§ 3.19 p.m.
§ Lord ROCHESTERMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether they are satisfied with the progress being made in any consultations they may now be having with the TUC and CBI aimed at establishing from the end of the present phase an agreed pay policy acceptable to Parliament and reducing inflation still further.
§ The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk)My Lords, these discussions are progressing satisfactorily, but it is too early to say what their outcome will be.
§ Lord ROCHESTERMy Lords, I do not think that that Answer is sufficiently informative to enable me to thank the noble Baroness very sincerely for having given it. Is she aware of the urgency with which my noble friends and I regard the need to prepare for the introduction of a further phase of incomes policy in six weeks' time; namely, our desire to encourage the Government to resist any pressure to which they may be subject to return to a system of so-called free collective bargaining? Furthermore, do the Government accept that such a policy ought to leave room for negotiation within bargaining units, aimed at restoring differentials after tax for responsibility and for skill which have been so seriously eroded over the past few years?
§ Baroness BIRKMy Lords, I am sorry that the noble Lord did not find the reply satisfactory. It was the truth. Maybe he does not find the truth satisfactory. Discussions are progressing; they are progressing satisfactorily. As the Prime Minister reiterated this week, directly an outcome to the discussions is reached, details will be announced. I should have thought that the noble Lord, Lord Rochester, would be delighted to hear that discussions are going on between the three very important arms which are so essential to any successful outcome, and would be happy to leave it there. I thought the reply was extremely informative and that he ought to be beaming at it. I repeat, the Government will put forward their proposals once the current consultations are completed. Naturally, any comments on differentials will be part of this discussion. I would 509 point out that, even in the past pay round, there has always been room, although the overall increase has been around the 10 per cent. mark, for maneuver within the settlements so that different groups of workers have in fact had their differentials respected.
On the question of Phase 4, may I point out that the success of the Government's pay policy up to date is shown by the fall in inflation from 26.3 per cent. in July 1975 to 7.9 per cent. now. It is absolutely essential that we do not squander this achievement in excessive wage settlements. This means getting broad agreement on moderate settlements which will keep inflation under control and, as soon as humanly possible, reduce it.
§ Lord CLITHEROEMy Lords, will the noble Baroness agree that it may be useful and informative to people if, instead of the word "inflation" we use the words, "debasement of the currency", which is what it is?
§ Baroness BIRKMy Lords, well, I think that by any other name, Shakespeare got there first! I think that it is very useful to continue to use a word which is easily understandable to most people. Most people understand inflation to mean prices which are rising and increases in their cost of living. We are trying to reduce that and, if I may say so, we are doing it very satisfactorily.
§ Viscount MASSEREENE and FERRARDMy Lords, would the noble Baroness agree that, whatever bearing an agreed pay policy may have on inflation, the main cause is the Government's insatiable appetite for public expenditure by ever and ever increasing the money supply without any increase in productivity? That is the real reason.
§ Baroness BIRKMy Lords, I would find the noble Viscount's question rather more weighty and credible if his own Party were able, so far as their pay policy is concerned, to come forward with some proposals which were not entirely encased in an an armour of silence. I should further point out that the propositions which have been put forward by his Party, particularly in another place, would have increased public expenditure to a con- 510 siderable extent. The tax concessions have had to be put right by the increase in National Insurance payments, and none of this is helping the cause of bringing down inflation, or indeed of bringing down unemployment. I think silence on that ground is the better part of valour.
§ Lord BLYTONMy Lords, is my noble friend the Minister aware that in the past three phases of wages control the trade unions have sacrificed a lot to help the Government in their inflationary measures, and that 75 per cent. of the trade unionists now want a freely negotiated bargaining position? I question whether we will get Phase 4; but what surprises me is the Conservatives arguing about Phase 4 when they are shouting to the skies outside that they do not believe in a wages policy.
§ Baroness BIRKMy Lords, my noble friend is right. During the past three phases the trade unions have made it possible for the Government to pursue an economic policy which has brought down the rate of inflation. Without the support—and, as my noble friend said, the sacrifice—of many workers of this country, we would have been in a very much worse position. It appears from the noises that we have heard from the Opposition in both Houses that any future they put forward in this field will probably result in very unfortunate confrontations with the trade unions.
May I finally say that on the question of free collective bargaining, the Government regard responsible collective bargaining as the best and most flexible way of resolving pay settlements. I am sure that my noble friend will agree that it is essential that these settlements must be moderate.
§ Viscount TRENCHARDMy Lords, would the noble Baroness agree that previous phases of the incomes policies, under both Governments, have eroded differentials and that therefore Lord Rochester's supplementary question about the importance of reintroducing differentials for skill and responsibility is vital if we are to create new wealth and reduce unemployment? It is not just a question of paying the individuals concerned for their skills and responsibility, but it is in the interests of the country as a whole that these should be—
511 Several noble Lords: Question!
§ Baroness BIRKMy Lords, I do not think that my right honorable friend the Chancellor of the Exchequer is unaware of this, and the question of differentials is obviously something that is discussed with the trade unions in these consultations. I do not think that I can go further than that because consultations are in progress at this time.
§ Baroness SEEARMy Lords, would the noble Baroness agree that to get the record absolutely straight, we should remind ourselves that the rate of earnings has this year increased faster than the rate of price increases, and that it is extremely important that they should not proceed to this extent, having regard to the level of productivity? It would be more accurate to talk about a fall in the increasing rate of inflation rather than a fall in inflation. Inflation is still rising, though at a less fast rate. To talk about the fall in the rate of inflation is extremely misleading.
§ Baroness BIRKMy Lords, there has been a fall in the annual rate of inflation. Of course there are different ways of gathering the figures, and it means that over a monthly or three monthly period one gets a different result. There has been an overall fall in the rate of inflation and there is a fall in the increase in the rate of inflation. Whichever way we look at it the fact is that to the ordinary people going out to buy items, inflation, although too high—and we accept that—has nevertheless decreased.
§ Lord PEARTMy Lords, I think that noble Lords will agree that we have had a good run on this Question Questions have taken 22 minutes so far.