HL Deb 05 December 1979 vol 403 cc695-712

2.53 p.m.

Lord McCARTHY rose to call attention to Her Majesty's Government's lack of effective and fair policies for dealing with the problems of rising prices, pay settlements and unacceptably high levels of unemployment; and to move for Papers. The noble Lord said: My Lords, I should like briefly to do four things this afternoon. First, I want if I can to delimit the area of the attack in this Motion on the Government's policies. Secondly, I want to summarise the essence of those policies as we take them to be. Thirdly, I want to say why we consider that they are ineffective and unfair and should be changed; and, finally, I want to give some small indication of the kind of alternatives which we would say were open even to this Government at this moment.

First, we are not suggesting—and I shall not be suggesting—that all the problems that beset the Government and the country at this time are the fault of the Government's policies. The economic problems of this country, which are basically those of our inability to maintain our competitive position in the markets of the world, go back a very long time. There are economic historians who will say that they go back to the 1870s; that it was after all in the 1870s that we failed to adopt protectionist policies and continued with free trade. Alternatively, there are economists who say that they go back to the 1930s, when we failed to develop in British industry the right kind of base in science and technology and continued to invest in declining basic industries. And no doubt many other people would say that the problems were very much influenced by the policies of successive Governments in the 1950s, 1960s and 1970s, our attachment to a high exchange rate and our concentration upon all kinds of doubtful economic objectives.

All these points no doubt have something to do with the situation in which we find ourselves today, and I have no desire—though I cannot speak for everybody on this side of the House—to exchange insults about which Government found which set of problems worse than the other Government who succeeded them. If anybody wants to attack Labour Governments, I shall defend them, but I want to try to get us to turn to constructive issues, in particular to the future.

Indeed, I do not want to deny—and noble Lords opposite can make what of this they will—that the present Government inherited a difficult economic prospect and that that difficult economic prospect was partly the result of the world recession and was partly the result of a number of assumptions which underlay the last stages of the previous Government's economic policies; in particular, unrealistic assumptions, as they turned out to be, about the rate of increase in pay settlements, and unrealistic assumptions about the underlying rate of productivity in the economy. As has been said by the honourable Member for Heywood and Royton in another place, if a Labour Government had been returned at the last general election they, too, would have had to come to terms with those changes in the economic situation as they had developed since the publication of the previous Government's economic policies.

My criticisms and my attack, and our criticisms and our attack this afternoon, are much narrower, and for that reason, I would suggest to the House, more deadly. We are arguing that the Government have failed to respond to the needs of the situation as they existed when they came into office, and that since coming into office they have followed policies which have divided the nation rather than united it and which will stimulate selfishness and the abuse of power rather than moderation and commonsense. We believe that these are policies which are not calculated to obtain the co-operation of ordinary people, or of the organised trade union movement, and which are based on false assumptions about the way in which the world actually works.

To establish this I am concerned with two central features of the Government's economic policies, and this is where I want to pass on to try to summarise what those policies are. I am bound to say that if at any stage I get my summary of these policies wrong, or I am unfair to the policies in any way, somebody will correct me. The central contention of the Government is that progress can be achieved by two sets of related measures: first, by reductions in the rate of direct taxation, which will stimulate initiative, growth and investment; secondly, by the use of the techniques called monetary control, to reverse the process of inflation.

We need not bother the House for very long with the first set of techniques—reductions in the rate of direct taxation—because we understand that they have been abandoned, or at least, if they have not been abandoned, that we shall not be hearing much about them in the near future. No doubt the Government will tell us when we will. We had an opportunity Budget, which the Institute of Fiscal Studies, an independent, objective institution, says left all the payers of the basic rate of tax worse off—at least, that is what has happened since the Budget—and which Mr. Riddel, the economic correspondent of the Financial Times, said: … concentrated gains on those earning between two and a half and three times the national average level of income ". This was the opportunity Budget—a Budget to make the rich richer and the poor poorer.

