HL Deb 31 January 1972 vol 327 cc519-31

4.2 p.m.

Debate resumed.


My Lords, I am very conscious in this debate of the danger of perhaps saying something inadvertently which might, in some way, prejudice the ability of my right honourable friend the Secretary of State for Employment to help the parties towards a settle ment. I therefore, and quite deliberately, do not wish to become too closely involved in discussing some of the specific controversial issues which are involved in this dispute. Rather, since the terms of the noble Lord's Motion are directed mainly at the more general question of the Government's policy towards incomes, it is mainly to this larger question that I shall address myself.

If I may say so by way of preface, I should like to express my appreciation of the moderation which the noble Lord and the noble Baroness have displayed in opening this debate, and my recognition of the qualities, as I think the noble Baroness put it, of "personal and professional knowledge" which the noble Lord, Lord Blyton, brings to bear on this matter. Nevertheless, I recognise the strong feelings which are inevitably aroused in a national coal strike. I also wish to associate myself with what my right honourable friend Mr. Robert Carr—a Secretary of State whom I think both sides of your Lordships' House would hold to be not only firm but also fair—has said about our mining community. The Government are not seeking a showdown with the miners. The last thing we have in mind, even if it were possible, is to drive them into some form of forced submission. The noble Lord. Lord Blyton, asked for some form of assurance on this, and that I can gladly and willingly give to him.

We recognise that there is in many quarters in this country and for many reasons a deep sympathy with the mining community. As an industrial community, deeply dependent on energy, we recognise the debt we owe to those who provide the energy without which our industry and our whole economy would be paralysed. Equally, those who provide that energy must be conscious of their obligations towards the larger community. What we as a Government are therefore concerned about—and this I think would apply to any Government—is to help in whatever ways we can towards a settlement which is both just to the miners and to the National Coal Board with its obligations, and to the community as a whole. We accept that the settlement for the miners must be a fair one; but equally it must be a reasonable one, taking account of the interests of the community—and not least the miners themselves—in curbing inflation.

My Lords, this brings me to the underlying theme of the noble Lord's Motion —the Government's policy towards incomes. Let me go back for a moment. When we took office in June, 1970. we inherited a wage/cost inflation unparalleled in peace-time for half a century. In their last six months of office the Government of noble Lords opposite nominally operated a statutory incomes policy with a norm of 2½ per cent. to 4½ per cent. for wage settlements. In fact, the situation had become so out of control from the autumn of 1969 onwards that by mid-1970—in the run-up to the General Election—the wage settlement speedometer was hovering around 10 per cent. and tending to accelerate. Earnings were increasing by 12 per cent.—six times as fast as productivity—a clear pointer to accelerating price increases in the future. Wage claims were plainly becoming increasingly unrealistic, and a rising tide of inflationary expectations was flowing in.

What policies should we, and could we, have adopted then and since to tackle the wage cost inflation which was rampant when we took office? We could of course have re-introduced a statutory policy. But the very problems we found indicated the failure of statutory policies, with their whole elaborate paraphernalia of norms and criteria. These had been operated by our predecessors through various stages of freeze, severe restraint, less severe restraint and so on since 1966. I would concede that the statutory policies may have made some impact initially. But at the end of four years they had collapsed under the pressures which had built up under them. In my view it would have been absurd for us to have repeated the mistakes and failures of our predecessors in this respect.

Second, we could have adopted a voluntary incomes policy worked out in agreement with the T.U.C. and C.B.I. In theory there is much to be said for a voluntary policy—a policy under which all parties agree on a common line towards the determination of incomes in the interests of fairness for the groups concerned and in the interest of the community in keeping prices down. Indeed Ministers have made it clear on a number of occasions—I have made it clear myself speaking from this Dispatch Box—that we should be glad to consider any proposals for voluntary policies which the T.U.C. or C.B.I. or other bodies might wish to make.

