§ 3 p.m.
§ Lord BOYD-CARPENTER rose to call attention to the problems created by the application of the principle of comparability in the settlement of salary and wage claims and to the urgency of reviewing the existing machinery for the application of this principle; and to move for Papers. The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. As I understand that this debate will, in due course, be replied to by my noble friend 1122 the Lord President of the Council, I would hope that the Leader of the House will not rule me out of order if I begin by expressing the pleasure that so many of us feel at the recent recognition conferred on the former Governor of Rhodesia and his lady in the Birthday Honours; and if he will allow a personal addition to that, as a former President of the Oxford Union may I add my own congratulations to the newest incumbent of that office.
§ My Lords, this debate is related fairly directly to the debate which your Lordships had last Wednesday on the initiative of the noble Lord, Lord Lever of Manchester. The emphasis in that debate was on monetary policy, and, though differing views were expressed, it was accepted that monetary policy alone could not do the job of combating inflation and restoring the national economy. The emphasis of this debate is intended to be on the management of pay and salary matters, particularly in the public sector, and I would equally begin by conceding that even the best management cannot by itself achieve the objective of restoring our national economy. But I would submit to your Lordships that a proper management of these matters is a very necessary complement or addition to the monetary policies which this House discussed at some length exactly a week ago.
§ My Lords, I am not, in raising these matters of policy, intending for one moment to advocate what in the jargon of the trade is called an "incomes policy". That rather woolly expression has become a sort of trade name for a particular policy of a specific restriction in wage and salary increases, whether by statute or by arm twisting. And indeed, using this phrase to have that meaning is, I think, just another example of the contemporary habit of using woolly expressions to describe specific but rather unpleasant things; it really rather ranks with the practice of describing people as "underprivileged" when what you mean is that they are poor, or turning the traditional rat catcher of the countryside into an executive rodent officer.
§ I suggest to the House that the proper management of pay and salary questions, particularly in that area where the Government have responsibility, direct or indirect, and have authority and 1123 influence, is today one of the major factors in the success or failure of the economic policies of Her Majesty's Government. Whatever view noble Lords in this House may take of the specific comments I shall make, I think I shall encounter very little disagreement on that point.
§ That brings one straight to the Clegg Commission, which was set up in the dying months of the late Administration by Mr. James Callaghan. I do not wish to say anything unkind of that gentleman. After all, with friends such as he has, enemies would be something of a luxury. I am also very much one who accepts the rule laid down by one of the characters in a novel by Saki—I think it was The Unbearable Bassington—where one lady observes to another, "It is always wise to be respectful to the leaders of the Opposition".
§ Lord BOYD-CARPENTER
I am glad I have the noble Baroness with me. To which the other lady present says, "You mean because they may one day lead the Government?", to which the reply comes, "No, because one day they may lead the Opposition". The Clegg Commission was set up in those last few weeks after the unhappy winter of discontent, with terms of reference which seemed to indicate a desire, as I think the composition of the commission itself indicated, to take the heat out of a good many of the claims being made by deferring settlements to a later stage. This is an expedient which Governments have practised before and will probably practise again. It has in fact worked very much in that way, and certainly the present Administration had, as a result, bequeathed to it a number of very substantial wage and salary increases in the public sector to the acceptance of which they had been committed by the acts of the previous Administration, both in setting up Clegg and in referring these matters to it.
What I should like to do, having sketched that background, is to invite the attention of the House to the way in which the doctrine of comparability, which Clegg was set up to advise or indeed adjudicate upon, actually works, and also, if I may, to analyse the principles or indeed 1124 the philosophy behind it. The idea of comparability in the public sector has a very respectable parentage. It goes back, as no one knows better than the noble Lord, Lord Houghton of Sowerby, many years to the Pay Research Unit which served many Governments in their decisions as to pay levels in the Civil Service. I was myself involved as a Treasury Minister, in the days when the affairs of the Civil Service were handled by the Treasury and when the Civil Service Department did not exist.
