HL Deb 31 July 1975 vol 363 cc1205-36

4.38 p.m.

House again in Committee on Clause 1.

The MINISTER of STATE, SCOTTISH OFFICE (Lord Hughes)

I was waiting to see to what extent the noble and learned Lord, Lord Hailsham of Saint Marylebone, was stimulating his friends to join in. If they are content that I should speak now, I am happy to do so. I do not propose to follow the comments of the noble and learned Lord with regard to the constitutional position. I regret the extent to which, in doing so, he found it necessary to suggest that my noble and learned friend the Lord Chancellor had deliberately absented himself from the Chamber because of this. I made inquiries, and understand that no indication was given by the noble and learned Lord, Lord Hailsham, to my noble and learned friend that he was to be pursuing a constitutional point.

Lord HAILSHAM of SAINT MARYLEBONE

I am sorry, but the noble and learned Lord the Lord Chancellor was on the Woolsack last night when I outlined the exact argument that I was to make.

Lord HUGHES

Yes. My noble and learned friend assures me that he understood that the noble and learned Lord, Lord Hailsham, was to follow the political line which he took yesterday, and while he undoubtedly did follow a political line—that was quite obvious in the earliest part of his speech—he then went on to the constitutional points. I think perhaps the noble and learned Lord took the matter so very far away from this Bill in referring to a whole lot of other things which he thought were constitutionally undesirable, that he has perhaps provided the Committee with another occasion on which we may have a major debate on points he has raised, such as those we have just had on the Statement

In any event, it will not surprise the noble and learned Lord that I do not find myself qualified to argue those fine constitutional points. I have a strong impression that those whose co-operation we are going to need in getting an incomes policy worked out in this country will be more concerned with the effects on them of the policy, rather than with the finer legal ways in which it may be brought about.

The noble and learned Lord started off by referring to the fact that the only purpose of Clause 1 was to deprive certain work people of their contractual rights. If I accept that that is the only purpose of Clause 1, then the noble and learned Lord was certainly in danger of misleading the Committee if he was suggesting that this is the first time it has ever been done, because exactly the same thing was done in 1972 under the policies of the Government of which he was a member. The difference then was that they not only took away the opportunity of applying these rights, but they amended them in the Bill; they deprived them of these rights in the form in which the Bill appeared. That may be a point of interest to the noble and learned Lord, but I suggest it will neither help nor hinder us in getting our policies accepted by the country.

There is already the clearest possible evidence that the attempt to get this policy into operation is meeting with success at this stage, which certainly was not obvious in 1972. What is obvious is that our fight against inflationary tendencies, to get inflation down in the way in which the Government are talking, to 10 per cent. within a year and to single figures by the end of next year, will succeed only to the extent to which we carry the people of this country with us.

Incidentally, I would point this out. I do not blame the noble and learned Lord for this; he has been concerning himself with many of these matters during the last 48 hours, and I cannot blame him for not having seen the final form of the Bill as it emerged from the Commons. Otherwise, he would not have made so much a part of his case the fact that the regulations to be made in regard to future documents were subject to the Negative Resolution procedure. That was amended. That takes away a very large part of his criticism about the future position, because Parliament is not at this stage being asked to agree to some vague unknown future document with only the opportunity of praying against it. This vague future document will come into operation only if, Parliament having seen it, it approves it in both Houses by the Affirmative Resolution procedure. That takes the future document into a completely different category.

The noble and learned Lord said that his attention had been drawn to the fact that the contracts which were being interfered with were only contracts entered into before the date which he mentioned in July. That is perfectly true, but the clause is deliberately drafted to affect only those contracts. Therefore, the provision makes it possible for employers to comply with the voluntary policy. Without this provision, employers contracted to give pay increases above the pay limits would be unable to comply with the policy without becoming liable to proceedings for breach of contract. The Government think it right to make provision for employers who put themselves into this position unknowingly, because they did not know when they entered into the contract that a policy of this kind would be necessary at the end of July and the beginning of August.

But if a future contract is entered into and an employer voluntarily and knowingly takes on obligations which will put him outside the limits laid down, then, of course, he must be prepared to bear the consequences of his action. If he does it knowingly, he cannot expect to have legislative provisions made to take him out of the contract he has entered into. But it is reasonable that he should be given safeguards when he complies with policies which the country want carried out, with a restraint on wages.

The noble and learned Lord then referred to subsection (5) which he criticised. He said that it was a deliberate attempt to keep the courts out of the situation; it was because we disliked the courts and we did not want the judges to have anything to do with it. In another place, it was said that it was almost a form of Star Chamber being brought in. What is the situation? Under the legislation of the previous Government, Parliament had nothing to say about it. They set up a Pay Board whose decisions were not open to question or challenge in this or the other House of Parliament. But in the provisions which are being laid down here the Secretary of State can be challenged in Parliament, in this House or in another House, on the actions he may take. Therefore, far from this being a removal of control in the matter, it is an extension of it; and, after all, if we are to have regard to the old terminology, the way in which we have prayed Sunday by Sunday in church, this is the High Court of Parliament. Therefore, it is at least laying down that the Secretary of State, in taking action under subsection (5) of Clause 1, as it will be, is at least answerable to the High Court of Parliament for what he may do.

It was obvious that, whatever the intentions of the previous Government, the attempt to lay down rules precisely, word by word, line by line, law by law, did not work. Let us recall the experience with the Pay Code and find out whether we would have been better doing something like that, rather than adopting the method in this Bill. The previous Administration started off with a White Paper on stage 1, which ran to one and a half pages of print. By stage 2 this had become nine pages of print in the Pay Code, and six months later they added another eight pages of print, and that was only stage 3. Indeed, even the existence of 17 pages of the stage 3 Pay Code did not relieve the Opposition of the need to have Pay Board officials advising daily on numerous inquiries.

The inquiries which have been coming into the Government at this stage have shown that what people are anxious to do is to find ways of making it work. They are not asking questions to find ways of getting through it. The degree of co-operation from the trade unions and from the employers is at this stage a good augury for the success of the policy. I suggest that it will be much more acceptable to the people outside this House if we put on the Statute Book a Bill which will work, even though it is not in a form which would most commend itself to lawyers.

