§ 3.42 p.m.
§ The LORD PRIVY SEAL (Lord SHEPHERD)
My Lords, with the permission of the House, I will now repeat a Statement which has just been made in another place by my right honourable friend the Chancellor of the Exchequer. His words are as follows:
"The Government have been engaged in discussions with the TUC and CBI about measures to achieve a drastic reduction in the rate of domestic inflation. For millions of our fellow citizens, particularly housewives and pensioners, this is the overriding priority. It is a pre-condition for reducing unemployment and increasing investment. Although these discussions are not yet concluded, I believe it is necessary for the Government to state their intentions now.
"We are determined to bring the rate of domestic inflation down to 10 per cent, by the end of the next pay round and to single figures by the end of 1976. This means the increase in wages and salaries during the next pay round cannot exceed 10 per cent. The same limit is being set for dividends.
"The Government have already reached an advanced stage in preparing measures which are fair and just. These measures will ensure that all sections of the community share the burden fairly. 116 They will set out how the 10 per cent. limit for settlements should be expressed, for example, as a percentage or flat rate or some mixture of the two. They will describe how the Government can satisfy the public that the limits are being observed. They will also cover action to check the rate of price increases as the rate of pay inflation slows. In addition they will deal with the central problem of compliance, since it is no good having an agreed limit for pay increases unless we can be certain it will not be exceeded. In particular we must be able to satisfy those who settle early in the round that they will not be left behind by later settlements at an excessive level. I know the TUC attaches special importance to this.
"The Government will use a battery of weapons for this purpose. For example, we propose to fix cash limits for wage bills in the public sector so that all concerned may understand that the Government are not prepared to foot the bill for excessive settlements through subsidies or borrowing or by loading excess costs on the public through increases in prices and charges. We will take action through the Price Code to encourage compliance by private employers.
"I propose to employ the system of cash limits more generally as a means of controlling public expenditure in the short term.
"The Government are already consulting the CBI and TUC about the proposals. They welcome the efforts the TUC have already made to arrive at a plan for lower pay increases in the next round. We would much prefer to proceed on the basis of a voluntary policy agreed with the CBI and TUC. But a voluntary policy will not be acceptable to the Government unless it satisfies the targets they have set for reducing inflation and includes convincing arrangements for ensuring compliance. If, however no agreement can be reached which meets these conditions, the Government will be obliged to legislate to impose a legal requirement on both public and private sector employers to comply with the 10 per cent. limit. The Government will announce their decisions in a White 117 Paper to be published before the end of next week."
My Lords, that concludes the Statement.
§ 4.46 p.m.
§ Lord CARRINGTON
My Lords, the House will be grateful to the noble Lord the Leader of the House for repeating this Statement. I think it must be obvious to all of us why the Government have made this Statement this afternoon. Therefore, it would not be my intention to make any particular comment on it, or to make things more difficult at the present time. I would say only this, that it is in any event very difficult to make a comment on a Statement which is a Statement of intent rather than a Statement which sets out what is going to be done. Of course, the test of it is whether it is adequate. I do not think we have the facts yet to know whether it is adequate; neither have we the Government's proposals to know whether they are adequate. In any event, the whole depends on whether the Government have the capacity and the will to carry out their intentions. But it is no business of any Opposition at this stage to make the life of the Government more difficult, and certainly nobody on this side would wish to do so.
I should like to ask the noble Lord one question. The last phrase of the Statement says that a legal requirement will be put on private and public sector employers to comply with the 10 per cent. Does that mean a statutory incomes policy? We should like to know whether that phrase bears that interpretation. But, as I say, it is not the duty or the role of an Opposition to make things more difficult in circumstances such as these. Equally, it is the duty of the Government to act in the national interest, and in so far as this is a step towards action it is welcome. We shall await the next stage before making any substantive comment.
§ Lord BYERS
My Lords, I should like to follow the noble Lord, Lord Carrington, by saying that we, too, would wish to be helpful. We welcome the fact that at last a Statement of intent has been made, and we welcome the determination of the Government, expressed in the Statement, to try to control this monster of inflation with which we are all battling 118 at present. What is important is to make sure that the proposals are implemented with the greatest possible urgency. From these Benches we naturally welcome the fact that the Government are prepared to consider a statutory incomes policy, if indeed that proves necessary, because ever since the February Election we have been warning the Government that, in our view, if the voluntary system did not work, something of the sort would be necessary. We know all the difficulties we have had confronting us. I think the Government have had courage in including that phrase in the Statement they have made today. I want to ask only one question. When does the next pay round begin, when does it end, and what is to be done in the meantime to prevent a rush of excessive pay claims in the immediate future?