I have never been wholly convinced, if my noble friend does not mind my saying so, that the setting up of that department was a particularly good thing. I was involved very much in the work of the Pay Research Unit and I fully appreciated the difficulty of their task. But their task, of course, was infinitely simpler, particularly in those days, than that of the Clegg Commission. They had simply to try to work out what, in the light of general levels of similar employment outside, were the proper levels of remuneration in the Civil Service. They had, of course, at that time the problem, which continues, of trying to give due weight, from the Civil Service point of view, to the factors of a very high degree of security of tenure, a guaranteed pension and the right to retire on that pension at the relatively early age of 60. They had to try to make a judgment as compared with other employment outside in which those factors were given due weight.
§ Lord SHEPHERD
My Lords, the Pay Research Unit does not—I speak with some authority in this matter—advise as to what the settlement is to be. It provides the information to the negotiating parties. It is not the unit that advises the Government or any other body as to what the settlement should be; it merely provides the information. It is for the negotiators to decide how that information should be used.
§ Lord BOYD-CARPENTER
My Lords, the noble Lord is, of course, 1125 exactly right, and he had direct responsibility for it when he was a very distinguished Minister for the Civil Service. But I think he will agree that the unit, which supplies the information to the negotiators, given the prevailing view that there should be a relationship between Civil Service remuneration and that outside, is likely to be a major factor in the decisions. Obviously, the position of one negotiating party or the other is greatly strengthened or weakened if the research unit's report weighs heavily one way or the other. I think that the picture which perhaps inadvertently the noble Lord was painting of the Pay Research Unit as a mere mechanical operation is a slight exaggeration.
§ Lord SHEPHERD
My Lords, the noble Lord should make it clear that the Pay Research Unit provides information in a raw sense to the two sides; it does not weigh or balance one factor with another. It deals purely with raw material.
§ Lord BOYD-CARPENTER
And my Lords, it supplies the material in the form that it thinks is most helpful to the negotiating bodies.
§ Lord BOYD-CARPENTER
My Lords, that was certainly my experience. The noble Lord's experience is, perhaps, more recent than mine. I would ask him to accept that I had two periods of dealing with this operation and it may be that under his benign rule the system developed. However, certainly at the time when I was involved the material was, as he said, supplied, but supplied by people whose job it was to help the negotiators with a proper supply of information. I am sorry if the system did not operate in that way when he was concerned. Indeed, if it did not operate like that with him, then perhaps that accounts for some of the rather unfortunate settlements which were made at that time.
§ Lord SHEPHERD
My Lords, I am the chairman of the board of the Pay Research Unit and I intervened only in order that the factual position was clearly established.
§ Lord BOYD-CARPENTER
My Lords, I am most obliged to the noble Lord. 1126 I do not think that there is any quarrel between us. The system has developed over the years and I think that our exchanges make absolutely certain that there is no misunderstanding in the House as to the position. I think that the noble Lord would go further with me and agree that the task is a difficult one. It has now become—land this was the point that I was about to make when he intervened—an even more difficult one, inasmuch as they and the negotiating bodies, and ultimately the Government, have all now to face the fact that the indexed pension—always an important factor in this respect—is now, in an age of inflation, relatively even more important. It is, indeed, very difficult to make any comparison between a body that has such a pension, and outside employment.
I am quite certain that I am right in saying that in the private sector indexed pensions hardly exist. No company of which I know could possibly operate a funded scheme on that basis. Indeed, I have never yet heard an insurance company quote for an insurance operated pension scheme with fully indexed benefits. No doubt the flexibility of our insurance industry is such that it could be so. However, I am sure that the figures which it would quote in relation to salary would be most alarming and very different from the 2 and 3 per cent. valuation which the Clegg Commission put on this factor when it was considering the Health Service workers a short time ago. I see that the noble Lord is nodding his head as regards that point.
Therefore, while we are on the question of the PRU, which I was, on the whole, indicating had a good history—and I am sure that the noble Lord contributed to that—and a long-established practice, it must be remembered that even with the relative simplicity of the comparison, the task in an age of inflation has become so enormously more difficult that I am certain that my noble friend will have to give consideration to the whole system.
