HL Deb 05 March 1973 vol 339 cc865-972

2.47 p.m.


My Lords, your Lordships will recall that a month ago this House debated, and in substance approved, the White Paper setting out the general policy which the Government proposed to pursue, and the new legislative framework needed to give effect to it. To-day I am asking your Lordships to give a Second Reading to the Bill embodying this framework. What we are seeking to achieve in our policy, as the Title of the Bill indicates, is to tackle inflation on a comprehensive, effective and equitable basis. I think that we all know that for a whole host of reasons, economic, political, and not least social, we have somehow as a nation to deal with this curse. Our differences, and some of them I suspect are more synthetic than substantial, are more over method than principle. In any event, in carrying forward these policies we seek, and we are confident that we have found, methods which are straightforward and which allow flexibility of operation to meet differing circumstances.

My Lords, in opening this debate I am only too conscious of the handicaps under which I am labouring. In the first place, the Bill and the Code are in a sense umbilically linked. We now have a Consultative Document before Parliament, but to do justice to it and to the Bill I should have to speak at an inordinate length. I do not propose to speak at an inordinate length and therefore I may do less than justice both to the Consultative Document, being debated in another place today, and perhaps also to the Bill. More important, my Lords, I am speaking on the eve of the Chancellor's Budget which must inevitably hear on the policies we shall be discussing this afternoon. Finally, I am speaking under the shadow of a serious, and as yet unresolved, international monetary crisis. Again the form its resolution takes is bound to have its impact on the success of our counter-inflationary policies.

I think your Lordships know that the Government, and I personally, have come reluctantly to the statutory path. I much prefer the voluntary approach. But I am equally clear that we now need to walk the statutory path, albeit for as short a time as possible, if we are to tame this inflationary animal which is threatening not only our economy but much else besides. To succeed, our policies must be fair and be seen to be fair, and I believe that they are. There may be disputes about this. To succeed, they must also give proof of success. Despite all the difficulties with which we are faced on the prices front—and I do not for one second under-estimate them —I believe that the first fruits of success are beginning to show. Since the standstill, the average monthly increase of 0.5 per cent. in the all-items index has been substantially less than for the previous six months when there was an average of 0.7 per cent., or in the last six months of the last Government when the figure was again 0.7 per cent. I do not claim for one second that 0.5 per cent. is not far too high—of course it is. Thus, and in particular, the standstill has been very successful in controlling nonfood prices which have increased by only 0.2 per cent. per month in the past three months, compared with more than three times the rate in the previous six months.

I acknowledge, of course, that there has been a significant rise in food prices, which, as noble Lords know, has been almost entirely due to higher fresh food prices: and this rise in turn reflects the world beef shortage, the rise in grain prices due to factors quite outside our control, and the seasonal increases in the prices of fresh fruit and vegetables. We have never claimed that fresh food prices could be controlled, just as the last Government never pretended during the 1966 standstill that they could be controlled. But despite this rise in fresh food prices, the overall level of retail prices has been rising a good deal more slowly in the past three months than it was previously. There is no doubt that but for the standstill there would have been a reverse process appearing; namely, an acceleration. Nevertheless, my Lords, all experience, both here and abroad, shows that the transition from a standstill (which is a relatively easy policy to set out and to monitor) to a more flexible policy is a difficult one. May I use a homely motoring analogy? It is rather like engaging gear and easing one's foot off the brake without either letting the car jump away or letting it stall. It is for this reason that the legislation, taken together with the Consultative Document, makes very careful provision to ensure that the changeover is such as to allow a real opportunity for genuine increases in pay—after all, 7 to 8 per cent. is not to be sniffed at—some real flexibility in the way these increases are determined (a point the critics seem to lose sight of) and some real opportunity for steering these increases towards the lower paid, while devising price control measures that are wide ranging and rigorous, but nevertheless provide for recognition of the differing circumstances of individual firms, the reinforcement of competition, and for adequate margin for investment.

Although your Lordships will not wish me to weary you or myself by a clause by clause examination of the Bill, I shall in a moment touch on some of the more significant provisions. Meanwhile, I feel it may make for the convenience of the House if I take up the story from our last debate and try to relate the Bill now before us, on the one hand, to the developments which have occurred since it was first introduced in another place and, on the other hand, to the proposals for price and pay control set out in the Consultative Document, and which are later to be embodied in the Price and Pay Code.

The Opposition have often sought to caricature this Government as doctrinaire, inflexible and confrontation-loving. This Bill and the Chequers discussions which preceded it give the lie to this charge. Moreover, we have been the reverse of inflexible or doctrinaire in working out the details of the legislation. We have made a number of amendments to the Bill in another place to take account of criticisms. And while I think we are all agreed that we should deal with the Bill now before us expeditiously, we shall not be doing so cursorily; we shall be offering certain Amendments at Committee, and we shall be willing to consider on their merits other Amendments that may be raised. But on the heart of the policy, the vital need to secure a reduction in the rate of price rises, mounting an attack on both fronts, on manufacturers and retailers' prices and on pay, we are determined to stand firm. Fairness obviously demands that the policy should bear equally on prices and on pay. While therefore we are flexible on method and on techniques, we are utterly determined to defend the citadel of this policy.

Some of our critics have taken the line that there should be a rigid control of prices, but no statutory intervention on wages, and have suggested that our policy is basically a statutory wage control masquerading as prices and incomes policy. Others seem to fear that price control may prove only too effective, and that profit margins may be eroded to a point where the level of new investment—on which we depend utterly to maintain our economic growth—may be seriously endangered. I have noted that the Financial Times has argued that the C.B.I. have more to complain about than the T.U.C. while at the other end of the spectrum the Morning Star has claimed that the Code curbs pay and is easy on prices. It is perhaps conceivable that we have struck about the right balance.

I agree that the Code is tough on prices—probably tougher and more comprehensive than any Government measure since the war. But the Consultative Document specifically provides for the Price Commission to take into account the investment cost of enterprises when administering the controls. It is our hope to raise the share of our gross national product going to investment—and we attach great store to this—in order to sustain the improved rate of economic growth which we are now achieving. I would concede that if firms reach their profit margin ceiling, their immediate financial incentive to reduce costs may be impaired. But I also believe that most firms, the wiser ones, will take the longer view, and will not relax their efforts to control costs.

Again, my Lords, we have been taken to task on the ground that by setting up these Agencies we are effectively withdrawing a vital area of our economic affairs from the control of Parliament, and either advancing along the "corporate State" road, or, some have claimed, creating monstrous unregulated new bodies that will act like Courts of Star Chamber. I would remind those who have voiced these criticisms of some significant concessions made in another place during the passage of the Bill. First, my right honourable friend the Secretary of State for Employment has given an undertaking that the Government will ensure that any new Code or any substantial addition or alteration to the Code should be debated in draft. The Agencies can only exercise the powers conferred on them for the purpose of ensuring that the provisions of the Code are implemented. So we are not proposing to give the Agencies by any means an uncircumscribed power.

I should like to remind your Lordships that the Bill provides that if the Minister is satisfied that there are exceptional circumstances which justify intervention by him in any case where the Agency have imposed a restriction, he may override their decision. In the exercise of this power—or indeed in his decision not to exercise the power—the Minister would be accountable to Parliament. We have also taken steps (this was during the passage of the Bill in another place) to ensure that adequate publicity is given to the publication of notices or consents issued either by an Agency or by a Minister. In sum, I claim with confidence that the Bill—certainly the Bill in its amended form as it has come to this House—ensures that there is an adequate Parliamentary presence, and that the policy itself and its mode of execution are both exposed to adequate Parliamentary scrutiny and discussion.

My Lords, so much for the Parliamentary supervision. What about the difficulties to which I referred previously of changing on the pay side from a standstill to Stage 2 and then onwards? Over the weekend my eye lit upon the report in the Observer of an interesting discussion between three distinguished professionals in this field—Professor Hugh Clegg, Mr. Harold Lever and Professor Andrew Shonfield—none of whom, I think, would claim to be of my political persuasion. I was very struck by a remark made by Hugh Clegg in this discussion, and I quote: It is a well known problem with incomes policies that if you cut off at a certain point and say that henceforward a policy is going to run, some people are caught. This is precisely what happened in the standstill, and it makes the change of gear from the standstill to Stage 2 difficult and, it would also seem, a rather noisy one. We do not deny that there are hard cases. In our debate a month ago, I dealt with one of the hard cases and one with which I am particularly concerned; namely, those civil servants involved in the pay research cycle this year. But many of us are aware what a major breach of Stage 2 would lead to. It would mean a return to all those practices with which we have grown all too familiar during these past years: a perpetual process of leap-frogging, endless jostling in the pay queue; a return to the all-too-familiar vicious circle, a vicious circle which hits hardest those who are on fixed incomes or those without brute bargaining power.

The Government in any event—and this was made very clear in paragraph 33 of the White Paper—are acutely aware not only that the imposition of the standstill has itself caused some anomalies and highlighted some important categories of employees who, not without justice, feel that they have been hardly done by, but also that the normal process of pay determination will inevitably create further problems of relativities, both within and between different groups of workers. We recognise, as the Prime Minister has more than once spelt out, that the resolution of these problems must have a major place in a policy designed to deal with inflation in the longer term. At the same time, we must be clear that the singling out of cases for special treatment can create a fatal weakness in a policy designed effectively to control inflation. Without being partisan, I can say that most observers agree this happened with the previous Administration's policy. It is therefore essential that cases should not be considered in isolation but that the problems should be considered as a whole, and that progress towards their resolution in Stage 3 should be made within the total sum of money available to finance pay increases during that stage.

It is therefore our intention to ask the Pay Board, as a matter of very high priority, to consider the scale of the problem and to suggest the principles and priorities for making progress in resolving particular classes of anomaly during Stage 3 within the total amount available for pay increases during that stage. The Pay Board report would provide a basis for consultation with both sides of industry—and I stress "both sides"—with a view to the consequent amendment of the Price and Pay Code, subject to Parliamentary approval. In view of the volume of work involved and the importance for early advice, we propose to ask the Pay Board to begin by concentrating on the anomalies resulting from the imposition of the standstill and subsequently to give advice on problems of wider relativity.

My Lords, I thought it right to talk at some little length on the background to this Bill, and now very cursorily I should like to highlight some of its main clauses. First, there are the provisions which enable the two agencies, the Price Commission and the Pay Board, to be established and to operate, and the 'Treasury to draw up the Price and Pay Code to guide them. These are dealt with in Clauses 1 and 2 and in Schedule 1. Thus Clause 1 establishes the two new agencies—the Price Commission and the Pay Board. Your Lordships will have noticed that the chairmen of these two agencies, Sir Arthur Cockfield and Sir Frank Figgures, have recently been designated, and I am sure that there will be no dissent from the proposition they are both extraordinarily well equipped to discharge the very great responsibilities that will fall upon them.

The other clause in Part I—Clause 2—is one of the key clauses in the Bill. It provides the mechanism to the setting out of the statement of policies—the Code—which the Government expect those concerned with pay and prices to observe. It is therefore somewhat similar in purpose to Schedule 2 of the 1966 Act. It also provides for consultation by the Treasury for those who will be most affected by the Code and its operation. As I have already said, intensive consultation has taken place in the preparation of the Consultative Document which is now before Parliament. I will only express the hope that during the crucial period—and it will be only a comparatively short one—between now and when the Code becomes operative we shall have the benefit of consultation not only with the employing side of industry but also with the trade unions. The Consultative Document indeed draws on many of the points made by the trade unions during the tripartite discussions, and I, for one, deplore the fact that such consultation was ruled out (and ruled out by the trade unions themselves) when preparing the Industrial Relations Act. Such consul tation then would have been for the benefit of all. Likewise further consultation now with the trade unions would be for the benefit of all.

The second main element in the Bill, my Lords, concerns the main control powers. These are contained in Part II; that is in Clauses 3 to 11 inclusive, and in Schedule 2. This Part of the Bill will come into force with the making of the first Order embodying the Code under the Act. Subsection (1) of Clause 3 contains these "switch-on" powers. This subsection formed part of the draft Bill as published in the White Paper. Perhaps, therefore, I should draw your Lordships' particular attention to the remaining provisions of the clause, because they have been incorporated in the Bill after the White Paper stage when it came before Parliament in another place. These are designed to secure as smooth a transition as possible from the standstill to Stage 2. It is our intention to bring the standstill on pay to an end on March 31, but in order to enable prices to be effectively monitored in the month of V.A.T.—when V.A.T. comes into effect in April—to retain the prices standstill until the end of that month.

For its part, Clause 4 of the Bill provides that Part II of the Act, which contains the compulsory provisions, can last for only three years. I should like to make two points in this connection. In the first place, in proposing a three-year period of operation for the regulatory powers in the Bill the Government are in no wise retreating from their belief that the voluntary approach is preferable to the statutory path. It is not our intention to maintain these controls a moment longer than necessary, and there is clear provision in the clause to revoke them at any time. If we can get rid of them before the three-year period is over, so much the better. But while they are necessary—and they are clearly necessary at the present time—it is really vital to provide a stable and solid framework within which the Government's policies, both to cool inflation and sustain growth, can operate effectively.

The second point which I wish to make is that Clause 2 provides effectively for Parliamentary control over Part II of the Bill—the statutory part. Fresh legislation would be needed after the three-year period for the continuance of any statutory policy. Moreover, within the three-year period while the statutory powers can be "switched off" by an Order in Council, they require a draft Order, with the Affirmative Resolution procedure, in order to be re-activated.

Clause 5 provides for the notification of price and pay increases. Three tiers for notification of both price and pay increases are provided for, and each case in those categories is somewhat different. There are the larger companies, where prior notification is required; there are the middle-sized companies, which will be required to notify regularly but retrospectively and there are smaller companies which will be required to keep and have the information available if that is required.

The final Part of the Bill—namely, Part 4, Clauses 13 to 21 and Schedules 3 and 4—is supplementary to the other provisions. And in this Part of the Bill I would only wish to draw your Lordships' attention to Clause 15— a clause which deals with offences. I do so because there is an inaccuracy—a not unimportant inaccuracy—in the January White Paper. In paragraph 42, the last paragraph of that White Paper, it was stated that offences under the Bill include, and here I quote from the words of the White Paper: striking or threatening to do so to force an employer to contravene a Notice or Order". I wish to make it clear that subsections (2) and (3) of Clause 15 only—and I emphasise the word "only"—make liable the leaders of industrial action who exercise pressure on employers to contravene Sections 5 or 7 of the Act. This differs from Section 5(2) of the Temporary Provisions Act which also made liable the participants in a strike contravening the provisions of the Act. I emphasise this because I feel it is important and because of the unwitting inaccuracy in the White Paper. I should also wish to emphasise that the clause has been deliberately framed to reduce the risk of imprisonment to the very minimum.

We are faced, my Lords, with a major and pressing problem in tackling inflation: a problem not unique to our own country, one which we share in a greater or lesser degree with most other industrial countries. May I again express my conviction that if we fail to tackle it this time, we shall not only allow our economy to be crippled, but our democracy to be eroded. It is no secret that the policy which we decided to adopt was not our first choice. However, given the failure to reach effective voluntary agreement, despite sincere, sustained and strenuous efforts, we felt and we feel that there was no option but to submit these proposals to the test of Parliament.

I should like to ask your Lordships: What real alternative is there? The Labour Party and the T.U.C. seem to suggest that we can leave collective bargaining unrestrained while bearing down heavily on prices. Such a policy failed during the period of the C.B.I.'s voluntary restraint. This restraint was extremely effective so far as prices were concerned. I can only state my view—sincerely held—that the attack on inflation must be right across the board. We must deal with both ends of the equation —with both prices and wages. The policy now enunciated by the Labour Party, as I understand it, whatever its political appeal may be, simply fails to take account of the stark reality that the accelerating inflation which we decided we had to throttle in the autumn owed far more to persistent high wage increases in the preceding year than it did to price increases which mainly—although I would say not entirely—followed those wage increases.

The policy enunciated in the White Paper, embodied in this Bill and incorporated in the Green Paper, is one which we have chosen, despite evident ideological reservations, because we have become convinced in practice that there is no credible alternative policy open either to the Government or to the nation. We are convinced that any Government in this country worthy of the name would feel bound to tackle this problem head on. I do not think that there is any great dissent from that view in your Lordships' House. We are equally convinced that we need to sustain that attack, and again I do not believe that many in your Lordships' House would disagree. It is also our belief that the methods which we have chosen, after deep consideration and preparation and after a great deal of consultation, arc both flexible and fair.

May I emphasise one point in conclusion? The last thing that we are seeking is any confrontation with the trade union movement as a whole, or with individual trade unions. Indeed it is our belief that many of those trade unionists who are most concerned about Stage 2 are those who will lose most if our policies fail. We have shown that we are willing to be flexible; we shall continue to be so. But—and these are my final words—we have no intention of retreating one inch from the defence which we believe to be in the national interest of any of the essential bastions of our policies to contain, and then to conquer, this evident evil of inflation. My Lords, I beg to move.

Moved, That the Bill be now read 2ª.—(Earl Jellicoe.)

3.16 p.m.


My Lords, the noble Earl opened with a formidable list of difficulties under which he said he was labouring in moving the Second Reading of this Bill, and I am happy to think that he surmounted them all. We appreciate the fact that he thought it advisable, in moving this Second Reading, to adopt what I suppose in current jargon would be called a "low profile". I am sorry that the noble Earl has apparently so much trouble in changing gear in his car. Some one should tell him that there is such a thing as an automatic gearbox. Equipment can be quite useful in these modern days: equipment not only of a technical kind, but also to facilitate social change. One of the criticisms that we make of this Government is that immediately they came to office they threw aside all the equipment which we left: the Prices and Incomes Board, the Consumer Council, and the rest of it. The Government would have found their task very much easier if they had sought to build instead of destroy when they first took office.

I shall not advise my noble friends vote against this Bill, nor shall we seek to impede its passage to the Statute Book. We shall offer what we consider to be constructive Amendments at the appropriate stage, but we recognise and accept the fact that the sooner this Bill becomes law the sooner will our country move from the absolute freeze which has been imposed upon some incomes. Rigidity is an unpleasant posture and absolute rigidity is incompatible with life itself, let alone growth. But to say we shall not impede this Bill does not mean that we believe it can solve our problems. This Bill does not go near the heart of our problems; indeed, it does not go towards the heart of our present basic problem.

I confess readily that had this measure been brought forward two years ago I would have supported it without serious qualifications. I should have considered that the Government were building upon, improving, the prices and incomes structure which we erected. If my noble friend Lord Peddie had been given these powers when Chairman of the Prices and Incomes Board I can well see that we could have been using this for constructive purposes. I cannot give that unqualified support now for reasons which I shall try to explain. The first reason is that within the time that they took office Her Majesty's Government have soured the political and social atmosphere in which the provisions of the Bill will have to work. Not only have the Government worsened the economic state of the country, but they have intensified the worst social strains. The doctrine of Selsdon Park glorified the idea that every man has the right to grab as much as he can and the influence of that doctrine to-day is only too plain to see.

If it was possible to change human motivations by Act of Parliament, and if we wanted to remedy the damage which this Government have done, we should not now be considering a Counter-Inflation Bill but a Counter-Selfishness Bill. All the clever talk about cost-push or demand-pull inflation, all the efforts to monitor price tags or fix wage rates, is so much spitting in the wind unless we can reverse the present trend of our society and improve the spirit with which one class and section views another.

I have noted a tendency of late, within the higher reaches of my own Party, to say that what is needed is the right of individual choice, or, as the more trendy would put it, the right "to do one's own thing". It is, I believe, basically the insistence on "doing one's own thing"—in the streets, on the stage as well as on the shop floor, in the trade union committee and in company board-rooms—that is the cause of the malaise from which the Western World is now suffering. It is quite contrary to the Socialism with which I was brought up and the idea of "Each for all and all for each" which was the slogan of the Co-operative movement in which I was reared. It is this doctrine of imposing one's own will, irrespective of the consequences upon others, which results in children being on the streets instead of at school, in men and women being unable to get to work for lack of transport, and unable to work, if they do get there, for lack of heat. But, I insist, it is this Government who have encouraged this selfishness and given a lead to this doctrine of imposing one's will irrespective of the consequences.

As the noble Earl himself has said, the present Government, or their Prime Minister, are not incapable of altering course or changing their mind, but the frightening and self-defeating factor is that they assert the superiority of their current course with the same sublime arrogance and intolerance with which they sailed in exactly the opposite direction. It is no good the noble Earl's saying that they have been ready to talk, if before they agreed to talk they laid down ground rules which are quite incompatible with proper discussion. My Lords, I do not exaggerate in this matter. One can give innumerable examples, but in relation to this Bill listen to these words: The powers which the Government have taken to…impose an arbitrary control over wages and prices are unprecedented and inexcusable…". That was the present Prime Minister talking of the policy of the previous Government. But we have reached this present dangerous point, and we are all citizens of the same country. What can be done? I repeat again that first we must try to improve the social climate. If there is confrontation—and there is, despite all the denials or attempts to wipe it away made by the noble Earl at the Dispatch Box this afternoon—if there is this escalating intolerance, someone must take a first step away from entrenched positions. It is not unreasonable to expect the Government to take that first step.

In a letter to The Times last week a much respected, independently-minded, highly experienced former Parliamentarian appealed to the Government to repeal the Industrial Relations Act. It may seem a lot to ask. But is it? Does the Act work? If the Government think it works, would the noble Earl like to rise now and tell me why are not the ASLEF men and the gas men brought before the courts? Why has that not been done if we have this piece of impeccable legislation? Would the noble Earl like to tell me why this action has not been taken? He will not get up because he knows full well that it would be quite impossible to attempt to make that Act apply to these men. But if it will not work—and all the evidence is that it will not work—are we not then getting the worst of both worlds or all possible worlds? I know there is much in the Industrial Relations Act which all Parties will support, but cannot we now in the light of experience wipe it out and start again, start afresh?

