and to discourage obsolete philosophies.

6.48 p.m.

LORD AUCKLAND

My Lords, the discussion this afternoon has ranged over very wide topics, and at times, because the discussion ranged over a great many economic matters, I could not help feeling that we had almost lost sight of the Bill. That I think is no bad thing in the present climate of opinion. But it seems to me that, whether my noble friends on this side of the House or noble Lords opposite accept this Bill or not, one thing is absolutely certain. That is that no incomes policy will ever work if we adopt a kind of "us" and "them" attitude. If those who work in the City of London (and I have worked there for nearly twenty years, not as a company director) are always suspicious of trade unions and trade-union activities, the activities of the Co-op. and so on, and if trade unionists are always suspicious of the City of London, we can never hope, under any Government, to get this country on a sound footing.

This Bill is without doubt necessary. I agree with my noble friend Lord Erroll that it is a badly drafted Bill, but it has been in existence for so short a time that I, for one, have barely had time to study it, so I do not want to go too far into that aspect. However, I want to make reference for one moment to the remarks made about Mr. Hambro. Mr. Hambro's remarks about the Prime Minister may have been intemperate (that is a point of view which could be accepted in some circles), but I think my noble friend Lord Erroll was quite right when he made reference to the criticism of Mr. Hambro in another place. My noble friend was not seeking to defend Mr. Hambro's increase in salary. I listened to his speech most carefully, and I believe—and I think most people on reading Hansard will take the view—that he was stating merely t rat one man had received an increase in salary but that it might well be that many others, in all walks of life, may have the same in the future. In any case, it will be interesting to know just how much increase Mr. Hambro will get after taxation. It is also not unreasonable to ask how much the bankers, who are so often attacked by the Party opposite—or at least by some members of the Party opposite—do for exports. I believe that in that connection we should look a little more constructively at this particular Bill.

I would also mention, in passing, that the City column of to-day's Daily Mail sets out the losses made by Lloyd's of London, where I spent 18 years as an ordinary worker in Lloyd's (as a broker and an underwriter, though not as a director, so I have no axe to grind there), and six years as a working member of Lloyd's. Therefore I myself have suffered from this, but I think it is fair to point out that these losses will not be borne by the taxpayer. They are borne by every member of Lloyd's, and it is a condition of becoming a member that a man is responsible for the last halfpenny when these losses occur. I think this is a fair point to make, in view of some of the attacks that are occasionally made on private companies.

I do not want to rub in too much salt, but it is fair to say that nationalised undertakings are able to write off losses of this kind, as we have seen in the Transport Bill. Here again I am not necessarily criticising this. For example, the railways have faced enormous difficulties over the years, and I am certainly not going to suggest that in pre-nationalisation days the railways were absolutely perfect, any more than they are now. But we must get rid of these prejudices and try to judge things on their merits.

I want to refer briefly to labour disputes in relation to this particular Bill. It is hoped, and I think this is one of the policies of devaluation, to help our exports, and I believe that all Parties wish this to happen. I support the Government in the line which they are taking regarding the railway dispute, and I think the House will have listened with great interest and with broad agreement to the speech made by the noble Lord, Lord Champion, even though those who, like myself, use the Southern Region every working day, do feel rather frustrated when our train is stranded outside a station for an hour or so, as I have experienced.

This Bill will work only if we have a climate of opinion which will not direct itself solely to those like Mr. Hambro, and others—who, after all, have worked for long years for this country, and many of whose profits go to our export fields—and at the same time always blame the trade unions when things go wrong on the labour front. It is my belief (and we have many examples in this House) that most trade unionists are responsible people, and they have given many years of loyal service to this country. It is vital that there should be, as in other countries, particularly in Scandinavia, which I visited recently, far more communication between the two sides.

One of the problems in this country, both at managerial level and at trade union level, is that there is too much distance, not only between the two sides but within the sides themselves, both at trade union level and at managerial level. Whatever else comes out of this Bill, about which I and others have a good many reservations—and I would point out to those who have criticised the Party to which I belong for the attitude we have taken in these Prices and Incomes Bills over the years, that it is largely certain Members in another place who have provided the bulk of the hostility towards the provisions concerned—I believe that all of us in this House, where-ever we sit and whatever views we may hold, want to see an incomes policy work. But we also want the climate of opinion and the wherewithal to make it work—something we shall not have while there exists the kind of rancour that is so often fostered by extremists.