How are we to make a sensible judgment as between an employment with an indexed pension payable at 60 and employments with some pension rights— or none—but none of them indexed and most of them payable at more advanced ages? I am sure that that is a task that even the most 1127 devoted public servant would find extraordinarily difficult to undertake. I shall be interested to hear when my noble friend comes to reply how Her Majesty's Government think that they will be able to handle this.
However, the task, as I have said, is easy by comparison with the task which was imposed on the Clegg Commission. For that commission was confronted with a number of requests to weigh the remuneration of one quite separate occupation as against another. It is a task of great difficulty. However, I wanted, as I have said, to consider the philosophy of it for a moment. Why, as regards what one man is paid, is it directly relevant to consider what another man in a totally different occupation is paid? Of course, there is a link when there are recruiting problems, but the recruiting problems very often speak for themselves. People joining one of these trades or another, as someone put it, vote with their feet. But how otherwise, for example, is it necessarily relevant to what a teacher is to be paid to consider what a Health Service worker is to be paid? What is the necessary relevance between the two?
The doctrine of comparability, which has been built up in the last year, seems to me to be one that is philosophically and socially somewhat dubious. There are many factors that have to be taken into account in assessing remuneration for a job. Recruiting is one such factor—and a very important one. It is important to recruit people of the proper calibre. Equally important is the amenity or lack of amenity of the job; the hours; the holidays; the prospects; the attractiveness of the job and so on. They are all extremely difficult factors because they vary very much as between one individual and another.
I should like, if the House will allow me, to quote—because it is expressed so much better than I could do it—what is said in a paper which is so far unpublished, but which I understand is to be published by Professor Meade on The Fixing of Money Rates of Pay. Professor Meade, who as the House knows, is one of our greatest authorities on these subjects, says:the principle of comparability is needed in order to set wage rates which will balance supply and demand in the various sectors of the economy".1128 Your Lordships will recall that that was the point which I made a moment or two ago. He goes on:But to press the principle of comparability beyond that is to embark on a mysterious meta-physical exercise. How is one to balance job security and pension rights against high immediate pay or how to balance a quiet life at a routine job against a tiring but exciting job but with longer holidays? Different individuals have different valuations of the different characteristics of different jobs. One can do no more than try to assess whether at given relative rates of pay sufficient individuals prefer one job to another".That summarises the basic dubiousness of the very principle of comparability once we depart from the fairly firm base of the competing claims to recruitment of different occupations.
Having said that, one comes to the problem of the actual operation of the Clegg Commission. Has it, in fact, been able to operate successfully? It is fair to say that its lifetime has been short. It has, I am sure, tried to do what the Government of the day asked it to do. I am really suggesting to the House that it has had an all but impossible task. However, how does this comparability exercise work? If it is done conscientiously—as I am sure it has been—then it involves the following. If in one occupation there has been an excessive pay settlement or award, that excessive award is then taken into account in considering a new pay claim by somebody else, because if one is forced to comparability one is not confined, as I understand it, to comparability with reasonably assessed pay settlements, but simply with actual pay rates as determined. Therefore, once one gets into the system —and your Lordships will be well aware of the fact that there have been several pay settlements in recent years which have been very high—the whole thing becomes geared to produce further excessive pay settlements. Of course, comparability always means levelling up; it never means levelling down. Therefore, it is right to call it, as The Times called it the other day, an "engine of inflation". I do not blame the Clegg Commission, for I think that it was given the wrong job to do, but, having been asked to do that job by the Government of the day, they have tried as ordinary, responsible citizens to do it.
However, one cannot pass over the recent Himalayan blunder for which the 1129 Clegg Commission was responsible in connection with the teachers' pay claim. It is very striking that the taxpayers and ratepayers have been landed with a liability for an additional £130 million because of an error in the award that was made. Incidentally, there was a very interesting letter published in The Times the other day by a correspondent who pointed out that an accountant acting for the Warwickshire County Council who had made an error of £57,000, which had therefore cost the ratepayers that amount, was being ordered by the district auditor to refund that sum. I am not suggesting that even at the present level of professorial salaries, the Clegg Commission should be asked to refund the cost of their error. But it is an interesting speculation that if by an error you cost the ratepayers £57,000, you refund it, but if your errors are on a much larger scale, nothing of the sort happens.
