HL Deb 22 October 1975 vol 364 cc1506-11

7.5 p.m.

Lord JACQUES rose to move, That the Counter-Inflation (Price Code) (Amendment) (No. 2) Order 1975, laid before the House on 5th August, be approved. The noble Lord said: The background of this Order will be familiar to those noble Lords who took part in the debate on the White Paper, The Attack on Inflation, and on the Remuneration Charges and Grants Bill. This order amends the Price Code by providing a sanction against excessive pay settlements. The Government's intention is to use the Price Code as one of the sanctions to support the pay limit. This was made clear in the White Paper, and specific power was taken in Clause 3 of the Remuneration Charges and Grants Bill to enable the Order to be made. The Order's provisions ensure that all firms subject to the Price Code are prevented from passing the costs of an excessive pay settlement through into their prices.

The Order also re-establishes control over the self-employed whose business expenses amount to less than 10 per cent. of their profits or gains. Other self-employed people are already covered by the Code. The Government thought it right to bring them all back within the scope of price control at a time when wage and salary-earners are being asked to make sacrifices as regards their pay increases. In conjunction with the Price Code Order, changes have been made to the procedural requirements on firms in order to ensure that the Price Commission—and through them the Department of Employment—receive sufficient information to permit adequate scrutiny of pay settlements which enter into price increases.

My right honourable friend had to strike a balance between the need to ensure adequate scrutiny of pay settlements which enter into price increases and her desire to avoid unnecessary delay to price increases which can affect firms' cash flow adversely. After full discussions with the CBI and the Price Com mission, my right honourable friend has, I believe, struck the right balance. The CBI have given, and fulfilled, an under taking to urge all their member firms to make full use of a voluntary advance procedure, under which firms may send information about relevant pay settlements 28 days in advance of their price notifications. The Secretary of State on her part has undertaken that, if these arrangements work satisfactorily, she will not implement other proposals such as the lengthening of the statutory pre notification period.

The Price Commission have also issued a pro forma to help firms to present the information on pay settlements. Firms generally have welcomed the pro forma, and the vast majority have made use of it in their notifications and do not seem to have experienced difficulty in completing it. It is early days in the new pay round, but already agreements have been reached covering some 1½million workers in a wide range of occupations: local authority manual workers, grocery workers, plumbers, bakers, shipbuilders, car-workers and so forth, all of whom have accepted settlements in accordance with the policy. In some cases this has involved renegotiation of previous settlements in order to bring them into line with the policy. On the prices side, recent figures have been encouraging. The Retail Price Index for September, published last Friday, showed a fall in the year-on-year mite of inflation for the first time this year, and the three-monthly figure, expressed as an annual rate, fell for the fourth month in succession to 10.4 per cent.

In conclusion, it is important, how ever, that the Government should be in a position to take all available measures to back up the objectives and policies which have been endorsed by both sides of industry as being vital in the national interest. If the pay limit is observed, no firm will suffer as a result of this Order, and the whole of industry will benefit from a lower rate of inflation. There may be difficult times ahead, but real benefits can accrue if this Order is carried out. I beg to move that this Order be approved.

Moved, That the Counter-Inflation (Price Code) (Amendment) (No. 2) Order 1975, laid before the House on 5th August, be approved.—(Lord Jacques.)

7.10 p.m.


My Lords, this is not a subject that I look at very often, and I am bound to say that I am appalled at one of the sentences that fell from the noble Lord, because in it he referred to the self-employed. I suppose I must declare an interest and ask him where the interest is, because I cannot find it in this Order at all. I do not know which part it is that applies to the self-employed or in what way it applies to them, so there fore I shall have to do some more research. But, seriously, without embarking upon a major examination of the economic situation and price policy of the present Government—which, in fact, happened in another place when this Order and a companion Order were discussed—I must express the hope that the present state of affairs will be only temporary, so that we shall not have to endure for too long this incredibly elaborate system of subordinate legislation, the contents of which must be known to very few people indeed. This is an addition to the Schedule to the price control Order of 1974 and here we have new paragraphs 131 to 136. There are, of course, immensely complicated provisions in the earlier paragraphs of the main Order which are not before the House at all.