But, my Lords, it was crystal clear in June, 1970 that it would have been impossible to work out an agreed voluntary policy which would have made a sufficient impact at sufficient speed on the accelerating wage inflation then in progress. More important, for a voluntary policy to succeed there must be "volunteers"—all unions and employers must agree to play to the rules of the game and be seen to play to the rules, or the policy is bound to fail. Having been through five years or more of statutory and voluntary incomes policies, there was at that time little or no disposition on the part of employers or unions to embark on a voluntary policy. But let me repeat that we have never ruled out a voluntary incomes policy. Our position remains that we should be glad to consider any proposals from the parties concerned for such a policy. And we do of course keep in touch on a regular basis wth the T.U.C. and C.B.I. on these matters at meetings of the National Economic Development Council and indeed elsewhere.


My Lords, may I interrupt the noble Earl? Is he saying that he is willing to entertain proposals for a voluntary incomes policy, despite the powerful arguments which he is giving as to why it will not work? If he still believes this, why did the Government reject out of hand the suggestions of the General Secretary of the T.U.C. in this respect, which were treated with contempt by the Chancellor?


My Lords, I thought I was making it clear—and I think nobody would deny this—that in the early stages, in June, 1970, the chances of a voluntary policy being adopted by both sides of industry were virtually zero. I was making it absolutely clear, however, that we did not rule out, and we do not rule out, the possibility of exploring what can be done along these lines at this time or later, and that if either the C.B.I., the T.U.C. or anybody else wish to make proposals in this regard, we shall of course look at them very carefully.


My Lords, may I ask a question of the noble Earl? Did he and the Government, by Divine divination, foresee a complete breakdown between the C.B.I. and the T.U.C., and did they abolish the Prices and Incomes Board as a result of this divination?


My Lords, I do not credit myself with Divine powers. But perhaps I may go on.


My Lords, before the noble Earl goes on, may I ask this question—


My Lords, perhaps we can get on. I have already given way.


I am sorry, my Lords. Perhaps the noble Earl will be good enough to answer the question that my noble friend Lord Shackleton put to him. If the Government have this willingness to receive initiatives from the T.U.C. or the C.B.I. or from other quarters, why did they, not on one occasion but on two occasions, reject and snub the T.U.C. when they put forward constructive proposals?


My Lords, I rest on what I have said. I have made clear our willingness to receive representations, and I should have thought that we could let the matter rest there for the time being.

A third approach to the inflation which we inherited would have been to take no action directly on pay but to cut back on demand. We rejected—and rightly rejected—this course. It was quite clear that inflation in 1970 was what economists describe as "wage/cost" inflation, not "demand/pull" inflation; that the rising levels of wage settlements and unemployment were increasing simultaneously. So, far from tackling wage/cost inflation by reducing demand, we have carried out the largest reflation of demand since the war. The details are known to your Lordships and I shall not go into them, but they are designed to stimulate the economy over the years 1971–72 to 1974–75. This is our answer to those who claim, as I think the noble Lord, Lord Blyton, was at least half suggesting, that we have "created" un- employment to bring down wage settlements. It has never been any part of our approach to tackling this great national problem of inflation.

The policy we decided to pursue, and which has been followed consistently since June, 1970, has been to urge employers and unions, in the public and private sectors alike, to bring down progressively and substantially the level of wage settlements to more realistic levels. We have urged employers and unions to reach fair and reasonable settlements, but settlements which recognise the need to return to more moderate levels closer to the increase in national productivity. The policy has been assisted by the Government's reflationary measures. It has also been greatly aided by the C.B.I.'s initiative on prices restraint in July last year, which the T.U.C. said was bound to be taken into account in the levels of pay settlements. My Lords, this is not a negative policy, nor is it directed against the unions. We do not seek to bring down the level of money wage settlements just for the sake of it. Our aims—which we share with the unions and employers—are: to provide the basis for faster growth without inflation; to achieve rising levels of employment; and to create the conditions for a faster and, sustained growth of real earnings on which living standards depend, not inflated money incomes which are inevitably and quickly eaten away by rising prices.