LORD HIRSHFIELD

My Lords, before the noble Lord sits down, I am not too sure whether this is completely relevant to the subject we are debating, but I seemed to follow that he was saying that underwriters at Lloyd's have been making serious losses for which they do not get relief. If that was what he was saying, surely the fact is that they were making considerable profits in the past, they have been making losses in the past year or two, but they will soon be drawing substantial income tax repayments because of those losses.

LORD AUCKLAND

My Lords, at this hour I do not want to go into a discussion about Lloyd's. I am well aware that profits have been made in the past and these have been taxed. The amount received by way of compensation for these losses, as I understand it, will be relatively small in comparison to the losses made, but I do not think that this is an hour to get too embroiled in that particular matter.

7.0 p.m.

LORD POPPLEWELL

My Lords, this has been an interesting debate, and I think it has been interesting because of the number of speakers and the various positions they occupy in this House. Apart from the last speaker, the noble Lord, Lord Auckland, it is interesting to note that there has been only one speaker on the other side, the noble Lord, Lord Erroll of Hale, who opened this debate. I think he enjoyed himself thoroughly for about 31 minutes, and he has been conspicuous by his absence from the House, except for a very brief interval from time to time, from then till now. I think it is just as well that we should put this on record, particularly because of the attitude adopted by the noble Lord, Lord Erroll, who did not deal seriously with the merits or demerits of this Bill but enjoyed a rough knockabout and attempted to protect Mr. Hambro.

The noble Lord objected very strongly indeed to the attitude taken by the Government in suggesting that Mr. Hambro's £4,000 increase in salary should be referred to the Prices and Incomes Board. This also worried the noble Lord, Lord Auckland. The noble Lord, Lord Erroll, in particular, drew attention to the fact that this £4,000 increase was before taxation. My noble friend Lord Champion very rightly pointed out what the reaction of the railway driver, earning £12 or £15 a week, would be to the £4,000 increase of Mr. Hambro. I would remind noble Lords that the railway driver's wage of £12 or £15 a week is before taxation. All the wage rates that have been submitted to the Prices and Incomes Board are before taxation. The analogy here is that it as well for all of us to take some particular note of these figures, because I think that particular line is not at all edifying in a serious discussion of this description.

To me the prices and incomes policy that is being followed by the Government is one of the most important events that has taken place in our industrial relations and in our economic structure for many generations—or many decades, at any rate. It is quite understandable that sections of the Labour Movement, some of our trade unions, may be very disturbed because they are being asked to alter completely their line of approach, that is, making demands for increased wages irrespective of the consequences. Now they are asked to ensure that any increased wages given to them are married up with an increase in productivity. That is indeed a very big change because previously any increase in productivity was not normally followed by increased wages. That increase went in certain directions until the trade unions became so strong that they demanded their share.

Naturally, the trade unions are very concerned with regard to the reserve compulsory powers in the Bill, because they fear that although, as has been pointed out, during the two previous Ells the compulsory power has never been exercised, should there be a change of Government they may very speedily see a quick change in this direction. Therefore, to get over and explain away this problem, and to get the co-operation of the trade unions to accept this, I think the Trades Union Congress General Council has done a wonderful job of work for which they have not received sufficient credit anywhere. To get together the executives of the trade unions in that famous meeting some 18 months or so ago and to discuss this question of prices and incomes, even involving reserve compulsory powers, and to get that adopted (with a very small majority though it was) was an indication of the statesmanlike attitude the General Council of the T.U.C. were taking in approaching our economic difficulties in a realistic manner.

Would that the Confederation of British Industry had shown half the, statesmanlike attitude the General Council of the T.U.C. have shown, because the Confederation of British Industry, instead of accepting a responsible attitude towards vetting machinery so far as prices and dividends were concerned, threw up their hands and said, "Ours is a loose confederation, and we have no power at all to institute such a line". The T.U.C. had no power, the General Council had no power. The free-for-all of the trade union movement and the industrial movement set up in this country did not give and has not given any overall power to the General Council of the T.U.C. They took the responsibility of attempting to get the trade unions to forgo some of their sovereignty and to hand it over to the General Council in order to vet wage claims, in order to try to ensure that there was a restraint, or, alternatively, that the part the trade unions were playing would be in accordance with the best wishes and the best needs of this nation, instead of the distinctly individualistic line of approach that prevailed previously. This is a big step forward indeed, and all credit should be given to the trade union movement for the attitude they have adopted.

It is not surprising that there should be certain individual trade union leaders who have not "played ball" with the rest of their colleagues. Do not let us be mealy-mouthed about this. Frank Cousins and Clive Jenkins have not done the trade union movement a great deal of good. But that is a point of view; it is a point of view based upon their past experience, and I am sorry that they have not been sufficiently forthright to realise how essential this is if we want to get out of the economic difficulties which this nation has had to face for a variety of reasons.