However, I suggest that it somewhat discredits the system that these devoted and highly intelligent men should none the less, in the way the system has worked, commit an error of this sort. Quite apart from the general philosophical aspects of the matter, to which I have referred, I think that that by itself demands that Her Majesty's Government should very seriously consider whether either the doctrine of comparability or the Clegg Commission itself should continue. I understand that in any event Professor Clegg is due to retire in September and return to his duties at Warwick University, where he holds the Chair of Industrial Relations with very great distinction. I do not know what my noble friend will say, but it may well be that the Government will be considering whether or not to wind up the whole mechanism.
However, I would stress to my noble friend that there have been a series of high pay settlements in the public sector and that many of us—whether we are supporters of Government policy or of their opponents—are worried by this level. If this level of settlements continues, it will undermine the whole anti-inflationary policy of the Government. So far it has been possible for my noble friends to urge that most of these settlements were either via the Clegg Commission or a bequest to them from the previous Administration. 1130 But that defence is now running out after a year or more, and the Government are ultimately responsible for settlements in the public sector. I hope that we shall hear from my noble friend of the Government's determination to be resolute in dealing with forthcoming pay claims.
There is, of course, the teachers' settlement which resulted from the Clegg errors. I am bound to say that I find it a little disturbing that an honourable profession should insist on holding its employers to an agreement which has turned out to be based on an erroneous calculation, though it may be strictly within its rights in so doing. But I very much hope that the fact that that award was inflated by something like 4 per cent. as a result of an error will be very firmly taken into account in the next round of settling teachers' remuneration. I am certainly not picking out the teachers; I have a great regard for their profession. But it seems to me that over the whole area of Government control it is essential to keep pay increases well below the level of inflation and perhaps somewhere near the permitted target for monetary growth; and one recognises that this will involve unpleasantness and difficulty for Her Majesty's Government, particularly perhaps for my noble friend as Minister for the Civil Service Department. However, I hope and believe that the Government will be resolute in this matter.
That brings me to my final point. I was greatly encouraged by what the Prime Minister is reported as saying yesterday about her attitude to the recommendations of the committee presided over by the noble Lord, Lord Boyle. I hope that, in being resolute in the whole of the public sector, the Government will be resolute at the highest levels as well as lower down. In parenthesis, perhaps I could say that I have never understood why the Boyle Committee was required to deal with the nationalised industries. I cannot understand why those industries, like private industries, should not settle the remuneration of all their members; after all, it is they who have to encounter directly the reaction of their own organised labour to increases at the top, which all of us in industry know perfectly well is a very sensitive topic. For the rest—the judiciary, officers in the services, and senior civil servants—that is the responsibility of the Government, 1131 and one which I suggest the Government should bear.
I should like to remind my noble friend that when the Department of the Environment was set up by, I think, Mr. Heath with the initials "DoE", the on dit was that the departmental motto would be: "The buck stops here". Whether or not that applies to the DoE, on this matter, the buck stops with the Government and I hope that we shall have an encouraging reply that the Government grasp the crucial importance of this to their policies, to the recovery of the country's economy and to a stable future in a non-inflationary situation for all of us. My Lords, I beg to move for Papers.
§ 3.27 p.m.
§ Lord HOUGHTON of SOWERBY
My Lords, your Lordships will not suppose for a moment that my temporary eminence on these Benches is a reward for good conduct. It is merely part of the arrangements wisely made by my noble friends who see to these matters, that the spokesman for the Opposition has some knowledge and experience of the subject under debate. My own contact with this topic goes back a very long way. However, before I go further, I should like to join with the noble Lord, Lord Boyd-Carpenter, in extending warm congratulations to the noble Lord the Lord President on his recent distinction and well-deserved recognition for pre-eminent services to the country and to the future of Rhodesia.
