PAY AND PRICES (Hansard, 15 November 1978)

§ The PARLIAMENTARY UNDERSECRETARY of STATE DEPARTMENT of the ENVIRONMENT, (Baroness Birk)

My Lords, with the leave of the House, I shall now repeat a Statement on pay and prices being made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows:

"For the last five weeks the Lord President of the Council, the Secretaries of State for Employment, Prices and Industry and I have been engaged in intensive discussions with the six trade unions leaders who represent the TUC on the National Economic Development Council to see if we could reach a better understanding on how to handle pay negotiations in the current round. We have also seen the CBI regularly during this period and have given them the opportunity to make representations to us.

"We finally reached agreement with the six representatives of the TUC last Friday on a statement covering collective bargaining. costs and prices. I shall arrange for the text of the draft statement and associated TUC guidance to negotiators to be circulated with the Official Report. The Economic Committee of the TUC endorsed the statement yesterday morning. The General Council of the TUC, however, found it impossible to take a decision either 737 for or against the statement yesterday afternoon. Nevertheless I think it may be useful if I describe to the House the nature of the statement and comment on the situation which has developed.

"Both sides in our discussions started by agreeing the fundamental objective of economic policy in the coming year must be to keep the annual rate of inflation from rising above its present level and indeed to bring it down further if possible because otherwise it will not be possible to reduce unemployment, promote growth and improve real living standards.

"In its White Paper last July the Government committed themselves to the view that inflation cannot be kept down unless the level of pay settlements is not above 5 per cent.

"The White Paper allows some flexibility around this limit by permitting the use of the so-called kitty principle within groups, by allowing self-financing productivity deals and by envisaging exceptional treatment in certain circumstances which are very closely and carefully defined.

"In our talks with the TUC the Government Ministers were exploring ways in which additional flexibility might be achieved or particular problems eased without endangering our control over inflation. We ranged over the role and effectiveness of the Price Commission, the problems of the low-paid, comparisons between pay in the public services and the private sector. The progress we made is recorded in the draft joint statement.

"An important disagreement on the methods of achieving our common inflation objective remained at the end of our discussions. The Government were unable to discover a satisfactory substitute for the policy they set out in the White Paper last July. So we reaffirmed in the draft statement the views we expressed in that White Paper including the 5 per cent. limit on settlements and the use of discretionary action where necessary to support it.

"On its side, the TUC remained committed to voluntary collective bargaining and expressed the view that, providing negotiators observed the guidance which is set out in the annex attached to the joint statement, volun- 738 tary collective bargaining would result in settlements consistent with keeping inflation at its present level.

"We made no attempt to paper over that disagreement in our statement.

"In our talks with the CBI over this period, they repeated their belief that the clauses now inserted in Government contracts which oblige contractors to observe current pay policy could enable the Government to take action in support of its policy which would have an unreasonably adverse effect on some contractors. The Government will now be discussing the operation of the clauses with the CBI and will consider any proposals to extend the scope of the provisions for arbitration which they contain in the light of the need both for fair treatment for Government contractors and for an effective counter-inflation policy.

"Perhaps the most important element in the statement we agreed with the six representatives of the TUC was our agreement to keep a close watch on progress towards our inflation objective and to consider action which may from time to time be appropriate to make sure we stay on course. I would like to invite the CBI to meet us from time to time on a similar basis. I believe we could all learn a lot by regular contact in this way to ensure that we keep the rate of inflation down. And this would make an important contribution to the success of the wider ranging annual discussion of the prospect for pay and prices, the first of which is planned for next year.

"I do not pretend that our problems would all have been solved if the TUC General Council had joined the Government in supporting the statement. They can be solved only in the wide range of individual negotiations and settlements which will take place over the next nine months. Even if the statement had been agreed yesterday, there would still have been very important differences of approach between the Government and the TUC. But I believe that a firm commitment to achieve a common objective and a determination to look honestly at the facts month by month as the round proceeds would offer us a significantly better prospect of achieving our common objective to keep inflation down.

739 "There is no question now of trying to renegotiate the statement which the General Council was unable to support. The General Secretary of the TUC made this clear yesterday. However, the Government and TUC have asserted their belief that there must be each year a thorough discussion between them so that there is a broad understanding on pay and prices for the period ahead. The Government will in any case continue their regular contacts with the TUC on the whole range of other questions in which we recognise a common interest.

"Meanwhile, the Government, of course, remain committed to their 5 per cent. pay policy, as they would have been also if the TUC had accepted the draft agreement. The policy described in the White Paper remains the best basis for the attack on inflation and we know this view is shared by the great majority of the British people."