The noble Lord, Lord Rowley, rightly pointed out the difficulties that have occurred since the First World War. There is another difficulty that he did not mention, but it has a bearing. Since we have dispersed our Colonial Empire and we have many other nations springing to life with their own self-nationhood, much of the wealth that we were attracting from those particular areas, which assisted us with our invisible balance of payments, is no longer there available to us. This, combined with the other matters that have been mentioned, is a burden that we have had to bear. As we all know, it culminated in our living beyond our means—like the housewife who, instead of budgeting each week according to the income she receives, spends more from time to time and the reckoning day arrives. That reckoning day has arrived here, and this Bill is one of the measures that this Government are taking to try to plan the economy of the country to ensure a better standard of life for all by increasing our productivity effort in order to pay for our imports and to meet all our balance-of-payments difficulties. We may object to the "Gnomes of Zurich" or whatever they may be, but the bare, stark fact is that we have been living on borrowed money for far too long and under the 13 years of Tory rule no real effort was made to adjust the balance. It is this effort that we are now making to repay those loans and, as it were, to get away from the clutches of the moneylenders; and it is essential that we should ensure the success of this prices and incomes policy.

We have been subjected to a tremendous attack from the Press from time to time, and also, in the main, by our political opponents who have been condemning us because of devaluation. This was something that was brought about. We have had many political gibes against us for adopting devaluation. We were told it was not going to be successful. We were told that we shall have to devalue again at some other time. We may do; I do not know. But the result that we can see at the present moment is an increase in our shipbuilding orders. We now see our shipping lines placing orders for the building of British ships in British yards instead of, as they have been doing in the past, building ships for British shipping lines in foreign countries—in Japan, Germany and Scandinavian countries. Devaluation is one of the means by which our shipbuilding order books are now being filled, and it is being of material assistance in helping us to meet our difficult balance-of-payments problem. We also see the tremendous increase that is taking place in our car exports and in the other goods mentioned by my noble friend Lord Douglass of Cleveland.

This is indicative of a general line of approach. It is indicative of the honesty and sincerity of this Government, and of their determination to place this country on a proper economic basis, and in not being afraid to adopt stern and unpopular measures for our own people in a desire to see the nation's interests put well to the fore. These are difficult matters. Many of our people, particularly trade unionists and many of our so-termed Left-wing Labour Movement, condemn the Government because we have not been able to control prices in the way that has been mentioned. It is the easiest thing in the world to say this. It is acknowledged by all, I think, that we should like to control prices. We should like the control of prices to be as effective as some of the wage restraint measures that we have had to adopt, but, as one noble Lord said earlier, there are thousands of different prices. It is to the credit of the Government that they have referred to the Prices and Incomes Board so many suggested price increases of a general character. The fact of their having been referred to the Board has been sufficient to influence those concerned, and the price increase in some instances has been postponed for a considerable period of time. That is something of which the nation is not taking sufficient cognisance. It is something that is not seen easily by our people as a whole. They see the varying retail price levels, and they ask for a control of prices.

Our economic distributive set up is a difficult hotch-potch. We have small individual shop keepers, small individual traders, massive self-service stores, and big engineering amalgamations as against small engineering firms. To try to achieve a common-sense level of prices in all those matters is extremely difficult; and the Government are to be commended for by this Bill attempting to strengthen the Prices and Incomes Board in the work of investigating some of the prices, so that in future they will be able to make a recommendation that some prices will be reduced.

This is forward thinking. I know there is urgency attached to an adjustment and that in the next few months—not in an 18 months' period, as was suggested by one noble Lord, but in a much shorter period—we must be on a firmer foundation so far as our balance of payments is concerned. Once we have achieved that and we get the full impact of the policy that we are now following, let us hope that in that period of 12 to 18 months we may be receiving some of its greater benefits. By that time I am certain that the nation will respond accordingly and pay credit to this Government for not having been afraid to adopt unpopular measures for the general wellbeing of the nation.

7.18 p.m.

THE EARL OF DUNDEE

My Lords, I cordially agree with the last speaker Lord Popplewell, in saying that we have listened to a large number of extremely interesting speeches in this debate, including particularly, if I may be allowed to say so, his own to which we have just listened. Another good point about all of them, I think, has been that they have been—

LORD ROWLEY

Short.