My Lords, I am not against cuts in taxation. It might have been possible to make certain modest cuts in taxation. It would have been necessary, I think, to direct them in a rather different way; but the central charge against the Government is that, because of their belief in the sanctity of the public sector borrowing requirement as they interpreted it and the economic situation as they saw it, in order to finance those cuts in the level of direct taxation it was necessary to raise the level of indirect taxation; to raise VAT to 16 per cent., which put 3 or 4 per cent. on the cost of living; to cut public expenditure in ways which will lead to a whole range of increases in public sector prices, increases in rates, increases in prescription charges, increases in council house rents and so on; and subsequently to introduce a level of MLR which makes very sick reading to those who believed that the aim of this Government was to look after the interests of small businessmen.

It is the combination of cuts in direct taxation and the need to raise indirect taxation which I would argue demonstrates that this Government did not really appreciate the problem they were facing. But, in any case, this policy, we are told, has now been put into cold storage. In any case, we are told, we shall be very fortunate if we see any continuation of this policy in the next Budget. One cannot help wondering what the Parliamentary Secretary to the Treasury in another place now feels about his much vaunted price tax index. What a pity he did not listen to those in the Treasury who thought, as they have always thought, and as the statisticians have always thought, that new statistical devices should be run-in for six months to see how they go. One cannot help feeling that if this one had been run-in for six months we would never have seen it emerge.

So I move to the second part of the policy, the policy of monetary control. This is the most important aspect of the policy because it is still with us. The policy of monetary control is to be the main instrument for reversing the process of inflation so as to enable us at some time in the future to start once again to remit direct taxation. There are a number of things that one could say about monetary control. The first thing is that it has not worked. It has not worked in the sense that there has not in fact been a reduction in the rate of increase of M3, in that since the Government have been attempting to impose their monetary targets on the economy, it has been about 60 per cent. off target. I know that the Government will say that there are special reasons for this, and that those special reasons are connected with, for example, the Post Office unions and their industrial dispute. But if you look more closely at the reasons given by the Government in their economic prospects for 1980, I put it to the House that there are no particular reasons why the main difficulties should go away. The main difficulties, the lasting difficulties, are over-optimistic assumptions about their ability to roll back the rate of public expenditure and over-optimistic assumptions about the extent to which increases in the MLR will actually choke off investment and borrowing. We have no reason to believe, particularly if we make realistic assumptions, as I hope we shall, about the rate of increase in inflation in the next 12 months, that a 17 per cent. MLR is going to be any more effective than a 14 or 15 per cent. MLR.

But the second problem, of course, is that the gurus of monetary economics—like all intellectuals, they betray you at the moment you need them—are becoming increasingly doubtful about the viability of the way in which we set out to control monetary mechanisms. They say that it leaves out all kinds of important areas such as overdrafts, credit cards, acceptances. They say that all the other indices, other than M3, move in different ways from M3. They say that it turns out to be just a fancy way of justifying ever and ever increasing levels of rates of interest, which have to keep ahead all the time of levels of inflation, otherwise they have no effect whatever. So there is an increasing doubt about how far our mechanism for controlling the minimum lending rate and other instruments is in fact effective. Yet at the same time—because intellectuals never help you in moments of doubt—there is increasing doubt about alternative ways of doing this.

We used to be told by many economists, including Mr. Sam Brittain, for example, in the Financial Times, almost daily, that what we really needed was to find the monetary base of control. If we could find a direct control over the monetary base, all these problems would disappear—except, of course, that in the United States they tried something like that recently and it produced the most ghastly fluctuations in the rate of interest, rapid increases in the velocity of circulation of money and an atmosphere, says Mr. Harris of the Financial Times, like a Marx Brothers script.