The Earl of SELKIRK

I wonder whether I could have an answer to a question I asked last night. The noble Lord the Leader of the House said he would get an answer to it today. The noble Lord, Lord Hughes, has said, very properly, that everybody is interested in how this works and what is its effect. My noble and learned friend Lord Hailsham has explained the difficulties of the structure. Of course, one of the curious things is that this is rather like an international treaty which you homologate by an Act of Parliament; it is an agreement between two parties which is placed here. Its working is something about which we are entitled to have some explanation. May I explain what I mean? Today is the last day of July. Tomorrow the Act comes into force. There are people who have to make decisions on wages and so on, tomorrow.

Lord HUGHES

I am very sorry. There must have been some slip up. I was not there during the later stages when the noble Earl spoke, and I have not seen what he said, so I do not know the question that I am supposed to answer. If the noble Earl would be good enough to let me know what it was and then go on to elaborate, that might give me time to find the answer.

The Earl of SELKIRK

I am not very good at that practice normally, but the question I am asking is: what decisions do people make tomorrow? May I put a very simple question? What about teachers? There has been a recent recommendation for teachers. I am not certain on what date it came out, but the Paper refers to recommendations made before the publication of this Paper. What was the date of publication of this Paper? I do not know. I am asking a purely practical question. What do people do? One of the rules is that there cannot be two rises in 12 months. We know that there was an award by the noble Lord, Lord Houghton, last December. Are teachers excluded from the second award this year?

May I add a more difficult problem. There are a number of places where teachers' awards are not on the Burnham scale but are based on the Burnham scale. They have to be worked out at a much later date. I asked this question last night. I knew it would not be answered then, but I asked it deliberately because I hoped that it would be answered today, and I am sorry that the noble Lord has not been informed of it. Clause 1—and this is important—uses the words, "imposed by the policy". That means to say that it is imposed by this White Paper. There are two documents. One is the Government policy and the other the TUC policy. In this field the wording is different. I suppose one has to assume, though one does not know for certain, that the Government's view is more important than the TUC's. I do not know whether it is, but what the Government say is that in the immediate application there may arise inequity. It then goes on: …they accept that Wages Council proposals and the awards from formal arbitration references made before this White Paper"— as I have no date I do not know what is "before this White Paper" and what is not— should be implemented… Then it goes on: …provided that they have had no principal increase under the existing TUC guidelines within the last twelve months. This affects teachers and, probably, many other people as well.

The emphasis the noble Lord rightly laid on the effect of this is that people want to know. Whatever one may say about the rule of law, I believe that the great body of people in this country want to follow the rule of law. There are some who do not, but the great body of people do, and it is therefore fair that the Government should tell them what the position is. These are decisions which people have to make in the very near future; they have to decide how they stand in this matter. They want to follow it as best they can, but they have equally to be fair to their employees. It is no good one person taking a tough line on this when somebody else takes a weaker line. They want to carry out as far as possible what is considered to be a fair interpretation of the Bill. I should be glad if the noble Lord—if he has had sufficient time to get the information from those who know what is happening—could answer this question, because it is important and many people would like to know the answer. If the noble Lord can answer, I should be very grateful.

4.53 p.m.

Lord HOUGHTON of SOWERBY

If I may respectfully say so, I think that the noble Earl, Lord Selkirk, is asking too much of my noble friends. They do not know the answers.

Lord HAILSHAM of SAINT MARYLEBONE

They promised one last night.

Lord HOUGHTON of SOWERBY

In the circumstances in which his policy has been put together, it is quite obvious that many of the answers to the questions which are now being asked will have to be found in the course of discussions between trade unions and employers, and between both of them and the Secretary of State's Department. These are the facts of the situation. There are an enormous number of questions which are going to be asked and many anomalies which will emerge, but at any rate the policy in principle and in general has been approved by the Trades Union Congress. They have said that they will oppose any claims which breach the general principles of this White Paper.

So far, so good. That is the fundamental starting point to this policy. I ask a question which, so far as I am aware, has not been satisfactorily resolved in the debates in another place, and that is the problem of incremental progression, and other automatic steps in wages and salary scales which have become conventional in the structure of payment, especially in white collar occupations and in the public sector. I believe that an answer has been given to the question of pensions. Where increases in pensions are to be given under existing arrangements reflecting increases in the cost of living, I believe that an assurance has been given that these pension increases will go on and will not be limited to the £6 which applies to pay. I understand, however, that there are some doubts as to whether improvements in pension schemes now undertaken to provide additional benefits may be caught by the £6 limit. I am afraid that these are problems, complicated and full of controversy, which will have to be settled in the course of the next few weeks and months. We had these problems following other attempts to apply some firm limitation to pay Increases on earlier occasions. These are inescapable from the application of this kind of policy.

These are dramatic measures to arrest inflation quickly with an immediate response, free of long-drawn out discussions and negotiations of new pay structures which might be involved in any permanent attempt to scale down remuneration in the interests of the fight against inflation. I think we have to face the fact that if this policy is to be implemented quickly, if we are to achieve its main purpose, which is to stop pay increases in general at the present time, we shall have to leave many of these anomalies and difficulties to be sorted out.

The noble Earl mentioned teachers. As I understand it, the recent award by the arbitration tribunal in the case of teachers in England and Wales will not be caught by the White Paper. They had their award from an arbitration tribunal before the White Paper. Also, I think that changes in salary scales in those grades which flow from Burnham improvements may be exempted, too, but I am not at all sure about that. This bristles with difficulties in the field of relativities, of comparative treatment, equity, inequity. Goodness me! One knows, as does anyone who has been in the trade union movement for five minutes, the kind of problems which will arise from the implementation of this policy—but it is either this, or inflation goes on.

This is the best policy we have, from the best Government we have, and if anyone has an alternative, then we ought to know what it is. The noble Earl, Lord Hailsham, said that this policy is better than no policy at all, and this is the policy that we have. In the circumstances, and within the hours when something has to be done, surely for the time being we have to accept this policy and all that may flow from it and hope that it can be held. This is the important thing; that it can be held both on the Government side and on the trade union side. If this policy will stick for 12 months only, it will make a very big difference to the whole situation. I say no more about the predictions which the noble Earl, Lord Hailsham made about policies of this kind breaking down, but—

Lord HAILSHAM of SAINT MARYLEBONE

I am not an Earl.

Lord HOUGHTON of SOWERBY

I am sorry to bestow on the noble and learned Lord a distinction which he does not have.

Lord HAILSHAM of SAINT MARYLEBONE

And does not deserve?