§ 3.50 p.m.
§ Lord SHEPHERD
My Lords, I can only thank the noble Lords, Lord Carrington and Lord Byers, for the way in which they have received this important Statement. There can be no denying that inflation is today not only the greatest curse of this country but also of Europe, and unfortunately we, for our special reasons, are suffering from this disease with greater severity than others. It is a disease that only we can cure. There is no doubt that, although pay and wages play a part, other factors also have their influence on inflation, but pay and wages today play a very significant part. Therefore, it is necessary to deal with them.
It has been the Government's hope—and I believe this is a hope that has been shared by the Opposition, the Conservative Party—that we should seek, by consent, to have a voluntary policy. It is still our wish that, through consent and the co-operation of the CBI, the TUC, and all the workpeople throughout this country, we should be able to achieve a policy that will restrain wages and incomes to this 10 per cent., or some flat rate equivalent, and that we can break inflation in the coming year. If this is not possible, then the Government have a responsibility well beyond their own members; they have a responsibility to the people as a whole, and therefore they may have to take legal requirements to enforce—I hope there will be an agreed view—measures both for the public and for the private sector. Do not let us play 119 with words, whether it is a statutory policy or otherwise. At this moment of time what we must seek to do is to get the widest measure of consent. If I may refer to Mr. Jack Jones, it seems that today at Blackpool he has had a major triumph within his union. There are leaders of unions who are seeking by consent to achieve a new policy that can break inflation.
In answer to the question of the noble Lord, Lord Byers, as to when a new pay round starts or the old pay round ends, my understanding is that it was when Stage 3 came to an end, which was the month of July, 1974. Therefore, we are now at the end of the old pay round and any of the major claims—I do not think that there are any exceptions—then become part of the new pay claims. This is a matter on which the Government must hope that we can still at this late hour, after long debate with our friends of the CBI and the TUC, reach a measure of consent and have a voluntary policy. We have a few days in which efforts ought to be made by all of us. If we fail then we shall have the White Paper, Parliament will have its opportunity to discuss it, and the legislation obviously would flow from it.
§ Lord REDMAYNE
My Lords, I obviously would not quarrel with what the noble Lord has said or what my noble friend has said about not inquiring too closely into the detailed Statement which the Government have made. Nevertheless, since I speak as a retailer for a low paid industry, I should like to put it on the record with the Minister that he must not too easily accept that a flat rate equivalent to a percentage limit is necessarily the right answer, in the sense that it will bear very heavily on the profits of traders who are already oppressed by price control to a quite unwarrantable degree. We do not take part in these direct discussions between the CBI and the TUC. I would therefore ask with all the more emphasis that this point should be borne in mind.
§ Lord SHEPHERD
My Lords, clearly all matters need to be given thought, but I should not at this stage have thought that special pleading for any particular section of our community, however warranted and however difficult their circumstances may be, is particularly 120 opportune. We need now to carry the nation as a whole with us during this very difficult period. Sacrifices are bound to have to be made. I hope, however, that what sacrifices are made will be borne by those who can best bear them, and that we shall seek to mitigate the difficulties for those who are less strong.
§ Lord MAYBRAY-KING
My Lords, is the noble Lord aware that millions of people living on fixed incomes, and millions of people who do not have the power of powerful trade unions to compensate themselves for rises due to inflation, are the people who suffer most from inflation and will welcome anything that the Government do to check inflation? Some of us are very glad that the noble Lord has mentioned Jack Jones who, in his various speeches, has stated the case of the pensioners on fixed incomes, and the need for a rational policy on the part of the trade unions.
§ Lord SHEPHERD
My Lords, the noble Lord is quite right. We have not only to consider at this moment those who are pensioners and who are on fixed incomes. What I think few appreciate is that one also needs to consider those who have saved their money, and to ensure that the sacrifices they made to achieve that are not lost. These are all factors which I believe are part of the national interest, and if we can get co-operation, through the media and through political co-operation which I hope we shall receive, then I have no doubt at all that the British people will respond.