Finally on criticisms of monetary supply, the most damning criticism of all of the gurus of econometrics is that we are now seeing a whole series of extremely well-researched criticisms of the whole concept of the relationship between the rate of increase in money, however defined, and the level of inflation. Some of these are mildly humourous. Messrs. Llewellyn and Witcombe claim that there is a closer fit between inflation and dysentery in Scotland—dysentery in Scotland 12 months ago, I should say—than there is between inflation and M3. Professor Hendry, in a very remarkable inaugural speech at the LSE last month, said that he has a much better theory, the Hendry theory: that inflation since 1964 is much more closely correlated with the cumulative rate of rainfall. So the whole technique of monetarism is disintegrating in the face of the Government.

Nobody says that there is not some relationship, if other things are wrong, between money supply and economic activity rates. Nobody says that if public expenditure is out of control, if we have the wrong exchange rate policies, if we have the wrong fiscal policies, if we are in the middle of a wage explosion, if we are printing money like the mad Barber of Whitehall, then we shall have additional difficulties. But the fact is that to use monetary policy nowadays as the main instrument to correct inflation is very largely a discredited philosophy. If I may quote finally from Mr. Anthony Harris—not a supporter of this side of the House—in the Financial Times, he said this only last week: The sad fact is that the first few months of the experiment have been almost a solid setback. Monetary targets have not made trade unionists rational or businessmen confident … and now the very methods used are under question. But so unfortunately are the methods used by the would-he reformers. The automaticity so beloved of the theorists looks in real life like a Frankenstein monster with several screws loose ". What we have in fact, he said, is a scheme of Byzantine complexity, when all the major indices of money supply are moving in different directions ".


My Lords, will the noble Lord allow me to interrupt him? I am most grateful, because we are listening to his speech with great concentration. Does he feel, therefore, remembering that the IMF asked the previous Government in 1975–76 to cut public expenditure by £2½ billion, which they succeeded in doing in the first year, and another £2 billion in the second year, which they also succeeded in doing, with the reduction in inflation which resulted—it got the inflation rate down to 7.4 per cent. by 1978—that all this is now undone? What was good then, is it not good now? What has changed between the two situations?


My Lords, if I may be allowed to say so, the noble Lord is talking about the wrong thing. He is talking about the PSBR. What the IMF really wanted to concentrate on was PSBR, and if I had enough time I would draw the attention of the House to the recent work of Taylor and Threadgold, published by the Bank of England, which shows that if only you realise that you can index the PSBR you do not have to do all the funny things that the IMF forced the Labour Government to do. The reason why that worked—and I am going to get on to that soon—is not because we cut public expenditure but because at that time we had an effective incomes policy. Unfortunately, in the subsequent year we had an ineffective incomes policy. I am quite prepared to admit that.

The only point that I would make about the criticisms of Mr. Anthony Harris is that I think the idiom is wrong. We are not talking about Frankenstein or about science fiction. I think that we are talking about the Bellman in the Hunting of the Snark: He had bought a large map representing the sea Without the least vestige of land; And the crew were much pleased when they found it to be A map they could all understand. This was charming no doubt; but they shortly found out That the captain they trusted so well Had only one notion for crossing the ocean And that was to tingle his bell ". I suggest to noble Lords that the bell was labelled "M3". He was thoughtful and grave but the orders he gave Were enough to bewilder the crew When he cried, ' Steer to starboard, but keep her head larboard ' What on earth was the helmsman to do? My Lords, this is the policy. We are suggesting on this side of the House that it will not do. It particularly will not do if we are talking about it as a policy for de-escalating wage settlements. As I understand the present Government, their policy is to welcome and even to laud very widely different levels of wage settlements. This, they say, is a sign that the policy is working—everything from the 5 per cent. in Talbot, through 13 per cent. for local government, 16 per cent. in most of British industry, and 20 per cent. (we are told today) in the National Union of Mineworkers and the NCB, 21.5 per cent. in Fords and 30 per cent. in British Oxygen and so on. This, they say, is a sign that the policy is working. I would suggest that it is not a sign that the policy is working. I would suggest that there is a number of reasons to suppose that the policy is not working; that short-run things of this kind simply produce escalation; and that for reasons which are evident enough what is read into subsequent wage demands and wage claims are the higher settlements rather than the low ones. Unfortunately, nobody quotes Talbot, but a lot of people will quote what happened in the NCB.