Then there is this Phase 2. I ask the noble Lord who is to reply: cannot a definite term be put to its provisions? They cannot work fairly. One union is already harnessing the horses to drive a coach through the loophole of the merit pay clause, and it will be the better-paid who will get through that loophole, not people such as the National Health Service workers. The Health Service workers, the London teachers, and certain others who had a two-part wage agreement and who found the freeze upon them before the second instalment was implemented—they do have a special case. The Government are ill-advised to have got themselves into a position in which those special cases cannot be considered. It would have been better from many points of view if the plan had been to move from Phase 1 directly to Phase 3, or whatever it is that the Government have in mind for Phase 3, for the longer the pattern of Phase 2 is imposed, the more rooted will be the habits of non-co-operation and the more will the special unfairnesses fester. So I ask whether the Government can give more specifically a time factor so far as the operation of Phase 2 is concerned.

May I say one thing more about incomes control? I have myself long argued the need for an incomes policy, and if I now express doubts it is not, I would say to the noble Viscount, Lord Amory, because I take orders from unions or anyone else. But I do try to learn from experience, and experience seems to show that the attempt to impose wage rates from Whitehall for all of Britain's industry is almost bound to break down. The matter is so immensely complicated and the opportunities for evasion, especially among the least deserving, are so widespread that the sheer practicability must be suspect. It really is necessary for all of us, wage-earners and wage-payers alike, to look at the other man's proposals with a greater readiness than the noble Earl showed when he was moving the Second Reading this afternoon.

This idea that prices should be statutorily controlled and wages voluntarily vetted is not so absurd as some would make out. Many of the over-generous wage agreements struck in recent years were possible only because the employer knew he could take it out of the customer. Most of us could think of examples where an employer has got out of line of a national agreement, not because that employer was particularly generous but because he knew that he could more than recoup himself by a price increase. With the discipline of effective price control such settlements would be impossible. I have memories, which cause me exquisite pain even now, of experience in Government when a particular Minister would argue for a wage increase over the agreed norm on the basis of a so-called productivity agreement. I never really knew the meaning of the word "phoney" until I listened to that talk of productivity agreements. Always they led eventually to applications to put up prices. The best test of a productivity agreement is effective price control; and if some services cannot be priced by market forces, then I hope the new Price Commission will take social need into consideration.

So we should not rule out a solution which tackles wages through prices. At the same time, in my view it is unrealistic to ignore the possibility, in the future as in the past, of one section of the community, more tightly organised or more strategically placed, using their strength to do better than their fellows. A completely voluntary system will not restrain them and it is idle to suggest otherwise. Some reserve sanctions are essential. But—and this is where the Government go wrong—such sanctions have to be agreed; they cannot be imposed. And agreement cannot be reached unless it is sought as part of a fair deal all round, and that is what is lacking. One element in any fair deal must be some further action to stop food prices rising. It is farcical to speak of price control if fresh food is exempt. I heard one housewife say last week that it was frightening to shop these days and another —and not the wife of a low-paid worker, either—said it was "horrible" to go into the grocers. Since the so-called freeze the official figures show an increase of 7.3 per cent. on food prices, and fresh food has risen by l4.7 per cent. This at a time when we have had a freeze on prices. The budget of a working-class household will provide 25 per cent. for food; in a typical old age pensioner's budget it is 33⅓ per cent. Meat, fish, eggs, fruit and vegetables will all still be outside control. It is humbug to say that we cannot check these increases, or at least try to check them, by control and/or subsidy. We did subsidise prices, until we capitulated to the lunacy of the Common Market agricultural policy. Effective food price control, or at least an honest attempt at it, is one essential for the fair play concept.

Another essential is an end to land speculation. Really deep hatred of what is happening in the land and property market is not confined to one political Party. I shall not quote examples again —we all know them. The only difference between us has been that the Government say that all that can be done is to release more land for the speculators. The real solution here is public ownership of land, but to-morrow the Chancellor of the Exchequer could strike a significant blow for the British people by announcing a 90 per cent. capital gains tax on land sales. To-morrow, too, we shall learn the rate at which some essential clothing, which has never before been taxed, will bear V.A.T.


Hear, hear! He will have to take it off.


My Lords, clothing and food, absolutely essential, put up in price, not because of wage increases but because of deliberate Government policy. The Government should be prepared to adjust, if not reverse, their policy on food and clothing; they have done something about shelter, and they must tackle the land scandal. They could repeal the Industrial Relations Act without sacrificing anything but pride. With that kind of approach they would be entitled to expect restraint on wages. Public opinion would he behind them, and public opinion can be very potent. After all, the wage earner is part of the public—as the striking power-worker found when the breakfast-deprived bus conductor made him walk some year or so ago.

In a modern, integrated industrial economy we each depend upon the other, and some can take advantage of the rest. What we are now finding is that the continuous working of this modern highly integrated, immensely powerful, industrial economy is just incompatible with self-centred, selfish, self-seeking behaviour. We need to-day nothing less than a new social ethos if we are going to make our economy work. I cannot see, so far, that the political context in which this Bill is brought forward promises that progressive change. I hope that I am proven wrong, for the history of our people gives me cause to believe that our problems can be solved.

3.35 p.m.


My Lords, in following the noble Lord, Lord Beswick, I should like to say that there is much in both the previous speeches which I am able to agree with and to commend, but may I just pick on one particular point? I believe the suggestion that there should be a 90 per cent. capital gains tax on land sales is unlikely to bring more land on to the market. I would commend the Liberal policy of site value rating, which in other parts of the world has had just the effect which the noble Lord, Lord Beswick, and I should like to see, namely, more land available for housing and less speculation.

I think it is important to recognise that this Bill is not really a statutory prices and incomes policy. What we are being asked to support is an emergency expedient which has arisen from a number of causes, not least of which has been the failure of the policies of previous Governments to make a sensible, voluntary system work. I do not say this in a critical way, because I think it is very difficult indeed to get a voluntary system to work, but we should recognise that that is why we are at this impasse to-day. All we are now doing is to establish a breathing space and, if possible, a firm base from which to develop a fair industrial system in which reasonable growth is possible, and if I have any criticism to make of the last two speeches it is that in my view there was not the right emphasis on the need for growth in our economy at the present time. I have no doubt that a Bill of this sort is essential as a holding measure, and we shall support its Second Reading.

I cannot really understand the attitude of those trade unionists who are using industrial action to inconvenience, and indeed to jeopardise, the livelihood and health of their fellow citizens at the present time, and I ask myself, why should the country suddenly be subjected to this wave of bloody-mindedness? It cannot help anyone. It must surely be clear that if inflation is to be brought under control, then price and wage increases must stop somewhere before we start the necessary re-adjustments in Phase 3. It must surely be clear to the gas workers, the hospital workers, the civil servants and ASLEF, not to mention the teachers, that if their industrial action succeeds in weakening the determination of the Government, that action will be followed by further strikes by miners, busmen, dockers, postmen, Vauxhall workers, and so on. As was recently pointed out in the Economist: Except in jobs which need a lot of new recruits because of sudden changes in technology or demand, there can only be one national result of a wage increase well above the rate of rise in national productivity. It can only put up prices, and, as the noble Earl the Leader of the House said, it will rob the defenceless sections of the community who live on fixed incomes (largely old people), the poorly paid and the unemployed. Even so, the proposed restriction on wage increases of about 8 per cent. is about twice any national increase in productivity which is likely to be achieved. Refusal to accept this wage restriction must surely lead to uncontrolled inflation, and I cannot see why this is not clear to the leaders of the unions who are at the moment undertaking industrial action. The refusal to accept the scrutiny by a pay board of the relative merits of pay claims makes one a little suspicious.

Indeed, a common feature of these industrial acts has been the special pleading on radio and television by what I can only call well trained actors arguing often from suspect premises. Much of their argument, when stripped of its camouflage, is not about low wages but about wages which they regard as low in relation to other workers. All this can be dealt with if Phase 2 guidelines are accepted and proper readjustments are permitted, as they must be, in Phase 3. We need this breathing space and we cannot afford to make any exceptions at all if we are to get things right in Phase 3.

I believe one of the reasons for needing objective scrutiny of pay claims by the Board is because so many of the arguments are designed to mislead. For instance, to say that a skilled gas worker gets only £23 basic pay is, as The Economist demonstrated, quite misleading, because hardly any gas worker I understand gets only basic pay, and if the gas workers accepted the present offer they would be some way above the average of industrial wages. In the same way, many of us saw on television a London teacher saying that both he and his wife were teachers in London but that they could not afford London accommodation. I am told that the combined household income of such a childless couple would probably be somewhere above £3,000 a year.




The two of them, childless, in London and both teaching, I am told that that is about right. That puts them in the top 10 per cent. I am not saying that £3,000 is an adequate figure: far from it. But I am saying that there is a lot of special pleading going on at the present time and the sooner we get someone to undertake an impartial examination of these claims and the relativities, the better for all concerned. I have not seen much evidence so far of a willingness on the part of the higher-paid workers to give up much in favour of the lower-paid workers in the group to which they belong.

Now I should like to deal with the Bill itself. I wonder whether the Government are wise to separate the functions of the Price Commission and the Pay Board. That is a point which the noble Lord, Lord Peddie, made in a speech not long ago and 1 found it a forceful one. I see that they have taken powers to amalgamate these Agencies and I should have thought that one body was probably preferable at the outset if only to ensure that the trends in the fields of both pay and prices were constantly monitored and co-ordinated. Secondly, I put forward once again the need to have the public or national interest (represented on these boards. I should like to see people on them who are not directly associated with employers or workers, people such as we have had on arbitration boards in the past, who can really look, particularly in Phase 3, at suggestions such as that made by the noble Earl, Lord Jellicoe, for finding out what the country can afford in wage increases and in settling anomalies. That is an excellent idea on the part of the Government. But, it has to be something which has the stamp of impartiality somewhere on it, because it is very easy to agree that we can afford far more than in fact we are going to be able to afford. I believe that Phase 2 is really the policing of the freeze. Phase 3 will be the adjustments which are necessary. I commend the Government for deciding to get on with finding out what we really can afford to pay as increases in our national payroll.

I do not want to deal in detail with the Green Paper, but there are one or two things which must be said at an early stage, particularly since the Bill places the responsibility on the Price Commission, and indeed on the Pay Board also, to exercise their powers to ensure that the provisions of the Code are implemented. I cannot see any reference to profits in the Bill, but there are many references to them in the Code, and the noble Earl the Leader of the House touched on this in his speech. I believe that the references in the Code are very worrying indeed because they show a fundamental misunderstanding of the role of profits in the economy. I do not think that one can push aside what the Financial Times said. Whoever drafted paragraphs 19 and 36 of the Code accepted the old Left Wing shibboleth that "profits" is a dirty word and that it is associated with the employer's side of the business; therefore it must be controlled or limited if justice is to be done.

That is a fundamental misunderstanding. It has nothing to do with the employers' or the workers' side. I believe that no intelligent member of the Labour Party honestly believes that about profits. When it appears in a Conservative Government paper, it does a grave disservice to the attempts of those of us who are trying to get a better public awareness of how the economy works and what we have to do to increase economic growth. It is not, as the noble Earl, Lord Jellicoe, said, trying to strike a balance between what one might call the employing side and the employee side; it is much more than that. I have taken up this theme on numerous occasions inside this House and outside, and I have always said that we have to recognise that unless British industry is profitable it will not remain in business; not for anybody, be they worker, shareholder or anybody else. If industry makes losses then it cannot afford to pay the higher wages. If industry does not make profits through its efficiency and productivity there is no scope for reducing or containing prices. Profits are the lifeblood of the private enterprise system. Business must make profits, and I believe that what matters is that, wherever possible, they should be made in genuine conditions of competition. But what really matters is how they are used and it is vital, to my mind, that we should not allow them to become part of this phoney class struggle. They are absolutely vital to private enterprise.

I should like to see a very great extension of profit sharing and employee shareholding. Profit sharing is forbidden by the Code as I read it. I have no objection to dividend limitation or to price control in the present circumstances if it will help towards countering inflation, but attempts to reduce profits fairly made will dry up the funds for investment and reduce severely the achievement of economic growth upon which our future and future wages depend. I believe that the thinking behind paragraph 19 of the Green Paper is very dangerous indeed, and I hope that we shall have an opportunity of getting it changed. What it says is that: In order to ensure that the benefits of increased productivity are passed on to the consumer not more than 50 per cent. of allowable cost increases arising from pay increases may be passed on as price increases. I believe that to be stupid and unfair. It is very unfair to the service industries. It is very unfair to the labour intensive ones. It is unfair to the public to allow the capital intensive industries to pass on 50 per cent. when the labour costs in a capital intensive industry may be only 15 per cent. or 20 per cent. That is an absolutely wrong attitude to take in a Paper of this sort.

Paragraph 36 has the same idea. It says: In addition prices should be reduced where other factors (such as an increase in the volume of sales since the last price increase) lead to a significant fall in allowable costs per unit. Surely that is just what we want. We want to get a fall in costs. We want to encourage growth, and limitations on profit in this way remove all incentives to increased productivity. The same analogy to efficiency, productivity and profit occurs elsewhere in the Code. I should like to make sure that we make it a rule that nothing in the Bill or Code must be allowed to reduce efficiency or productivity if we are to get growth.

The same idea occurs in paragraph 120 which says that: …increases in pay under productivity or restructuring schemes introduced after 6 November 1972 count against the pay limit. In other words, there is no incentive to productivity. There is a slight exception in paragraph 121. But what responsible industrialist will contemplate new investment if he cannot buy productivity? I know there have been phoney productivity agreements; we have all seen them. But we must get the emphasis on being able to get productivity agreed and to be able to buy restructuring schemes if investment is to help economic growth. Finally, I wish to refer to the period for which the Act is to run and where the Government had some local difficulty.


My Lords, I have listened very carefully to what the noble Lord, Lord Byers, has been saying, and I do not want to go over that ground now; we shall have a chance in Committee. But I should like to draw the attention of the House, through the noble Lord, to paragraph 49 of the Consultative Document where specific exception is made concerning investment. The noble Lord, Lord Byers, said (perhaps quite rightly) that I had not laid sufficient emphasis in my opening remarks upon growth, and I should like to make clear that this Government are committed to growth and therefore to investment for backing growth. That is specifically covered in paragraph 49.


Yes, my Lords, it is specifically covered in paragraph 49, but that allows for using profits. My point is that we must not do anything which prevents the profits being made. There are numerous other examples which we can take in Committee stage, concerning tremendous encouragement, so far as I can see, to the inefficient industries, the ones that cannot make 5 per cent. on their capital. These are the ones that are going to be allowed to increase their prices. But the chap who is really efficient, who has got a first-class operation going, when he gets over the 5 per cent. has got to do something to reduce profits. This is the wrong thinking. I hope that on Committee we may go into this matter, because we are in the consultative stage, and if we get this wrong we shall, in my view, have the wrong basis for trying to get growth. It is not just a question of pay and incomes, but of the growth we want to get in the economy.

May I refer again to the period during which the Act is to run. This is one of the problems the Government ran into in another place. I am not one who wants in any way to weaken this important holding operation, but I must say quite clearly that I do not see us being able, for anything like three years, to run our incomes and prices policy on the detailed interventionist and bureaucratic lines envisaged in this Bill and the Green Paper. I cannot see it working. If the freeze goes on for too long, we shall have lost the whole basis of the operation. I think the American experience bears that out. I believe we must enact this measure subject to renewal every twelve months. I give two reasons: first, because I believe that we cannot live under freeze and siege conditions for more than a few months without undermining the holding operation; secondly, a programme such as that outlined in the Green Paper and the Bill is so important to every individual in this country that it demands full Parliamentary discussion and approval at intervals of no less than a year. I hope when we come to Committee we shall be able to find some compromise on this question. I should hate to feel that this matter was with us without proper debate and discussion for three years.


My Lords, I am sorry to keep interrupting the noble Lord. I do it for the sake of clarification, to make it quite clear to your Lordships that the consultative document, the Green Paper, only runs for Stage 2; that is until the autumn. It will then be replaced by a further Code, which of course will be debated in Parliament.


My Lords, I think that is a very good thing; but the Bill has made provision for the organisation to go on unchallenged for three years. I believe Parliamentary challenge in these circumstances is very important indeed.

My Lords, we shall support this Bill. We want people to be richer, not poorer. We implore that we should not try to rush things too fast We should not agree to gross wage and pay demands at the time. We cannot afford to pay ourselves more than we are earning. But with this firm base, I believe that it is possible that we shall at last get a grip on the situation even if we do not completely solve the problem.

3.54 p.m.


My Lords, in rising to follow the extraordinarily cogent and stimulating speech of the noble Lord, Lord Byers, I must first tender a tentative apology to the House: if by any chance I am not in my place when the noble Lord, Lord Drumalbyn, replies, it will be merely because I have been summoned for a semi-official discussion of war and post-war history, which has taken months to arrange and which it would be very difficult for me to back out of at the short notice we have had of the appearance of this Bill in your Lordships' House.

The noble Lord, Lord Beswick, has announced that he will not ask his Party to divide against this Second Reading. If his decision had been otherwise, I confess that I should have gone into the Government Lobby. I should have gone into the Government Lobby, however, in a somewhat Lao-tszeian frame of mind. I should go in not because I think in principle and in the long run statutory control of incomes is the best way of managing that sort of thing. On the contrary, I still hold the view that if aggregate national spending is held more or less commensurate with the increase in the value of the product then freely negotiated contracts are better. Secondly, I should vote for the Government not because I am in favour of control of all prices. I am certainly in favour of control in the long period of some prices, prices which are, either necessarily or by way of conspiracy, monopolistically determined.

But in general, trying to keep things in proper perspective, I am opposed to direct interference with the result of market forces. This is not because I think that the direct result of market forces is always a good thing, but because I think that if it is not a good thing it is far better to tackle the fundamental influences behind demand and supply, to tackle them by way of taxes or subsidies or even by physical controls, than to monkey about with prices, which, after all, are a result of these fundamental forces. I do not believe, therefore, that price control is a good thing in itself. I do believe that all historical experience since the time of Diocletian shows how likely it is to be ineffective and how likely it is to run into grave trouble.

The reason I support this Bill is otherwise. I support it because I believe it is the only hope of stopping the fundamental conditions of inflation without bringing about a major depression. And by "a major depression" I do not mean the degree of depression that we have had lately, which has not been very much above the average which William Beveridge thought was the utmost achievable in his famous book on Full Employment in a Free Society. I mean rather old style, catastrophic unemployment, perhaps six, seven or even more per cent. I do not think we can get out of the truly terrible pickle in which we have got ourselves without such a disaster unless we are prepared to swallow a dose of the very disagreeable medicine which the Government at the moment are administering to us.

May I explain this attitude a little further. Inflation since the war is explained in many ways. It is sometimes explained in terms of demand, excessive spending on the part of someone or other; sometimes in terms of cost-push, successful monopolositic pressure for increased pay out of any relation to increased production. These explanations are very difficult to separate out. I have no doubt at all that in recent years there has been a considerable element of cost-push. I defy anyone to contend successfully that increases in earnings of 15 to 20 per cent. bear any relation whatever to the movements of the gross national product in recent years. But at the same time I would point out that with a public spending deficit of the order of magnitude which threatens to emerge, cost-push is not the only influence. It is not the main influence, for instance, on the level of land prices, to which allusion has been made already.

Be this all as it may, it seems to me that the fundamental point to bear in mind is that these things, cost-push, or excess governmental spending, would not be likely to happen if the rate of increase in the credit base were no greater than the rate of increase in the value of production at constant prices. Of course it is possible to conceive that, for a time, this condition might be offset by some increase in the rate at which money is used—namely, by the creation of credit outside the main organised credit system or, as happens in times of severe crisis, by a rush to turn money into goods at any price. It seems to me that in the main the proposition is incontestable that if the rate of increase of spending power is not greater than the rate of increase of production, attempts to borrow in excess of the disposition to save will prove nugatory and attempts to push up incomes will simply leave more persons without work.

But what has actually happened? Since the end of June, 1970, when the present Government came into office, M3—the most commonly accepted measure of the credit base—had increased to last September by something of the order of magnitude of 40 per cent. In the same period G.N.P. increased by—what shall we say?—5 per cent. I hope that noble Lords will notice that I am speaking in a loose way. I do not attach too much importance to precise figures here; I have handled too many of them myself. All sorts of things can go wrong in the best estimates; all kinds of incidental movements can be explained away by transitory circumstances; but surely the comparative orders of magnitude that I have cited are unmistakable. With that sort of disparity between the increase in the money stock and the increase of the national product, I would say that inflation of the kind that we have become accustomed to is inevitable.

It may be that some noble Lords on my left would regard it as unfair to take my figures from June, 1970. Much the same sort of rate of increase in the money stock began in the last few months of the former Chancellor of the Exchequer, Mr. Roy Jenkins. Having regard to the way in which his balance-of-payments troubles disappeared almost overnight when he had screwed himself up to reduce the rate of increase of aggregate spending, the change of policy has always been something quite astonishing to me. But June, 1970, is a long time ago. The present Government have been in office more than two years, and one of their chief promises at the Election was to arrest the rise of prices. Until recently, at any rate, with all respect, the rise of prices has not been arrested. I am a very great admirer of the present Chancellor of the Exchequer; I am a very great admirer of some of the financial reforms which he has instituted or, to take the case of negative income tax, which he has been the first Chancellor to contemplate; but I must say, in all humility, that looseness of his control of this very fundamental magnitude must be, in my opinion, a permanent blot on the record, and one for which the nation has had to pay very clearly. Look at what has happened to the balance of payments in recent months.