§ Lord LEE of NEWTON
My Lords, is my noble friend aware that there is a great deal of good sense in the announcement that he has made, and that we are reasonably sure that the vast majority of the nation will welcome the Statement? Would my noble friend agree that such a policy can only be of a temporary nature; that flat rate increases and so on, vital as they are now, cannot remain long? Would he therefore ensure that the Government now discuss with the TUC and the CBI a more permanent structure; that is, permanently to replace the absurdities of collective bargaining with a more sensible structure which can serve us well in the years to come?
§ Lord SHEPHERD
My Lords, I have no doubt that my noble friend is right, 121 but I am sure he would agree that the first sense of energy and resolve for the Government must be to see that we get through the next 12 months with the policy that I have just outlined being accepted and implemented by all of us.
§ Viscount WATKINSON
My Lords, is the noble Lord aware that the 10 per cent. figure is the figure that the CBI feels, after much discussion and research, is the maximum that will enable us to stay competitive in world markets, on which our whole livelihood depends? Is he further aware that if the Government now can give a lead to the nation and propose fair and reasonable terms, he will not lack co-operation from the business community?
§ Lord SHEPHERD
My Lords, I hope that we shall receive co-operation and support from all quarters of this country. Competitiveness is not only a question of what is paid but of what is earned, what is done, and what is performed. Therefore, one needs now not only to look at the immediate question of pay but to a high degree of co-operation between management and workpeople to see that we produce goods competitively, and seize the opportunities which I hope will be available in 1975, when we hope there will be an upturn in trade. Having achieved that, I hope we can look to a much wider and a greatly intensified of investment in our industries.
§ Lord CARRINGTON
My Lords, it is sometimes difficult to ask all the questions one should when one has seen a Statement for only a very short time. There is one question which I think I should have asked the noble Lord. There is no mention in the Statement of Government expenditure. Is this by accident or design?
§ Lord SHEPHERD
My Lords, I refer the noble Lord to the words in the Statement,I propose to employ the system of cash limits more generally as a means of controlling public expenditure in the short term.One can cut public expenditure in figures, but it has little immediate effect. What we need to do is to curb the availability of cash in the short term.
§ Lord DAVIES of LEEK
My Lords, is my noble friend aware that on both sides of the House a majority of noble 122 Lords welcome the Statement? I believe that it would be appropriate to pay a tribute to wise leadership in the TUC and to the co-operation o the CBI. Through their joint efforts they have arrived at this rough formula. Finally, is my noble friend aware that some of us like the militaristic language used in the Statement—in particular, the expression "the Government have a battery of weapons"? Out of that battery of weapons, will my noble friend fire one? Will he look carefully at price controls, because the price of elementary foodstuffs in the shops hits hardest at the old age pensioners and those in low income groups?
§ Lord SHEPHERD
My Lords, of course one could and should look at this; but one must be fair and must recognise that, in relation to food, we are very much subject to world influences. I do not believe that this Government could have done more than they have in the field of subsidy and, in particular, in the raising of old age pensions and the many other social measures which they have carried out. I hope that a Paper will very shortly be issued in which the country will see what is called the "social wage" and the extent to which that social wage has been increased in the last eighteen months.
May I suggest, since we have now been discussing this Statement for 20 minutes, whereas we were previously discussing the Sex Discrimination Bill, and since we may need to consider this matter further next week when we may have greater knowledge and more information, it may be well to bring this discussion to a conclusion and to move back to the Bill.
§ Lord ORR-EWING
My Lords, I should like to make one last point, which I feel ought to be cleared up. At a time when we are asking for voluntary control by so many people and for self-sacrifice by so many others, can we say, from Parliament, that we will not see the Boyle recommendations brought forward either in this House or in another place, because to do so would be out of sympathy with the whole tone—which is courageous in its intent—of the Statement which the Government have made today?
§ Lord SHEPHERD
My Lords, I had hoped that the noble Lord might have taken the sense of the House that we 123 should move on. I have no idea what view the Government will take on Boyle. Boyle has produced one Report and he has a number of others yet to submit to the Government. I do not think that this is a suitable occasion for us to consider that particular aspect of the matter.