The noble Lord, Lord Boyd-Carpenter, made a considerable assault upon the principle and application of the principle of fair comparability in the public sector. I have listened to the noble Lord for many years in another place as well as here, but I have rarely heard such an inconclusive speech as he had made this afternoon. I thought that he was going to lead us somewhere; I thought that he was going to take us along the road of reform and indicate the remedy which the Government might seek. But he left the subject in the air, and turned to the noble Lord the Lord President and said, "I hope to get from the Lord President the light upon this subject which I have failed to show". I expected rather more from the noble Lord. However, if we are to discuss this very important matter, we ought to begin with the 1132 principle; then we can consider the application and then go on to consider the effects of the application and the principle. But I think it is desirable in the first instance to come to some conclusion as to the basis upon which we are going to consider the pay of those in the public services.
In this century, this matter has been mulled over by three Royal Commissions and one Committee. The MacDonnell Commission of 1912 to 1915 was sitting when I first entered the Civil Service as a Temporary Registered Boy Clerk—all in capital letters—at 15 shillings a week. By the time Lord Tomlin came on the scene for the Royal Commission of 1929 to 1931, I had some responsibility for representing Civil Service opinion, and, again, when Sir Raymond Priestley was chairman of the Royal Commission of 1953 to 1955 it fell to me to give evidence to that commission on this subject. Finally, we had the Committee under the chairmanship of the noble Lord, Lord Fulton, from 1966 to 1968, on the structure of the Civil Service, though they did say something about this principle of fair comparability.
The first two Royal Commissions that dealt with this subject failed to find a practical solution to the problem of what are the principles upon which the pay of the public services should be fixed; what are the criteria; what are the guidelines; how you do it. Priestley made that attempt, and the committee under Lord Fulton endorsed the findings of the Priestley Commission of a few years previously. While the Tomlin Commission came down firmly for the principle of comparisons with outside occupations, they failed to devise the machinery to give effect to it. The Priestley Commission did a much more thorough job. They laid down the principle and designed the machinery to apply it. In their report they devoted 30 pages to the examination of this question, both the principle and the method of the application of the principle of fixing Civil Service pay. They said—and I quote from paragraph 96 of their report:We think that a correct balance will be achieved only if the primary principle of Civil Service pay is fair comparison with the current remuneration of outside staffs on broadly comparable work, taking into account differences of conditions of service".That really is the principle today. In paragraph 131 and subsequent para- 1133 graphs they discussed the method of applying that principle. They dealt first with the question of finding the facts and then, secondly, the translation of the facts into Civil Service rates.
All this was accepted, after negotiation, by the Civil Service National Whitley Council in the early part of 1956. I happened to be the chairman of the staff side of the Civil Service Whitley Council at the time, and Mr. R. A. Butler, now the noble Lord, Lord Butler, was Chancellor of the Exchequer. He took the important and bold decision to accept what Priestley had recommended, both in regard to the principle and also on the application and the machinery to be set up for the purpose. The Civil Service Pay Research Unit was set up precisely on the lines recommended by the Priestley Commission in paragraph 139. It was a branch of the Civil Service not connected with those divisions of the Treasury responsible for questions of pay and conditions of service.
Now I come to the Fulton Committee. Between 1966 and 1968 the Fulton Committee, while saying that consideration of the principles of fixing pay was not directly within their reference, said in paragraph 226 that their proposal on the revised structure of the Civil Service did not in their view:imply any departure from the principle of fair comparison which was established by the Royal Commission of 1953 to 1955. In our view this principle remains valid and will continue to be necessary to the efficiency as well as to the contentment of the Service.This really means that the principle of fair comparison has become entrenched in theory and in practice in looking at this difficult question of fixing Civil Service pay, and it has been there for 25 years. That does not mean to say that it should not be reviewed. I think that in these changing times one can never be sure that established practices meet the needs of the day or are immune from any critical review. But I am warning your Lordships that history seems to suggest that this principle has been gone over so many times and has become so much part and parcel of the whole structure of the Civil Service arrangements that it will take a great deal to shift it.