A reduction in the level of money wage settlements is necessary for all these aims. It is now all too evident that the very high pay settlements of 1969 and 1970 were illusory. They could not, and did not, lead to a permanent increase in real earnings. Because they far outstripped the possible increase in productivity, they produced the excessive rise in prices in the first half of last year, and they led also, following years of economic stagnation in this country, through their effect on company costs, to thousands of workers being made redundant. It should now be obvious to all that wage/cost inflation is in the interest of no one. It is not even in the long-term interest of those who are powerful enough to bludgeon their way to high settlements; much less is it in the interests of those who are less powerful or less fortunate—those living on fixed incomes or in weak bargaining positions. That is why we are determined to set our course by the same star—to continue to aim at bringing down the level of settlements, whatever the temporary difficulties and transient unpopularity it may cause us. But I would not claim for one moment that all the processes and all the machinery are perfect in this respect. I listened very carefully, and was struck by some of the suggestions which the noble Baroness made in a notably constructive speech, and I can tell her that these will be carefully examined.

I wish to make it clear to noble Lords who seek to argue otherwise, that this policy applies equally to the public and private sectors. We have urged employers and unions in both sectors to secure a progressive and substantial reduction in the level of settlements. Private sector employers, as well as public sector employers, are under pressure to bring down the levels of pay settlements. The companies which are supporting the C.B.I. prices initiative are naturally under pressure to keep down the increase in their labour costs and achieve moderate pay settlements. The C.B.I. pointed out to their members that it was a corollary of the prices proposal that employers in both the public and private sectors maintained and strengthened the policy of resisting excessive pay settlements as firmly as possible. I would therefore point out to those who urge the contrary, that de-escalation in pay settlements is necessary in private and public sectors alike, and that our policy is, in fact, directed at both sectors. That is why, as we continue and intensify the policy to build on what has been achieved so far, we are asking all concerned with pay determination, whether in the public or private sectors—employers and unions, those conducting independent pay reviews and inquiries, arbitrators and wages boards and councils—to consider the interest of the whole community in curbing inflation and to achieve a much more moderate level of pay settlements.

My Lords, we are not proposing to persist in our present policies "just for the heck of it". We propose to do so because we believe in reinforcing success. A year ago settlements of 10 per cent. to 15 per cent. were common; to-day many settlements in the public and private sectors are being made in the range 7 per cent. to 8 per cent. During 1971, the hourly wage rate index increased by 10.2 per cent.—high enough in all conscience, but down when compared with 13.8 per cent. in 1970. And the index of average earnings increased by 7.9 per cent in the first 11 months of 1971, compared with 12.4 per cent. in the first 11 months of 1970. The percentage increase in average earnings shows the same trend. The increase in average earnings in November, 1971, over the previous 12 months was 9 per cent.—again, high enough in all conscience: but this is the first time the figure has been in single figures since January, 1970. These figures are still, of course, far too high in relation to the growth of national productivity which we are achieving, and in relation to the performance of many of our competitors abroad. But they indicate, beyond dispute, that the acceleration of wage cost inflation in 1969 and 1970 has been reversed.

We are now beginning to see the benefits. The rate of increase in prices has been falling sharply. In the first half of 1971 retail prices (excluding seasonal food) were increasing at an annual rate of about 11 per cent.; in the second half of 1971 they were increasing at an annual rate of around 5¾ per cent. And wholesale prices, which increased by 5 per cent. in the first half of 1971, increased by only 1 per cent. in the second half. These figures demonstrate that our policies have enabled us to begin the break-out from the vicious spiral of escalating wages and prices. We now have a much more favourable environment for the continued reduction in the level of settlements to more realistic levels. It should now be easier for all concerned to achieve more moderate pay settlements and greater price stability.