Secondly, even if this policy managed to succeed for 12 months, in the sense that the different levels of settlements could be sustained for 12 months, the imbalance between groups doing similar work in different parts of the economy will produce inflationary wage claims in the second period, in the wage round next year. Thirdly, the Government in a policy of this kind have no defence against any powerful group which comes forward and says: "We have the strategic power, we have a low labour-capital ratio; we have a powerful case and we are determined to extract anything we want from our industry ". It is strange that a Conservative Administration should make this mistake; because this was the reason for their disasters with the miners in 1972 and 1974 and with the electricity workers in 1971.

I am saying that these policies will not work. I am saying that it is particularly in the area of incomes policy that the Government need to think through their policies. One knows what the Government will say if one mentions the question of incomes policy. The Government will say that all incomes policies in the past have failed; or they will say that, at least, they have failed in the long run. This is really a very curious criticism. It comes from a simple conceptual confusion, the confusion of not realising the difference between a problem and a puzzle. A puzzle is something that you solve. Either you have the right solution or you do not. That is what we are talking about in relation to incomes policy. A problem is a permanent problem which you have to live with, which you have to try to do your best with and which you can keep changing tack with and which you hope you will make progress with as you go along.

The only weird thing is that this is accepted by the opponents of incomes policy; and by the Government if we are talking about the balance of payments or the problem of economic growth or about the various techniques for demand management. If we search for a balance-of-payments equilibrium, we move from fixed rates, to managed rates and to floating rates. The only thing we have not tried recently is to go back on the gold standard. If we search for stable growth, we have fine tuning, coarse tuning and no tuning at all. If we try to do something about investment volume, we have high MLR, low MLR, tax concessions, all kinds of subsidies. We try SET, VAT, REP, CC & C, SSDS and EEC—and none of it has worked out in the way that the textbooks say. All of it has gone rather wrong. We have tried everything. Nothing has worked precisely in the way that the advocates said that it would; and that is why we are in the mess we are.

But in relation to incomes policy, and only incomes policy, we must have perfection. We must have a policy which works in the same way in perpetuity; which does not just make a contribution to the problem of wage-induced inflation, but solves the puzzle. There are to be no solutions of puzzles; there are to be things which help in dealing with problems. I would argue—and, if I had not already spoken for so long, would have developed the point—that, in fact, in relation to our past incomes policies (and I would include both political parties in this) we have made two types of mistakes.

First, we have accomplished our incomes policies by particularly daft supplementary policies, lunatic exchange rate policies, inadequate public expenditure control and ineffective monetary policy. When a man attacks incomes policy, he has usually made some ghastly mistake in some other aspect of government. Secondly, because of our mistakes in other aspects of government, we have very often been over-ambitious in what we have expected wage moderation to do. Here, the last Government, I admit, were over-ambitious in what they thought they could do. I can say this because I cannot be proved right and I cannot be proved wrong. But tell the House that I believe it profoundly; and I said it at the time. It is because I was not listened to that noble Lords opposite are sitting where they are and we are sitting over here. If the last Labour Government had had a wage norm of between 7 per cent. and 8 per cent. they would still be in office. The essence of a prices and incomes policy is to get the norms right. Anything worth doing is difficult and sometimes you get it wrong; but we get lots of other things wrong in lots of other areas of our fiscal, monetary and exchange rate policies.