The Priestley Commission ended the waffle of the earlier Royal Commissions on this subject. The earlier inquiries provided no basis for negotiation, no 1134 basis for satisfactory arbitration; indeed, the whole experience of trying to fix Civil Service pay and to arbitrate upon disputes was frustrated by the absence of reliable and acceptable data upon which the matter could be considered. I went through that bitter experience myself for many years, when one clutched at evidence from outside, only to be told that it was not relevant; it was not comparable; that there was other evidence. One asked for the other evidence to be produced, but it was not produced. So mostly consideration of Civil Service pay and conditions in those days rested upon internal rather than external comparisons, which was really very unsatisfactory.
I believe that fair comparisons hold the field at the present time, and the question is: if it is challenged, what is to replace it? I have my ear to the ground, and I hear that other suggestions are now being made: for example, merit awards, or payment by results, or productivity bonuses, something to stimulate, to motivate efficiency and productivity in the Civil Service. I do not think that we want payment by results in the taxation system or even in the field of social benefits. I think we should have awkward questions as to what results would be paid for. Are we to encourage the predatory instincts of tax inspectors and, by contrast, reward the sympathetic approach of the staffs of the benefit sections of the Department of Health and Social Secuirty?
If we are looking at special rewards, special increments, extension of scales and responsibility allowances, all I can say is that we have had them all before and there have been many problems arising from them. However, I am not at the moment able to assess the strength of any alternatives that may be in people's minds or how seriously they are being put forward. All I know is that the noble Lord, Lord Boyd-Carpenter, did not put any forward and I will be very interested to know whether any will be forthcoming later on from the Lord President of the Council.
Meantime, there was a significant change in 1977 to the machinery employed for the application of the principle of fair comparisons. Your Lordships will know that my noble friend Lord Shepherd is the chairman of the Civil Service Pay Research Unit Board. This was estab- 1135 lished largely as a result of criticisms in your Lordships' House that this research unit in its old form was a Civil Service body where all who served upon it had an interest in the outcome of their review of Civil Service pay, in some cases probably quite closely to the grades in which they were serving. It was thought that there should be some oversight, some independent body to authenticate what the unit was doing. That is the change that was brought about in 1977. We have the unit, which is still there as an executive body, and the board as a supervisory body. The board is responsible for the integrity of the operations of the unit itself.
Your Lordships will know that there has been a report only in recent weeks, the second report of the Civil Service Pay Research Unit Board and the Civil Service Pay Research Unit 1980. If anyone really wants to examine some of the points the noble Lord has made about comparability and high settlements in the public sector, there is a great deal of evidence in that book about the information on which the unit came to its conclusions.
On the question of pensions, there is also an accompanying booklet, a report of the Government Actuary, on the very points that the noble Lord raised; namely, what part shall the indexed non-contributory pension have in the final reckoning of the comparability of Civil Service pay with pay outside. Indeed, am I not right in saying that the Government have appointed a committee to look specially at this question of the influence, in the final assessment, of the validity of fair comparison of the pension arrangements in the Civil Service? They are very important considerations upon which a conclusion has not yet been reached.
It is only right to say that from the time the pay research fair comparability machinery was set up in 1956—and I had everything to do with that in reaching agreement with the Government upon it—to 1961 that system worked extraordinarily well. It really was a new era in relationships between staff organisations and the Government on this difficult question of pay. The need for arbitration fell dramatically, because evidence was produced by the Pay Research Unit upon which negotiations could take place 1136 intelligently and well-informedly on both sides because of the information produced by the unit. Mostly those negotiations were both peaceful and successful.
In 1961, the then Chancellor of the Exchequer introduced a pay pause. He did not, however, interfere with the principle of fair comparability. What he did was to postpone increases, which the review had shown to be justified, until a later date. There was no interference with the functioning, or the principle, or the application of fair comparability during that period of the pay pause. It was merely deferring increases which otherwise would have been due.
In 1974, the Wilson Government introduced, by agreement with the staff side, a new arrangement. One was to get the research over earlier on fair comparability, looking into the past, so that they could overcome the need for long periods of retrospective pay increases. This really did trouble the public and unions greatly. The Civil Service had six months, sometimes longer, retrospection of pay increases because of the delay in evaluating and negotiating the information which the pay research produced.
