HL Deb 18 July 1974 vol 353 cc1237-43

3.38 p.m.

LORD SHEPHERDrose to move, That the Draft Counter-Inflation (Abolition of Pay Board) Order 1974, laid before the House on July 9, be approved. The noble Lord said: I beg to move the Motion standing in my name on the Order Paper. When the Government took Office the system of pay controls was already on the point of collapse. Its rigid and detailed rules had led not only to the miners' strike and the three-day week, but also to an accumulation of anomalies and inefficiencies; and were helping to spread ill-will and disputes throughout industry. The system was not even succeeding in its original purpose of curbing inflation. A clear lesson emerged from this experience. It is that the complexity and variety of the problems that arise in pay determination are such that solutions cannot be imposed against the wishes of working people through central regulation, except perhaps for a relatively short period of time. For this reason the Government have repeatedly stated their intention of abolishing the statutory pay controls at the earliest opportunity. The Prices Bill provided a power to abolish the Pay Board and the associated pay controls.

The Bill received the Royal Assent on July 9 and the draft Order which we are debating was laid before Parliament on the same day. Subject to its approval in this House and in another place, the Order will be made without delay and brought into operation seven days later. On that day, the Pay Board will cease to exist and we shall at last be free from statutory controls on pay.

In the interests of securing an orderly transition to a voluntary system, the Government have tried to mitigate the worst of the anomalies which the pay controls have caused. Over the past few months consents have been issued in a number of cases and special treatment is envisaged for certain public sector workers, particularly those working in London. With arrangements made for these particularly hard cases, the Government look to other people not to re-open settlements, but to abide by the guidance given by the General Council of the T.U.C. that the 12-month interval between major increases should be generally maintained. Unless it is, all our policies within the social contract on rents, food subsidies, pensions and the rest, will be in jeopardy and we would lose any chance of bringing the intolerable rate of inflation under control.

It is imperative that we avoid a general wage explosion. Resumption of voluntary collective bargaining will enable employers and unions to make settlements suited to their circumstances and conducive to the increase of output and efficiency. To help it work more effectively we propose to establish two new institutions: the Conciliation and Arbitration Service and the Royal Commission on the Distribution of Income and Wealth.

The Conciliation and Arbitration Service will be managed and developed by an independent council, which will include representatives of the T.U.C. and the C.B.I. It will provide conciliation and arbitration services, freely and readily available both nationally and locally, and will seek to develop and improve collective bargaining machinery. Both the T.U.C. and the C.B.I. have welcomed the creation of such a service and have agreed to give it their full support. Arrangements for its establishment are well advanced and the Government aim to have it in full operation by September 2 under the chairmanship of Mr. Jim Mortimer.

The Royal Commission has a different role. The Government are determined to create a fairer society. As the first step, we need to establish, in a much more thorough and comprehensive way than has previously been attempted, the facts about the distribution of all kinds of incomes and wealth—earned and unearned. On the basis of references made to it by the Government, the Royal Commission will range over the whole field, producing reports of a factual nature which will assist policy-makers and those who are active in collective bargaining. The Government intend to set it up under the chairmanship of my noble friend Lord Diamond at about the same time as the pay controls are abolished.

I am sure the House will want to join me in welcoming the choice of my noble friend Lord Diamond as Chairman of this important Commission. He has an undoubted ability for such demanding tasks, as he has proved many times in his capacity as Deputy Chairman of Committees and also in organising the Committee on E.E.C. Legislation. Unfortunately, the Commission's gain is our loss, and consideration must now be given to his replacement as Deputy Chairman.

With the restoration of voluntary collective bargaining in sight, the General Council of the T.U.C. issued on June 26 their report Collective Bargaining and the Social Contract, which gives guidance for union negotiators after the abolition of statutory controls. We warmly welcome this constructive response by the T.U.C. to the measures already taken by the Government.

In this report, the T.U.C. recognise, and I quote: although the groundwork is being laid for increasing consumption and living standards in the future, the scope for real increases in consumption at present is limited, and a central negotiating objective in the coming period will therefore be to ensure that real incomes are maintained.

They suggest this will entail claiming compensation for the rise in the cost of living since the last settlement, taking into account that some workers will have obtained agreements and that these should be taken into account in their negotiations. Alternatively, they suggest negotiating arrangements to keep up with the cost of living during the period of the new agreement. However, the T.U.C. also say, and again I quote: the 12 month interval between major increases should in general continue to apply".

The General Council will expect unions who have difficulty in conforming to the spirit of this policy to inform them of the circumstances and to seek their advice, or to respond to an invitation to discuss the situation.

The C.B.I. have as yet issued no statement but I have seen in The Times this morning that they have given support to the social contract. They have welcomed much of what the T.U.C. have said, and, in general, the abolition of pay controls. According to The Times their regional councils will soon be advised by circular that the social contract is acceptable. They have, I know, pressed for the retention of the 12-month rule on a statutory basis. But I have to say to them that in regard to statutory requirement, while everyone is agreed that the 12-month rule should in general continue to apply, and as I said the T.U.C. have given it particular emphasis in their recommendations, it would be quite out of the question to retain the Pay Board and the whole apparatus of pay control, simply on this one point.