There are those who think that, given this sort of diagnosis, it follows that the problems could be solved quite simply by arresting the rate of increase of money supply until it had a more normal relationship to the increase of production. I wish that I could share that view, but I do not. Once inflation on the scale we have recently experienced is in full tide, a sudden check of the order of magnitude which would be necessary in increase of money stock would be likely to bring about a grave crisis. Once inflation is proceeding at that rate, all experience shows that business expectations and trade union expectations are keyed up to further increase. Wage claims are in the pipeline which take account of expectations of that sort. If the finance is not available and there occurs a sudden retardation of the rate of increase, then dismissals and bankruptcies are probable. Only if there is some artificial check on the increase of claims can we hope that production will continue at the present level, or perhaps even grow.

It is for this reason that I think that the general principle of that upper limit on pay increases for the time being is worth supporting. Not that I think that it will not involve injustices; most obviously it will. Not that I think that there will not be a good deal of evasion and that eventually it will crumble; I think that that will happen. But I think that it affords a breathing space, the only breathing space that I can conceive; a pause in which we can regain control of the increase of money stock without causing an industrial crisis, and an opportunity for the public to realise what many of them have long forgotten (as the noble Lord, Lord Byers, so vividly pointed out), that claims on G.N.P. which exceed its rate of increase by very much, such as those that we have recently witnessed, can only result in either inflation or unemployment.

As regards details, surely those are better discussed at the Committee stage. I have comparatively little to say about the pay provisions. I think that the attempt to bias negotiations in favour of the lower paid, put forward with the most excellent motives, may well prove self-defeating in that it will provide an obvious incentive to substitute skilled for unskilled labour. But the idea of a general upper limit beyond which increases are not an allowable cost—I am quoting from the explicit words of the White Paper rather than the Bill—seems to me to be sound. I confess to many more hesitations about price control. Here I find myself in considerable agreement with what was said by the noble Lord, Lord Byers. I think that we ought not to forget that where there is not strong monopolistic power, prices are results and not causes. As I said once before in your Lordships' House, the rise in the value of my poor little dwelling in Hampstead Garden Suburb from about £3,000 to about £40,000 is a result, not a cause, of inflation. I am not a cause of inflation.

I would urge that the adaptability of market prices to the underlying conditions of demand and supply is a valuable feature of any system, whether privately of publicly run. I think all experience shows that if prices are held at levels much below that which would clear the market, there tend to develop shortages, and distributions according to the time that people can afford to wait in queues rather than accordingly to what they are prepared to pay. I must say that I think one can tremendously underestimate—I felt that the noble Earl, with whose general intentions I feel such tremendous sympathy, himself underestimated—the administrative difficulties which seem to me to leap to the eye from the most casual perusal of the Green Paper. No doubt in Committee we shall have more opportunity of alluding to these difficulties, but my imagination boggles when I think of the difficulties which will emerge in the definition of, for instance, what seems to be the simple concept of allowable cost. As I read the Bill and the Code, I must confess that I think there is real danger of upsetting the relative incentive to produce the things most in demand, and to contract those for which demand is less urgent.

As for the idea of controlling prices, including import prices, and leaving incomes to be determined in a free-for-all, hazy atmosphere of good will, I hope it is not necessary to point out that this is the road to further crisis, both national and private. The Government and nationalised industry would be committed to rising deficits and the private sector would be doomed to bankruptcy, unless indeed the influence of credit creation were to continue, and that could go on for only a limited time before a final crash. I say, in all earnestness, that those who suggest that the control of imported food prices is easy, should consider again the lessons of war experience. During the war, we succeeded in doing it by monkeying about with the index numbers and by putting all imports under State control, which I doubt whether many Members of your Lordships' House wish to do as a transitional measure. In fact, in point of pure logic—and I am not adhering to pure logic; I say that lest noble Lords on the Opposition side rise and charge me with being a cold-blooded economist, guided only by the geometry of his craft—if you are to have one kind of control rather than the other, it would be better to have pay control and let prices look after themselves.


My Lords, is the noble Lord aware that we would never accuse him of pure logic, if he is arguing against control of imported food prices, when in fact, a short time ago, he was arguing in favour of the intervention price set out in the Common Agricultural Policy.


My Lords, I shall not go into that, although I cannot help suggesting that it is a little wide of the mark. But I am arguing from what I still believe to be the pure logic of the situation. I agree that Government is the art of the possible, and since, I am sorry to say, at least 80 per cent. of the population of this country, regardless of Party, probably think that the levels of prices are determined not as they in fact are, in the main, by impersonal forces, but by the manipulations of profiteers and monopolists, I suppose we must stomach a certain amount of unnecessary price control to make the prevention of inflationary pay claims at all palatable. I would only predict that the price we pay for this palatability in its present form—I am not arguing that it is incapable of improvement—may be quite considerable. I am quite sure that if we succeed in getting the volume of aggregate demand into a more reasonable relation with aggregate production, it will be quite unnecessary to have control of prices over all that part of the field where any sort of competition prevails.

In all this, we must try to keep a sense of perspective. In a former debate, I remember that the noble Lord, Lord Platt, said that he wondered—I hope I did not mistake him—whether this is not a crisis of capitalism. I would rather say that it is a crisis of finance. It is not the existence of private enterprise which has got us into this muddle; on the contrary, the crisis, I am sorry to say, is most acute in nationalised industries, where the delusion prevails that the public purse is a sort of widow's cruise, and where, because of the pivotal nature of nationalised industries, most harm can be done to society when attempts are made to stop the process of excessive claims. But I do not want to end on a note of controversy. Rather I should hope that we would all agree that the essence of the trouble is an excess of aggregate demand over supply at stable prices, and that unless that excess is directly curbed no amount of restraint on pay and prices will prevent further trouble.

4.18 p.m.


My Lords, in the debate this afternoon we are concerned with the basic principles and objectives of the Counter-Inflation Bill. I have no intention of engaging in any dissertation on the anatomy of inflation, or indeed of wasting any of my time replying to some of the points made by the noble Lord, Lord Robbins. All we can do at this stage of the proceedings is to recognise the existence of serious economic circumstances which necessitate drastic remedies. I believe that subsequent stages of this Bill will indicate ways in which it can be improved, but I welcome the sight of the Government jettisoning old concepts, although I recognise that their courage might be born out of desperation and recognition of a worsening inflationary situation.

I have no intention of repeating the points made when I spoke in the debate a month ago, except that I must once again emphasise that to-day we are in a situation which justifies—indeed, demands—positive action.

This Bill may or may not be all that we want, but the objectives must be achieved; otherwise, the effects on all sections of the community will be shattering. At the same time, although I do not seek to inject too much political flavour into my speech, I share the view expressed by the noble Lord, Lord Beswick, in pointing out that the Government themselves have a high measure of responsibility for the present situation. There was a free-for-all following the first flush of electoral success, and that, without any question of doubt, encouraged inflation—and it is all too well known that inflationary forces are self-generating. People were indeed encouraged to believe that rising prices and inflation were part of the normal economic scene. There was the belief that inflation, and ever-increasing inflation, would be a permanent feature. It is obvious, my Lords, that our entry into the Common Market and the need for economic and monetary harmonisation have presented Britain with almost appalling problems, and if inflation is not tackled the immediate impact will at least be that membership benefits will be seriously delayed. I often wonder—and I speak as an ardent supporter of the Common Market—how far our recent entry into the Common Market has sharpened the Government's perception, and the need to jettison their old ideas. I believe that the experiences of past weeks have done much to emphasise in the minds of the Government the need for much more positive action than they were prepared to take some two years ago.

Now I recognise that the Bill, and indeed the Code, my Lords, cannot in themselves provide the complete solution to this problem of inflation, any more than a compass can guarantee arrival at a distant port. The Bill, like the compass, can be something of a help; and indeed it would be a miracle if it was possible to have a successful voyage without the aid of a compass. A prices and incomes policy, no matter in what form it may be expressed, can only be part of an overall plan. It is no substitute for fiscal or monetary action. It is certainly no substitute for far more dynamic action in improving the efficiency of industry as a whole. Certainly it is no substitute at all for improving, as I just stated, industrial efficiency and better deployment of manpower. In the old P.I.B. days we had quite a number of critics and supporters. They often tended to polarise into extremes. There were some who believed that a strict policy and a tough Board could alone create the environment conducive to substantial economic growth. There were others—and they still exist—who believed that the free play of economic forces alone could provide the answer. Both points of view were, and are, devastatingly wrong. The truth is that we have to look upon this new-found policy, and the activities of the newly-created Board and Commission, when they are created, merely as an additional but indeed powerful tool in checking inflation.

It needs, in addition, a concerted effort, as indeed the noble Lord, Lord Byers, indicated, to increase overall productivity; and I would emphasise that, in the presentation and operation of this policy and the activities of the Board and Commission first of all the direction must be seen to be constructive, and not restrictive. Secondly, it must be based upon a public recognition of need. Without those two conditions, the policy will fail: there is no doubt at all about that. I believe that at the present point of time there is a recognition on the part of the overwhelming majority of people in this country that the Government should take some positive action. In that regard, the Government are fortified, and they have a measure of voluntary acceptance for the authority that is implied in the operation of the Bill.

But my main criticism of the Bill and the Code is that they tend to emphasise the negative or restrictive activity rather than the constructive. It is very significant, my Lords, that in only one case—that is, in paragraph 75 of the Code—is there a fleeting reference to the purpose of increasing real earnings. If you are presenting this policy to the worker, obviously what he seeks to achieve is a better standard of life. That is what so many have told him an incomes policy can achieve; but nowhere do the Government appear to have sufficient confidence in the policy achieving that end that they make express reference to it—neither in the Bill nor in the Code. I would strongly urge that that be underlined, because the primary objective—and I am sure it is on the part of noble Lords opposite—is to increase real earnings. Indeed, there is hardly a mention in the Bill of that particular aspect.

The Bill provides for a Pay Board and a Price Commission, apparently because it is thought that pay and prices should have separate treatment. As I have said on a previous occasion—and it has been confirmed by the noble Lord, Lord Byers —prices and pay are inextricably interwoven, so why keep them apart? It would seem that the Government themselves recognise the possibility of merging them in the future, when in paragraph 3 they make reference to that fact. Another interesting point is that in paragraph 138 it is proposed that there should be a special panel for the construction industry, including members of both the Pay Board and the Price Commission. To whom will they be responsible, and whose staff will they use? It is provided in Part 3 of Schedule 1 that any person can be a part-time member of both agencies.

My Lords, I think there is a need for a clearer indication, particularly in the Code, as to closer co-ordination of the staff, but nowhere is this mentioned. I recognise, of course, that there is a certain psychological value in having a separate Price Commission to indicate to trade unions and workers that special attention is being devoted to it. I recognise that; but I believe there must be some co-ordination between the operation of those two bodies, otherwise it will make for conflicting decisions and it will make for waste. But the real success of the Pay Board or the Price Commission will depend on how they operate. If there is a rigid, inflexible approach, with strict adherence to regulations, the value of the Commission or Board will be restricted. As noble Lords know, the P.I.B. discarded the convention of judicial hearings and claimed the valuable freedom of informal contact and discussion, and I can assure noble Lords that a great deal of value flowed from that method of operation.

In my opinion, my Lords, the control of prices is vital. Without it, I really do not see how it is possible to effect a reasonable or rational measure of control of pay. Furthermore, unless workers see and believe that effective steps are being taken to control prices, they will not accept pay restrictions. Noble Lords on both sides of the House recognise that there must be a degree of voluntary acceptance. Otherwise it could not be done. Paragraph 12 of the Code, dealing with prices, indicates that the prices of fresh foods will not be controlled. I recognise the enormous difficulties of obtaining successful control over the prices of these types of food. But the recognition of the difficulties, in itself, does not justify taking no action at all. If essential food is excluded from the obvious supervision, I think that there will be trouble. I could suggest some action. The seasonable movements of foodstuffs, of fresh fruits, for example, and of all kinds of food are known. They have been and can be charted; and any variation from the average can be noted and investigated. Therefore it lies within the realms of possibility that the Prices Commission engage upon activities which would indicate that they are at least making an effort to control the prices of those products.

The trouble with the Government is this. They recognise those difficulties but are afraid to express in clear, positive terms the methods by which those diffi- culties can be dealt with. Why do I say that?—because in paragraph 137 it is stated that a sub-committee of the Price Commission, "will…be able to carry out" special inquiries into any food prices. It does not say "must", but "will be able". There will be no difficulty at all in placing that responsibility on the shoulders of that prices subcommittee who engage in these inqiries. I know the difficulties, but here we are dealing with a psychological situation. We are dealing with a situation in which the Government have to demonstrate to the world that they are serious about it, that they really mean what they say and intend to curtail and restrain inflation—to restrain inflation and at the same time to raise real pay. That is the intention. At least, make it a little more explicit in the documents.

Pay is a factor; the pressure of pay demands has carried the major blame for generating inflation. There is no doubt that it has been a contributing factor. With that I would agree. But it is not all the story. Rising steam can blow off a kettle lid; but what built up the steam? For a long time we have had rising prices with little or no control and many employers, as some noble Lords have stated, have pursued a policy of built-in recognition of continuing inflation; and it goes on even now. You can see advertisements constantly hammering home into the minds of the general public the inevitability of rapid inflation. I repeat what I have said: the situation is self generating.

I believe that there are very few of us here on either side of the House, myself included, who really have a clear idea of what rising prices really mean to people on low pay. To the majority of us it is an academic discussion. It is so to me, to be perfectly honest and, I believe, to the majority of the House. Therefore of the terms that we hear when some people talk about low pay and the difficulties of increasing it, all I would say is this: that the solution of this problem of low pay will not be found in these two documents. It needs something more decisive; it needs serious tackling of the basic problem of real pay. It is often found in factories and it is often found in industry that you need means whereby you increase the efficiency and overall productivity of the people engaged in those industries.

Some control is essential. I recognise frankly that free negotiation of wages will do little to improve the general standard of those in receipt of low pay. Some of my friends on this side of the House may not like that; but it is the truth. One often finds that the processes of industrial negotiation (usually backed by industrial strength) are concerned more with the maintenance of relativities than with improving the standards of the low paid.

Therefore I hope that, stemming out of all these activities, we shall have probably for the first time, some really serious consideration of what low pay is all about and that we shall try to seek ways and means whereby this problem can be tackled. Some form of intervention is essential; free bargaining is not sufficient to ensure equity in wage determination and at the same time to restrain inflation. I think the paradox is that controls of the kind suggested must rest upon voluntary acceptance. It will need an effective assurance that the powers given under the Act will be used effectively; and that I think is absolutely necessary. Above all, the work of the Board and the Commission must be seen to be constructive and dynamic and not merely restrictive. I make no apology for repeating that point, for it is so important. The basic purpose of this activity, the basic purpose of the activities of the Prices and Incomes Board, of which I was a member, was really to create an environment which would permit a faster economic growth and higher real wages. Those objectives in my opinion should be made much clearer than they are in the various documents that have been produced by the Government.

I come to my last point. I know that many, particularly of my own political persuasion, have in recent months and probably in recent years (and I heard it when I was at the P.I.B.) have said that we should not desperately pursue a faster economic growth which might be gained at the expense of the quality of life. Why not, they say, have a more leisurely economic progress and concentradte on equitable distribution of wealth? I recognise that the more equitable distribution of wealth is a very laudable objective. But the mere fact of having a more equitable distribution of wealth would not, unfortunately, end our problems. It is not a question of whether we can stand still and get whatever are the spoils that there are to share but of the circumstances which are such that the economy can move either forward or backward. Our relative position over the past years in comparison with the development of many other industrial countries, has not been of a character that can ensure a rising standard of living for the great mass of the people and at the same time ensure the social developments that so many of us—at least, on this side of the House, I am sure, on the other side, too—have close to our hearts.

Therefore, even though there may be some points that I do not agree with in the Bill and there may be certain aspects worthy of amendment, the objective is right and I give support to those activities because I recognise that the situation as it is to-day is such that if this country is going to progress in the manner we all desire we must take positive action and that, I hope, will justify in the long run co-operation from all sides of industry.

4.40 p.m.


My Lords, it is with some diffidence that I follow in the footsteps of the speakers to whom we have listened this afternoon. None was more impressive than the noble Lord, Lord Peddie, who has such intimate knowledge of the problems which we are considering. The only reason I wanted to make a few disjointed remarks was to assure the Government that one who has criticised them for the last two years for the policies they have pursued is to-day—in company with every other speaker who has taken part in the debate—going to support them, as I think I definitely must and should, with great pleasure.

I think that many working people in this country imagine that the policies which the Government have pursued have been completely supported by the business community. That, my Lords, is not the case, and I should like to report the most recent discussion I had with a man in the Midlands who has built up a successful engineering business from nothing. I said to him—this was four weeks ago, when the situation was very much better than it is to-day—" If you were a Member of the Government what would you do in order to make the people of this country realise that you understood their problems?" The reply of this successful Midlands businessman was, "I would introduce food subsidies at once, and I would control speculation in property and land."


Hear, hear!


My Lords, it may not be possible to carry these things out in a sweeping measure, but it was very interesting for me to hear a successful business man give that as his view. Some of you, I am sure, enjoy, as I do, listening to Alistair Cooke every week-end from America. This week-end he was even more worth while listening to. The price of beef is rocketing in America to-day and the President advised everybody to eat fish. Your Lordships can imagine what Alistair Cooke did with that. One had the sort of evocations of Marie Antoinette saying, "Let them eat cake, if there is no bread." He went on to say that it was unfortunate that people in public office tended to lose touch with the people they were governing as they rushed from function to function and from official meal to official meal—and I speak as someone who has done that.

In my criticisms of the Government which I adopted for the first two years they were in Office I wrote, I am ashamed to say, many letters to The Times newspaper. In one of them I ended with the phrase that what we wanted was "Toryism with a human face". I said that because, while I can fully appreciate leading Members of the Conservative Party criticising a former Labour Government, what I object to is their criticism of the thirteen years of Tory rule. I think that we shall have to leave it to the historians to decide whether inflation is worse to-day because the policies of confrontation failed, or whether the rate of inflation would have been much less if policies of concensus as followed by Macmillan and Butler had been followed. To-day, the future lies between the Government and certain militants in the trade unions. Can the Government drop their first and former image of confrontation?

Can the unions step back from the brink? If not, my Lords, we are heading for disaster; and in this respect it would appear from what I have seen in the Press and on the tape that Mr. Feather has become a little more militant to-day than he was yesterday. I am not suggesting for a moment that this applies to all trade unionists. Many that I know have told me that they feel that in the desperate position in which we find ourselves we must all remember that we are citizens of this country. As a secretary of a trade union said to me the other day, "This is my country, too". I think that there is this strong feeling, perhaps not among all members of trade unions, but among some.


My Lords, as an admirer of the noble Lord, may I say that surely when he reads the words he has just used he will regret them. I am sure he will agree, on reflection, that there can be no more patriotic section of the community than the trade unions. We never even started to fight the war until 1940, when a Labour Government put Mr. Churchill into power, backed by the whole might of the trade union movement.


My Lords, coming from a former Parliament, I make the same mistakes as the noble Lord, Lord Wigg. But I hope that he will not think that I am making any criticism of trade unions. What I was saying, and I think I can support it by statements that have been made, was that there are some members of the trade union movement who are very militant and there are others who are not, and I was drawing a comparison.


My Lords, I am sure that the noble Lord, Lord O'Neill of the Maine, does not mean to infer that because a man is militant he is not patriotic. I am militant, but I am just as patriotic as the noble Loyd—at least, I hope that I am.


My Lords, I think that we had better let the matter rest there; I still stick to my personal opinion. I was delighted to see that the first letter in The Times to-day is signed by the noble Lord, Lord Roberthall, who will be taking part in this debate. I was absolutely delighted to see that in the final paragraph of his letter he expressed the hope that the regional employment premium would be allowed to continue. As someone who comes from a region, I think I am right in saying that the termination of R.E.P. was foreshadowed by the Labour Government. That may be so, but to-day it is still in existence; and I hope that the Government will give consideration to this matter because you need the support of the regions if you are going to carry through your policies.

I do not want to detain your Lordships. In my view the situation is extremely serious. In my view we should—as we have all publicly stated that we would—support the Government at this time in this measure. But may I once again express to the Government that a policy of consensus is necessary if they are to succeed in the policies to which they have set their hands.

4.49 p.m.


My Lords, may I ask the indulgence of the noble Lord, Lord Drumalbyn, in that because of an engagement, I may not be able to be present when the noble Lord winds up the debate. I know how one feels when someone on the Opposition Benches says that, and as the final speaker one has a good speech to make in reply to the debate. But I hope that the noble Lord will accept my apology.

My Lords, the train on which I came down to London to-day had an unscheduled stop in the Midlands and was running about 35 minutes late. When we got to Euston I went to the engine driver's cab and I said to him, "You enjoyed catching up to get to Euston on time, did you not?" He said, "Yes, it was thrilling. It is surprising what ground you can make up if you try." I thought that quite an optimistic note on which to come here to-day—you can catch up on the ground lost if only you try.

I was a little dispirited by the analogy given by the noble Earl the Leader of the House of his motor car, although I accept the desirability of the automatic gear which was so wittily advanced by the noble Lord, Lord Beswick. I did not interpret the point quite like that. My interpretation was that of a real old Tory trick of having one foot on the brake and the other foot on the accelerator at one and the same time, and when the foot was taken off the brake the car surged forward. Well, it might. Anybody can put forward their own interpretation. Perhaps the noble Lord, Lord Robbins, would put an interpretation on it as meaning the money that we were printing last year so that the British public could buy stuff—not ours, of course, but Japanese, because we cannot afford to buy our own.