THE EARL OF DUNDEE

—remarkably short; and, considering the late hour at which we began the debate, we have got through 12 speeches in an unusually short space of time. I do not think that there is now any danger that other business will have to be taken after the conclusion of this debate; therefore perhaps your Lordships will forgive me if I try to be fairly short, too, as I want to be, because I am afraid I cannot say anything favourable about this Bill and I hate having to indulge in a long disparagement. The only good thing I can say about it is that we do not intend to vote against it, because the Government, I think mistakenly, have put this Bill forward as the central feature of their economic policy. If your Lordships' House were to refuse a Second Reading to a measure which the Government regard as the most important part of their policy and which has been approved by the House of Commons, they would really have something genuine to complain about—very different from the transparently fabricated constitutional non-crisis which they invented the week before last.

May I say first just a word about the incomes policy in general, and then I hope another not very long word trying to indicate where and why I think the Government have gone wrong. I and most of my friends, in both Houses, have always been in favour of a voluntary incomes policy. In 1962 we set up the National Incomes Commission, which was an advisory body, and also a number of economic development councils to co-ordinate with it. We did not receive any support from the Party opposite, or from the trade unions, who refused to join with us in trying to work an incomes policy, because, they said, it was designed only to restrict wages and not to restrict profits. That only showed they had not read the White Paper or the Order in Council under which "Nicky" (as the National Incomes Commission was called) was set up, for it clearly required the National Incomes Commission to give advice concerning the restriction of profits as well as the restriction of other incomes.

However, when the change of Government took place I think that we gave the present Government far better support than they had ever given us. When the Prices and Incomes Board was set up, in substitution for the National Incomes Commission, we recognised that because it had the support and co-operation of the trade unions it was, therefore, a stronger and more efficient instrument for carrying out its job than the National Incomes Commission had been. I do not think the opposition from our side to the present Government's incomes policy at that time was any more formidable than it was on their own side. We had Mr. Enoch Powell, who did not quite approve of it, and they, in the Cabinet, had Mr. Frank Cousins, who openly expressed disagreement with his colleagues; and now both these distinguished public figures have decided that it is not useful for them to remain in co-operation with their former colleagues.

But until about 18 months ago, so far as I can remember, it was always understood by all Parties that our policy in this regard was a voluntary one. That was made perfectly clear in the 1966 Election by the Prime Minister, when he pointed out that a statutory incomes policy would mean embarking on a very slippery slope, and that there was no question of doing so. It was only three or four months after the Government had secured their present majority that those former undertakings were abandoned and the principle of statutory compulsion was introduced—a principle which I have never been able to support and which I think most of our Party have never been able to support, either.

I listened with interest to the speech of the noble Lord, Lord Champion, today. It was a most charming account, and very relevant to our discussion, particularly his recollections of his work in the signal box and his feelings at that time. But I wonder whether, 18 months or two years ago, he would have got up and recommended that the compulsory statutory powers for controlling incomes should be continued for more than three years from now until 1971. I do not think the noble Lord would have done that at that time. I doubt very much whether Mr. George Brown would have done so, although he too has now demanded that we should have a longer period than up to the end of 1969 for the duration of these statutory powers.

My Lords, there were other prominent members of the Party opposite who made rather different comments on this compulsory element in the incomes policy very soon after it was introduced in 1966; and I think it is relevant to refer to them because they go a long way to explain how the rift has taken place between the Opposition and the Government over the whole question of incomes policy. Mr. Crossman, in September, 1966, just about a couple of months after the first statutory element was introduced, took quite a different view from those who said that this was only a temporary measure to get through a very bad period, and that after that we must go back to the voluntary system. He said that the July measures were not a last-ditch defence of Government policy, but a last-minute dash for freedom, a break-through into new patterns of industrial relations and new experiments in co-operation between State planning and collective bargaining, and he rejoiced that we had abandoned what he called the "rusty old tool" of laissez-faire, economic bargaining.

Just about a week later the present Minister for Productivity, Mrs. Castle, said at Bolton: Economic planning in a democratic socialist economy cannot operate sucessfully if wage-fixing is left either to the arbitrary decision of a wage-stop or to the accidents of unco-ordinated sectional bargaining. She said she was quoting from the pamphlet Keep Left, which had been written some years before. She went on to say: The members of that group, Dick Cross-man, Ian Mikardo and myself among them, had no doubt then that in a planned society incomes must be planned along with everything else. We called it 'socialisation of the wages sector' and declared that to make it happen we needed the recognition by the trade union movement that wages in any industry are no longer the business only of the employers and the workers in that industry but of the whole nation. And she said that it would call for something more effective than collective bargaining between employers and employed.