As I have said, the Government endorse the approach to negotiations put forward by the T.U.C. in their statement of June 26. As regards negotiations for which we are directly responsible, we propose to base our own approach on the T.U.C. guidelines and no doubt other public sector employers will do the same. We commend the guidelines equally to employers and employees in the private sector as the basis on which they should proceed in their own negotiations. This applies whether or not the employees concerned are in unions in membership of the T.U.C., and whether or not the employers are in companies in membership of the C.B.I.

Because of some recent cases I should like to place special emphasis on the importance of private sector settlements keeping within the T.U.C. guidelines. I have already said that it is imperative that we avoid any general wages explosion. This can be done only if all those concerned with pay determination recognise that, as the T.U.C. have said, the scope for real increases in consumption is limited in present economic circumstances and the main objective should be the maintenance of real incomes. I can only repeat that the T.U.C. guidelines represent to the Government the right approach in current circumstances, and it is our hope that they will be accepted. On the question of equal pay, it is necessary to remember that the Equal Pay Act, introduced by an earlier Labour administration, will come into force in December, 1975. So all concerned with pay determination should bear in mind the need to make steady and orderly progress towards full implementation of equal pay by the end of next year.

I have spoken so far about the pay situation generally. However, I should like to describe in more detail the Order which is before the House, and for which the Government are seeking approval. Unavoidably, in the circumstances, it is a long and detailed document, and I am sure the House would not wish me to go through it paragraph by paragraph. But I should like to refer to some of the more important points contained in it, and then to deal with any further points which need clarification when I wind up.

In addition to abolishing the Pay Board, the draft Order does three things: it provides for Amendments and repeals of the Counter-Inflation Act 1973; it provides for consequential Amendments to the Price and Pay Code; and it provides for the revocation of statutory instruments, first relating to the functions of the Pay Board and, secondly, which modify statutory provisions regarding pay. The Price Code will, of course, remain substantially in its present form, but it will perhaps be of interest to the House to note that the Secretary of State—in practice the Secretary of State for Prices and Consumer Protection—will be responsible for the Code, instead of the Treasury, who were responsible under the Counter-Inflation Act.

In conclusion, I should like to say that for months, even years, past the rate of inflation facing us has presented grave dangers and growing tensions. In the presence of these perils, coupled with the huge gap in the balance of payments and the urgent demand for more exports and investment, there can be no room in the year ahead for a general improvement in the standard of life. Even with the measures for the fairer distribution of the national wealth which this Government are determined to pursue, it will take great exertion and intelligent co-operation throughout the community as a whole to prevent the standard of life from falling, and to ensure that the poorest are not hit hardest by inflation.

However, the removal of the pay controls and a return to a system of consent is not a negative measure. This is something progressive employers, no less than the unions, have wanted, and it can play a major part in enabling us to increase production, avoid industrial disputes, restore genuine collective bargaining and generally unleash anew the democratic vigour of our society. I therefore commend this Order to your Lordships' House.


My Lords, before the noble Lord sits down I wonder whether he could give an illustration. He has enunciated an extremely important proposition; namely, that the objective of wage negotiations in the next 12 months should be to maintain the standard of life. Could he give an indication of the degree of change in money rates which will achieve that objective?


My Lords, again I was going to say that that is a question from a noble Lord who ceases to be one of my noble friends because of it. It is clearly a matter of great difficulty to define what he has asked in any specific terms. Clearly the unions and employers will have a shrewd idea of what is possible in their negotiations together; and I would hope, too, that guidance will be given by the Government, by the C.B.I. and by the T.U.C. through the media—not direction, but guidance—as to the course of events. The point that I sought to stress in my speech is that the T.U.C. and the Government, and I think management itself, accept that in the immediate foreseeable future negotiations should be on the basis of seeking to maintain the present standards of living; that there is no room at the moment for improvement, and that that should be the limit, the aim and the objective of negotiations.


My Lords, I wonder whether the noble Lord could answer one short factual question at this stage? The Pay Board is abolished and the Counter-Inflation Act is not repealed. Is it still true that there remains a residual power in the hands of the Secretary of State, should he so desire, to reimpose compulsory controls?


My Lords, if my memory serves me aright, the existing controls come to an automatic end in October. If they were to be continued beyond that date, fresh legislation would be required. That is my understanding. My Lords, I beg to move.

Moved, That the Draft Counter-Inflation (Abolition of Pay Board) Order 1974, laid before the House on July 9 be approved.—(Lord Shepherd.)


My Lords, we are very grateful to the noble Lord, LORD SHEPHERD, for explaining so clearly the purport of this Order.


My Lords, I have just received information that, if it were your Lordships' wish, I could now make a Statement on Maplin. It may be that some noble Lords would prefer to hear that than, (shall we say?) the continuation of this debate.