When we have heard the noble Lord, Lord Robbins, and other exponents of economics in the past we have listened to them with great respect—I know I have. I have not been envious, because I am not in that league. I know my limitations: and to-day I am afraid that I recognise some of Lord Robbins's limitations, too. It seemed to me that what he was saying was such a long way from the shop floor.

My Lords, is it not time that political Parties got big enough to admit when they have been wrong. I remember February, 1972, when the noble Lord, Lord Beswick, got up at the Despatch Box and almost the first thing he did was to admit what the Labour Government had done wrong prior to the General Election of June. 1970. But when Parties hold strongly to beliefs in which they have been born and bred, which have been successful over the years in advancing the wellbeing of people, it is hard to give them up. It is interesting to note (I will not dwell too long on it) that the conditions under which the present Government came into office were very similar to the conditions appertaining in America when President Nixon assumed office in 1968, in that there existed a highly-charged economy. He put into operation the known remedies of monetary and fiscal policies. But for the first time in economic history in a modern industrial State, although unemployment in the old days was a discipline on people so that they would not ask for more money, in 1968-69 that policy failed miserably in the United States of America, in that it made no difference to the demands of the American workers and rabid inflation resulted: so much so that in August, 1971, they brought out their first control. It is interesting to note that the present Government in this country did not learn anything from the American experience, and imitated it almost to the letter.

It seems to me that political Parties on both sides of the House—not so much on this side as on the other—have misread the signs of the times. The industrial nations of the world are in a ferment. This stems from disappointment and disillusionment with this material age, which is being recognised for what it is. Everything is being called into question. It is not just a matter of wages. You mention something and it will be called into question, whether it is education, drugs among children or the system of Government. Wherever one goes throughout the industrialised nations of the world it is there. Your Lordships may not think so, but it is in Japan, too.

I recently made a journey to Japan with the idea of getting some information about Japan's attitude to world opinion on their own growth rate. They will have their anxieties, too, and before very long. The problem is not just confined to us. All the world has to find a solution to the question of (shall I say?) differential pay and growth. We have heard exponents of growth saying how invaluable it is, and how impossible it is to do without it. But, my word! there are some strong lobbies appearing in the world to say that we can do without growth. The noble Lord, Lord Peddie, has just raised this in his speech. Just think that last October the Lloyds Bank Review had the leading article on The Myth of Growth. This would have been inconceivable two years ago. I believe that we cannot get this country where we want it to be without growth. We must have it, despite the critics of what we have done with it when we have converted it into profits.

My Lords, I have been moved to speak in this debate by some experiences that I had when I was in Japan and the Far East. When I came back to this country my heart was in my boots, because I had heard so much about our inability to take advantage of opportunities in the Far East. Let me give your Lordships one example. A £15 million contract was saved for this country by an Anglophile who stuck his toes in and refused to budge, despite the fact that the Japanese competition was so severe that their price was a third down on ours and the delivery time was halved. I could give you instances of this as long as my arm.

How are we to get this over to the people on the shop floor? In view of the seriousness of the position now, is it not about time that we should manage to agree upon certain things between both sides of the House and say quite definitely to the country and to the workers on the shop floor: "These are the principles we believe in and these are the courses that we need to set things right"? We shall need a massive education programme on this matter. May I ask the Minister at this juncture, just to save time, whether it is possible to amend this Code during the Committee stage?


Yes, my Lords.


Is it, my Lords? Have you read the debates in the Commons? I should like the Minister's answer to this question. May I ask the noble Lord whether it is possible to amend this document during the Committee stage?


My Lords, this is a Consultative Document, and consultation upon it is going on inside and outside the House. It is not yet in final form. It will be put into final form in a White Paper and then introduced in an Order embodying the Code. May I also just add this: I was asked whether it would be possible to amend the Code at the Committee stage. If the noble Lord means: will it be possible to take into account suggestions that are made about the Code, the answer of course is, Yes. What I am trying to say is that this is not presented in a form for amendment in the strict sense.


My Lords, that really is unsatisfactory, because there are so many principles laid down in this Code. According to the Minister, they are all subject to negotiation—


My Lords, consultation.


I presume that even after the Committee stage it will be possible to get the Price Commission or the Incomes Board to alter what is in the Code?


My Lords, if I may intervene again, may I say that the Code is a matter for the Treasury. It is the Treasury which has to make the Code, subject to the will of Parliament. There will eventually be a debate on the White Paper and then subsequently the Order has in the end to be approved by Parliament within three days.


My Lords, surely the Minister will agree that the question put to him is governed by Clause 2. It will then be the subject of a Statutory Instrument, which will not be capable of being amended in either House.


My Lords, that is, indeed, the position.


My Lords, I accept that. I will try to be as brief as possible, because I appreciate the time factor: hut, you see, this document is really a political sop. This is nothing else but putting industry in a straitjacket. It has not been thought through. There are any number of glaring instances in this Price and Pay Code that cannot be defended in debate or in principle.


My Lords, I should like to help my noble friend, if I may. When the Committee stage is reached, the noble Lord will be able to move Amendments to Clause 2(4) and this will enable the kind of things he has in mind to be debated by the House.


My Lords, I am much obliged to my noble friend. I hope that applies to later items, too. But I must point out that while the Government have been astute disciples of American methods, if they had studied what has been happening in America they would have noticed that the question of the offset for productivity was changed from the original inception over there, because once the incentive was removed —or, let us say, the benefit had to be disgorged—the idea failed and was withdrawn. We in this country have adopted a different method and we have gone to the length of cutting the permissible wage increases in half and requiring the other half to be absorbed. That is in paragraph 19.

The noble Lord, Lord Byers, was absolutely correct when he drew attention to the fact that labour-intensive industries are going to be in a very serious pickle; and apparently we have it in our power, if we will, to do something about this. In a publication of 1971 statistics (No. 1081) the figures of gross national product of industries appear in a "league table". I should like to draw the Minister's attention to this table and ask whether this can be used to ameliorate the hard lines of the labour-intensive industries, such as the wool trade. I will leave that idea with him and hope that at a later stage something may be done about it.

My Lords, what about the industries which are cyclical? Everybody knows that the textile industry works in a three and a half years' cycle, or something like it—or at least it has done so during my own lifetime. The result has been that profits have declined in bad times and one has had to look forward to the good years when there would be a swing upwards, so as to be able to recoup. If you are going to carry out to the letter what is in this Code, what will happen to the synthetic fibres industry? It has had a terrible time during these last two or three years. Last year, after Nixon's 10 per cent. cut, it plummeted to the bottom. We knew there would be an upswing during 1973. May I ask what you are going to do about that one? Are you going to leave them in a cleft stick and at a disadvantage with their competitors abroad because we cannot afford to invest? Are you going to cause them to export their goods and then import foreign products at a much dearer price?—because in that case, you will be doing more than killing two birds with one stone. Consider the wool industry. It knows that it has wage increases coming up. It has to bear in mind price rises and has to average with the price of existing wool contracts. Quotations are made six months in advance at fixed prices. I know that a paragraph mentions fixed price contracts. But as I understand the situation, they can be severely penalised if the present intention in the Code is maintained.

Why is there no control on imports? The only discipline you have on imports is by margins of existing profit. This is not an adequate discipline. I should like to know what would happen in the case of an importer of cloth or garments who, realising that the only control was on profit margins, decided to give up buying from British firms and to import the goods from abroad. Surely under the present code he would be able to start from scratch with a higher margin.

I do not think the prices and incomes policy will work for the reason advanced by my noble friend Lord Beswick. My experience, after two years of hard slogging on prices in the Board of Trade, working day and night on it in 1950–51, leads me to believe that it cannot succeed. On its present basis we cannot get it over to ordinary people unless we hold the rise in prices of food and clothing. Some twelve months ago I appealed to the Government to consider taking half a dozen items out of the cost of living index and holding them, giving a sense of stability to the country that we could hold something. But, as my noble friend Lord Beswick pointed out, we had to scrap all those ideas because of the effort we made to get into the Common Market. My Lords, in conclusion, may I say that at first I was a Socialist by necessity; secondly, I was a Socialist by conviction, but I hope to God that I am never a Socialist by decree! But at the rate we are going, I do not think that that is going to be too long delayed.

5.15 p.m.


My Lords, I, too, must begin with an apology to your Lordships, especially to the noble Lord, Lord Drumalbyn. I have a long-standing engagement which I have to keep, and I hope that this debate will finish in time for me to hear the last speeches, although I doubt very much whether it will do so.

I rise mainly to say that this Bill has my wholehearted support. The Bill as a Bill, has the support of almost the whole of this House. My only regret is that the conversion of the Government to the policy embodied in the Bill was so long delayed. There may be more joy in Heaven about the late repentance of the sinner, but I am absolutely sure that we should not be in such a bad economic position as we are in today if the conversion had come rather earlier. I hope that the Labour Party will remember this, and that they will be converted in good time from the latest change in their policy, which The Times described as an "S turn". Looking back on the past, I have always felt that if the conversion to devaluation had come rather earlier, the Government might not have changed when they did, and might not have had to give up their own attachment to some form of statutory policy. Historically, the trend of events makes it absolutely clear that we need some form of statutory policy and that we ought to envisage keeping it on the Statute book until we get a big change in our present conditions.

Historically, I do not think it is altogether fair to accuse the Labour Party of an "S turn". It was Mr. Attlee's Government in 1948 which first called attention to the problem of rising costs in a full employment economy. I have the best of reasons for knowing that when Mr. Gaitskell was Chancellor of the Exchequer he took this problem very seriously indeed. In those days we all thought it could be done by a voluntary policy if the Government had been prepared to give a strong lead to the country. That was the way that we were moving: first, to point out that you needed a policy; then to suggest that there must be some strong lead from the Government. When Labour returned in 1964, it was part of the statement of intent that there should be a much more gradual upward movement of costs, and from then until 1969 we went through a period with constant realisation that some strong lead, and probably some compulsory policy, had to be adopted. The only change has been the recent one—the agreement with the trade unions that statutory control of wages shall not again be a part of this policy. That is something that I hope will be changed in good time.

Looking at the Conservatives—naturally a much less interventionist Party—when they were elected in 1951 they were against controls of any kind. But the logic of events began to catch up with them. In 1956 they issued a White Paper spelling out in rather more detail Mr. Attlee's White Paper. Then Mr. Thornevcroft, as he then was, as Chancellor of the Exchequer, was a man who. on the whole, believed in free market forces. He set up the Council on Productivity, Prices and Incomes. It did not do very much, but it was the forerunner of our later policies. Finally we had Mr. Selwyn Lloyd who came out with a fullblooded freeze policy. Unfortunately, he took on the nurses to start with. He became very unpopular and his policy was dropped when he was dropped.

Then we had the present Government who came in firmly against any sort of control but have been forced to move, through attempts at voluntary control, to some form of statutory powers, at least in reserve. As the noble Earl the Leader of the House reminded us, nearly all other countries have had exactly the same experience, which is a consequence of the humane and desirable policies of full employment, which we have all pursued in varying degrees since the end of the war. I remember well in the 'fifties and early' sixties when these matters were discussed among Governments, finance Ministers and central bankers broadly speaking took the view that the way to control inflation was by more discipline, stricter financial policies and more control over money. But they seemed to me to overlook completely the fundamental difficulty we are in now, which is that unemployment cannot be used as a weapon. Thank goodness we cannot use it!—but we now have to have something to take its place. Practically all those people who in those days were saying, "No, we don't want control; tighten up the money supply, tighten up the Budget, and it will look after itself," have been forced to come round. The most striking example of all has been the United States of America, a country wedded to the free market and to not having controls, and yet a Republican Administration introduced the whole apparatus, even though the United States had a better experience in inflation than many other countries. Hence, it seems to me that something like this measure is inevitable, and I support it.

I agree with the noble Lord, Lord Beswick, when he says that we must not think that this is going to be the end of the matter, or that it goes to the heart of the matter, and that what we need in this country is something much more fundamental—which he called "the new spirit". I wish he could have elaborated on that and told us how he could get it. I do not think that just repealing the Industrial Relations Act (I know he proposed that only as a start) would do it. A great problem we are facing now is the problem of discontent with our system. It seems to me that the community neither wants capitalism nor wants Socialism—we have had several Labour Governments but we have not made much progress. It is a real difficulty and none of us knows the answer, yet we can admit that there is an underlying feeling of discontent which is leading to all these troubles. Inflation is a very bad thing, bust it would be an illusion to suppose either that this Bill will work easily or, if it succeeds in getting inflation under control, that we will not still have troubles.

I want to make just a few further short comments—not on the Bill itself, which seems to be more an enabling Bill giving powers than one which spells out in detail how they are going to be operated. I agree with the noble Lords, Lord Byers and Lord Robbins, that, if you can control costs and eliminate the monopoly element price control is not the important thing. It is cost control that is needed. But I agree with a number of other speakers who have pointed out that the problem of making this policy stick is a political public relations policy and it would not have had any hope of success without some form of price control. We all have to face the fact that there is going to be rather rough justice in the early period and that people have to put up with a certain amount of hardship. We must hope that this period will be used to consider a number of modifications, which I am sure will have to be made, in Phase 3.

The last time I spoke to your Lordships on this subject I said I thought there were three fundamental conditions required for a successful policy: that the Government should state a norm; that there should he some mechanism for adjustment, and that there should in the end be some form of sanctions. Looking to Phase 3, my own feeling is that the norm implicit in the present Bill is a rather high one. I admit that if we can make a success of it we shall be much better off than we have been in the last two or three years, but we shall be far from controlling inflation. On the questions of machinery, there is not doubt that one needs an adjustment mechanism. Indeed, the present industrial difficulties we are suffering from is a clear illustration of that. There is no doubt that people who feel themselves caught at the time when the freeze comes on have a real sense of injustice. I was glad that the noble Earl, Lord Jellicoe, said that the machinery is going to get to work very soon; and when it does get to work, if it is admitted that something must be done for those who missed out on the last round and therefore started off at a real disadvantage, I think the same could be said for profits.

Finally, there is the problem of sanctions, which is of course the most serious problem. No sanctions will work unless we can get public opinion with us. At the same time, I am sure there must be some because, it does not matter how much co-operation there is, somebody is sure to break through; and if somebody "gets away with it" that upsets everybody else. So in the end there must be some mechanism of sanctions. The particular provision in the Bill that wages cannot be passed on beyond the norm in the form of prices might be a sanction, as I believe Lord Beswick was claiming it would be. But it must be remembered that if this happens and there is a long strike, the firm concerned is going to be bankrupted and then there are going to be employment pressures. If this proposal is adopted, I do not know whether there will be provision for some compensation for a firm which is compelled, because of Government policy, to closed down altogether. This is something we need to think about a great deal. However, this Second Reading debate is a debate on the general principle of the Bill, and I wish the Government well on it. I am delighted that it seems that the atmosphere of the House implies that the Government will have an easy passage on it, and I hope so.

5.28 p.m.


My Lords, I want to take a line which is rather different from that taken by previous speakers in this debate. First, I would say how glad I was that the noble Lord, Lord Roberthall, took up the point which had been made by my noble friend, Lord Beswick, to the effect that we should require a new spirit in this country if we were to make real progress on the social problems now facing us. It has seemed to me over the past few weeks that the position in Britain has become so crucial that anyone who feels strongly should stand up and be counted. I feel strongly, and have done so for some time. There must be millions like myself who wonder when some sort of sanity will return to our industrial scene. We see Government and unions moving inexorably towards a confrontation which both say they do not want and which both are bringing to an inevitable conclusion.

As one who is no economist, I should like to make my small contribution to this debate on counter-inflation, and I am sure I speak for millions of people in the country who, like myself, are non-economists. I want to look at the background of this Bill. I believe that the background is even more important than the Bill itself, because it is only by bringing home to everyone in this country what the background really illustrates that the Bill itself will succeed.

First, the gasmen. We know that this is a moderate union with a splendid record. A union led by moderate men; a union which feels it has no alternative but to strike. Why? What has been gained by such action? If I may take the second point first, what has been gained by anyone? Industry has been impeded or closed down; workers have been laid off; £15 million profit earned by the nationalised gas industry has been wiped out; old people who need warmth more than anything have been deprived of this necessity. One does not need to be an economist to see that the first three factors I have mentioned lead to, first, higher charges for gas when services are resumed and, second, claims for higher wages to meet the resultant increase in the cost of living. One does not have to be an economist either to see that this is economic madness.

A week ago—last Monday, to be exact—a senior union official said—and I quote: We have been concentrating on industrial and commercial supplies, but this is now likely to spread to domestic users. It appears that only in this way will the effect of the dispute begin to bite.' Let us take the position of the West Midlands on Saturday. The Gas Board ordered 50,000 customers to stop using gas from yesterday. In this area nearly 2,000 industrial, commercial and public facilities, including 525 schools, are cut off. Throughout the country about 4 million homes are affected by 9,700 men on strike and 27,000 others undertaking industrial action. More than 100,000 children continued to miss school as 1,150 schools were closed and 3,500 homes were without gas because of delays in repairs. Supplies to 2,700 industrial users were cut off.

Why have the gasmen done this? May I suggest that it is not only, and probably not mainly, because of what they were offered but because it is not as much as the electricity workers will get, because they beat the freeze. Everyone, in Parliament and outside, knows that when any dateline is drawn anywhere and on anything there must be hard cases, whether it is the number of stamps necessary for a pension, for example. If you are on the wrong side of the line, you just are, and the noble Earl the Lord Privy Seal told me that I was in good company (which I did not know) in saying this with regard to what Professor Clegg had said in the Observer on Sunday. But it cannot mean that everyone on the wrong side of the line can be transferred, or you will have no line. There cannot be anyone who does not realise that once any group gets special treatment, however well deserved that special treatment may be, there will be a rush of all the other groups who consider that they, too, represent a special case.

Taking the hard cases, I imagine everyone will agree that there are a great many workers who are grossly underpaid. We can all make our own list. The unions speak strongly about low-paid workers and pensioners. They are in a position to do something about the former. What have they done? What have the higher paid unions offered to their lower paid brothers? As I understand the position, the strikes, the industrial action and the protests are against the level of the freeze for all; not because the maximum increase is too little for the lower paid. I should like to be told that I am wrong, and I say that very sincerely, but I have not heard any higher-paid unions say that they will accept less so that the underpaid may have a better deal and a better share of the cake.

As for the pensioners, all that the unions have done for the pensioners is to make life for them more difficult. However justified industrial action may have seemed to those taking it at the time, so far as the old people are concerned, the miners' strike deprived them of light in their homes; the gas men's strike is depriving them of warmth and cooking facilities and the continual industrial action is pushing up prices. I do not think the pensioners have any cause to be grateful. And, as I am speaking frankly, neither do I think that the general public has any cause to be grateful. I often wonder: do the unions think they are justified in taking it out on the public in the way they do, however strongly they may feel about their own claims? The public have claims too, and I think it is time somebody said this. I wonder, and I wonder often, if union spokesmen have any idea of the public reaction when they appear on television and say how sorry they are for any inconvenience caused. This is not a plea to the unions; it is a protest from all those without industrial power who have not the strength to fight back.

What about the railway commuters who have paid money for their season tickets? I wonder, have the unions ever added up the total? Strikes at airports so that people's holidays are ruined; strikes on the railways so that they travel to work in misery or they do not get there at all; strikes by miners so that they sit in darkness at home; strikes by gas workers so that they cannot cook or keep warm. I think it is time we cried "Halt". When a moderate union like the gas workers feels it is essential to inflict hardship on non-offending domestic users to gain redress, then it is certainly time to call "Halt".

I believe the situation is so serious that Parliament itself, with one voice, should support this Bill and condemn any further industrial action. However strongly we may feel about the Government's blunders and past policy which made this Bill necessary, I believe that the present counter-inflation programme must be supported. To me it is not only the reputation of the Government and of the Tory Party that is at stake but the reputation of Parliament itself, and I think the Oppposition should say so. As I see it, the alternative is anarchy. It is the use of industrial power to deprive innocent people; it is the continued erosion of what money each of us may have. The little becomes less. It is not good enough. Deep down in their heart of hearts I cannot believe that the unions think it is good enough either. Certainly they could not say that it is fair.

In conclusion, there are four points I should like to make. First, in all these battles and in all this talk about hardship and prices nobody mentions those living on small, fixed incomes. We have had a couple of small mentions to-day. But is this a section of the community which should be shunned? We hear talk of how this particular wage increase cannot possibly match the rise in the cost of living. What about those who have no wage increase at all? I am not speaking of the relatively few, rich elderly people but I am speaking about the great many people who have worked hard all their lives and who have retired on their savings. Why should they he ostracised? They are a great deal worse off than some members of even low-paid unions. Why should they not be considered? We must all know many who have a great struggle to manage at all. I certainly do. And I hope that something will be done for them, with the support of all political parties.

My second concluding point is addressed to the Government. Their great lack, and the country's loss, is of someone who can talk to the unions. "Talk" is not exactly the right word, but all Members of Parliament know what I mean. Apart from this lack, though, I wish the Government would try to understand that some gesture is needed. I wish that they could realise that there are certain things which offend people—of all Parties and of none. I think that many trade unionists grudgingly believe that something must now be done. I am sure the general public does, and here I am returning to the point where I started—to the background of all this. We shall always have arguments about what is fair. But what the country as a whole knows is not fair are the rent increases, the transport fares increases, the profits on Centre Point, and the food prices. If only the Government would make a big gesture on these things. If only they could understand what this would mean. My Lords, it would encourage the moderate radical opinion in the unions to be heard—and make no mistake, it requires a great deal of courage to stand up at a union meeting and oppose the militants—it would make people think that perhaps the Government were not so out of touch after all. It would add a little warmth, which is what people feel is so lacking in the Government to-day.