My Lords, I respect the views of people who believe this, but I do not think that they are views which I could ever accept, and I think they go a long way to explain why so many people in the country do not really believe that the Government want only a temporary emergency statutory power, with penal sanctions, and will afterwards go back to a voluntary system.

On this side of the House my noble friend Lord Molson (who apologised for not being able to stay until the end of the debate) supported the principle of compulsion. He made one interesting exception; he excepted that part of the Bill which deals with rents, which he said ought not to be controlled. He gave a closely-reasoned argument showing that the result of controlling rents would be that we should have less housing and that the housing problem would not be solved. But if you are not going to control rents by statutory compulsion, and if you are going to prevent wages from rising by statutory compulsion, what will the workers then say and think? Will they accept this statutory prohibition on increasing their wages while the local authorities are allowed to put up their rents? I do not think they will. This shows how one kind of compulsion must always lead to another. The sequence of compulsion will have the effect of restricting the economy so severely that growth, which is the ultimate objective, will be impossible. There one has what seems to be a vicious circle. The aim is to have more economic growth; one is afraid that this will be prevented by inflation; and to prevent inflation one starts restricting wages and rents, and controls everything. The result is that one does not get economic growth.

I have always said, and I think it is true, that an incomes policy will succeed only on three conditions. One is that there must be much more competition in industry than at present is the case. That is one reason why after we set up our incomes policy machinery in 1962–63, we soon afterwards introduced the abolition of retail price maintenance, which was not at all popular but which we thought was necessary to make the incomes policy work. The next condition is that one must put an end to restrictive practices. I was interested to hear from the noble Lord, Lord Douglass, an account of the journeys he had made to different countries. I am grateful to him for giving us his account of his travels, but in order to make our economy work properly we must look at the trade union organisation in countries like Sweden, Germany and the United States which he visited, where that organisation is not nearly so prehistoric and out of date as ours. That is all I will say on that point at the moment.

The third necessary condition for an incomes policy to succeed is economic growth. That is what the Government by their general policy are preventing. I know that they do not believe this. I know that their desire is to achieve greater economic growth and I know that they do not always believe us when we try to tell them that putting up taxation to about 40 per cent. of our gross national product (it was only 32 per cent. three years ago) and imposing the prohibitions which they have put upon investment abroad are measures which in themselves restrict growth to such an extent that this vicious circle is inevitable. That is one reason why instead of having what we were always quite rightly criticised for having, alternate periods of "Stop" and "Go", in which the "Go" was sometimes rather longer than the "Stop", under this Government we have nothing but "Stop-Stop" the whole time and no "Go" at all.

I do not want to take up arty more time. May I conclude by saying that I do not believe that the main cause of inflation is what is called wage-cost inflation. If one looks at the economic figures for the last 15 or 16 years, I do not think that it is a tenable theory that prices have been pushed up by wages. I think that it is more likely that wages have followed rises in prices. I do not know whether the noble Lord, Lord Shackleton, who is to reply has read the article on incomes which wits published last February by the National Institute of Economic and Social Research. That article showed quite convincingly that since compulsion came in in 1966 wage increases had been just about what they would have been from natural factors, and that for the first time they were rather more than they had been in comparable periods when there was no compulsion.

I think that this is the first time in which our wage policy has been designed to depress the standard of the wage-earner's living. We all agree with the principle that there should be continued growth, and we want to try to see that the growth of wages should be a little less, instead of being always a little more, than the growth of production. But what we are now trying to do this year is to prevent anybody from getting more than 3½ per cent. increases in wages, although we are proclaiming that the cost of living will go up by 5 per cent. because of devaluation. So we are making a statutory provision that everybody shall get less real wages by the end of the year than he was getting before.

I believe that the fundamental cause of inflation in this country—in some circumstances it may be caused by wages going too high—is that Government borrowing below-the-line has been met to too great an extent by the creation of new money: the printing of new notes and credit money through the banks. There are three ways in which the Government can meet expenditure. One is by taxation, which takes money out of the economy. Another is by borrowing in the open market, which also takes money out of the economy because the money is there already. The third is by creating new credit money which was not there before. Up to a point, if it is in keeping with a rise in the growth of economic output, the creation of new money may to a small extent be a good thing, but over the years the printing of new money has been greatly in excess of economic growth. That is the cause of inflation. If one looks at the various Budgets in recent times, Chancellors have tried to take money out of the economy. One Chancellor takes out £500 million; another £700 million and so on. They put up taxes by £500 million, which is taken out of the economy, but then they put more back by increasing our new money by more than £500 million; so that the whole aim of moderate deflation is defeated. That, and not excessively high wages, is the fundamental cause, which has been our trouble over the last twenty years.