There are also other factors regarding the more precise quantification of benefits both in the Civil Service and outside. The fringe benefits in outside occupations must not be ignored in this context. Motor cars, holidays, education of children, all sorts of fringe benefits are there which do not apply in the public sector. But I regret to say that in July 1975 the Labour Government suspended the Pay Research Unit and the whole operation of fair comparisons in the Civil Service. This was due to the economic situation at that time, and it was not until September 1977 that the Pay Research Unit was restored; and it was then that the new machinery, the two-tier system of supervisory board and executive unit, was set up.
In April 1979 the first pay research review under the restored system was brought into operation, but by stages, and also accompanied by a staff reduction in order to keep within the cash limits. The same applied for 1980. The effective date there was deferred for six weeks, as well as staff cuts coming into operation, to meet the cash limits.
The Standing Commission on Pay Comparability, to which the noble Lord 1137 referred, was introduced by the Labour Government in 1979 to provide some machinery for inquiry and award in sections of the public services which were not otherwise catered for in the machinery for fair comparability. There were the local government officers; the teachers were referred there, and others for whom no other machinery for testing fair comparability was available. I myself was chairman of the teachers' pay inquiry in 1974, and I know the difficulties of trying to find the answers to fixing pay in a profession like that without the assistance of a research body, which we have in the Civil Service. It was a very difficult exercise indeed. When Professor Clegg himself came to look at the teachers' pay on the Standing Commission, he found equal problems of looking into the evidence which had to be available if you were to get any guideposts into what you were doing. Anyway, that was done at that time to meet a particular situation and to provide machinery which was not otherwise available.
I want now to come to some philosophy on this subject. Difficulties arise if the continuous application of the principle of fair comparison is interrupted or deferred. The reason why there is so much misunderstanding on fixing pay in the public sector is that people do not realise that they are working in arrear. The pay research review is to find what adjustment is needed to maintain the principle to discover what has to be done by comparison with what has already happened. In short, it is a catching-up exercise. If that is suspended as part of the general wages policy, then the public services are denied the benefit of fair comparison with current rates outside. They are bound to fall behind.
This is what makes for so much discontent while it lasts, and for so much difficulty subsequently to put right in a major review. This was the discovery that we made in 1974 when looking at teachers' pay. They had fallen so far behind that it took a 30 per cent. increase to pull them up. This was regarded as a staggering increase and an enormous additional load to expenditure on education at that time. But these are the inevitable consequences of letting public sector pay fall into arrear and then in one go trying to catch up. Teachers' pay and 1138 other public services had a gap which had to be closed, and which was eventually so wide that the pay increases to close it appeared to many people to be out of scale with other pay increases being given at the same time.
But they are not in the same race. This is the problem. They resemble men on the running track who are sometimes well behind and look as though they are in front. This is exactly how the public services have been for so long. People think that they are forging ahead, they are leading the latest round of pay increases, when what is happening is that they are bringing up the rear of retrospective adjustment having regard to what has already happened. This has happened more than once and has caused a great deal of misunderstanding.
As we move towards comparability, I think on a wider scale than ever before, we are, in a way, moving into a fair comparability state. The Civil Service is no longer alone; it is in the company of an increasing number of others in the public services of one kind and another. It is true that it enjoys its own fact-finding agency, its own negotiating body and its own arbitration tribunal in the event of final disagreement. But there is no reason why other sections of the public services should not have the same. The Civil Service got these facilities, with the ultimate right to go to arbitration, because they happened to be in this position almost longer than anybody else, and other sections of the public service are undoubtedly moving into the same field, and some of them attract warmer sentiment in the public mind, probably, than does the Civil Service. They all want their fair place in the sun. Not all of them rest their claim on fair comparability.
Some, like nurses and the police, are looking perhaps more closely to relativities; and a large part of the nation's workforce, not only the workforce in the public service, are looking for fair relativities as well as fair comparisons. In fact, I have heard it said that the workers of Britain have now got into a state of lateral thinking; they are looking sideways all the time. The absolute grievance is a minor one compared with a relative grievance; what somebody else gets, they should get. They are always 1139 looking sideways and not always looking ahead, even for themselves.