My third concluding point is the unions. My Lords, I support the unions. Perhaps after to-day they will tell me what I can do with that support, but friends and supporters are not worth much if they are afraid to speak up. I am now saying in public what a great many people are saying in private. And I would rather the unions were not spoken of in those terms. I sat for a trade union city as a Member of Parliament for 10 years—one of the Divisions of the City of Coventry. When I went there Mr. Jack Jones was the organiser of the Transport and General Workers Union and Mr. Harry Urwin was his deputy. They taught me a lot. I had a great respect for them personally and for their ability. I think they felt, too, that I was able to make a contribution as a Member of Parliament. I am saying that because I want to see the vast amount of ability and compassion in the trade unions used for everyone in the country. I just do not believe that the trade union movement in its heart of hearts believes that physical hardship should be inflicted on people unable to fight back. I do not believe that the trade union movement is selfish. I hope that to-day's special Congress will decide that industrial power carries responsibility, whatever provocation may be offered. I hope it will decide that physical hardship and a deterioration in hospital services are not the right weapons—and I repeat, whatever may be deemed the provocation.

My Lords, I want to get rid of this Government every bit as much as my trade union friends, but I think that it should be done by the ballot box and not by industrial action. I want to see trade union representatives sitting on the various boards, tribunals and committees that are being set up. There is no one to take their place. I want to see their industrial experience and knowledge used in this sphere to amend faulty codes; to seek to change what they believe to be wrong; and, above all, to use their influence to rectify the position of the lower paid. I have always hoped that one day the T.U.C. would wish, and would be given the power by the unions and the authority, to play a major part in deciding the fairest way to apportion industry's share of the cake. It is only for the unions to decide which workers should receive most. Only they can decide the priorities in bringing up the grossly low paid to a fairer share of all workers.

And finally, my fourth concluding point. We cannot go on like this. The country has suffered; industry has suffered; people have been thrown off work; hospitals have been hit and the sick have had their problems made worse; the consumer population has been bullied; and the old have been deprived. The cost of living must rise because of all this industrial action. To repeat only a few figures known to us all: £15 million profit lost by the Gas Board; £1 million lost in one day by British Rail; and £56 million lost by British Leyland. We must be mad! Surely everyone must realise that if we continue to throw away money at this rate there will be nothing left to pay anybody anything, much less the 8 per cent. now available to all. My Lords, let industry, both sides of it, cooperate to get us out of this terrible situation. The stakes are much greater than any political Party. I believe that we are playing with the authority of Parliament and with the future of our country. Let us be done with it. Let us leave politics for the General Election.

5.47 p.m.


My Lords, I do not think that any of us on these Benches could have failed but to be greatly moved by the courageous and pertinent words of the noble Baroness. And for reasons which I shall explain later, I am profoundly grateful that I am following the noble Baroness and did not precede her.

Having missed the debate on the White Paper, I should like to preface my remarks by making a contribution to the "Diamond Book of Records"—even though the noble Lord is not here. Since the Session began five months ago, Parliament has received from the Government two White Papers, two Bills, and a Green Paper on inflation; an average of one major publication in the same policy area per month. I do not know whether that is a record, but while I should congratulate Ministers on their application, it is beginning to be a fine point whether it takes more Government paper to cause inflation or to cure it. All that means is that there has been a great deal written and spoken about inflation and counter-inflation, including the historic speech made by the noble Lord, Lord Robbins, last summer which he followed with a further authoritative speech to-day. I I am not sure that the noble Lord's speech last summer was not the point at which inflation became official—established, as it were. Since then, through many vicissitudes, we have arrived at the Green Paper about which enough has already been said to-day to make it another rapidly depreciating "greenback". I confess that when it comes to voicing my thoughts on that Paper I shall be a devaluer rather than a revaluer.

Noble Lords had a fairly good innings on the White Paper last month. I could not be here, but I read Hansard. I had hoped that in the second innings Government and Opposition might have thought that honour was satisfied, the pitch well worn and declare to-day after one or two wickets. However, since the decision is to play it out, before I bowl against the Green Paper I should like to bat for the Bill. I do not welcome it but I support it, believing it to be inevitable, if Government and unions are unable to agree on voluntary pay restraint even when threatened by uncontrollable inflation. I accept that they have been engaged in a struggle for power for nearly three years and that in those circumstances voluntary agreement was probably impossible to secure and almost certainly impossible to retain, to operate. I stand with the Government in that struggle, not because I am a Tory nor because I am an employer or a capitalist, but primarily because I believe that British people will be happier in a free, democratic society than under Communism, which I must tell the noble Lord. Lord Roberthall (although he is not here), I see as the only viable alternative. Because I do not want our Western democracy and free society to collapse, I stand shoulder to shoulder with those whom I judge most effective in its defence at any given time.

I had at this point one or two comments to make about the dilemma posed by trade union policy, but I am greatly relieved that the noble Baroness, Lady Burton, has said it for me and far more effectively than I could have done. I do not think that any of us on this side really feels happy moralising about or criticising trade union matters and policies, but we do it from time to time with the greatest reluctance and distaste, because we feel it necessary and we feel that certain things have to be said. But, despite the burden which the noble Baroness has taken off my shoulders, I should like to make one quotation in reply to the opening remarks of the noble Lord, Lord Beswick. The quotation is this: The revolution of rising expectations is a grim reality in Britain, even more so than in the rest of Western Europe. The willingness of organised groups of workers to hold the community to ransom is one of the manifestations of this revolution. The Labour Government failed to persuade the country, and especially the trade union leaders, of the overwhelming need for a prices and incomes policy, and, even more important, failed to persuade all workers that rising standards of living are not the result of fighting but of producing goods and services. That is not a quotation from a speech by the Prime Minister, nor is it from a Conservative pamphlet. It is an excerpt from an essay published a year ago by the Fabian Society entitled Labour and Inequality. The intelligentsia of the Left recognise as clearly as my noble friend the need for a prices and incomes policy in the absence of voluntary restraint.

I think the Government are entitled to protect society, even if further legislation has to be introduced in the interests of society. We have lived much of our lives with inflation and with diminishing confidence in money. National economies and the international monetary system are under increasing strain. Some economists believe that monetary pressures and economic disequilibrium are so critical as to require statutory prices and incomes policies as permanent features of every national or multinational economy. I believe that to be an unrealistic view. Statutory pay and price controls are a straitjacket which the British people will only wear in an emergency and for a limited period. The impact of Phase I upon pay and prices has been quick and effective. The effects should be sustained if substantially alleviated in Phase 2.

Of course there is militant opposition to the whole statutory policy; as the noble Lord, Lord Thorneycroft, expressed it so forcefully in the debate on the White Paper: There are a few wage claims by a few powerful unions out of all proportion to what can be afforded at the present time, and the Government have to hold those at whatever cost.—[OFFICIAL REPORT, 5/2/73, col. 878.] I am sure he received warm support from these Benches. I would add to the noble Lord's remarks by saying: beyond that do not seek confrontation, and, above all, do not seek it for electoral purposes.

I think the British expect the Government to secure peace with honour with the unions. They look beyond the emergency legislation to the time when the Government's expectations in Europe begin to be fulfilled, when the benefits in Europe, in the form of faster growth and higher real wages, begin to flow. Before then, and by then, the Government must secure voluntary agreement within which the Agencies can continue to operate in an advisory capacity, and at best with reserve powers only. The unions must know that they are fighting a losing battle. The British people will not in the long run accept to be governed other than by Parliament, nor will they accept a peace such as noble Lords opposite proffer, which would contribute nothing to either effective Government or strong economy. Unless the peace is with honour and to enhance our democracy, better St. Helena!

May I say a few words about the Government's latest weapon in the counter-inflationary struggle, the Code for which we have received the blueprint or Green Paper. Whenever I consult my lawyer or tax accountant after a new Budget and ask him to explain certain things to me, invariably the reply is, "I do not understand it either; wait till the Finance Bill". I find myself in a similar predicament over the Green Paper. I do not understand it, and I am puzzled and concerned that this should be so. I am prepared to concede defeat over tax; I am one of many who do not want to go too deeply into such a distasteful subject, and I seek professional advice. But on commercial and industrial matters I really do enjoy juggling with figures, and however I juggle with the figures in the Green Paper they refuse to submit to any form of calculation known to me, from simple arithmetic to calculus.

From this experience I make my first point, which is that if the Government's Code is to carry conviction with the great body of professional and expert opinion that will be brought to bear upon it, much more detailed explanation must be provided than its present authors have found time to do in between preparing to-morrow's Budget. I seriously warn noble Lords that as it stands it just will not do. First, for instance, if industry and commerce are even to consider the reference level of net margin as unrealistically low as 1 per cent. of turnover, or of net profit of 5 per cent. return on capital employed, the reason why these figures have been adopted by the Treasury must be spelled out, or they will be justified in doubting the Government's intentions in paragraph 49 about attracting investment.

Secondly, it is well known that increased productivity is mainly attributable to added investment. Yet the effect of paragraph 19 could be that in a number of labour-intensive industries the benefits of increased productivity would not be sufficient to outweigh the rigour of 50 per cent. absorption of allowable costs required by the Code. This could apply particularly to the service industries. Where this was so, if labour costs, for instance, were 70 per cent. of turnover and the increase in productivity only 2½ per cent.—half the Government's expectation—the investment would no longer be attracted and productivity would suffer.

Thirdly, I have serious reservations as to whether the Government are right to bear upon gross profit margins in the way that they propose to do. Is it a valid assumption that all sectors of manufacturing industry can be expected to find two favourable years out of the last five years as a reference level? What about the effect of the formula on an automated high output industry? Surely the effect of the price reduction could be to increase the break-even point of the undertaking to a level from which it would be hard to retreat if business fell away. Nothing is more difficult than to increase prices in a time of recession.

Finally, I think it fair comment that Ministers are in danger of pursuing interventionist policies with a noninterventionist mentality. They are willing to lay down guidelines, set up Agencies, draft Codes and impose penalties, but draw back from participating in any way in the application of their policies. I hope that the remarks of the noble Earl, Lord Jellicoe, indicate that the Government are sensitive to this issue, but I must underline that the fourth principle relating to pay in the Green Paper in paragraph 75(4) spells out: to leave to those who normally determine pay decisions on the amount, form and distribution of increases within the limit. Surely it would be nugatory if the Pay Board were to operate only in a negative sense. The Board should not merely police pay settlements but also participate in the application of the Goverment's pay policy by giving positive advice to industry as to how the group schemes might be operated to the maximum benefit and best advantage. As well as being helpful, this would generate the atmosphere of goodwill in which the Board could function most effectively.

The noble Earl, Lord Jellicoe, suggested in his opening remarks that the Government might form judgments as to how much the limits will inhibit normal pay negotiations. If I am right in thinking that this is what he meant, then may I recommend that the Government take Parliament and the people fully into their confidence on these issues. Tell the country your findings and where the trouble spots are likely to be. We are all in this together: the Government and Opposition, employers and employed, patrials and immigrants, housewives and dependants. The Party that my noble friends and their colleagues in another place represent was elected to govern the people. I say that the Government in this emergency should both lead and confide in us.

6.3 p.m.


My Lords, I regard myself as privileged to follow the noble Earl who has just spoken. I pay him a compliment by saying that I find myself in almost complete agreement with him, and where I disagree with him I prefer to engage in controversy with him rather than with the noble Baroness, Lady Burton, because I accept his sincerity whereas I do not accept hers. I have been fighting the Dudley family all my life. I was elected seven times for Dudley, and from my first election I was fighting the noble Earl's father, and yet we became friends. The reason I fought him—and I say this to the noble Baroness—is for a very simple reason, and although she sat in the House of Commons for ten years my reason has never entered her head: at the present time, in the second half of the twentieth century, after fighting two wars in which all classes of the community made equal sacrifices (let me put it no higher than that) one-tenth of British adults own between them three-quarters of the nation's private wealth, while only 1 per cent. of the adults own about half of all the ordinary share capital. From the time that I was a little boy I have listened to the kind of speech made by the noble Baroness. In my earlier days I heard it at Tory meetings with the Union Jack on the speaker's table. I have heard variations on the same theme from that time down to the noble Baroness to-day.

Let me tell the House a story that was told to me by the noble Earl's father, which illustrates what is possible between men who fundamentally disagree and yet live within a widely ranging social scale. His father was Regional Commissioner. He was loved by some, but he was hated by many. So far as I was concerned I came to like him, to respect him, yet I did my best to pull him off his perch, and I partially succeeded. My story is this: a complaint came to him as Regional Commissioner that coal production at Lord Dudley's Baggeridge Colliery, which he owned before it was nationalised, was unsatisfactory and it was suggested that he should go down to the pit and take with him the Minister of Fuel and Power, the late Major Gwilym Lloyd George. They went to the pit and got there just before the back shift were coming up. On the board in the canteen was written, "A cup of tea 1d., scones 1½d., sausages 3d." The Earl of Dudley went to the board and rubbed it clean, and on it he wrote, "Back Lady Dudley's horse at Ascot on Saturday". Down the pit he went and away, and he forgot all about the visit and his advice until he got to the saddling enclosure at Ascot, when the trainer said to him, "I am very sorry, my Lord, but her ladyship's horse has not been going too well. It is drawn on the outside. My advice is not to back it." Lord Dudley took the advice and the filly drawn on the outside had a clear run and won at 100 to 8. Lord Dudley had a qualm because he had not backed it but worse was to follow for on the Monday morning his manager rang up and said, "My Lord, do you know what you have done? There is nobody on the shift at all. They all backed your horse, and they won't come back again until their winnings are dissipated!" So he rang up Gwilym Lloyd George and said, "I am sorry, Gwilym; I went down with the best intentions in the world. I told the men to back the horse, it won at 100 to 8, and nobody has turned up, and production has 'gone for a Burton'". So Gwilym said, "Cheer up, I had fifty quid each way on it".

It is possible for extremes to talk together, and it is also possible to have memories of a Worcestershire Prime Minister. If I had to have a sticker to stick on the back of my car—I have never had one yet—what I would put on it is, Stanley come back. All is forgiven." Despite the fundamental differences that existed on economic policy in the 'thirties, when there were three million unemployed —and I well remember when my pay was cut from 9s. a day as a sergeant to 8s. 3d. there were statements by the then Professor Robbins saying how essential it was that we should make that sort of sacrifice—Stanley Baldwin had the sense of consensus that has existed in the Tory Party right down to the present Administration.

Since June, 1970, the present Prime Minister has divided Britain as it has not been divided for hundreds of years. I say to the noble Baroness, Lady Burton, that the reason why the trade unionists are "bloody-minded" is because they do not believe that lot. It is all very well for the noble Lord, Lord Roberthall, to say, The Kingdom of Heaven is open to those who repent". Yes, if they have repented; but have they? Is it a case of: The devil was sick, the devil a monk he would be"? If I were Mr. Heath, one of the appointments I would have made would be to have Mr. Aubrey Jones as chairman of one of the Agencies, but of course his hatred of Mr. Aubrey Jones is such that he could never appoint him. His likes and dislikes are so fundamental that the interests of the country take second place. Another thing that he might have done is, instead of having the noble Lord who is going to reply to-night—and who, after his defence of our oil policies, one would have thought would have resigned over the weekend—to have had the noble Lord, Lord Butler of Saffron Walden, a master of the art of the possible, speaking from the Government Front Bench. He is a man who understands that in British politics it is pragmatism, it is consensus, that counts.

It is perfectly true that if we go on fighting each other nobody is going to win at the end of the day. It is quite useless to spend one's time, even from the safety of the Labour Benches here, using a stick on trade unionists. The question to ask is: "Why do they strike"? Here, again, I reflect upon the intelligence of the noble Baroness, Lady Burton of Coventry, because she has said what moderate men the gasworkers are. Yes, they are, and they have not struck for years. Why should such moderate men behave in such an immoderate way? Why should they inflict upon the community, of which they are a part, the blows which they undoubtedly are inflicting? The reason is that they have not been given a fair deal. If you do not treat the British people in a way that they think is fair—never mind what somebody else, even the noble Baroness, Lady Burton, says—they will react, and that is exactly what has happened. In some way or other, we must find our way back on to an even keel, if it is only in the terms of what the noble Lord, Lord George-Brown, got in 1964—a letter of intent. I would not ask the Government to swallow their pride and take the Industrial Relations Act off the Statute Book, because, as the noble Lord, Lord Beswick, said, they are not using it anyway. But what they must do is to subsidise the cost of food on at least some of the major items, particularly the items which, by Government action—and I have in mind sugar—have had their prices forced up, and will continue to be forced up, because circumstances which are far beyond the Government's control have been set in motion.

I want to deal with sugar in some detail, but before doing so may I say to the noble Earl, Lord Jellicoe, that I get a queasy feeling in my tummy when I hear him blaming on to world prices the cost of food and the like. The noble Lord, Lord George-Brown, was in the other place with me in 1948, when Stafford Cripps took the first freeze through the House of Commons, and he will recall that it looked at one stage as if, with the help of the trade unions, price stabilisation would be pulled off, but then came the Korean War and prices moved against us. I fought the 1950 Election and I fought the Earl of Dudley's money. What were all the placards in Dudley carrying?—a big picture of a stocking with a hole in it. When I tried to explain the impact of the Korean war, was I listened to?—not on your Nellie! The Tory Party discover world prices only when it suits them. Our fellow countrymen—never mind this House—are not bloody fools. They see what is happening and the result is that the Government's policies are not accepted. The Government create by their actions the conditions in which rejection is firmer and harder.

Let me now turn to sugar. There was a sugar agreement concluded by a Labour Government, under which we paid the primary producers£64 a ton. One of the effects of that price and of the coming of the Common Market is that the primary producers are cutting back production. So that in Jamaica —where I have been recently, although not on holiday—which lived by the production of sugar, one of the astonishing facts is that refined sugar vanished. You could not buy a pound of white sugar. They were even 31,000 tons short of their quota to the United States, and the spot price in December had risen to £107 a ton. Then that cunning French peasant, M. Pompidou, hit on a bright idea. He has got this lot weighed up, so what he did (realising that for the support of his policies it is essential to have a rising production of beet, for which he wants a guaranteed price of £90 a ton) was to raise the issue of refining costs, and he tried to insist—he did not get away with it on this occasion—that the refining costs should be at the lowest level. As the refining costs for cane are much higher than for beet, the effect would have been to put the cane sugar producers right out of action.

Whether or not the Government know it, sugar is a cost element in almost every manufactured food and drink in this country. Therefore, if the price of sugar is to rise as a result of the policies of this Government, plus the fact of the secondary causes which have been brought into effect, how, in the name of fairness, can the Government go to a trade unionist and ask him to accept a burden which they have imposed upon his shoulders? Here let me say that I agree with the noble Baroness, Lady Burton, about action which inflicts loads upon the community. But I think one has a right to go to the gasworkers and say, "Look, you, like other workers in essential industries which are used by the public at large, must accept a cooling-off period. In return for the coolingoff period we are going to make you an exception. We shall treat you as an exception in return for which you give the community at large something." I think that a cooling-off period applied to the engine driver, applied to the gas worker and applied to the hospital worker is a sensible policy, provided that you give them something in exchange.

Let me tell your Lordships of a little experience that I have had in talking to an engine driver—a man for whom I have great respect—who has done his best to bring up his girl properly and to give her a better chance in life than he had. At the time of the previous strike he was taking home £22 a week, often for driving a very fast train on long runs. He told me how fed up he was, how he wanted to get out, and of the difficulties his pay had caused for the family. A row had arisen about the girl. She wanted to stay out late at night and he said, "You will be in at 10 o'clock". It was the type of argument that most of us have had—and I have three daughters. But she said, "I will not be in at 10 o'clock. When you earn as much as I do, you can talk like that". Those are the kind of forces which are let loose in our society, particularly in the case of secretaries and the like. Nothing is done to circumscribe the efforts of these agencies all over the country, which are deliberately creating conditions which are forcing up rates of pay to absolutely phenomenal heights. If there were a completely new approach, the Government might hope to get the trade unions talking. But they will not get them talking merely by fixing a date, drawing a line and saying that those who happen to be on the wrong side of the line must consider themselves caught, and must make the best of it.

I shall not keep the House for more than another two or three minutes, but I want to say how much I agreed with the noble Earl, Lord Dudley, in his—if I may use the word—attack upon the Government's policy in relation to profits and the way they are handling industry. I think that, great as the complaints of unions, such as the gasworkers and others who have been caught by the Government's policy, are, the employers, the owning parts of society, have an even greater complaint, because not only do these boys not understand how our society works as a whole, due to the fact that they are so remote from it; it is equally obvious that they do not understand how industry works; and unless profits can be created from which investment—and investment in the very short run—can be made, then the outlook of our society as a whole is very dismal indeed. I am a socialist by intellectual conviction, like my noble friend Lord Rhodes. The place in society into which I was born determined my political outlook, and my experience through life has only confirmed me in that view. But, like my noble friend, I want democratic Socialism. I do not want Socialism by decree. I do not want our society to have to go through all the trials and tribulations which have affected other communities, merely because this lot cannot run their own system of society—and I do not believe they can. One of the difficulties for the Labour Government was that they were confronted with the breakdown in our economy in 1964. Because what is the difference to-day from the situation which we inherited in 1964? Mr. Maudling had tried to do what Mr. Barber is doing. He was worshipping at the god of growth. Growth was to save everything. There was a massive deficit in the balance of payments. In two years this Government have managed to worship the same god and to create another major deficit. Is it absolutely certain that growth will deliver the goods? Lord Rhodes was talking about his experiences in Japan. I would commend his words to noble Lords and to the Government. In Japan they have enormous growth, but they have fantastically large inflation.

I believe that inflation is, as it were, something which is with us; a permanent part of our capitalistic society. I believe that inflation is an essential part of a capitalist society because capitalism works only on the basis of anticipated profits, and unless those profits are going to rise then the entrepreneur will not take risks. The question is, not whether or not there is going to be inflation, but at what level that inflation is going to run and whether in fact it can be controlled—and it can be controlled only by good will between all sections of the community.