We are not going to oppose this Bill, and any Amendments which we may propose in Committee will, I hope, be entirely constructive. We all have the same objective as the Government. We all want full employment, stable prices and economic growth and, when the Government bring in a measure which they say is the central part of their plan to achieve that common objective, it would not be right for your Lordships' House to oppose it. We must do our best to help the Government and hope that they will achieve their objective, but I do not think they will. I have no doubt that devaluation, like a shot in the arm, may promote some growth and I wish we could take advantage of it and make it permanent. My fear is that the Government's economic mismanagement will fail to extend our temporary increase in production this year into the permanent increase that we want. We shall do our best to help them constructively in their aims, but we must add that if those aims do not succeed, the responsibility is with the Government alone and not with us.

7.41 p.m.

LORD SHACKLETON

My Lords, once again we have had a debate in which the argument is very clearly on one side; namely in support of the Government. Luckily, the armies are not to be deployed against them, even though on the last occasion they were rather uncertain.

I should first like to say that I very much appreciate the co-operation of your Lordships, and indeed of the Opposition, in the procedure we have followed. There has been talk of "Shepherd's Pie" and "Beswick's Breakfast". I am rather disappointed. I hoped it might have been "Shackleton's Shish-Kebab". I think the procedure is really rather satisfactory. First of all, we are giving the Opposition far more time than my noble friend Lord Shepherd, in his perhaps more authoritarian days, ever allowed the House. We then took all the stages of the Bill in one day, having had a go a week before on the White Paper Bill; and the same thing happened previously. But on this occasion we are effectively giving a week between the Second Reading and the Committee, and there will be several days before Report and Third Reading.

I am sorry that the noble Lord, Lord Erroll of Hale, has suffered so. In fact, I am rather worried about his diary because he kept on talking about it. Apparently he had not written in his diary that we had said that the proper Bill would come in on Friday; he thought it was coming in on Monday. Nor, apparently, had he written in his diary, until it was announced in the House last Monday, the information which I had given him the previous Thursday, when I noted that he consulted his diary but did not write anything in it. I should not go into these intimate details, if the noble Lord, Lord Erroll of Hale, were not so prone to go into such things himself. Indeed, I felt that he must have been suffering very greatly. It may well have been through having to work things down to decimal points when he was trying to work out his dividends. I realise that he is an engineer, and I should have thought he would have been familiar with his slide-rule in his long term budgetary forecasting in his firm, where it is very usual, in my experience, to work your estimates, your allocation of costs and your forecasts down to two or three decimal points. But when it comes to dividends they are too sacred, and I realise that great distress has been caused to his firm. I am sorry that they have had such trouble in order to make a not very convincing political point here.

There have been a number of excellent speeches, and I do not think I need state the case for incomes and prices policy. It has been so admirably made, with great strength and moving sincerity, by many of my colleagues—Lord Blyton, Lord Douglass, Lord Champion and Lord Popplewell. The speech of the noble Lord, Lord Arwyn, was very short. I rushed in, but I am afraid that I heard only the last minute. However, I heard that it was a very good speech. I must ask the Opposition, who I know listened carefully to those speeches, to heed the views that were expressed—and expressed very moderately. When I look back on the history that some of our trade unionists have had, I am amazed, in the light of past bitter experiences, by the moderation with which they argue these issues. And I do not think it is good enough to reject or oppose this Bill on some of the grounds advocated by the only two noble Lords who have opposed this measure at all. Incidentally, I noticed that the noble Lord, Lord Auckland, in a very short and admirable speech, did not criticise the Bill. I am not sure whether or not he is opposed to it. He obviously suffered, as he described, as an ordinary worker in Lloyd's, which seems to be a particularly painful type of activity.

The noble Lord, Lord Molson, who always makes such very thoughtful speeches was generally in support. He apologised for his absence. Then there was the noble Lord, Lord Henley, with a very forthright speech. I rather hope that the Opposition, whose co-operation I again acknowledge over the timing of this Bill, will see that, whether or not they agree with our policies in general terms (I listened very carefully, and I can see there are arguments, also, in relation to taxation and expanding economies), the policies they followed did not solve our problems. The policies we are now trying to carry out have been carried out in difficult circumstances, but we are absolutely convinced that, given these circumstances, they are necessary.