It may be said that this is all very well; but this is a recipe for a Labour Government. Labour Governments could (and, I think, would) have got the unions together after the election, pointed at the public expenditure programme and said: "What can we do to maintain the programme? We will say on our side that we will do nothing to increase the cost of living through our policies, by such things as increases in indirect taxation. What will you do?" In relation to what they could obtain from them, so they could look again at public expenditure. It could quite reasonably be said: "You cannot expect that from a Conservative Government". You cannot expect that because this Government, when the previous Government were in office, were busily undermining their policies, for example, in relation to the private sector and the critical area of attitude to the Ford dispute and elsewhere and because the present Government when in Opposition were busily saying that we did not need an incomes policy; and because now they are saddled with a collection of bits and pieces salvaged from the hack end of the 1971 Industrial Relations Act which they are intending to introduce in the mistaken belief that it will correct the balance of trade union power, but for all these reasons there is nothing they can do.

I say that we cannot accept this. There are meetings at this moment with the NEDC and the trade union movement. I say that the trade union movement of this country has no general desire to go on a wages explosion. I say that the decision of the National Union of Mineworkers this week shows that to be so. I say that, even at this late stage, the Government could make an appeal for wage moderation, and I say that, unless and until they do, we are justified in placing this Motion before the House. My Lords, I beg to move for Papers.

3.21 p.m.

Baroness SEEAR

My Lords, in listening to the speech of the noble Lord, Lord McCarthy, I had the uneasy feeling that the House might think, when I sat down, that the Lib-Lab pact was still on. It is always irritating when the first speaker says a great many of the things one had planned to say oneself. However, I would assure the House that the Lib-Lab pact is not on and I hope to make points which will demonstrate that there are differences of very considerable substance between the approach of the Labour Front Bench and the approach we wish to put forward, although in many ways the criticisms that we have to make move in the same direction. I would also say—I should have said this at the beginning—that I much regret that I was a minute late and that the noble Lord was at the Dispatch Box before I arrived. Also, I fear that, because of an engagement I made a long time ago in Oxford, I shall have to leave before the end of the debate. I am very sorry indeed about that.

We on these Benches are entirely behind the Government in putting the control of inflation very much in the forefront of the policies they are pursuing. I think there can be very little disagreement in your Lordships' House about the fact that so many of our other problems flow from the fact that we have extremely unstable prices and that there is great fear and anxiety as to what is going to happen as inflation soars. It must be necessary that we should do everything in our power to reduce inflation. We also agree that public spending did call for some reduction, but we wish the reductions could be made with more discrimination. The idea that you reduce public spending by cutting at everything in sight that you can cut can hardly be a wise policy. We believe that the effects of the cuts, indiscriminate as they are, will make it more and not less difficult to get the kind of backing from the country as a whole for what the Government are attempting to do. Even if their intention is right, in their methods they are very much open to criticism.

Our basic criticism of the Government's attempt to control inflation concerns their almost messianic belief that there is one sovereign cure for all our ills, and that is to control the money supply. I have never believed, in any of life's situations, that there is one simple solution for any problem that I have ever yet encountered. Anybody who believes this is so is working on the old academic assumption—the first academic speaker, followed by the second academic speaker, is taking the opportunity to have a crack at academics, which may or may not be very nice of us—that all other things are equal. This is the great fallacy of relying on academics, because nobody in the real world ever does encounter a situation in which all other matters are equal. If all other matters were equal, it might be possible in certain circumstances that control of the money supply would be the answer; but this is an Alice in Wonderland world. I do not believe that, in the circumstances in which we find ourselves today, it is true that control of the money supply will deal with our problems.

Part of the attraction for this Government, as I understand it, in the control of the money supply as the answer is, first, that they believe this is the cure for the disease they have diagnosed. Secondly, they believe in the "hidden hand ". They have been reading Adam Smith late at night and early in the morning, and perhaps not always interpreting what they have read as wisely as they might have done. They believe that there is a mechanism whereby, if you get the money supply right, the mechanism will work through automatic controls in adjusting all other problems and you do not have to come in with other policies to deal with other aspects of your problems because if you stick to control of the money supply, if you are tough, if you get your back to the wall and do not give way, then in God's good time it will all come right because of the "hidden hand ", and so on.