Here, I am going to close on the words I used after winning seven elections. After every Election I won I said the same thing: "We have had a hard tight; there has been a horseshoe in both my gloves; I have hit, kicked, bit and spat at anyone who got in my way. But now that it is over, let us remember something. Our society works on only one condition, and that is that the things on which we agree are infinitely greater than the things on which we disagree." That was the situation up to June, 1970. That has been thrown away, and it is for that reason that I will vote against this Bill to-night.


My Lords, before the noble Lord sits down, and while I appreciate the remarks he made about me, may I ask him whether he does not think that the word "attack" is rather a strong one to use about the few reasoned criticisms that I made of the Government's Green Paper? Secondly, may I remind him that I think my father had very little connection with Dudley politics. He was President of the Stour-bridge Conservative Association, but he was not on the best of terms with Dudley Borough Council and I think he had little, if anything, to do with politics in Dudley in his lifetime.


My Lords, I will put the noble Earl right on only one point. From what members of the Conservative Party told me, they never did anything, including the selection of a candidate, without the permission of Lord Dudley.

6.23 p.m.


My Lords, the noble Lord, Lord Wigg, and I share two things. One is a great admiration and affection for the British Army, and the other is admiration for the memory of the contribution which the first Earl Baldwin made to the pacification of industrial relations in those years after 1926. I am afraid I cannot follow the noble Lord or my noble friend in any intimate knowledge of Dudley. The only thing I know about it is that it has a "smashing" zoo, but I am afraid that other intricacies or intimacies of its connection are beyond me. However, I am glad to follow the noble Lord because in some ways, as on previous occasions, some of the thoughts and sentiments which he has expressed have fallen very close to the views that I have tried to express.

I have studied the Bill before your Lordships' House, as well as the Consultative Document, but I wish to address my remarks to what I would feel are wider issues which seem to me to form the backcloth to this piece of revolutionary legislation. My Lords, I do not think that in connection with this particular Bill terms like "revolutionary" are out of place. Quite apart from the fact that it is contrary to everything that the present Government proclaimed before and after the last Election, it is more far-reaching than anything in this field attempted by a Labour or any other Government in peace time. It abolishes at a stroke the criteria and processes by which, normally, decisions are reached with regard to the current value of goods and labour.

It enables the Government to take powers which Parliament would be justified in surrendering to them only at a time of national crisis. Such powers can, in practice, be exercised effectively by a Government only because either they have the overwhelming support of the public or because they have the power and the resources to impose the disciplines of an authoritarian State on the public. If we rule out, as far as the present Government are concerned, any wish to impose their policies forcibly upon a recalcitrant nation, it follows that the Prime Minister and his Ministers must be able to rely on the public as a whole to back them up in what they are doing, and to back them willingly and wholeheartedly. This, of course, depends on some of the intangibles of politics, but in particular upon the respect for and confidence in what is nowadays called the style of Government and the personalities of those who exercise power, felt by a vast majority of the nation.

What I am really trying to say, my Lords, is this. In any country which hopes to operate a Parliamentary democracy you must get your politics right before you can get your economics right. Or, to put it another way, it does not matter how ingenious or prudent policies such as those embodied in this Bill may appear to be, they are useless if there is not a sufficient volume of public opinion to support them and to coerce dissident minorities into toeing the line. Of course, my Lords, as the Polls show, in theory everyone is against inflation, and by that they frankly mean, for the vast majority, that they are against rising prices. In practice—and I am treading now on the theory or perhaps the practice of economics; I have the noble Lord, Lord Robbins, here, who will no doubt correct me if I am wrong, although I shall not accept his correction with any ease—probably more than half the nation is better off as a result of the long inflation since 1939 than it would otherwise have been. The Government, in particular, are a lot better off.

One of the few things I remember from my university days is being told by my then tutor, Sir Kenneth Pickthorn, apropos the second half of the 16th century, that the Government of a country has a vested interest in the existence of an inflationary situation. Since it is always in the interests of debtors to repay their debts in depreciated currency, and because the Government at any time are the biggest debtor of all, they have a greater interest than anyone else in keeping inflation going. I thought that might stimulate the noble Lord.


My Lords, I only wish, on invitation, to say to the noble Lord that the gold and silver inflation of the 16th and 17th centuries was, roughly speaking, at a rate of less than 2 per cent. per annum, which contrasts, I think, very sharply with the rate of inflation since the last war.


My Lords, we do things in a bigger style these days, but that does not take away from the principle that I learned so many years ago; and, frankly, most people in this country at the present time, or at any rate a great many, rely to some extent upon credit to maintain or advance their standards of living. It is only when inflation gets out of hand that urgent action to control it seems necessary. But the processes of controlling it hit as many people as they benefit. It is perfectly true that the people who gain from controlling inflation are the poorer, the older and the weaker sections of the community, but unless the Government can appeal successfully to the consciences of those who benefit from inflation the latter have an easy get-out by pretending that the poor, the old and the weak can be compensated by increased pensions, social benefits and other forms of welfare help.

It is of course, true, as we all recognise in this House and in the country at large, that galloping inflation such as Europe saw after 1918, particularly in a community with a highly-vulnerable, export-based economy like ours, can, if uncontrolled, and will if uncontrolled, bring social revolution and economic collapse. Therefore it is right that the Government should seek to limit price rises and wage increases and the progressive depreciation of the value of money; but to do so successfully—and since any action they take will involve some degree of unfairness and many anomalies—the Government must ensure that the political climate in which their proposals are launched is such that it will muster the support among people, many of whom do not see, anyhow in the short term, that inflation is the direct threat to their standards and who see very quickly that the Government's proposals hit them a bit harder than the man next door or the man in the next factory.

Short of a situation in which inflation produces economic collapse and widespread suffering, which is, as I have said, a revolutionary situation, the enactment of legislation of the sort represented by this Bill can be successful only if the nation can be persuaded that we are facing a major national crisis—and such a crisis, whether in peace or war, has always produced in the past a political situation in which Party Government has been superseded by a national Government. If a Party Government, as opposed to a national or coalition Government, are to surmount a crisis without recourse to some form of coalition, they can do so only if they can show themselves representative of the nation as a whole.

My Lords, I come now to the kernel of my argument. This Government have not succeeded (and some people will say have not really tried) to create a political climate in which alone their incomes policy can be successful. The Conservative Party has, or had, the chance (which is not available to the Labour Party for historic reasons) of reaching an understanding with the trade union movement without succumbing to the domination of organised labour's militant Left Wing. The helplessness of the Labour Party in relation to the trade union movement was amply shown at the time of the In Place of Strife episode, and it was shown as recently as last week when Mr. Wilson had his social and industrial policy for the next Election dictated to him by the T.U.C.

As I have said, the Conservative Party ought to have made it its first objective to reach an understanding with the trade union movement right at the beginning of this Parliament and to have paid a price which a powerful movement can exact from any Government. After all, in the history of our Party there are good precedents for this. It was as long ago as 1874 when the alliance between the Conservative Party and the trade union movement which gave rise to the Conservative Working Class Association all over Lancashire and the North was first started. If it could have happened then, a sympathetic, understanding and far-seeing, Administration could have done it even in the difficult days of the present time. But what has happened is that the attitude and policies which the Government have adopted have alienated moderate trade union opinion and have made the position of its tradititonal leadership almost impossible. It is no good talking about getting voluntary agreement. Two sides are necessary for that; and the two sides that will reach a voluntary agreement must have confidence, understanding and sympathy for each other.

My Lords, I would say this frankly and designedly at this present moment: a great deal of the responsibility for this situation belongs to the attitude and character of the Prime Minister. In a speech last week to, of all bodies, the Institute of Public Relations, he said of ASLEF, of the gas workers, of the hospital auxiliaries, of the civil servants and of the teachers that their strike is pointless and their actions are irrelevant to the real issues facing the nation. The distinguished political correspondent recording these remarks went on to comment thus: He held out an olive branch to the trade unions even if at times he appeared to use it to heat them over the head. I find it beyond comprehension that anyone seeking to mobilise support for policies which may be inevitable but which will be, and are, widely unpopular and for which he depends to a large extent upon the support of the trade union movement, should be so insensitive to the basic principles of how to handle ordinary folk in a mature, industrialised democratic country such as ours.

The civil servants and the workers in a great nationalised public service such as the gas industry, the skilled craft union of ASLEF, the hospital workers in close contact with the sick, do not support strike action for irrelevant reasons. They do not face a programme of causing suffering and inconvenience because they are being led by the nose by a bunch of irresponsible militants. I know, and we all know in this House, that there are political parasites and jackals of Communism and anarchism prowling around any industrial situation; but the present strikes are not their handiwork. The action of ASLEF is not irrelevant. It may be ill-judged and it is certainly damaging; but it is symptomatic of the basic problems of the nation to-day. Let us make no mistake about this: behind it is the consciousness of the realities of the power which organised labour can wield in a highly-developed industrialised society and a widespread feeling that any group has the right to prevent its standards of living from falling below what it regards as its legitimate expectations by taking action when such need arises. In human terms this attitude is understandable and inevitable—and we are dealing with human beings. To expect them to refrain from using the power in their hands to achieve ends which seem to them to be perfectly justified is to ask too much of human nature, unless you can do so in a climate of opinion which persuades them to accept sacrifices and restraint—and this can only be created by the existence of a national emergency or as a result of the most sympathetic and sensitive political leadership.

The Government seem to believe that all power lies in the hands of the Executive, exploiting sometimes in a rather cavalier fashion the legislative capacities of Parliament. I have been astonished at how many times your Lordships have been required of recent months to process legislation on matters which concern the intimate problems of ordinary people and which seem to disregard human considerations and local sentiment in the interests of administrative convenience or what is called cost-effectiveness or financial prudence.

It is perhaps always a mistake to try to seek historic parallels. But I have had an uneasy feeling for some time past that just as the heroic age of the Tudors was followed by the wars and disintegration of the reign of James I, so the heroic age of Churchill was followed by the reign of another Scottish intellectual and cynic, Mr. Macmillan, and that we are now watching events and forces being dissolved in the crucible of history to produce another confrontation between the embattled sections of our nation.

If there is anything in my view, I would advise my right honourable friend the Prime Minister to study the character and career of Thomas Wentworth, Earl of Strafford. Of this remarkable man Miss Wedgwood says in her distinguished biography: Administrative and financial efficiency are not in themselves passports to favour in England…his tragedy, which was also the tragedy of the King's Government, was not confined to the last months of his life. His inordinate ambition and self-confidence as well as his ability, fitted him for the highest place in the State, at which through long years of frustration he always aimed. But he lacked an essential quality of statesmanship; his judgment of human relationships was always poor and he had neither the good nor the bad qualities necessary to manipulate his fellow men or even to make and keep friends in the society and age in which he lived. Had he brought to the human side of politics the skill that he brought to administration and finance, the outcome of his rule might have been very different". Unless the Prime Minister and the Government can bring that essential quality of statesmanship to their handling of the present situation in this country it will not be the action of strikers but the legislation of this Parliament which will be seen to be irrelevant, as were the acts of the Long Parliament three centuries ago. And if I am to continue my historic parallel I should perhaps remind the leaders of the great trade unions that their lineal predecessors in the exercise of extra Parliamentary powers, Cromwell's commissioners and major-generals, in some cases followed Strafford to the scaffold and created a popular prejudice against them that has lasted from that day to this.

All this, my Lords, is not quite so fanciful as it may sound. No doubt it is our duty to put this piece of legislation on to the Statute Book in the best shape possible, but what is important is that the Government should now try to create the political climate which alone can make it effective. Let them accept that the Industrial Relations Act should be amended. In return, let them reach a sense of understanding with the Trades Union Congress as to the implementation of their prices and incomes policy. Let them accept the realities of power in the hands of the trade union leaders. Let them begin the process whereby trade unionists are brought into participation in the responsibility of industrial management at board room level rather than shop floor level. Let them who brought so many reforms, the present Government, seek to reform industrial relations by a processs of conciliation instead of confrontation. Then perhaps this Bill, when it passes into law, may have some relevance to the problems of our country.

6.42 p.m.


My Lords, if I may say so without its sounding wrong, I would describe the speech to which I have just listened as one of the finest I have been privileged to hear in the period of two years that I have been in your Lordships' House, and I am grateful. I may not agree with all of it, but it was shot through with so much wisdom and understanding. I know how difficult it is to follow a speech of such philosophical content which was not full of carping criticism. I know that the noble Lord, Lord Alport, whose sincerity I would never doubt, may not agree with my approach to the problems, but I am sure that for noble Lords on both sides of the House it has been a pleasure to listen to that speech.

My Lords, so much has been said that I will try, if I can sufficiently discipline myself, not to speak for too long. I was grateful for the fact that the attitude of the Prime Minister has been pointed out because unfortunately—I do not doubt the Prime Minister's sincerity—on November 6 he changed his attitude completely. As Mr. Andrew Roth said in his Westminster Confidential: The Prime Minister is worried that not enough trade union leaders realise that he changed all the rules on November 6, when 'Phase One' of the freeze' came into effect. He feels, like some particularly bossy headmaster, that once he changes the rules everyone must kowtow to the Prime Minister of the majority party in the House of Commons.… The Prime Minister was clearly misled by the initial public opinion poll, which registered three-quarters of those polled as favouring his 'Phase Two' effort as worthy of support. But the Gallup Poll in the Daily Telegraph of 15 February demonstrated that there has been a dramatic change in public opinion. It showed"— and this indicates the relevance of Lord Alport's observation about whatever Party is in power must get the public with it— that 57 per cent. of those polled thought that Mr. Heath's prices policy was not fair and only 29 per cent. thought it fair. Fully 55 per cent. thought the incomes policy unfair and only 29 per cent. thought it fair. And 47 per cent. thought the prices and incomes policy would not succeed.… It is often forgotten, in this "U-turn" that the Prime Minister made, that during the Election forum over the radio and television in June, 1970, when we were fighting each other on a purely political platform, the right honourable Edward Heath then said: We opposed the compulsory wage freeze all the way through and we have been proved right. We said that it would make industrial relations with the unions much worse. It has. The Daily Mirror followed that up and said in November 1972: In fact, ultimately it was the Government who could not deliver the goods, not the T.U.C. It was the Government who could not deliver a political deal which might have made some modest inroads into the position of wealth and privilege in Britain. They could not deliver it because in the end the Tories are understandably sustained by wealth and privilege. The noble Lord, Lord Alport, said that the Labour Party was born out of the loins of the trade union movement. If one looks at the massive millions poured into the coffers of the Tory Party, one might say that just as the Labour Movement can be accused of having been nurtured and supported by the trade union movement so the brewers and other big industrial tycoons have poured millions into the Conservative Party. Let us accept that as being the traditional position and there is no need to quarrel about it; there is no need to try to make cheap political capital out of it. Something is happening in the world due to—the phrase was originally Eisenhower's—this revolution of awakening expectation that is taking place throughout one end of the world to another. With the vast improvement in the mass means of communication, people are struggling for a higher standard of life; and the merchants of desire, the advertising merchants, who create desire beyond the cost of living so that things become necessities, like a television set or a telephone, have added to the personal desires of the ordinary person.

The great difference between that and the struggle that we had after the war, when we in the Labour Party came to power—I had the privilege of being in the other place for over 25 years—was that we had built-in "social shock absorbers" in the form of subsidies on food, and subsidies to create employment. Having built in those social shock absorbers we were able to keep down the cost of living for the benefit of the underpaid and the less privileged people. Now all the brakes have been taken off. It is an old story about "lame ducks" and I do not want to repeat it now because it is so stale. Suddenly all that was built up by some of the best Conservative and Liberal leaders and others by common agreement was taken away. To take away these shock absorbers—like family allowances and grants to enable more people than ever to get technical and university education—in that rigid righteousness when the Conservatives won the 1970 General Election was a huge mistake.

To be fair to the Government, inflation is not just their problem. Someone quoted Alistair Cooke. I have listened to him talking about inflation in the United States. So we accept it as axiomatic that throughout the world this inflation takes place. I agree with the noble Lord, Lord Alport, that part of the price of civilisation is inflation, but it should be controlled inflation. When I was a child one penny bought a tin of Cherry Blossom boot polish. I do not smoke now, but then I could buy five Woodbines for one penny. In West Wales we used to have our boots and shoes made to measure and they cost the vast sum of five shillings or up to ten shillings. To have your boots made to measure was the thing to do in a country district so that good leather boots would last. Think of that, compared with the £10 that you pay for good leather shoes to-day. There is therefore in all civilised societies an amount of inflation that I think is necessary. I wish the speech made by the noble Lord had been made by the noble Baroness, Lady Burton of Coventry.

I will not bore the House, because most of your Lordships are so well informed, but I have taken the trouble, before shouting about it, to read the T.U.C. Economic Policy and Collective Bargaining. Contrary to saying that they do not think about the lower paid workers (let us take it for granted to save the time of the House), on page 43 the General Council are particularly concerned with the low paid workers, and they believe that the £20 minimum is absolutely necessary for the low paid workers. Then it goes on with constructive alternatives on how to meet the pay of the low paid workers. That is enough to quote in a well-informed House like this to contradict the idea that inside the trade union movement they are concerned only about the privileged and people who have technical training, and are not interested in the lower paid workers.

The noble Lord, Lord Byers, was talking about teachers earning £2,500 a year and not wanting to be in London, but wanting to move out. I do not want to name anybody, but I happen to know a couple of graduates who obtained their Ph.D. at Cambridge last year and who have come here to do medical work; but, despite the fact that they are both working, they cannot afford to raise a deposit on a house. They are seeking somewhere to live until they can save some money to buy a house, for which they will have to pay an extortionate price. So it is no good chiding these teachers who want somewhere to live.


My Lords, the example given by the noble Lord, Lord Byers, was a quotation from something he saw on television. The young man who was interviewed said that he and his wife were university undergraduates and their joint income was £3,000 a year. He then said: "We want to start a family, but if we start a family our income will be £3,000 a year. How can we do it? "But then, that is the Liberal way.


My Lords, as usual, the noble Lord has picked up my speech and he with his horse is three gates ahead of me. That is what I was going to add. I do not know whether he will be attacking me next, but that does not worry me. Another opportunity will occur to discuss the Budget.

Let me make two other points. We are no longer masters in our own house on this issue. The mammoth dollars in their billions which are moving around Europe at present are part of the price that the world is paying for an uncontrolled system of acquisitiveness—or the acquisitive society. I have said this before and it may sound old-fashioned, but I think it is true. The capitalist system in society has made a great present to mankind: it has shown how to produce. But now, with the revolution of a wave of expectation, it has not solved the problem of how to distribute. It distributes only on the basis that you have the money to buy; it does not distribute on the basis of need. It is no good scoffing at the old-fashioned Christian, or the Marxist or others. That problem is one to which some day, between us, we shall have to find an answer.

I hope that something will be done by the Government to establish this selectivity in lending. If a person is borrowing money at a fantastic rate of interest, there is a difference between borrowing it to start up a skating rink or to start up a little factory for woodworkers where in a rural district it will employ three men. There should be some check on money that is passed out to people. The Amendments on this Bill in the other place, one of which was for some control of lending, failed. One was for the control of insurance premiums. This certainly could come in in respect of the motor car. So far as insurance overseas or export guarantees are concerned insurance would be difficult to control, but certainly in the field of the motor car the ordinary man needs protection, and we should have a State system of insurance if only to insure cars. I am quite sure that this would be an anti-inflationary policy worth while in this country.

So, my Lords, I hope that when we reach the Committee stage of this Bill we shall have the opportunity of discussing some constructive Amendments; and I hope that this time the Executive will not roll the Bill through without taking notice of what is being said. Warnings have come from both sides of the House over the last year or two that we in Parliament are losing our grip; we are losing the power that should exist in the two Houses, and giving too much to Governments, of whatever colour. This is a sad thing for the British democratic way of life. Something is causing the bloody-mindedness and the cause should be analysed without denigrating some of the finest people of this country. At times when we need them to defend the country, to cut coal or to work themselves almost to the bone to produce, we praise them; but at moments like this the underpaid have to bear the greatest slurs imaginable from people who do not know what work really is.

6.58 p.m.


My Lords, I must start by apologising for the fact that for a long time past I have had a diplomatic engagement. I could not foresee that this debate would come up to-day, and I cannot cut the engagement without causing offence. I shall have to leave before the winding-up speech, and I am very sorry for that. I entirely approve this programme for Phase 2. It is of course a great interference in people's lives, but I personally cannot see any alternative. The Labour Party and the TUC have produced a plan which leaves out any control of wages. I cannot see that that makes any sense in present conditions. The plan must cover wages and costs, prices, dividends and other items at least as much as the present plan does.

The noble Lord, Lord Alport, has just left the Chamber, but I must say that I was sorry about his attack on the Prime Minister and on this legislation. I think he had the problem somewhat out of perspective. As I see it, what we are all suffering from is the fact that the trade unions have succeeded in making a Labour Prime Minister stand on his head twice: first, over industrial relations, which it was quite apparent had to be amended; and secondly, over the vital question of Europe. I do not think the country liked that manoeuvre. The result is that we have a Prime Minister who is undoubtedly a great leader of men. Anybody who can convince the Board of Trade that we ought to go into Europe must be a great leader of men. That is what he is, and I believe that is what the country needs.

It is all very well, my Lords, to say that we must have a consensus, but we have tried everything. We have had declarations of intent; we have had agreements and exchanges of letters, and they have never led to anything. The trade unions apparently cannot agree, much as one would like them to—I do not blame them for it—on any forward-looking policies. They are able to agree to chuck out of the T.U.C. the seamen and various other unions who found it in their interests to register. I think that is a deplorable process. It is diminishing the influence of the moderate elements in the T.U.C., which is more 10 be deplored than anything.