Lord HOUGHTON of SOWERBY

One finds the different degrees of nobility in your Lordships' Committee difficult to assess and sometimes difficult to distinguish. My main point is there, and I hope we can get this Bill through in the quickest possible time and leave those who have agreed to it in principle to deal with the problems that arise from it.

Lord ALEXANDER of POTTER-HILL

May I ask my noble friend Lord Hughes a question for clarification? I accept the statement by my noble friend Lord Houghton of Sowerby that, as far as teachers in the maintained schools are concerned, there is no major problem; I do not think they are affected by this, unless they may be in terms of incremental credit. It is, however, a fact that there are a considerable number of schools which follow Burnham, but not on date; a great many schools make their adjustments with effect from 1st September, whereas the Burnham Agreement is from 1st April. In many cases they may have made their decisions to do so on 1st September, which would be 12 months after their previous decision, following the same pattern. I should be grateful if an indication could be given that agreements so reached, to be effective on 1st September following Burnham, would not be affected by this Bill.

Lord HUGHES

If I have not been able to lay my hands on all the answers to all the questions put by the noble Earl, Lord Selkirk, I cannot blame my noble friend Lord Houghton of Sowerby, who gave me ample opportunity to look for them, and fortunately I was able to find them. My difficulty on this issue was not getting the answer but knowing the question because I had not heard it, it had not been communicated to me and it had not been printed; nor am I clairvoyant. The basic features of the policy which we have laid down are clear and simple. The policy is designed to limit pay awards during the period to a maximum of £6 a week, and that policy is directed to voluntary compliance. Without broad acceptance, no policy will work.

In the vast majority of situations, those determining agreements should have no difficulty in seeing how it should be applied and we believe that this is already evident, but if individual employers or unions are uncertain about the application of the policy in particular cases, the employers' associations, including the CBI and the TUC, are able to give advice and guidance; that is their customary role. The Department of Employment is also ready to give advice to any inquirer and is already doing so. There is every indication, as I said, that people seeking for that advice are seeking for the ways in which they can make the policy work, and we are not getting inquiries along the lines of finding how to drive a coach and horses through the policy.

Obviously, if noble Lords wished to put me into difficulties, I have no doubt they could ask a series of individual questions to which I could not furnish the answers this afternoon. I might be able to furnish those answers this evening or tomorrow or next week, but most of these are capable of being answered within the policy when one looks at the individual details of the cases. I ask your Lordships to consider the one to which the noble Earl, Lord Selkirk, referred, and my noble friend Lord Houghton gave the correct position. The White Paper lays down in paragraph 8 that the Government accept: …that Wages Council proposals and the awards from formal arbitration references made before this White Paper should be implemented; and that settlements may also be implemented for groups which, before the date of publication of this White Paper, have reached agreements for annual settlement dates not later than 1 September, provided that they have had no principal increase under the existing TUC guidelines within the last 12 months. Provided such an agreement has been made before the date of the White Paper—and the date is 11th July—then that can be implemented from 1st September in the cases to which my noble friend Lord Alexander of Potterhill referred. But if there is no such agreement to implement the arbitration award given generally to the teachers, then it will be caught by the terms of the policy.

The Government have felt that obviously, when bringing in a policy in which one says that after a certain period increases should not exceed a particular figure, there are bound to be difficulties and it seemed to the Government that the best way of dealing with this was to say that where there was a procedure under way—an arbitration award or a wages council reference—before the date of the White Paper, then that should be allowed to stand, and the teachers present as good a case as exists. I have no doubt that in the next few weeks there will be many references to the CBI, the TUC and the Department of Employment, but the position which has emerged does not seem to indicate that there will be difficulty in implementing the policy in any of the cases which are likely to be referred to them for guidance.

The Earl of SELKIRK

I am obliged to the noble Lord, Lord Hughes, for giving me that information and it is important that people should know about it. I am bound to say that I do not think the matter is very clear, but I note what the noble Lord, Lord Houghton of Sowerby, said about the teachers getting their award because it was made before the White Paper was published. It is laid down clearly by the Government and the TUC that no two awards can be made in 12 months, and I mention that because it is a difficulty. I am not creating difficulties but trying to clarify what is not as clear as it should be, but the noble Lord, Lord Hughes, has helped a lot.

Lord HUGHES

If one looks at the terms of the Houghton Award—and who am I to say this in the presence of its principal author?—one sees that what happened as a result of the arbitration award was never to be regarded as a second increase within the period. I am of course paraphrasing here, but the first one was, in fact, a restructuring of the scale and the award which came as a result of the arbitration was the pay award for the period of the year before.

Lord HAILSHAM of SAINT MARYLEBONE

I am grateful to the noble Lord, Lord Hughes, for his kindness to my noble friend in answering the question about which a promise was made in the latter part of last night, and of course I appreciate his difficulty in identifying the question in that he was not actually here himself and had not heard the promise made. I certainly did not want to complain that the noble Lord should answer me, but I must tell him that I said nothing this afternoon—although I said it in greater detail, as I told the House I would—which I had not said last night when the noble and learned Lord the Lord Chancellor was on the Woolsack, and as he was taking copious notes I had assumed that we should hear him in answer to the argument I was presenting today. But the last thing I wanted to do was to offer the noble Lord who has answered any discourtesy at all, and I hope he will accept that from me

Lord HUGHES

I certainly did not take it that I had been offered any discourtesy. As the noble and learned Lord is aware, I am the spokesman here for the Department of Employment and I have come into this not as a constitutional expert but as the number two in this field.

Lord HAILSHAM of SAINT MARYLEBONE

The noble Lord is holding his own very well but the point I was making last night and this afternoon—and I made it both times—was a constitutional point and that point has, I am bound to say, through no fault of the noble Lord personally, not been answered. I must apologise to him for having got the Negative Resolution point wrong. That was entirely my fault, and he is right in saying that I have been under rather considerable pressure in the last 48 hours, through I think no fault of my own. However, I should apologise to the Committee. I was wrong about it and anything which depends on the Negative Resolution point is of course undeservedly withdrawn because it was a wrong one. Nevertheless, the basic point has not been answered.