I suppose that the Government to which the noble Lord belongs is bound to make the employers the ones who are penalised for any contravention of the Code, which is what these paragraphs do. They produce a result whereby, if an enterprise grants to its workforce remuneration which is in excess of the £6 limit, it suffers certain penalties. So far as I can make out, the employers are the only people who will suffer penalties. I suppose that this stage of the Session and this stage of this evening do not represent the right time to argue the full details of the matter, but I am bound to say that I should have thought there were other methods which might be used—taxation, for example—and ingenuity could no doubt devise further methods by means of which not only employers, but also those who press for remuneration beyond the £6 limit may also suffer penalties. But that is not the policy of the present Government.

It seems to me we have to accept that, for the moment, we must have a policy of this kind, but I would also suggest that as soon as possible we must get rid of the whole apparatus, because not only is it becoming so elaborate, so complicated and so difficult to follow, but it also seems to lay the penalties very unfairly on one side rather than on the other. I do not think that any of the bland words of the noble Lord, Lord Jacques, can cover up what appears on the face of these Amendments to the Schedule, which would put all the onus and all the disagreeable side of any wage increase on to the employer.

There has just been a certain wage increase in Northern Ireland. Can the noble Lord say whether the provisions of this new amendment to the Price Code Order will be used in order to deal with the situation at Standard Telephones and Cables, because that seems to be exactly what this provision is apt to do. I have been told that instead of this there are other means which the Government pro pose to use. If that is so, would the noble Lord tell us why they are using other means and not the means provided for under this Order?

Baroness SEEAR

My Lords, we on these Benches recognise the need for continuing control over inflation. But, as the noble Viscount, Lord Colville, has said, this extremely complex Code is, in our view, by no means the right way in which to do this. We have urged for a long time the need for an inflation tax, which would be a far simpler and fairer way of bringing inflation under control. We urged this long before the Government were converted to any need for an incomes policy, and we continue to urge it. In the circumstances, we accept as far less than even a second best the procedure which the Government are con firming once again tonight, with all its complexity and, indeed, unfairness. Of course, the prime importance of control ling inflation makes it essential that we should go along with the legislation in front of us, but we would underline how much better it would have been if the policies advocated from these Benches had been adopted in due time.


My Lords, may I first say in regard to the self-employed that originally they were all in the Code, and in the liberal policy that was followed by this Government in making changes to the Code during last year and earlier this year, we took certain of the self-employed outside the Code. I have not had an opportunity to look up the part which refers to this, but I will advise the noble Viscount later. I was so busy listening to what he said that I could not concentrate on finding it. It is reason able that if those who are employed are subject to restriction, those who are self-employed should be similarly subjected. That would, I think, be generally regarded as reasonable, and that is the reason why that small sector of the self-employed have been brought within the Price Code.

So far as other methods are concerned, there might be other methods of con trolling prices, or of penalising those who go outside the Code. So far as the latter are concerned, having regard to past experience in this country in regard to pay policies, and to similar experience in other countries, we believe the method which we are now following to prevent industry going beyond the Pay Code is the best. We believe it is likely to be the most effective and least likely to result in bad industrial relations.

May I make it clear that we inherited the Price Code and we have liberalised it a good deal; for example, there is now an investment allowance which did not exist earlier. But we are not committed to the Code for ever. We say, first, that the Code in its present form will undoubtedly be needed until July 1976, but we do not accept that it is absolutely essential for working in conjunction with a pay policy. There could be other ways, and that is a matter to which the Government need to give a great deal of thought. So we are committed to control, but not control in the present fashion after July 1976.

So far as the Northern Ireland company are concerned, I understand they were told some time ago that a wage settlement for certain employees of the Northern Ireland subsidiary company did not conform to the pay policy. Subsequently, the company asked for a re consideration of the matter and supplied further information. My right honour able friend the Secretary of State for Employment has considered these further representations and has informed the company that the settlement breaches the pay policy. I understand that is the stage which the matter has reached at the moment.

On Question, Motion agreed to.


My Lords, I beg to move that this House stands adjourned during pleasure until 7.45 p.m.

Moved accordingly and, on Question, Motion agreed to.

The sitting was suspended at 7.20 p.m. and resumed at 7.45 p.m.