I have been asked: Why the hurry? I appreciate that the noble Lord, Lord Erroll of Hale, did not press us very far on this. The answer is quite a simple one. I gave one of the reasons on Monday, and the noble Lord gave the same reason again to-day—perhaps at greater length and perhaps with even greater clarity. But the Government's policy was announced in the Budget speech on March 19, the White Paper was published on April 3, and the National Board has been operating on the new criteria for over two months. There really is an urgency to get this Bill into law. The Government are proceeding in a way—and the noble Lord, Lord Champion, pointed to this—which creates difficulties for themselves, by their willingness to come back year after year to Parliament to get new authority. I think it is not unreasonable in those circumstances, the Government not having taken absolute powers which could be renewed by Order or under the Expiring Laws Continuance Bill, that we should try to get our business through quickly. This is one measure, anyway, which no-one can suggest has not been very fully discussed in another place.

There are one or two points which I should like to deal with quickly. I thought that the noble Lord, Lord Erroll, made rather a lot of the problem of the Chairman of Hambro's Bank. Again, all our hearts on this side bleed for him and, in so far as it helps to raise further money for the Conservative Party, I am rather delighted, because I know how worried the noble Lord, Lord Carrington, is about this, and it may be that this is a helpful and co-operative gesture. The noble Lord, Lord Erroll, asked what powers there were in this matter. I do not propose to refer precisely to this particular instance, because, so far as I know, no reference has been made. But under Section 2(1) of the Prices and Incomes Act 1966 the Government have power to refer any question relating to wages, salaries or other forms of income. I admit that it is rather exceptional. The noble Lord and other noble Lords, I think, referred to the position of engine drivers. My Lords, their salaries are usually fixed collectively: they are not dealt with by some benevolent board. I really do not see what is so awful about this beyond the fact that there is obviously, again, political advantage in it.

I should like to pursue this just a little more. The Government made it clear in their White Paper that the principles of the policy apply to all forms of personal income, including those of company directors and others whose remuneration is not fixed by the normal process of collective bargaining. Such groups are not covered by the voluntary arrangements for early warning. Nevertheless, the Government expect these groups and others who are not subject to these arrangements to ensure that improvements in their remuneration can be justified fully under the policy; and the Department of Employment and Productivity has been concerned on numerous occasions in the application of the policy to persons not covered by the early warning arrangements, including the giving of advice to individuals and directors of companies.

My Lords, I am grateful for the fact that the noble Lord did not regard this particular matter as being actuated by malice on the part of the Government, and I assure him that so far as the Government are concerned—and I stress "so far as the Government are concerned"—there is no such thought in this case but simply a wish to establish for those concerned the facts about an increase in remuneration. Furthermore, it would have been really difficult to ignore if the Government are in fact being asked to give advice in other cases. The letter inviting the observations of Mr. Jocelyn Hambro was sent on June 25, and Mr. Hambro replied on June 26 that a full reply would be sent as soon as possible. I really do not think I can comment further on this.

My Lords, perhaps I will shorten my speech and proceed to another point which the noble Lord, Lord Erroll, made. He suggested that the early warning system for prices applied to only a small minority of prices. I assure him that this is not correct. The early warning arrangements, together with those for the constant watch on food prices, cover some 70 per cent. of the expenditure represented by the retail price index. I do not want to make too much of the position of the Conservatives in this matter, but we were twitted. The noble Earl, Lord Dundee, complained that the trade unions did not co-operate with the National Incomes Commission. I really am astonished that noble Lords' memories are so short. The National Incomes Commission had no direct remit to deal with prices, and this was one of the main reasons, apart from the basic distrust for Conservative Governments on the part of the trade unions, for the lack of co-operation with the National Incomes Commission. On the other hand, the present Government have tried to deal with the whole field—and it is a very difficult field indeed.

My Lords, the noble Lord, Lord Erroll, asked me not to twit him because he did not explain what was the Tory line on an incomes policy. He said that he did not want to waste time; so I will be fair. I only wish that I knew what it was. We know that they are very split on this subject. It is all very well for the Labour Party to be charged with being divided on these matters, but we know that the stretch from Maudlingism to Powellism is very wide indeed. The Tory line on industrial relations has been set out in the booklet, Fair Deal at Work, although it is not described as being a final, definitive statement of Conservative policy. The interesting thing is that although the Conservatives reject statutory powers over prices and incomes they want a great deal more legislation governing trade unions and collective bargaining. Indeed, they want to bind on the trade unions a number of obligations, including provision for penalising them in some circumstances for unofficial actions by their members. I therefore find it—

THE EARL OF DUNDEE

These proposed subjections to the law are bringing the trade unions under the civil law in the same way as any two ordinary people who make a contract are brought under the civil law. They are not bringing them under the criminal law.