It is of course perfectly true that, when one has any sort of a wage freeze—and I use the term generically—one must deal with pre-existing contracts which continue to require performance after the wage freeze comes into force. One can allow them to continue to have validity or one can deprive the worker of his rights. Alternatively, one can arrive at some halfway house. It is true that in 1972 we chose the second of those options and the worker was not entitled to the benefit of a pre-existing contract. However, we did it by Statute. That is the point that I was making. The point I was making was that it is fundamentally subversive of the rule of law and of Statute to do it by White Paper while not even incorporating the White Paper in the Statute, because Parliament has never approved it in that sense. It has not gone through three Readings, it has not been capable of amendment and it has in this case, been approved by only one House of Parliament. That is not a constitutional way of behaving, whatever the noble Lord may say.

Secondly, the worker has not been deprived of his rights per se. The worker has been deprived of his legal rights at the option of the employer, and that is also a constitutional point to which no answer has been made. The employer can continue to observe the contract and will not, presumably, suffer from industrial relations trouble if he does, but he is not bound to do so. That is what the clause provides. To deprive workers of their contractual rights at the option of the employer is not a constitutional way of proceeding.

Thirdly, I made the point that if the contract was made before the date of commencement of the Act—we will say before today—the employer has an option, but, if he makes a contract tomorrow or the next day, assuming Royal Assent today or tomorrow, he is bound in spite of the fact that he does not limit himself to the White Paper limitations. That cannot be right, I submit, but it is what the clause does. There has been no answer to that either.

At the end of the day, we have the Secretary of State proposing to construe the Act itself. It is no kind of answer by the noble Lord to say that we had an independent arbitral board, because we did and no doubt that arbitral board was arguably better than the courts. The truth is that it is quite a different thing to make the Secretary of State judge in his own cause than to make the Secretary of State's construction of the meaning of his documents subject either to decision in the courts or impartial construction by the arbitral board. It is really not good enough to try to run away and talk about the High Court of Parliament as if this were a court of law For certain purposes, it is a court of law, but everybody knows that it is a legislative body which in its Lower Chamber is very largely dominated by the Executive. Therefore, it does not exercise judicial functions except in a very limited and, for this purpose, totally irrelevant sense.

The truth is that the Bill is not necessary to carry out this policy. The Government could have carried out their policy by another Bill. The difficulty they were in is that if they proceed in a constitutional manner by passing an Act of Parliament—albeit in a hurry—which defined the rights of the worker in the Statute and which did not leave it to the option of the employer in the Statute, or which did not deprive the courts or an independent arbitral body of their jurisdiction, they could have done so. I still believe that the policy would not work, but it could have been done in that way. The reason why it has been done as it has is to provide the purely specious excuse that this is not a statutory policy. As a result, the statutory policy is made statutory by something which is not a Statute, but is referred to as one, and is made voluntary without really being voluntary and is being made in accordance with a document which has not had Parliamentary approval. The fact remains that that is a constitutional outrage.

Lord HUGHES

I do not want to prolong matters unduly. The noble Lord has said that certain of these constitutional points have not been answered, but I do not completely accept that. I thought that I had given a layman's answer to what was said. Just as in the question of what people get paid—the rate of wages, the amount of deductions for income tax and national insurance—the vast majority of people regard their pay as what is in the pay packet at the end of the day, not the gross figure before the deductions, I suggest that what the great majority of people in this country are interested in in relation to the policy which is being carried out by the Government is not the method by which the Government arrived at it but the way in which it will affect their pay packet at the end of the day, and whether that policy will result in that wage packet's value being protected. I suggest that the great majority of people are much more interested in seeing a policy which will work. They are not interested in any other policy.

I have no doubt that the noble and learned Lord is quite correct about the constitutional points, but I doubt very much whether the great majority of people will be worried if the policy works through the wrong method rather than if it goes wrong through the right method.

Clause 1 agreed to.

5.18 p.m.

Lord BYERS moved the following Amendment:

After Clause 1 insert the following new clause:

Employers' contributions to secure benefits under approved schemes by way of pensions etc.

". The document laid before Parliament by command of Her Majesty in July 1975 (Cmnd. 6151) shall not apply so as to impose restrictions on ordinary annual contributions by an employer to secure new or improved benefits under a scheme approved, or provisionally approved, by the Board of Inland Revenue by way of pensions on retirement, pensions for dependants, lump sum payments on death in service or pensions payable in the event of illness or disability:

Provided that such new or improved benefits apply in the case of existing schemes to all members who are not already eligible for such benefits and in the case of new schemes to all employees or to all employees except those under an age not exceeding 26 or who have completed a period of service not exceeding 5 years.".

The noble Lord said: The object of this new clause is to seek to exempt from the £6 limit an employer who wishes to make contributions to secure new or improved benefits in pension schemes. It is important that we should take this in view of the fact that the Social Security Pensions Bill will, I suspect, receive the Royal Assent next week.

I ought to begin by making it clear that the new clause follows exactly the wording of a new clause moved in another place on Tuesday night. In the ordinary way, I should not have raised the matter in this House after a new clause had been rejected by a vote in another place, but millions of people are likely to be affected by the issue and I feel that it is an issue which, as a result of the legisla tion having been so hastily prepared, has perhaps not been fully appreciated by the Departments and the Ministers concerned.

I tried to raise the matter in yesterday's debate and, indeed, I spoke to it at some length, but I had no reply last night from the noble Lord, Lord Beswick, to the points which I made. However, in an interjection, he made two points. The first was that it could be unfair to give deferred pay—which is what a pension is—to some people and not to others. This unfairness exists at the moment and it is a fact of life, but if the noble Lord will carefully consider the wording of my new clause, he will see that there are explicit provisions to prevent discrimination or any further unfairness. The new clause is designed only to permit a levelling-up. It will not perpetrate any further unfairness and it will reduce some of the unfairness which exists at present, to which I referred in examples yesterday.

Secondly, the noble Lord, Lord Beswick, yesterday feared what he called a phoney deferred pay system to get round the £6 limit. There is nothing phoney about an improvement in pensions which benefits one of the poorest sections of the community and the one which is worst hit by inflation. There is nothing phoney in reducing future dependance on supplementary benefit, which is what we have all been trying to do through the new Social Security Pensions Bill. I do not deny that there could be a phoney pensions scheme, but the wording of the new clause exempts only those schemes approved by the Inland Revenue.