Indeed, my Lords, the current economic prospects are unusually encouraging for a slower increase in prices, for a faster growth of real earnings, for the growth in employment which we all desire—above all, for a renewal of growth—for that economic resurgence which has eluded us this past decade or more. We now have a real opportunity to achieve the rapid sustained expansion that we need. Profits are beginning to recover as the economy begins to pick up. The revival in demand, brought about by our measures, provides hope for a return of the business confidence and increased investment which we have to achieve. There is less reason now to fear a balance of payments constraint; though this is a tiger always ready to enter our doors. There is unused capacity, waiting to be brought into productive use. And ahead—pace the noble Lord, Lord Blyton—lies the prospect of a European market of more than 250 million people. The opportunity for rapid and soundly based economic growth is therefore ready to be seized, if—and only if—we can avoid a resurgence of inflationary pressure, brought about by wage increases far in excess of increases in productivity. My Lords, the Government feel—and I personally am convinced—that it would be a tragedy if, at this point, we were to relax on the wages front and put at risk once again all this chance of recovery, this opportunity for resurgence.

It is against this backcloth that the dispute between the N.C.B. and the Union should be set. The National Coal Board genuinely believes that the offer it has made is the highest possible one that it could have made if it is to keep down price increases; and what the Government's critics seem to be suggesting is that the Government should intervene and press the N.C.B. to raise its offer to a more inflationary level, and beyond the level which in its own judgment it thinks it can afford to pay, on the grounds that the miners are a special case. Well, my Lords, at whose expense should this be? Should it be the coal users? The workers in weaker bargaining positions, most of them lower paid? Or higher-paid workers, who have to accept a low average wage increase? Or is inflation to be allowed to proceed unabated, with prices rising more sharply and reducing the living standard of those dependent on fixed incomes who arc often in a more exposed position?


My Lords, will the noble Earl allow me to interrupt him? I am extremely grateful to him for giving way. We have read figures in the newspapers to the effect that the Coal Board is going to suffer losses of perhaps £100 million by the end of this week, and of course more if the dispute goes on. Would the noble Lord equate this amount with the amount that the Coal Board would have to fork out in increased wages if it made a slightly improved offer of, say, 11 per cent.?


My Lords. I am surprised to hear an offer increased from. I think, 7.9 per cent. to 11 per cent. characterised as "slightly improved". I am afraid that I cannot do in my head the sum which the noble Earl asked me to do. My noble friend Lord Drumalbyn, who will be replying, will no doubt have a computer at his disposal, and I am sure that he will deal with that point.


My Lords, would not the noble Earl agree that when one talks about percentages the difference between 7½ per cent. and 11 per cent. can be very small when related to a very low wage?


My Lords, I will come again to the question of wages. I do not want to take up too much of your Lordships' time at the start of a debate in which there are a great many speakers. My noble friend Lord Drumalbyn will be dealing in greater detail with this question of relative wages when he winds up. If I may move on, I was saying that some group would have to pay for the special treatment which the noble Lord, Lord Blyton, is calling for. I think that those who argue this should say which group should suffer.

It is not for me or for the Government to take sides in this matter, but I must point out that the N.C.B.'s final offer was already at a fair level compared with other recent pay settlements in both the public and also the private sector. The 7.9 per cent. offer was above the settlements in respect of gas and water achieved only last week. It is already well in excess of the growth of national productivity and it offers, or it offered, with last year's pay settlement, an increase in miners' pay on average of about one-fifth; that is, 20 per cent. That is no small figure in two years and more than covers the cost of living increase in that period—which happens to be from October, 1969, to October. 1971—of 17.4 per cent. And this at a time when there is a real prospect, as I hope I have demonstrated, of a genuine reduction in the rate of increase in prices.

My Lords, there has been discussion in the Press and on television, and the noble Lord, Lord Blyton, mentioned it in his speech, about the position of miners in the "wages league table" over the years. I know that these differentials are very important, but I question whether this is a sensible way to look at pay relativities. In any event, the N.C.B. has shown that in a league table of minimum rates its final offer would have taken the miners from sixteenth place to sixth place. If any noble Lord opposite, or any of my noble friends, feel that this is not enough, I think they owe it to the House to say what they think would be enough and at whose expense it should be.