I believe this is grossly mistaken for two reasons. I very much doubt whether the kind of inflation we are experiencing at the moment is inflation which is very closely related to the printing press and its use in increasing money. We are not in that sort of inflation in which we have queues of people with lots of money in their pockets lining up for goods which are in very short supply. There is an element of that, but only a very small element. It is not that sort of inflation. Of course, there must be some control of the printing press but this is not that sort of inflation; and, because it is not that sort of inflation, control of the money supply is only one element of control.

The second attraction in the control of the money supply is the way in which it will deal with the other problems as a result of the impact of the control of money supply and the effect it will have on behaviour among both employers and trade unions. It is reasoned that, on the one hand, the employer will find himself very short of money and therefore will not be able to make rash agreements about pay or to pay over the odds. On the other hand, because Labour and the trade unions will see that high wage claims simply lead to unemployment and because they fear unemployment, they will control their wage claims.

Let us have a look at both propositions. The fact is that, when money is tight, employers are in no position to hold out against high wage claims. In fact, I understand now that the sophisticated approach is for the trade union not to go for the highly-successful employer, as used to be the case—because if you went to the highly successful employer and picked him off, he then went to the others and said, "Look what X is paying: You must pay this, too ". Today the sophisticated trade union will go to the employer who is in difficulties, because such an employer will not want to agree a high pay award, but he is in no position at all to stand a strike. This is what the Government have to take on board. When money is tight, the employers may be forced into giving way because, although it is still an evil, it is the lesser of two evils. You can survive in the short run by making an unwise pay deal, but you will go under if you do not make that deal and thus have to face a long strike. Therefore, you will settle for survival and agree to the high pay claim. This is one reason why tight money control, creating cash flow problems for employers, is no way in which to see that pay claims are not excessive.

Then, when you say that the increase in unemployment will have a sobering effect on the trade unions in putting in pay claims, I think again this is not in the real world. It is not in the real world for two reasons. The trade union official is in the business of bargaining to improve his members' terms and conditions of employment. On the one hand, he is concerned with what happens inside the trade unions in response to the pressures inside trade unions and in competition between other people inside the trade unions who are seeking their leadership positions. On the other hand, he is concerned with the successes achieved by other trade union leaders in other unions in getting increases for their men. "In no way ", as one well-known trade union leader said, "can I settle for less than X per cent. for my skilled men once the surface workers in the mining industry have got that X per cent. There is no way I can go back to my members, especially if I am facing an election very soon. There is no way I can go back with less money than has been achieved by a fellow negotiating trade unionist up the road ".

So those immediate pressures from inside the union movement on the negotiators are going to be far more powerful than the longer-term effects on unemployment and on the people who will lose their jobs. This may be very harsh but I believe that this is the way in which it works. Nor is there truth in the argument that high pay claims leading to high prices will lead people to believe that it is not in their interest to negotiate a very big pay claim because, so the story goes, there will be nothing in it, it will be confetti money so that one will have the pay claim and then the additional money, but it will not buy any more at the end of the day because of price increases.

Let us get it quite clear that that is not true for the people who get in at the beginning of the queue. If you are a powerful trade union you take good care to get in at the beginning of the queue because of the time lag while the increased pay works through into increased prices. If you are at the head of the queue of annual pay settlements, it is at least six months before the increases in pay work through to increases in prices. You have had your money's worth during that six months and you maintain your position at the head of the queue and you come round again next year. The fact of the matter is you are better off and the confetti money argument carries no weight with you because from your point of view it is not true.

So I deny that there is any automatic effect, that you can deal with the dangers of pay explosion simply by saying that tight money will lead people—employers on the one hand and employees on the other—to recognise that unreal increases in pay do not give benefit to members; therefore they will exercise control. The fact of the matter is that the Government were determined, for reasons that we can understand, that they would not get themselves saddled with any kind of incomes policy. But the fact is that no Government can be without some kind of incomes policy, if only because they are a huge employer in their own right. They must have a policy for the pay of their own employees and those closely linked with their own employees. Every time the Government say anything to local authorities about the amount of money they are prepared to let them have, by implication they are saying something about pay policy. Every time they say something about pay in the public sector, they are in fact declaring a pay policy. What the Government are doing is saddling themselves with a pay policy under the most inauspicious circumstances possible, because it is a unilateral pay policy for which there is no backing among those with whom they are dealing and for which they have not the support of public opinion.