As anyone who has tried to negotiate the approval of a pensions scheme with the Inland Revenue will know, it is necessary to comply with very strict requirements on many points of principle and of detail. Indeed, this new clause goes even further: it requires that exempt schemes should be approved by the Inland Revenue, and it contains a further provision to avoid unfairness, as I mentioned earlier. When the new clause was moved in another place, a number of points were put forward in its favour from all sides of the House, but when the Secretary of State for Employment replied he did not take up those points in detail. One can only conclude that the Government had already decided on their policy statement on pensions before the debate took place on Tuesday night because of the pressing nature of the legislation. In fact, their policy statements leave pension schemes and the implementation of the new Pensions Act in a far worse predicament than was even anticipated. Apart from schemes under negotiation in the period prior to the publication of a White Paper, there can be no new or no improved schemes for the next 12 months.

What I find profoundly disturbing is that new schemes and improved schemes after the next 12 months will be permitted to do, as the Secretary of State said, no more than meet the minimum statutory requirements for contracting out under the Social Security Pensions Bill. The minimum requirements—that is all that one can negotiate. Let me make it plain what this means. Nothing can be done for a year, and at the end of 12 months an employer will be permitted to provide a new or improved earnings-related pension but only in respect of service after the new State scheme begins and only in respect of that slice of earnings which qualifies for the new State scheme.

The result is that anyone close to retirement has no chance to build up an earnings-related pension for the greater part of his service. I do not believe that this was ever intended by the Government. I want to make it clear just who will suffer from this policy. Higher paid employees are, at the moment, very often in good pensions schemes providing generous benefits. They are not the ones who will suffer. It will be the manual workers and the female employees who will suffer because they are the two main categories excluded from pension schemes at the moment. These are the categories we were all hoping would be brought into good occupational schemes as quickly as possible after the Act was on the Statute Book.

I do not believe that it is the Government's intention to exclude such categories as that. I cannot believe that it is TUC policy, and it certainly has not got the backing of progressive trade union leaders whom I meet in the course of my work in the Pensions Information Centre from time to time. When Mrs. Castle announced the new State pension scheme some months ago, she laid great stress on the need for a partnership between State and occupational pensions, and she made it clear that the contracting out standards would be the minimum acceptable to the Government if the employer was to be allowed to provide benefits under his own scheme as an alternative to the new, earnings-related State scheme. What we are now being told is that the minimum is also the maximum. Under this policy to contract out, a scheme must provide no less than the minimum required but it must also provide no more than the minimum; and I do not believe that this is what the Government intend.

The Secretary of State for Employment said in another place that he hoped that employers and unions would continue to negotiate. But there is nothing to negotiate about. If there can be no greater benefits than those provided by the State scheme, which is what we are talking about—because the minimum requirements are just about the same as in a State scheme—and if there is to be no more flexibility than can be had in the State scheme, which by nature is inflexible, what initiative, what incentive, is there for an employer to negotiate and to contract out? From Mr. Michael Foot's remarks, I cannot tell whether the Government have failed to understand the problem or whether they are really content to accept this real set-back to the hopes and expectations of many hundreds of thousands of people. That is why I am moving for the introduction of this new clause today.

On 14th July I wrote to the Prime Minister, merely for clarification. I could not believe that this was the Government's intention. Today, in his absence, I have received a very courteous letter from the Private Secretary, in which he says, speaking for the Prime Minister—and this is what worries me, because I think that the Government really do think that they have done the right thing— With pensions, as with many other issues, the Government are faced with the problem of reconciling the long-term policies they wish to pursue with the short-term need to beat inflation. The Government believe that the Secretary of State's statement provides the necessary encouragement to both employers and unions to continue to negotiate improvements in occupational pension schemes.

But it is to negotiate on the minimum required for contracting out—negotiations just will not take place! Again, the letter says: He has now made clear on Report stage that improvements negotiated in the next twelve months to meet the minimum requirements for contracting out under the Social Security Pensions Bill will be allowed to go ahead from dates from 31st July 1976 outside the pay limits.

That does not make sense. It is a case of, "Thank you for nothing", and the Government must think again on this.

I appreciate that there must be restrictions, but there is already in existence an elaborate code of restrictions to prevent improved pension schemes from providing excessive benefits. The new clause would permit improvements only up to that ceiling; and even then there are further safeguards. These further safeguards prevent discrimination, and in the case of new schemes the only discrimination permitted would be to allow employers to exclude those people who are younger than 26 or those who have been in the job for less than five years. I have chosen those two categories because they are already embodied in existing pensions legislation. They are the two categories which are exempt from the requirements of the 1973 Act that a preserved pension must be provided on withdrawal.

I quite see that there must be restrictions on new and improved schemes in relation both to the level of benefit and the categories of those entitled to benefit. It is for that reason that I have worded the new clause in such a way as to provide these very safeguards. But my final point concerns the fear expressed by the Secretary of State for Employment when he said that to abandon the proposition that improvements in non-wage benefits should be counted against the £6 would destroy the credibility of the £6 limit.

This is the key to the whole problem. I am moving this new clause to exempt pension schemes which meet certain conditions, because I am convinced that such exemption is not only consistent with the Government's intention of solving our economic problems, with which I agree, but that it will actually assist them to achieve the desired result. Pensions have always been recognised as being quite different from other non-wage benefits. They are a major source of the invest ment funds which our economy so desperately needs. As such they need to be encouraged, not to be restricted.

The case for occupational pension schemes has been very well made by someone I should like to quote: Occupational schemes provide their men hers with additional income in retirements, generally related to earnings. They may also be geared to the needs of and agreements in particular industries or occupations, and they make a valuable contribution to the economy through their encouragement to private savings "— which is what we all want— by which employees put aside some of their current pay to provide for retirement. Those words are not mine. They were not spoken by anyone in the pensions industry. They were the words which Mrs. Castle used in the White Paper when she launched her new pension scheme. The point is that pension contributions which go into savings are anti-inflation; they take money out of consumption. Let us face it—the bigger the benefits, the better the benefits, the more costly, and therefore the more money which is removed in the immediate future for use in retirement at a much later stage.

The background to this Bill is the appalling state of our economy. I do not deny that the Government must take drastic action to restrict disposable incomes and consumption and to encourage savings and investment. I said that yesterday. It is because, and only because, new and improved pensions fulfil these objectives, and these objectives are essential to the solution of our economic problems, that I am moving this new clause. I hope that the Government really will give serious consideration to this matter. If they do not, a very big mistake will be made on social and economic grounds. I beg to move.

5.30 p.m.