Where do we go from here? I was hoping the noble Lord, Lord Boyd-Carpenter, would tell us; that he would at least put up a signpost and say, "This is the way you go". But he did not do that. What is this he hinted at about the Government setting an example to employers and unions in the next pay round? What is this about the Government having to see that settlements in the public service are well below the level of inflation? Is this the example which the Government have in mind to set to the private employer? These suggestions carry grave implications for fair dealing and contentment in the Civil Service. Fair comparability is a link, not a separate assessment. Is the noble Lord suggesting there should be a separate assessment, quite apart from questions of fair comparability?
If he is going to look at recruitment and efficiency, he will find he has a Royal Commission report against him on adopting that as the basis for fixing Civil Service pay; and if the link is broken to set an example and introduce a lower and arbitrary pay adjustment, that would be tantamount to a pay cut. What does the noble Lord think the Civil Service or public services generally would have to say if they were told, "You may on this basis of fair comparability be entitled or deserve a pay increase of a certain amount, but you are not going to get it. It does not matter what the facts produce and it does not matter what other people have had in the past; you are not going to get a pay increase now in excess of the going rate of inflation". That is a stand the Government could take, but is that how the Government are going to treat the Civil Service, throwing away all the investigations of this century? What justification could there be for it? Surely, no intervention or interruption of the present arrangements in the public sector could be justified except as part of a new incomes policy for wages and salaries, but that, the noble Lord said, he hesitated to recommend, or words to that effect.
If the Civil Service is to be treated differently from those in the private sector and is to be denied the implementation of the principle on which it has relied for so long, the Government must 1140 have a complete answer to the Civil Service for taking such a decision. I think they would have to answer the charge of discrimination against the public sector in conditions of free collective bargaining in the private sector. And if there is to be free collective bargaining in the private sector, then I think all the implications of that are to continue the system of fair comparability in the Civil Service.
§ Lord BOYD-CARPENTER
My Lords, would the noble Lord address himself at this interesting point in his speech to the situation created by inflation with the enormous increase resulting from that in the value of the indexed pension payable at 60? Would he also address himself to the fact that at the time of the various Royal Commissions to which he referred, that situation did not exist in any substantial degree and that Her Majesty's Government have now to deal with the situation as it is, with that enormous difference in favour of the public service as against practically anybody in the private sector?
§ Lord HOUGHTON of SOWERBY
My Lords, it is difficult to put this proposition in the setting of the facts and factors which might apply at the time a decision was taken. A great deal would depend on what was the current level of pay increases, for example, at the time the Government had to consider what they did about the public service, and there are other aspects of the general economic situation which would have to be brought into account. But I am saying that there is such a thing, so far as the Civil Service is concerned, as a feeling of justice and fair dealing at the hands of their employer, the Government, and it would be a grave matter indeed if the principle of fair comparability were set aside, except in the gravest circumstances of the national interest, and I do not see that condition applying in the foreseeable future. The principle of fair comparisons was designed for good times and bad—one might almost say in sickness and in health—and it is not to be mauled about as an example to other employers outside; the Civil Service has its claim to fair treatment as a matter of duty and obligation by the State.
I therefore hope the Lord President will give an explicit assurance that nothing of 1141 that kind is in contemplation because there are anxieties in the public service today and a number of them are already getting very restless indeed at what they hear of the likelihood of some further crisis in dealing with the public services' pay. I hope the Lord President will be able to say that, whatever the Government have in mind, they will maintain the principle of fair comparability for the public services because, in the words of the noble Lord, Lord Thorneycroft, the other day in a different context, if they leave fair comparisons they have nowhere else to go; and that indeed is true by the consideration given by three Royal Commissions and one committee; none of them could find anywhere else to go, and the noble Lord, Lord Boyd-Carpenter, gave no indication of where he would go. The Lord President will walk on some very sensitive ground, almost holy ground, this afternoon and he must be very careful in what lie says. The more he pleases the noble Lord, Lord Boyd-Carpenter, the more uneasy and restless the Civil Service will become. If he would like to be excused from saying anything at all, that is not a matter between me and him, but at any rate I can understand his predicament.