We are not suggesting that the Government should do what is all too often and boringly called a U-turn. A U-turn is a turn of 180 degrees. They need not go that far; there are many other variations in the kind of change one might make without making a U-turn. We implore the Government to look again at the realities of pay policy because this at least is one of the other elements that they must take into account and which in reality they are taking into account, because they have to have a pay policy in relation to their own sector. Could the Government not at least start again to have real discussions—not settlements—with the employers and the trade unions? I do not include in this one short morning at "Neddy." It has to be something far more continuous and far more thorough than that—something which is little more than just an obeisance to the idea of consultations. We need an advisory board on pay which can be in continuous session and where the Government can play their part in discussions about pay policy.

Those discussions should be about what the country can afford. My party has consistently supported pay policy, unlike any other party in your Lordships' House. However, we recognise that there is one weakness, and that is the weakness of the norm. If there is a declared norm it is inevitable that the norm becomes a minimum: nobody dares settle for anything lower than the norm and it is a matter of competition to settle as much above the norm as possible. We want to avoid norms but we want understanding about what the country can afford. The Government should have these continuing discussions and they should be backed by a nationwide attempt to educate the public as a whole in what can and cannot be afforded. The fact is that we think we can afford a whole lot of things that we cannot afford. That is the basic trouble at the present time. What are the Government doing to get it clear to the people? This must be a continuing campaign in a great many different ways. We believe that the settlements would best be made not in terms of a norm, but in terms of an understanding of what the financial and economic position really is, and that the settlement will best be made at company level. The less we have nationwide, industry-wide settlements, based on a norm, the better chance we have of controlling inflation.

However, the settlements at company level must be informed settlements. They must be settlements made by people who understand the dangers of settling too far outside what it is practical in economic terms to do. There are signs that this is beginning to come. The miners' settlement is one example of it. This could be reflected in company settlement after company settlement. That is where we want to get the adjustments made, and it is where we should put our weight. That means that there can be variation because the weakness of the norm is that it does not allow enough difference between the organisation which is in a position to pay and the organisation which is not. We have to accept that there should be a difference between those who can pay and those who cannot. I do not go along with the noble Lord, Lord McCarthy, if he is implying that there should be no variation between the successful company and the unsuccessful one. The great weakness in attempting to fight the Ford case last year was that Ford was in a perfectly good position to pay so far as the Ford workers were concerned. The idea of adjusting pay to value added at company level is one way in which this could be done.

I realise with the appearance of the noble Lord, Lord Carrington, in the Chamber, that there are far more interesting things that are going to come before the House than any speech I could make and I shall draw quickly to a close. We must focus on company settlements and get them not only in terms of cash in the actual pay agreements but also in terms of the other things which can be agreed at company level—improvements in occupational pension schemes, improvements through giving people the opportunity of sabbaticals, and other ways in which benefits earned by the company can be passed on to people in that company. There should also be much more generous opportunities to pass on the benefits of the added value earned in the company in terms of much wider distribution of shares. That gives people a far greater interest in what happens in the company. These are all variations, some of which will be appropriate in one way in one company and some in another.

If one did this in the framework of an understood economic policy of the country as a whole in relation to what it could afford, if this were carried through with an educational programme and if the settlements were made at company level with variations in the ways in which total remuneration—not just pay—could be given to people who had earned it, then I believe that we should begin to get somewhere. Until the Government make a move on this side rather than clinging to their one instrument of monetarism, the hope of defeating inflation and of getting support in the country as a whole will be nil.