Lord ABERDARE

I have the benefit of advice from my noble and learned friend that this clause is not particularly happy in this Bill. Therefore I should not be able to follow the noble Lord, Lord Byers, into trying to insert the clause into the Bill. But, short of the reservation of not walking through the Lobby with him, I give him all the support that I can in the points he made. He has put them with such force and clarity, both in the debate yesterday and again today, that it would be merely a waste of time if I were to rehearse them all again. Certainly, as he made them, I found myself in the fullest possible agreement with what he was saying. It seems to me that pensions, above all else, are counter-inflationary and we should be doing everything we can to encourage new pension schemes, to create real savings, to increase the amount of money available for investment—which is what we all require—and to transfer money from consumption to savings.

As the noble Lord, Lord Byers, has said, we have only just parted with the Social Security Pensions Bill in which many of us have been desperately struggling to encourage occupational pension schemes. We got a long way, and were hopeful that the final Bill would go even further, in producing partnership between private occupational schemes and public schemes. It seems a disaster at this particular moment if that energy and initiative, coming we believe from the occupational pensions industry, is to be inhibited as a result of this incomes policy, especially when, in our view, it is irrelevant to the £6 limit.

I cannot see how it can be maintained that it would affect the credibility of the £6 limit. Certainly, in our own counter-inflation policies, in Phases 1 and 2, which were far stricter—Phase I was a complete freeze—than the £6 limit, there was no question of limiting new pension proposals. As the noble Lord said, what we would be doing is preventing employers from putting forward proposals—because these are long-term proposals—above the sheer minimum basic for the future for their own employees, mainly manual workers, widows and other people who hitherto have not had as good schemes as they should.

Lord BYERS

Before the noble Lord sits down, may I ask him to reconsider his attitude to the possibility of accompanying me through the Lobbies. I have great respect for the noble and learned Lord sitting on his left, but this Amendment was dealt with in another place. It was discussed for several hours and no objection was made to the fact that it had no place in the Bill. While I much respect the legal qualifications of the noble and learned Lord, I should have thought that on this occasion he was not right.

5.33 p.m.

Lord HOUGHTON of SOWERBY

When my noble friend comes to reply he might, I think, deal with the question whether what the noble Lord, Lord Byers, has been talking about is covered by this Bill at all and, indeed, whether it is covered by the policy at all. That is, up to now at any rate, a voluntary policy. Unless it is caught by a statutory limitation under the Bill, it seems to me that no action of the kind that the noble Lord, Lord Byers, described, is prohibited. The clause that we are now considering, and which has been fully explained by the noble and learned Lord, Lord Hailsham, precludes a worker from getting increases in pay in accordance with an existing contract beyond a certain point. Clause 1 relieves the employer of any legal liability to honour his contract. That is what Clause 1 does. I do not see therefore that in the matter of pension schemes there is anything, either in the White Paper or in the Bill, which will prevent an employer from negotiating an improved superannuation scheme.

I know that reference was made to this matter in another place and that there was some obiter dictum from a Minister; but that has no effect, it seems to me, either under the White Paper or under this Bill, unless something is laid down which can be enforced at a subsequent stage by the Secretary of State. What are we talking about? It seems to me that we are talking about negotiating improved superannuation arrangements which involve, at least initially, increased contributions. Not until the improvement which is carried out qualifies for improved benefits can any money be paid out. It will have been paid by the employee into a fund, or by the employer and the employee combined into a fund, which is financing an occupational pension scheme.

I think it may be that we are getting unnecessarily concerned about something which may not be impeded either by the policy or by the law. I hope that my noble friend will be able to shed some light on it. I do not think the Government are entitled to press this policy beyond what has been agreed with the TUC and what has been put forward as a policy for pay and incomes. If pension increases in accordance with existing arrangements are to be granted notwithstanding the £6 a week limit on pay, it seems to me strange indeed if there is to be some obstacle put in the way of the negotiating of an improved pension scheme arising from which contingent benefits may be paid at some date in the future. I should be glad on my own behalf, apart from what the noble Lord, Lord Byers, said, to have an explanation of what may be a difficulty in the minds of noble Lords but which does not exist in the policy itself.

5.37 p.m.

Lord HUGHES

I fervently wish that the noble Lord, Lord Houghton of Sowerby, was right; but the fact is that, as Lord Byers well knows in putting forward his Amendment, the Bill does cover pensions. After all, the first word in the title is "Remuneration". That will cover the various conditions attached to employment: pensions, actual rate of pay and so on. If something were to be done it would have to be done in terms of an Amendment such as the noble Lord, Lord Byers, has suggested. I had the benefit of hearing what Lord Byers had to say yesterday in relation to this. He then declared an interest in the matter. I did not think it was necessary for him to do so; but at least it was quite clear during his remarks yesterday and from what he said today, that this is a subject on which he is an acknowledged expert and that he was not talking merely on his own behalf but on behalf of other people.

The noble Lord, Lord Aberdare, said that while he agreed with a lot of what Lord Byers had said, the advice he had got about the validity of the Amendment itself was such that it could not lead him into the Lobbies. I find myself in a position to look almost as far as Lord Aberdare; except I would suggest to the noble Lord, Lord Byers, that at this stage in the proceedings, given what was already said by my noble friend the Secretary of State for Employment and what I will myself say, I doubt whether it would serve a useful purpose to insert this Amendment—which the Government cannot accept—and to go through the motions of sending it back to another place, unless there were reasons to believe that the Government were in a position to advise another place that the Amendment could be acceptable. The Government are not in that position.

I do not think the past record of the noble Lord, Lord Byers, would lead anyone to believe that he is willing to go through an exercise merely for the sake of carrying it out rather than for what the end result is likely to be. I have an added difficulty that the brief I have been given is largely a repetition of what was said by the Secretary of State in another place, and as the noble Lord, Lord Byers, read out almost everything the Secretary of State said in another place, there is not much point in my saying it again. In everything he quoted my noble friend as saying, he was absolutely factual except in the following.

First, he was not right in saying that the answer which had been given by my right honourable friend must have been because the Government did not take into account what was in the Amendment before another place—this clause—and he did not blame them for that. As the noble Lord said, he wrote to the Prime Minister on 14th July, and the Statement that was made by my right honourable friend on 29th July was made after the Government had given careful consideration to the points which the noble Lord, Lord Byers, put forward.