This Bill is, in my opinion, a commendable and careful bit of work, as is the Code in the Green Paper. I congratulate the Government on it. I feel sure that the work benefited from the endeavours of the Prices and Incomes Board, about which the noble Lord, Lord Peddie, made such an interesting speech on February 5. It is a pity the Government ever abolished the Prices and Incomes Board, but now we are clearly going to set up something very much better. We must press these consultations to a conclusion and make sure that the Commission and the Board are made to work effectively. Obviously, in some form or other, they are going to be permanent features of modern Britain and I personally do not see how we can do without something of the sort in Phase 3 and thereafter.

My next point is this. I believe that the system of control, as it is before us in this Bill, is in itself incomplete. The fact is that money supply and monetary policy must play their parts, and so must budgetary policy. I would support what the noble Lord, Lord Robbins, said in this connection. If M3 increases at the same rate as in 1972—and I think I am right in saying that it was between 20 per cent. and 30 per cent. per annum—I think there is no hope at all of price or wage controls working. I believe that the Government and the Bank of England must cease absolutely to regard this problem with the benign indifference which seems to have been their attitude during the last year—especially, may I say, as our economic and industrial activity has now resumed progress. Obviously the Government cannot correct the ship's course all at once without causing serious accidents, but if they do not correct it during this year, then as sure as I stand here, my Lords, they will wreck their anti-inflation policy as set out in this Bill. I believe much the same observation applies to the Government's budgetary deficit. I hardly imagine that the Bank of England could restore dynamic stability —and I should like to emphasise that—to the M3 if the Government continue to run a deficit of something between £3,000 million and £4,000 million a year. I apologise for bringing up these issues on the very eve of the Budget, but they are extremely germane to what we are discussing.

Returning now to the Price Commission and the Pay Board and to the way in which they will use the powers we are about to give them, I believe that in the long run it will be very controversial that the Government—and I emphasise the Government—should say what increases are to be paid, as set out in paragraph 83 of the Code. I should like to take up a point made by the noble Lord, Lord Douglass of Cleveland, in what I thought was a most fascinating and constructive speech on February 5. Surely it would be most desirable that the Government should, at any rate in Phase 3, give a joint body like N.E.D.C. the fixing of a national norm on which the Pay Board would then operate. N.E.D.C. combines, I would recall to your Lordships, the Government, the C.B.I. and the T.U.C.; and if at all possible I believe that the norm ought to be agreed in some such way.

I would go along most warmly with the noble Lord, Lord Alport, in expressing the earnest desire that, in the great crisis we are now facing, we can nevertheless achieve some consensus for the future. Prices are very important when we fix wages; but I think we must avoid the situation from which we have suffered, in which the monopoly or near-monopoly power of some unions, leapfrogging over each other, forces up costs, which are then passed on to the consumer at home and abroad in the form of higher prices. I am not just blaming the unions: the C.B.I. have gone along with this, because on the whole it is less bother than to fight. Of course one can meet the export problem by periodical currency devaluations, which at least restores one's competitiveness in foreign markets; but in the end these lead to national ruin, as the French and Belgian experience between the wars has clearly shown. I think that there is no alternative to keeping our economic house in far better order than we have in the past. This is certainly the explicit object of this Bill and Code. Therefore I would urge that while some regard should be paid to prices, and especially food prices, when the norm for wage increases is settled, much more regard should be paid to increases in productivity both nationally and in each industry. I want to urge that the increase of productivity over the year before should be instrumental in fixing the rate of increase of wages and pay in the year ahead. This idea only represents a small development of paragraph 75 of the Code. When the trade unions discover that they themselves suffer from the colossal damage done by the loss of 20 million working days (as happened last year) and by the ruthless action of gas men, electricity men, train drivers and lorry drivers in maiming other industries and depriving their workmates of work, warmth, light and comfort, they may be less anxious to let the extremists do the pacemaking, and be more willing to co-operate in finding a less idiotic, less selfish and less egotistical way of fixing wages, especially as everyone's pay will be affected, and be known and seen to be affected.

I believe there is a great deal to be said for the right to strike in emergency, but I also believe it is time that we began to talk as well about the right to work. So I should like the Government to set about commissioning precise productivity studies immediately, so that authoritative material is available for N.E.D.C. before Phase 3 starts. Otherwise, if the Government continue to set the norm, I foresee that they will be carrying a very unpopular measure of responsibility all alone, and I believe that will end in political repercussions.

To sum up, my Lords, I fully approve of this Bill, so far as it goes, and I shall certainly vote for it. But in my opinion it will not be effective unless suitable action is taken to control the increase of the money supply, which almost certainly cannot be done so long as we run a budgetary deficit on anything like the present scale. Let us bring productivity in under N.E.D.C., marrying the progress in productivity of the year before to the increase in wages of the year to follow. Inflation, on the scale we are now suffering, is like a dangerous beast coming after us out of the river. A friend of mine once asked a Panamanian businessman what was the difference between an alligator and a crocodile—there are many of those creatures in Panama—and the man said, "Ma'am, there is all the difference in the wide world. An alligator, you tie a string around its neck and you take it out to tea with your lady friend on a Sunday afternoon. But a croc.—he is after you all the time! My Lords, I do not think the Chancellor can expect to be very popular if he has to take our "croc." over to Brussels with him, and I urgently hope that this Bill, the Code and other monetary measures will enable us to scotch the creature, or at least to keep it in a safe pen.

7.8 p.m.


My Lords, when one speaks at the end of debates, which is my usual position, one becomes increasingly discouraged. But I have one point to make this evening out of several I had prepared. Of course, this debate has been about economics, and there have been some remarkable economic speeches. I am not competent to criticise them. All I can say is that the economists do not agree—which is no surprise to anybody. However, there have been some "horse sense" speeches. My noble friend Lord Beswick opened in a way which I found admirable, because his approach was so co-operative and constructive. The noble Lord, Lord Byers, made a number of very useful suggestions to us, which we must consider.

My noble friend Lady Burton made what I think was one of the most forthright speeches I have ever heard from these Benches; and I understand what the penultimate speaker meant when he said that he thought the noble Baroness might well have changed places with the noble Lord, Lord Alport, which would have left the House more consistent. I want to suport my noble friend and her general comments and approach. I have something to fill in at the end of what she said. Before doing so, I must look at one or two other speakers. In particular I was fascinated by the speech of the noble Lord, Lord Alport. I must confess that the prospect of the Prime Minister's head on Tower Hill is not in its way unattractive. I wish my noble friend Lord Wigg had taken the horseshoe out of his glove before he attacked my noble friend Lady Burton. I was sorry to hear him say that he did not believe in her sincerity, though I do not believe that he meant it in that way. My noble friend Lord Wigg is somebody who believes in fighting hard and is a hardline Party politician. The whole point of my remarks to-night is that I am suspicious of the whole breed.

I wonder whether Party politics in our contemporary form is really serving the nation as effectively as Party politicians think it is. Certainly there is a good deal of evidence from recent by-elections and newspaper articles to suggest that it is not. The two or two and a half Party system which we have is not something one can afford to scrap because it provides stable Government. But I wonder whether Party managers might not do well to ease off a bit at the edges? The Counter-Inflation Bill seems to me to be an occasion for this; it is trying to do something which we all believe to be right. We in the Labour Party have criticised violently the unfairness with which this is being done, and it is perfectly clear that we would do it rather differently. The fact remains that we believe that without some such measure the country will be in a serious position, and I wonder whether we could not have been rather more gracious about it.

So long as the Government were doing the exact opposite of what we thought right, which they did for at least a year, there can be no question that we were right to attack them root and branch. But when they made their celebrated volte-face, was not that the moment for us to heap a few coals of fire and say, "Now at last you are doing the right thing, in however ham-fisted a way, we will help you"? Above all, the Government need help with the trade unions whom they have gratuitously goaded into a truculent hostility, and without whose good will no solution is possible. I believe, as my noble friend Lady Burton said, that there are many trade unionists and many Labour voters who would have liked to see the Opposition trying to help in this crisis, which is a national one, one which was exacerbated by the first year of Tory Government but is certainly not a Tory creation. Not all the workers want to be led by those people whom my noble friend Lord Douglass of Cleveland, in a brilliant and moving speech in our last debate—characteristically not reported by The Times—described as a sabotaging movement determined to destroy the system. These are the Communists under the bed. But we know that there are people who are not anxious for quick solutions of our problems, and this is one of the problems which will always affect the trade unions and their organisations.

I believe that many workers—and by "workers" I mean white-collar as well as blue-collar—would be happy to work hard for a good wage and enjoy the fruits of a prosperous nation; and I believe many of them think that this could be achieved by more co-operation and less "bloody-mindedness". Meanwhile, the wretched public, rich and poor, old and young, pregnant or paralysed, get it in the neck either way. Old women of 80 have to lie flat on the floor twice a day in order to see whether the gas pilot is still alight in their gas heaters brilliantly designed by marvellous English manufacturers. Then there are the transport problems, causing young girls to stand in the rain because the drivers are not driving the tube trains. The discomfort, irritation and misery caused to the entirely innocent public by sectional demands is leading, in my opinion, to a dangerous dislike and distrust of the trade union movement. This is dangerous because in the end one can govern only by consent.

Modern life is complicated, and its comfort and success depends on every man doing his job consistently and well. Any single group can upset the entire complex, though some much more easily than others. So the whole complicated machine can be maintained only by consent. This has been the theme of nearly every speech that we have heard to-day. It is absolutely true; it cannot be too often repeated. The unions have to be persuaded to co-operate. They will not, they say, co-operate with this Government; but they would, they say, with a Labour Government on terms recently announced. That is all right with me, but I am afraid that the public may be so bitter against being sacrificed, first to one sectional interest and then to another, that they would refuse to vote into power any Party which accepts this position. So it may go on and on, non-co-operation, misery for the public, hard-headed Government refusing to give way, trade unions unable to give way because of their rank and file—a position of almost total disaster.

As I see it, the measures in this Bill, or something like them, would have had to be taken by our own Party had we been in power. I am certain that we would have paid a good deal more attention to fairness than the Tories have: to rents, to food costs, taxation of the rich, and so on; but I doubt very much whether that would have saved us from a single instance of the industrial action now threatening the country. If it is necessary to stop inflation, which all sensible people believe is necessary, it is necessary to be fair about it. The least fair way of all is to let those workers whose work is essential to modern life under modern conditions for the day-to-day running of the country—gas, electricity, water, and many others—use the public's extraordinary vulnerability to their particular deprivations as a means of getting wage increases above those available for people like probation officers, shop workers, and others. This is the great unfairness.

We must welcome the return of a prices and incomes policy in its new dual form and of that much respected figure, Sir Frank Figgures, at the helm. There is no other way of achieving fairness. I know that my friends will tell me that I am politically naïve. Politics is about power and power comes from strength, not compromise. Imagine what my noble friend Lord Wigg would think of what I have to say; it is not the line he takes at all. I am saying: please look at this proposition again. I do not believe that Parties win power by following the procedures which both Parties are now following, particularly—as Mr. David Wood pointed out in The Times to-day—in Opposition. What the public do not like is the Opposition changing its mind, whether it is Tory or Labour. They accept it from Governments with a laugh, but they do not like the Opposition changing its mind. In my opinion, both Parties are playing their cards wrong; both Parties would do a good deal better, when in Opposition, to oppose the Government except when they are right. Most people on this side of the House believe that this Bill, with the many imperfections, is right and that we should support it. Convention is that we do not divide on Second Reading, which allows me to take a contrary rather than a contradictory line to my own Party's view and abstain, which I shall do.

7.19 p.m.


My Lords, the hour is late and my own intention is to be very brief. I have no desire or capacity to wander in the dizzy heights which have been reached by most of the speakers this evening. May I say at once that I support the present Bill, though it has some faults which doubtless can be dealt with later on. I want to emphasise —and that is all I wish to do—the vital need for all sections of our nation to work together on a basis of that willing partnership without which we cannot hope for ultimate success in a solution of the problems with which this Bill deals.

To turn now to the Bill before us, I want to give an illustration from the Bill itself of the faulty handling of joint effort. There are parts of this Bill which raise issues of fundamental importance for, or require particular action from, local authorities. I want to mention two such matters. The first concerns Clause 14, under which the Secretary of State is empowered to require rating authorities (and other authorities) to give him information about rates, including information about levels of proposed rates and the estimates and other assumptions on which those proposals are based, for the years 1973–74 and 1974–75.

Very naturally, the Association of Municipal Corporations objected, and continues to object, to local authorities being directed to provide information in this manner. Local authorities have adopted a thoroughly co-operative approach to the present extraordinary problems facing this country. Surely, central and local government must work in partnership in the provision of public services. Local authorities are responsible bodies answerable to the ratepayers, and the power to direct them to answer to the Government on a matter which is the concern of the ratepayers is neither appropriate as between one responsible body and another, nor is it calculated to secure the spirit of co-operation necessary to overcome current difficulties. In any case, if the Government require that local government rate-making powers should be supervised in this manner, then this Bill is not the appropriate vehicle. It is more a matter to be proposed in. and debated on, the forthcoming Bill on local government finance. So I suggest that this power of direction is a bad precedent and should not be enacted.

The other matter which I wish just to mention arises over the power the Minister is taking under Schedule 4, paragraph 2, to the Bill, to designate any inspectors or chief inspectors of weights and measures employed by local authorities as persons to enforce both the transitional arrangements of price changes following the introduction of value added tax and the abolition of purchase tax and selective employment tax, and if need be the longer-term price control provisions of the Bill. Again, the Association of Municipal Corporations (which is the leading body, as we know) is concerned that central Government should take over the officers of local authorities for central Government purposes by force majeure in this way.

Apart from the general principle that local authorities should not have their officers "requisitioned" by another authority in this way, considerable constitutional problems will arise, since the authorities' inspectors when designated will act as the Minister's officers, though still employed by the local authority, and further will be expected to use non-designated inspectors to help them who will be acting as officers of the local authority. One feels that this arrangement is most unsatisfactory and confusing. Inspectors will be unclear over their relationship to their local authority, their town clerks or other chief officers. In fact, paragraphs 1 and 3 of Schedule 4 appear to do all the Government want without this objectionable paragraph 2 at all. Under paragraph 1(4), the Minister is taking power to require the local authority to act, and in effect to use all its resources to act to enforce the Government's legislation. Paragraph 2 is in any event defective because it does not appear to cover the use of the authority's offices, telephones, equipment, stationery, transport, et cetera. The situation can lead to undesirable conflicts of loyalties. All these troubles would be avoided if Schedule 4 had been framed so that the Minister would look to local authorities, rather than direct to their officers.

I do not believe that Parliament can happily establish a precedent for Governments to take over local authority staff in this way, cutting out the local authority from its right to give orders and to organise and direct the staff it pays for. I hope that when the Committee stage comes it may be possible to deal with these matters, but I thought that as we are dealing with the Bill it would be right to mention them now. Perhaps I may be allowed to conclude by saying that I have been informed that the County Councils Association and the Urban District Councils Association share the concern which is felt by the other local authorities.

7.27 p.m.


My Lords, this has indeed been a worthwhile debate: a debate on a vital topic, a debate in which I have listened to every speech except those of my noble friend Lord Davies of Leek and of the noble Lord, Lord Alport. The latter was described to me as a sensational speech, one in which I gather he suggested that perhaps the circumstances were such as to justify a National Government. I must say that I feel that National Governments have always been a ghastly failure in peace time. I believe that they are right in war time and that the country will accept them then, but I doubt very much whether we have reached a position in relation to inflation that would justify the formation of a National Government. However, this of course is a matter of opinion, and this is the opinion which I strongly hold.

The debate has shown that the Second Reading of this Counter-Inflation Bill can be subjected to varying treatments: what is in the Bill; what has been left out; what is the philosophy and outlook of the Party whose Government put the Bill forward. And, as such, it contains all the elements necessary for a good old Party bash: a reminder of the faults of Government; a reminder, too, of the faults of past Governments; a reminder of the faults of political Parties, trade unions and the rest. In some circumstances I am all in favour of the Party bash. I firmly believe, however, that this is not the time for bitter controversy, but rather for a consideration of what is best for the nation as a whole. Here I agree with my noble friend Lord Donaldson of Kingsbridge. In this connection we have to remember that the nation includes the trade unionist equally with the employer and all the others who go to make up our society. I would remind my noble friend Lady Burton of Coventry that when we are speaking about the general public we cannot exclude the millions of trade unionists and their families; they go to make up nearly half of this nation. But that does not mean to say that I did not recognise, and indeed applaud to some extent, the noble Baroness's courage in putting forward the point of view which she expressed here to-day—not an easy thing to do from this side of the House, but that is one thing that I like about this House: we are not completely tied to Party points of view. Occasionally Members on both sides say things which are not wholly in accord with Party outlook and Party philosophy.

When I speak about the national wellbeing I mean that throughout the whole of the stages through which this Bill will pass we must take the national wellbeing as the starting point of our consideration. That does not mean, of course, that we shall not expose the failures of this Government which have led to this Bill, including the failure to secure T.U.C. co-operation, a point which was so well put forward by my noble friend Lord Beswick. The national wellbeing, so far as my thinking goes, means the preservation of our Parliamentary democracy, because I honestly believe that that is the best form so far devised for the government by human beings of other human beings; and although I believe our system enables us to be free, and truculently free, we must not allow the militants of either the trade unions or of the Right or the Left of any political Party to so exacerbate our existing difficulties as to endanger our system of democracy. It has been said, and I agree with this completely: we want neither fascism nor communism. Neither of these things would be accept able to me and I would fight against them. Our system of democracy was too hard won for us lightly to lose it.

I am firmly of the opinion that the duly elected Government of the day must govern, and also that that Government has a clear duty to ensure that their actions are not only fair but are also patently seen to be fair. In present circumstances, a head-on clash between organised labour as a whole and the Government would be a national catastrophe and would certainly jeopardise democracy as we understand it. That might seem to be putting the argument too high, but I believe that Keynes was not mistaken when he said Lenin was right when he said 'there is no subtler, no surer means of overturning the existing basis of society than to debauch the currency', and I would think that Lenin knew what he was talking about. He certainly had viewed society, seen what happened, and this was his considered opinion.

What is the present position? The Government seek to halt the course of inflation and have introduced unpopular measures to that end—I hasten to add, unpopular only for those trade unionists whose wages are immediately held down as a result of that action, but not, I find, so unpopular with those not immedately affected and who are fervently hoping to see prices steadied. Unpopular, perhaps, with those whose profit margins tended to escalate with every price increase, but not when they see the price they have to pay for other people's goods not being held in check. But most certainly not unpopular with those of us who are pensioners or on fixed incomes from savings scraped together to provide for old age and who have for so long seen their value decline with every passing day. Here I agree very much with a passage in the speech made by my noble friend Lady Burton, because it comes home to me as one who has tried to save just sufficient to be able to get by with the small pension that I have, but I see every day the value of my little bit of savings declining as a result of inflation; so I am directly affected.

So one could go on, singling out those who profit immediately from inflation but suffer from it in other ways, as all do certainly in the long run. The Labour Party is of the view that the Government have an over-riding duty to introduce measures to deal with inflation and the rising cost of living. The T.U.C. says in its recently published document, the one they were discussing to-day Economic Policy and Collective Bargaining in 1973Throughout the past three years, the General Council have drawn attention to the economic and social consequences of the rapid increase in the cost of living; at the same time they have acknowledged that the trade union movement should have a part to play in an agreed policy designed to reduce inflationary pressures. I know of no dissent from these points of view by the C.B.I., which certainly took an important step when they got agreement to impose a price standstill the other day. Clearly there is agreement about the desired end; the disagreement lies in the means to that end. How do we secure such an agreement? What do we do in order to ensure that we do in fact control inflation? I find the analysis of inflation by the T.U.C., as a matter of the use of resources, convincing when they say an advanced industrialised economy is faced with conflicts between providing ever-increasing investment in advanced technology and infrastructure, greater demands for consumption from an increasingly educated work force, increased social spending, and, in the case of the United Kingdom, an increasing need to cover the costs of imports by expanding the export sector. In a slow growing economy, the strain of meeting these conflicting objectives creates severe inflationary pressure, even when resources are not fully utilised. All of those complex interlocking factors in a society such as ours enter into the causes of inflation.

If I ever held it, I have long since discarded the notion that the militancy of the trade unions is the primary cause of inflation. Certainly there are growing doubts in many minds about the hypothesis that inflation is primarily due to trade union militancy. David Laidler, writing in the National Westminster Bank Review in November last on the current inflation, rejected the premise that union aggressiveness is the root cause of the problem. Timothy Congdon in the February issue of the same review called attention to the weakness of the Labour militancy hypothesis when discussing why inflation has accelerated.

On the other hand, it would be naive to suggest that wage and salary increases do not enter very substantially into the cause of rising prices. Sixty years ago last month I joined the old Taff Vale Railway Company, and at the end of the week I was made a trade unionist and I have been one ever since. In those days the trade unions—labour—were disciplined largely by unemployment. The fear of unemployment was a disciplining factor, and a very potent one. That stick of unemployment is no longer there. It has no disciplining effect at all because, as the T.U.C. put it in the part that I quoted, there is to-day an "educated work force", which means that we can get round the disciplining which certainly affected us in all our thinking in the days that I am talking about.

I assert that high wage demands are an effect as well as a cause of inflation. I do not believe that one can separate effect and cause. It is one of the factors, an extremely important one, and as such I believe that it must be subject to a measure of control. But to subject oneself to a self-denying measure of control is asking a lot of bodies whose very existence depends on their ability to deliver the goods in the form of higher wages and better conditions. I know something of the pressures that build up behind executive committees, general secretaries, and so on, and I know how difficult it is to deny those pressures and to avoid them. The other side of the picture—and this has been mentioned to-day—is that employers who find little or no difficulty about passing on increased labour costs by increasing prices, understandably tend to buy peace in their industrial relations at a cost to the public at large. That too has been going on for some time; it has been glaringly obvious to very many of us.