LORD SHACKLETON

We shall no doubt have an opportunity to discuss this point. What I really find so difficult is to find out what is the Conservative opposition to this policy other than an understandable tendency—and I know Oppositions are given to this—to take advantage of a particular situation and to press the Government where they think they are at their weakest. I must say that I was appalled at certain actions taken in regard to voting in another place on certain issues, and that I appreciated the forthright line which the noble Lord, Lord Henley, expressed on these matters.

Let me say just briefly something on the effectiveness of incomes policies. There is no simple arithmetical answer as to the effects, and as the noble Lord, Lord Molson, made clear, there are of course imperfections. This is the best we can do, and we believe it is a very important best. It is not possible to separate with any accuracy the incomes policy's effects from the effects of the lower pressure of demand. The National Institute, to which the noble Earl, Lord Dundee, referred, has had a shot at this, and it reached the conclusion, I fully acknowledge, that the incomes policy had not had any significant effect. But this was a pretty tentative type of analysis, and other work suggests that the results of the National Institute are inconclusive.

I always think that the National Institute is rather like the Met. Office at times. I know certainly that on the long-range forecasts both the National Institute and the Met. Office employ the same sort of methods. They look at the past, they look for analogies, they all sit round a table and they take a balance of opinion. On the long-range weather forecasts I believe they claim something like rather more than 50 per cent. reasonable accuracy. This is not in any way to denigrate the work of the National Institute; indeed, I would not wish to do so, since one of its main conclusions was that the Government ought to strengthen the National Board for Prices and Incomes as a weapon for restraint; that it could lengthen the period of statutory delay. Indeed, the Institute is urging that the incomes policy should be made even more effective.

My Lords, there are figures, with which I will not detain the House, which suggest that in some respects the policy has been effective and that, indeed, without it the results might have been very much worse. But I stress that this is really very urgent nationally. Many noble Lords have emphasised this. We know that the "low" Tories, as the noble Lord, Lord Henley, called them, are against it. Lord Molson (I do not know whether he is a "high" Tory or what) was for it. Lord Auckland, I suspect, is a "middle" Tory. As for Lord Sieff, who gave us an admirable speech, a good chairman's speech, again I was not quite sure on which side he came down. Obviously we are bound to listen with respect to anybody who has made such a great success in business—even though I was in competition with him personally.

I think, as the noble Lord, Lord Douglass, said, that the Conservative Party missed a chance in not setting up a committee with the T.U.C. and C.B.I. I hope myself that we shall now face this very fairly and that we shall give the Bill a good run. All noble Lords now have to explain why they do not vote or do vote; either there is a mandate or there is not; either there is too big a majority or there is not; they want to support the Bill and it is painful for them either way.

Now we have given them enough time, I hope that as this is a matter of such profound importance we shall be able to pass this Bill through fairly quickly. We shall undoubtedly have some interesting and worthwhile discussions at the Committee stage. I promise noble Lords that we shall listen very seriously to serious Amendments. I know, although some of my noble friends may not appreciate it, that there is a serious streak in the noble Lord, Lord Erroll, and that he may on the next occasion, if he has got his diary right, be able to make some serious contributions. We have had the important points made by the noble Lord, Lord Molson, on rent. I will not take up the time of the House in answering them; but I expect that we shall have the opportunity on "That the clause stand part …" to discuss the points he made on rate increases resulting from rent interventions. These are points that we have considered very closely. I can assure him that there is an answer that I could give.

My Lords, there are two points which I should like to emphasise. The first is that a prices and incomes policy has always been, and must continue to be, based mainly on a large measure of public support and co-operation front management and workers. However the Government consider that they might wish to move in a particular direction, and that we must depend on voluntary co-operation. The reason for the need, in the interests of fairness, for some power of compulsion as a reserve has been made very clear. That is based both on equity and the vital need that we should take such steps now and should be seen to be taking such steps. The statutory power will be used only to the extent necessary where voluntary arrangements are not being properly observed. It is therefore a buttress to the voluntary system.

The second point is that an incomes policy is not a substitute for fiscal action as an instrument of demand management, although the Budget allowed for it. I sympathise with the noble Earl, Lord Dundee, when he moved into monetary policy. I should have liked to debate this. I am hoping that the Bill will arrive—

SEVERAL NOBLE LORDS

It has arrived. You are all right.

LORD SHACKLETON

In that case, my Lords, I can shorten my remarks and say that a prices and income policy, including the reserve powers sought, is an essential factor of the Government's economic strategy for recovery and sustained growth. On that basis I warmly commend the No. 2 Bill to your Lordships, and shortly, I hope, we shall see No. 1.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.