Obviously, given the policy which the Government will ultimately want to apply in full to pensions, what is being done in this Bill cuts across that. We would never accept as a permanent part of policy that the people to be hit regarding pensions are the ones at the bottom of the scale. We would not accept it as desirable that those widows who do not have the benefit of a pension scheme should be permanently deprived of that. But this is one of the inevitable results of the situation compelling us to apply a policy which, in normal times, would be totally unacceptable.

For the purposes of this discussion, I accept what the noble Lord, Lord Byers, said about the unfairness to these classes of people. But it is no more unfair than saying to certain people, in industries where wages are low, that their wage increase should be limited to a maximum of £6 in existing circumstances. I can think of many people who have a cast iron case now for an increase of a great deal more than £6. Restricting these people to £6 a week is obviously a very much greater hardship than restricting somebody who is on a higher level. The Government have accepted that this is part of the unfortunate effects of a policy of this kind.

Lord BYERS

The noble Lord is still not accepting that a wage increase goes straight into consumption and is inflationary, whereas withdrawing or putting aside, as Mrs. Castle said, the contributions for future pensions is counter-inflationary. This is the biggest difference which the Government must now accept: it is helping their policy.

Lord HUGHES

That aspect of it is. That was one of the reasons why I found myself so much in agreement with a great deal of what the noble Lord said. But there is another aspect to that. In so far as this money is taken aside and put into a pension fund and invested, then, as the noble Lord says, it helps investment in the country. Pension funds have to earn their keep if the pensions are to be paid. The noble Lord emphasised this yesterday. But there is another side to it. The improvements in pensions cannot be made without charges being incurred.

Before I came back into Government last year, I was on the board of a company which had spent a considerable time working out a scheme because of the intended implementation on, I think, 1st April last year of the pensions policy of the previous Administration. The scheme which was worked out by that company did a lot of the things which the noble Lord talked about—giving widows' pensions, giving much greater pension rights to those on the factory floor, bringing the pensions of those on the shop floor much more into line with those of the executives and office staff. But it was at considerable cost to the company and this is something from which we cannot get away. The cost of pensions means an increase in labour costs and, at a time when the policies of this Bill are related to cutting the costs, hitting at cost inflation, it would be wrong to accept from these operations a situation which could add appreciably to costs. We have gone as far as we think we reasonably can go.

The noble Lord referred to what can be done from 31st July 1976 and said, "Thank you for nothing" because the maximum has become the same as the minimum. We have given the go-ahead and encouragement for negotiations to take place on improvements of schemes. But the limitation is not on negotiating what will be the scheme for the future; the limitation is only on what can be applied as from 31st July 1976. I hope the opportunity will be taken during this period to carry on negotiations about any satisfactory pension scheme which can be put into operation in its entirety when the situation in the country permits it. There is no reason why that should not be done. The Government have given the undertaking in advance of discussions with TUC and CBI about what will follow after the 31st July 1976, to encourage the negotiators to continue to negotiate, and the policy which will apply will be formulated after further discussions take place.

The Government would like to be able to go along with what the noble Lord, Lord Byers, has said. I do not dissent from what my noble friend said yesterday about the possibility of phoney schemes, but I do not think that can be regarded as the major factor. I accept that what the noble Lord, Lord Byers, said goes a long way to preventing phoney schemes from being brought into operation.

Lord BYERS

Inland Revenue!

Lord HUGHES

We know how the Inland Revenue tends to catch up a year later with the ingenious people who find ways through the legislation. For this purpose, we cannot afford to lose the time for the Inland Revenue then to produce the new legislation necessary to catch up with the smart Alecs.

The main objection is that we are permitting something to go through which is not contracted for at the present time, which is bound to add to the costs of industry and is therefore adding to cost inflation at a time when we want to get it down. It is for this reason that I cannot advise your Lordships to accept the Amendment. I hope that the noble Lord, having impressed upon the Government the desirability of not departing from their objectives in this matter, will consider this is as much as he can reasonably expect to get carried through now, because I can give no undertaking that the Government can accept a change of policy at the present time. I think it would be a waste of time to send this back to another place so that the Government have to ask them to take it out again.

5.49 p.m.

Lord HOUGHTON of SOWERBY

Before the noble Lord, Lord Byers, replies, I must intervene again. I must dissent from what my noble friend has said. Pensions have never been remuneration; I cannot sit here and listen to remuneration being applied to pensions. Pensions do not qualify for National Insurance contributions which relate to remuneration and earnings. I know it is frequently argued that pensions are deferred pay; but that is only an argument. It is a term of art; it has not been established as a legal point. Neither the White Paper nor the Bill say a word about pensions, nor about labour costs.

We are dealing with Clause 1, which relates to contractual improvements in pay from which employers are relieved. I entirely agree with my noble friend that this clause proposed by the noble Lord, Lord Byers, has no place as an addition to Clause 1 or, indeed, in this Bill. The Bill does not deal with the question with which the noble Lord, Lord Byers, has dealt. It seems to me that by far the best course is to test this out in the practical application of the Government's policy, which any interests concerned are entitled to do. There is going to be no law and no White Paper, and until an order is made for the approval of both Houses of Parliament there will be no legislative prohibition against any employer negotiating with a trade union or the staff concerned for an improvement in a superannuation scheme.

I am surprised that this has been yanked into this Bill, or within the scope of what is proposed. I am really astonished that the argument has been pursued that this is an addition to labour costs and, therefore, must be discouraged under the Government's policy. Had that been in the minds of the Government or the TUC, surely they could have said so. It is an important aspect—if it is an aspect at all—of the adjustment of conditions of service. What about additional holidays with pay, or other facilities which are given to employees by employers to make conditions of work more agreeable and acceptable? We are dealing with remuneration, and pensions are not remuneration. I think they are outside the Bill and outside the White Paper and my advice to anybody concerned is to go in and see.

Lord HUGHES

My noble friend Lord Houghton of Sowerby is not right in this matter. The TUC have accepted the fact that pensions are included. I would refer him to the Annex to the document, The Attack on Inflation, "Extract from the TUC Document" paragraph 7, which reads: Negotiators will be expected to offset any improvement in non-wage benefits against the pay figure. In this period of high unemployment, negotiators should of course continue to give priority to improving job security. I would draw his attention to the definition of "remuneration" in Clause 7 of the Bill which states, "any benefit…whether in money or otherwise…" which, therefore, covers pensions contributions. It was for that reason that, while I could not advise your Lordships to accept the Amendment, I had to agree that the noble Lord, Lord Byers, was dealing with a subject which was properly within the terms of the Bill.