To conclude what I wish to say in this part of my speech, we do not accept that our policy towards incomes made industrial action by the Union inevitable, as Lord Blyton's Motion claims. On the contrary, we believe that our policy is realistic and fair and has played a decisive part in curbing wage/cost inflation, and provides us with the opportunity to embark on faster and sustained growth, with greater price stability and rising employment. We believe sincerely that these objectives are in the interests of the community as a whole, and not least the miners; and that we must continue to seek to bring down the level of wage settlements to ensure that we do not put at risk the encouraging prospects for growth which are now before us.

My Lords, I have cast my remarks, as I said, against the framework of our overall incomes policy, and against the backdrop of what we judge to be the national interest. But we must also bear in mind the damage which this strike, if it is continued, can do to the prospects of the coal industry. Further cost increases and further pressures on prices already seem almost inevitable. This means that the National Coal Board's finances will deteriorate. Again, the strike will also probably mean more pit closures. For example, the Deputy Chairman of the National Coal Board has said that 10 per cent. of coal faces may have to close through lack of maintenance. There is at risk, I think, something like £100 million worth of machinery underground; and, if I may, I should like to express my appreciation of what the noble Lord, Lord Blyton, said about maintenance in this particular context.


My Lords, would the noble Earl excuse me one moment? He mentioned the figure of machinery at risk in the pits as being £100 million worth. It is much more than that.


I will, of course, my Lords, accept that from the noble Lord, with his special knowledge. It reinforces the danger to which the community is exposed. I will accept what the noble Lord says, speaking with his very special knowledge in this respect.

Again, there is the danger that consumers will lose confidence in coal. For the third consecutive year industrial action in the coal field has threatened supplies, and the present complete stoppage of supplies could be the last straw for some consumers. All these effects can lead in one direction, and one direction only— a further switch away from coal. There are the reserves of gas and oil in the North Sea; there are the developments with nuclear power. Coal, in fact, is now under strong competitive pressure. Only 20 years ago it supplied 90 per cent. of our energy needs; now it supplies something like 45 per cent. My Lords, there is no threat implicit in my remarks here; these are the facts. However, we know that the energy situation is a fluctuating one; we know it can change rapidly, and it is not yet too late for the industry to find once more the impetus to achieve the increases in productivity which it needs in order to stabilise its level of sales.

The noble Lord, Lord Blyton, in (if I may so term it) a moving passage in his speech, talked about the pit closures and the modernisation which took place in the decade of the 1960s. They were in fact remarkable: a halving of manpower and an increase in productivity of the order of over 50 per cent. This immense industrial transformation, this enormous change in the industry, was carried out without the industry falling apart; and that, in my view, is a monument, and a lasting one, to both the National Coal Board and to the National Union of Mineworkers. They succeeded in producing a technically advanced industry, better able to compete with the other fuels. It would be a great pity (I put it no higher than that) and not only the miners but the nation as a whole would be the losers, if this great constructive work of the 'sixties, terribly difficult but yet achieved, was eroded and put at risk in the 'seventies by continuing industrial action. That is one reason, my Lords, why we must all hope for an early end to the present dispute and a quick resumption within the industry, within the coalfields, of that fruitful atmosphere of good will and co-operation between management and labour which certainly existed at least in the earlier part of that decade.

My Lords, I would not wish in any wise to minimise what is at stake at present. This strike certainly threatens the energy supplies of our nation; it is certainly putting many consumers, including old people, to great and increasing discomfort, to put it no higher; and its continuance threatens the future of a great industry. Unless a settlement can be achieved on terms which are not only fair for the miners but fair for the community as a whole—and this is the other side of the picture—the prospect of economic recovery, of national economic recovery, which is bright at the present time, could be blighted. I think all I should like to say in conclusion is that my right honourable friend the Secretary of State stands ready to help in any way he can to achieve a fair and honourable settlement—fair for the miners, fair for the consumers and fair, not least, for our community as a whole. My Lords, I should like to express the wish that, on whatever side of the political fence we may come down, this debate will be conducted (as I think it has certainly commenced) in such a way as in no wise to impair the chances of that settlement—a settlement fair to all the parties concerned—which I am quite certain we all of us, again on whichever side of the political fence we come down, so ardently desire.