The question we must ask is, "Where do we go from here?" The trade unions deny seeking a confrontation; the Government deny seeking a confrontation; and I am positive that the majority of the people want to see industrial peace restored as soon as it is humanly possible to get that industrial peace restored. If there is such a wide measure of agreement, what now divides us all? Surely it must be that at the very centre of the division between us is the question of the fairness of the Government's policy for solving the problem. The strength of the argument against the Government from the trade union angle seems to me to lie mainly in three factors: food prices—perhaps the most sensitive area of all; the unfairness of Stage 2 on wages; and the apparent fairness of dividend restraint—but a disturbing recollection of past dividend restraints which resulted in undistributed profits being added to the capital value of the undertaking or used for later dividend distribution while wages not gained, even for increased production, were lost for ever to the workers concerned.

I recognise the dilemma posed by the profit-making restrictions mentioned by the noble Lord, Lord Byers, by the noble Lord, Lord Wigg, and by my noble friend Lord Rhodes. But surely it is a nonsense to suggest that profits can be free and wages restricted. It just is not "on". It certainly would not be accepted by the trade unions if you were to say, "Profits must be free, because if there are no profits we cannot do all the things that we want to do to improve our technology and all the rest". In this there must be a balance, and a balance means that there must be an element of dividend restriction in this connection.


My Lords, may I interrupt the noble Lord? The difference between profits and dividends is very great indeed. Will the noble Lord say how an unprofitable business is going to pay a better wage?


My Lords, that is a question which I regard as an important one. An unprofitable business cannot pay a good wage. Indeed, it ought to go out of business and probably would. That is the effect of the capitalist system which the noble Lord, Lord Byers, supports. That would be the effect of a nonprofit-making business. But that is only part of the story. I do not agree that we must have the sort of profits that have been made in the past. In this connection of profits and dividend restraint it is very disquieting to me to read that the banks seem to have escaped the most stringent controls. The interest rates have become an inflationary element in their own right and the Midland Bank, not out of line with the others, had pre-tax profits last year of 37 per cent. above the previous year. Nobody is going to tell me that that sort of level of profit is good for this economy of ours. Of course it is not good. I have not looked up the other banks but in the case of the Midland, the Treasury consented to an increased dividend distribution of some 16 per cent. That is a far cry from the 5 per cent. limitation in the Green Paper to govern dividend distribution.

Another factor is land prices. Unlike the noble Lord, Lord Robbins, who sees land prices and land speculation as an effect of inflation, I assert that it is both an effect and a cause in the same way that wages are. Land prices affect rent, and rent cannot be divorced from prices. Indeed, rent runs up through the whole of it. I prefer the example given by the noble Lord, Lord O'Neill of the Maine, who said that a businessman said to him, "I would control food prices and stop speculation in land." When trade unionists see what is happening in this field, how can we expect them to sit back and take everything that is suggested and said about them as to the restraints that they ought to impose on themselves? It is a nonsense.

Then there is the glaring injustice to groups of workers such as the gas workers and the civil servants who were on the point of catching up on long-established wage relationships when the door was slammed in their faces. I know all about the difficulty when you fix a date for this sort of thing. Some will have just squeezed through the door and some will be locked out. But that does not lessen the difficulty nor increase the possibility of acceptance of the position if all you have to say is, "You were very unlucky, chaps!".

Of the factors I have mentioned, I have dubbed the glaring injustice to the gas workers and others as the greatest obstacles to the acceptance of Stage 2 of the counter-inflation policy. I would put food prices and the gas workers' and civil servants' position very high. I believe that a move on those two stumbling blocks would go a long way towards securing the conditions necessary for the acceptance of the Government's policy. Perhaps I ought to make it clear that I am not speaking for the T.U.C. or anyone else, but rather as an old trade unionist who has had a little experience of disputes. There is a moment in every industrial dispute when a move by one side becomes acceptable to the other. If the move is made too soon the parties are not yet ready; if it is made too late, the positions taken up have hardened too much. I rather think that a move made now on food prices and on the gas and Civil Service workers' disputes might have the effect of leading to a wider acceptance of Stage 2 and a preparation for Stage 3.

On food prices, I welcome the Code's arrangement for setting up a special panel to deal with the prices of food and drink. That is certainly a field in which special inquiries are long overdue, if we are to judge by the Monopolies Commission's Report on Kelloggs, a firm which for a long time past has been fleecing the public. What the public would like to know is how many more are at the same rapacious game. There ought to be, too, in my opinion, an examination of retail price margins, which I suspect have increased not for any other reason than that prices have gone up in such a startling fashion. I think that, in addition to the Code's special arrangement on food prices, the Government ought to find a way to divert £200 million or £300 million to subsidise food in an endeavour to protect the public against world price movements. I certainly should not favour an open-ended subsidy, but the sort of figure I have mentioned, directed towards stabilising the basic foods of milk, bread, sugar, meat and potatoes, would go far to removing the complaint that wages are fixed but prices are not. That might seem to be expensive but certainly cheaper for the nation than the present loss of industrial production.

Perhaps as a footnote to that I might add that it may well be that food prices will not continue to escalate at anything like the recent rate, especially if the declared policy of Mr. Nixon of ceasing to pay United States farmers for not producing is implemented and as a result more cereals find their way on to the market from the United States of America. I think it is an undoubted fact that the Russian grain crop failure has caused to some extent the rise in food prices. My noble friend, Lord Peddic, was surely right to stress this aspect of the matter. He has an experience born of his period on the Prices and Incomes Board, and we ought to take very much notice of what he said in this connection.

As to the gas workers and others similarly placed, surely the Pay Board could be asked to look at their position and make recommendations outside the limits imposed by Stage 2, and if that is not deemed acceptable by the Government could we not have a clear declaration that Stage 3 will not debar the Pay Board from making a suitable recommendation in their cases in readiness for Stage 3? I had written that before I heard the speech of the noble Earl, Lord Jellicoe, and I was delighted to hear him say that he and the Government were thinking on these very lines. Stage 3, of course, will be the critical and the most difficult stage. To decide to change differentials within a single industry is an almost impossible task; to decide on that between industry and industry is almost a hopeless task, but it must be tackled if we are to have a purposeful, worth-while Stage 3 in this whole policy.

I am not unaware of the difficulties of the Government's acceptance of these proposals, but it would seem to me to be wise for the Government to take the further steps that I am here proposing in the hope of getting back to talks with the Trades Union Congress on possible modifications of their policy, and in securing co-operation to rid the country, which is now bedevilled by inflation, of strikes and other industrial action. I am sure the country is earnestly praying for this. If the Government make such moves, it would seem to me that the Trades Union Congress, while adhering to its stand that the programme for dealing with inflation must be equitable, ought to be prepared to make the necessary compromise to get the nation on to a course advantageous to our future, a future which at the moment looks pretty bleak, pretty well as bleak as anything I can remember for a long time, but not bleak enough yet for the National Government proposed by the noble Lord, Lord Alport. If we can do something of this sort, it could then lead on to co-operation about State 3 and after, the stage which is to some extent the dangerous one, because, as we experienced it in the Labour Government, you go on very well for a time, but once the gates are opened the flood pours through. That is something which I hope the Government, and everybody working with the Government, including, as I hope, the trade unions, will somehow avoid.

7.55 p.m.


My Lords, I think the Government have some reason to feel reassured by the debate to-day. In some ways it has been a surprising debate. We have had some very striking and cogent speeches from both sides of the House, and one cannot fail in this connection to mention the speech of the noble Baroness, Lady Burton, and the speech of my noble friend Lord Alport, with which I am bound to say I did not find myself in very much agreement. But it was none the less a striking speech. In the debate there have been expressions of the exasperation that we all feel, and of the general feeling of the need for a consensus. If I were to sum up what has been said in the debate to-day about this Bill, I would comment that the presentation to the country as a whole has been criticised as being defective; that it has been said that the atmosphere for its introduction is unfavourable, but that nevertheless the House as a whole is generally agreed upon the policy.

It would be very hard for the House not to agree at least on the objectives, which were described when we had the previous debate on the White Paper, The Programme for Controlling Inflation: The Second Stage (Cmnd. 5205) which began by saying: In the tripartite discussions last year the Government, the T.U.C. and the C.B.I. agreed on three objectives: to maintain a high rate of growth and to improve real incomes; to improve the position of the low paid and pensioners; and to moderate the rate of cost and price inflation. These remain the consensus of the objectives. Inevitably, there are differences of emphasis and disagreements about the methods to achieve those objectives. But I must say to the noble Lord, Lord Peddie (were he here), that at any rate in the very first three lines of that White Paper reference was made to the need to improve real incomes, and that this remains the background to the whole of the policy.


My Lords, may I ask the noble Lord this question? Although there was a reference to this matter in the White Paper, can the noble Lord tell us whether anything in the Bill or the Code points to the need to improve real incomes?


My Lords, one does not necessarily set out objectives in a Bill or even in a Code. The White Paper set out the objectives and the Government have made known what those objectives are. It is much more important that the country as a whole should thus know what the objectives are than that they should be incorporated in a Bill, or for that matter in a Code.

The Government have not only to do what is necessary but they have to persuade Parliament at least, and the people if possible, that it is necessary. Where a degree of surrender of freedom of action is involved, this is not always very easy to achieve. We have been chided during the course of this debate for the fact that we did not introduce this policy earlier. But again the noble Lord, Lord Champion, knows, if I may say so, with his mature wisdom, after 60 years of trade union membership which we all very much respect, that the timing of these things is very important.

We tried to get voluntary agreement, but the reluctance of the Trades Union Congress to accept pay control made that difficult. The noble Lord, Lord Robbins, to-day expressed the view that pay control was better than price control, while the noble Lord, Lord Rhodes, thought that in saying that the noble Lord, Lord Robbins, was a long way from the shop floor. The noble Lord, Lord Peddie, said that a consensus was required, and this was something that was supported by my noble friend Lord O'Neill of the Maine, as well as by the noble Lord, Lord Beswick, who, if I may say so, was on the top of his form this afternoon and made a notable speech, as did the noble Baroness, Lady Burton, who stressed that what was needed was a new spirit. The noble Lord, Lord Roberthall, said that although the norm was rather a high one—I shall come back to that shortly—the fact is that people are becoming accustomed to an even higher level of wage increases.

It is reasonable that a man on the shop floor should have some assurance that prices will not shoot up far beyond the permitted increase in pay; but is it so reasonable to say that there should be no fluctuations at all in prices? After all, the background to this situation is that last autumn the country was gravely ill; it was suffering from the malady of acute inflation, a malady which, when it gets to the acute stage, has to be treated immediately and systematically if it is not to become rapidly worse and worse. Last November hourly wages were 16½per cent. higher than they were a year before; production was running at about 7 per cent. more than a year previously, and retail prices were about 7¾ per cent. higher than they had been hitherto. It is when the rate of inflation in one country becomes very much higher than the current rate in other comparable countries that there is a real danger of its getting out of control.

In the treatment of complex diseases it is not unknown for there to be disagreement among consultants as to the critical factors and the steps to be taken to deal with them. In this case some thought then, and apparently still think, that it would suffice to act on prices. If those could be held, the argument ran, it would not be necessary for Parliament to impose any control on wages. The noble Lords, Lord Beswiek and Lord Champion, made reference to this factor.

The Government have taken action, for example, on sugar and milk, where machinery already exists. The price of sugar was held down by about 1p on a 2 1b. packet from March to July 1972, and 1½p per 2 1b. since then, while milk was reduced by a ½p per pint between April and July 1972. But food subsidies could not provide an effective and lasting solution to the problem of high prices for scarce commodities. Let us take beef as an example. If there could be devised a subsidy which would hold the retail price, for example, at the level of early 1972, the first effect would be to stimulate demand to the point where supply was inadequate to meet it. In particular, housewives who are now buying other meats would switch back to beef; and since beef supplies are inadequate all over the world at present, the inevitable result would either be unfairness between customers or, more probably, some informal rationing by the trade. The cost would escalate rapidly. It is a difficult matter to start a rationing policy, but it is a much more difficult matter to get rid of it once you have started; and the same goes for subsidies.


My Lords, some of us are trying to understand what the noble Lord said about sugar. Do I gather that what the noble Lord said was that sugar was subsidised up to the time when the freeze came into operation? Is he taking that as proof that the Government have done something, because they took off the subsidies when the freeze started?


My Lords, I was illustrating what the Government can do where they can do it. The noble Lord knows as well as I do that under the E.E.C. agreements the sugar subsidy is due to come off altogether by July.


My Lords, I am asking why it cannot be kept on? If it has been done, and is administratively possible, why is it not maintained in the present situation?


My Lords, we have already agreed that it should go. This would have to be renegotiated, if indeed it is renegotiable. There is another point that I should make here; that is, that in the United Kingdom wages and salaries, as a share of national income, are significantly greater than in any other European Economic Community country, and vastly greater than in Japan. That means that we cannot afford to experiment in trying to control wages by price control. A similar experiment was tried in Canada and proved unsuccessful, and all experience suggests that it would not be successful now. For example, the control of public sector prices in the last two years has not led to an equivalent containment in the public sector wages.

The £1 plus 4 per cent. limit is not out of line with the average increase in earnings since June, 1970. From June, 1970, to November, 1972, average earnings rose at an annual rate of 10.6 per cent. The Phase 2 limit of between 7 and 8 per cent. is therefore not as draconian as some opponents make out. To reject the limit and to take industrial action for more is, I am afraid, only to stoke up the fires of inflation.


My Lords, may I ask a question in connection with the level of wages in this country as opposed to other European countries? Could this not be a reflection of the low level of investment in this country over the past few years?


My Lords, I am sure that that is a factor. For the moment, the disease has to be treated. First, we needed a breathing space to enable the doctors to decide what the treatment should be, while in the meantime ensuring that the patient would get no worse. So we had a standstill during which there were no increases in pay and only such increases in prices as were necessary to ensure that trade could continue. The administration of the prices standstill has been tougher than in 1966, and many enterprises have absorbed a significant proportion of the unavoidable increases in costs. In fact, the standstill is being remarkable successful in keeping down prices, and I think that it is necessary to get this into perspective. We tend to look at the topmost increases in prices and point to them as if they were typical of the whole. Since the start of the standstill, prices have been rising at the rate of 0.6 per cent. a month, despite the increases in world commodity prices and the floating of the pound. Within this figure, prices of food, which accounts for about a quarter of consumer expenditure, have been rising by nearly 2 per cent. a month, and thereby giving cause for special concern. That sort of thing is apt to happen following bad harvests and crop failures, or other disturbances in various parts of the world. This has nothing to do with our entering the E.E.C. What we have to fear is not so much periodical rises in food prices as the possibility of not being able to afford to pay for them. Given the expense of our dependence on overseas supplies and world markets, that is precisely why it is so important to get a grip on inflation.

In the past two and a half years food prices have risen proportionately by rather more than the retail price index for all items of expenditure, but earnings have risen by more than prices, and pensions by markedly more. The aims of the Government are not only to contain inflation but to do so while at the same time stimulating growth. The standstill period was only a breathing space—an interlude for working out the necessary plans for the next phase, and for Parliament to consider them. The Bill we have been debating to-day provides the legal framework for the counter-inflation programme and the methods by which the aim is to be pursued, and we shall be examining these in detail when we come to the Committee stage.

I was asked by the noble Lord, Lord Rhodes, about amendment of the Code. It is important to recognise that the Green Paper is a Consultative Document and, naturally, in formulating proposals for the later draft Code, the Government will take into account comments in the House as well as by interested parties outside. The White Paper setting out the draft Code will itself be debated, and even when the final version is incorporated in the Statutory Instrument any further significant changes will themselves be debated in draft by Parliament. As my noble friend suggested, throughout the proceedings on this Bill it will be possible to consider its provisions side by side with what is set out in the Green Paper. The noble Lord, Lord Byers, and my noble friend Lord Digby referred to the effect of the policy on investment and profits—


Who is Lord Digby?


I am sorry, my Lords, I meant my noble friend Lord Dudley. I should have remembered, because he spoke immediately before the late right honourable Member for Dudley. My mnemonics failed me. So far as profits are concerned, in a market in which turnover is increasing and in which there is a state of growth, it is possible for most companies to achieve greater sales. Thus so far as profit control is concerned, the comparison will be between the profit margin being made as a proportion of the larger turnover that may be expected, and that in the best two of the last five years. So I do not think the situation is as bad as the noble Lord thinks, and I hope he will reflect upon that. But most certainly we shall be very glad to discuss with him any suggestions as to how the formula could be improved in this regard. We certainly expect—and this is most important—that money should be available out of profits to maintain and even increase the rate of investment. Because dividends will be restricted to some extent, it is likely that there will be at least as much—indeed, more in most cases—for investment. So the general picture is that the Government are determined that there shall be no restriction in the investment field and, as has already been said, if it appears that a company's investment programme is being impaired by the operation of the controls, use can be made of paragraph 49 in the Green Paper in order to give some relief with a view to maintaining the rate of investment. Criticism has followed three main lines. First—


My Lords, as the noble Lord has apparently finished answering some questions, may I remind him of the two questions to which I have not yet had an answer? I asked about the time factor. What is the projected date for the beginning of Phase 3? I think this is important, and if the noble Lord can be specific we shall appreciate it. The second question which I put and which I ask again is: do the Government really think that the Industrial Relations Act is working? If they think it is, why are they not applying it in the present circumstances? If they cannot apply it, can they not repeal it?


My Lords, the first question I can answer quite simply, by saying that it has been stated that Phase 2 will run until the autumn. It is not possible to be more specific than that at the present time. In answer to the second question, the fact is that the Industrial Relations Act has hardly been given a chance to run yet. We should like it to be given a full chance to run, and until it has been it seems premature to talk about repealing it and taking it off the Statute Book altogether.

The three main lines of criticism have been that the proposals in the Bill are unfair in restricting pay increases; secondly, that they do not do enough for the low paid; and, thirdly, that they will restrict growth and investment. It has been said by many speakers that a balance has had to be struck. If restrictions need to be imposed on prices and profits, then it is surely not unfair to impose them also on wages. I find it difficult to understand the logic of the Party opposite, which seems set on establishing an all-pervasive control over the production, land and capital sectors of the economy, but which apparently believes in unfettered freedom in all circumstances for the wage and salary sector, except when they themselves are in Government. The Party opposite and the T.U.C. seem to have reached agreement on a system under which the strong and the weak are equally free to get what they can. Is this likely to work out fairly?


My Lords, will the noble Lord be good enough to say who said that during to-day's debate? Who said anything remotely like that?


My Lords, it has most certainly been referred to. I am pointing out the significance of what has been said.


My Lords, can the noble Lord indicate where any wage award resembles the fantastic increase in land and property prices?


My Lords, that is not the point here. Inflation is undoubtedly being fermented by excessive wage increases, though not by them alone. I have already made that point. Until they can be brought into line, I do not see how we shall be able to get out of our present troubles. Under the proposals in the Green Paper, a considerable degree of freedom of negotiation is restored, subject to an upper limit for each group. The parties are free to arrange that a larger share of the money available to each group shall go to the lower paid. The relationship between the groups is of course of immense importance. It is during the course of the coming phase that we are very much hoping a system can be worked out for looking at the claims of different groups, so as to "even out anomalies". The only practical way of de-escalating the present inflationary wage demands is to apply the same rule to each of them.

The price controls set out in the Green Paper are the most comprehensive controls ever introduced in peace time. The Price Commission will have to monitor the movement of all prices relevant to its functions under Clause 6, including import prices, simply because the goods concerned come under their purview as soon as they are sold in the course of business within the United Kingdom. The prices of imported raw materials and capital goods sold by distributors will fall under the same percentage margin control as domestic products. But there is no way in which we can unilaterally reduce world prices. To offset higher import prices by subsidy would entail higher taxation, and would thereby be likely to reduce real earnings as well as to cut across our policies for overall growth.


My Lords, I noted that the noble Lord said, with truth, that one cannot reduce world prices. But just prior to that statement the noble Lord said that the Government would monitor such changes in prices. I wonder whether the noble Lord would point out in the Bill or in the Consultative Document the way in which that is going to be done.


My Lords, I have made it clear that it will be necessary to monitor these changes in connection with the fixing of margins on the goods as soon as they come into home trade. It will be necessary to monitor them; otherwise, it will not be possible to know that the margins are being adhered to.

My Lords, I would conclude by saying only this. Our objectives as a Government have remained consistent over the last two and a half years. They are the achievement of a sustained level of growth and higher prosperity in real terms. To attain these objectives, we have reduced taxation by an unprecedented degree, raised the level of social benefits, floated the pound and, in the Industry Act, provided a new base for industrial and regional regeneration on an unparalleled scale. It is within this context of growth policies that the Bill and the Consultative Document on prices and pay are set. They provide the community at large with a realistic opportunity to break out of the vicious inflationary spiral that has been eroding the quality of life, as well as damaging our economic prospects, over the last few years. I have said before that the aims are common; they are shared on all sides of the House. We shall be looking at the detail of the methods of achieving those aims in Committee, and it is with these common aims in mind that I commend the Bill to the House.


My Lords, the Question is, That the Bill be now read a second time? As many as are of that opinion will say, "Content"; to the contrary, "Not-Content". I think the Contents have it. Clear the Bar.

My Lords, I understand that Tellers for the Not-Contents have not been appointed pursuant to Standing Order No. 51. It thereupon becomes my duty to inform the House that a Division cannot take place. I declare that the Contents have it.

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