Lord PEDDLE

I think my noble friend Lord Houghton of Sowerby is splitting hairs when he indicates that pension is not remuneration. To be precise, that may be correct, but without any shadow of doubt, the extent of the pension has a bearing on the degree of benefit which a person secures from pursuing certain employment. It is part of the measurement by the person who is offered employment of whether or not it pays him to accept it. I support the point of view expressed by my noble friend on the Front Bench that the attitude is unquestionably right, and I do so for this reason. If the Amendment were accepted it would be tantamount to increasing the inequity of operation, if a necessary restriction were imposed on the degree of benefit the person expected to secure, and it would be one area whereby it would be possible by another route to increase the benefits, even though they may not be described as wages or remuneration. Without any doubt, in terms of equity alone I would give support to those who oppose this Amendment.

Lord BYERS

I am deeply disappointed that what I hoped was not Government policy has turned out to be the policy. I am grateful to the noble Lord, Lord Houghton of Sowerby, who has had tremendous experience in these matters. I cannot help feeling that, in the long run, he is more likely to be proved right than the Government. If this is the Government's policy, then I can only say that I am deeply disappointed. I have no intention of wasting the time of this House or another place, particularly as I do not appear to be getting the support which I thought I might get. I feel that the Government should offer to meet those who are interested in the pension movement—and that includes trade unions, pensions negotiators, people like Mr. Lucas of the Municipal and General Workers' Union and others. This need take place not next week or the week after, but in the very near future, so that representations can be made. We can then see whether it is possible within this anti-inflationary context—because we all want to defeat inflation—to deal with labour costs. If it does not mean an increase in prices and comes out of profits, it is something which might be discussed and might become an exemption.

I would say to the noble Lord that I feel that the Government are on the wrong track. I do not want to go through a time-consuming exercise tonight, but I should like to feel that this is not the end of the road and that we could perhaps have meaningful discussions, particularly with the three Departments concerned. Three Departments, which have not been co-ordinated properly have been concerned, and a pension matter is being dealt with by the Department of Employment when the expertise is in the Department of Health and Social Security. The Treasury also has a very great interest in this matter. This is what happens when you have hasty legislation. I am not blaming the Government for the haste. For a long time we have been asking them to do something. When things have died down, it will be helpful to have the three Departments at a Ministerial level to talk over this matter.

Lord HUGHES

Before the noble Lord withdraws the Amendment, as I suspect he is now going to do, may I say that while I have no authority to commit my right honourable friends in the matter I will certainly draw their attention specifically to what the noble Lord, Lord Byers, has just said. So that whatever may or may not be possible during the counter-inflationary policy there should be no obstacles placed in the way of getting pension schemes on to a proper basis at the earliest opportunity. It may well be that that would be served in the way which the noble Lord has said, by having these discussions even at this time.

Lord BYERS

Before the noble Lord changes his mind, may I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clauses 2 to 6 agreed to

Clause 7 [Interpretation]:

On Question, Whether Clause 7 shall stand part of the Bill?

Lord HOUGHTON of SOWERBY

To my noble friends who commented on the meaning of the term "remuneration", I would say only that this Bill relieves employers of certain contractual obligations and Clause 7 seeks to define the range of those obligations. That is all that this Bill does. I would venture the opinion that it does not stop employers from negotiating with their staff or their unions improved benefits which were not contractual rights before. However, we will see what happens. The argument as to what is or is not within the scope of the Government's policy, and the rules that may be laid down under this Bll and under the White Paper, has already begun. It is the first of a thousand arguments that will take place in the next 12 months.

Lord HUGHES

The noble Lord may be right. I do not know whether or not the advice which was given on this matter by the noble and learned Lord opposite put him on my side, but I was not prepared to argue with his law when he was against me, and certainly I am not prepared to argue with his law when he appears to be with me.

Lord HAILSHAM of SAINT MARYLEBONE

I do not want to take up the time of the Committee. I could not have gone into the Lobby with the Liberal Amendment, partly because of the reasons of time which were explained by the noble Lord. We cannot obstruct this Bill, bad as the policy is and rotten as the means taken to adopt it may be. We have no desire to obstruct this matter, and that would be the effect.

I thought the Amendment was also inapposite in a Bill of this kind, because the only peg upon which it could have been hung was the peg of Clause 1; and though I fully agreed with the construction of that clause which the noble Lord gave to the Committee, namely, that remuneration must include pensions because of Clause 7, it seemed to me that something which permitted the employer to break his contractual engagements under Clause 1 could hardly be a suitable peg to use to define the scope of the White Paper under which he was to be permitted to break his contractual engagements. For that reason I advised my noble friend, although I had great sympathy with the policy, that this was not an appropriate Amendment to support on its merits.

Lord HUGHES

I have learned another lesson, rather late in the proceedings: I ought not to do anything which would bring in either my noble friend Lord Houghton or the noble and learned Lord Lord Hailsham.

Clause 7 agreed to.

Remaining clauses agreed to.

House resumed: Bill reported without amendment. Report received.

Then, Standing Order No. 44 having been suspended (pursuant to Resolution), Bill read 3a.

Lord SHEPHERD

My Lords, in moving that this Bill do now pass, may I on behalf of the Government express deep appreciation to your Lordships, and in particular to the noble and learned Lord, for the way in which the Bill has been expedited. We are very grateful indeed. We hope that the fears of the noble and learned Lord will not be realised, but that the confidence of the Government in this Bill will be fulfilled. I beg to move that the Bill do now pass.

Moved, That the Bill do now pass.—(Lord Shepherd.)

Lord HAILSHAM of SAINT MARYLEBONE

My Lords, I should like to thank the noble Lord the Leader of the House for his courtesy and for what he has said. I have spoken harsh words about the Bill and I meant every one of them; but I have also lived up to my promise not to obstruct the business of the Government in carrying their policy through. On the whole, I think that is very much better than saying you agree with something when you do not. This is not a debating society. We are responsible for our actions and we have facilitated the business without agreeing with it; I think that is a very honourable course to have taken.

Lord SHEPHERD

My Lords, I fully agree with what the noble and learned Lord has said.

On Question, Bill passed.