Incomes, Productivity and Unemployment (Hansard, 8 July 1981)

§ Viscount Hanworth
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ The Minister of State, Treasury (Lord Cockfield)
My Lords, over the years, big rises in money incomes without commensurate increases in productivity have increased our labour costs relative to those in other countries, so undermining competitiveness. This has meant loss of markets, severe pressure on firms' finances and profits, and so loss of jobs. Future prospects for unemployment depend crucially on reversing this decline in competitiveness through lower pay rises and improvements in productivity.

§ Viscount Hanworth
My Lords, I thank the noble Lord for that long and erudite reply. However, I should like to ask him whether he realises that a great many people think that the Government's public relations statements have been inept, to say the very least; that they have failed to get over some of the very simple facts of economics; and that the impression still remains that what they are doing is wholly doctrinal and not really related to trying to put this nation on its feet? I think that there is lacking completely the slightest Churchillian touch.

§ Lord Cockfield
My Lords, I am sorry that the noble Viscount does me less than justice. In the first major speech which I made in your Lordships' House, after we came into office, I said: the employer who accepts an excessive pay settlement damages his own profits and puts the viability of his business at risk. The employee who insists on an excessive settlement damages the company for which he works and puts his own job in jeopardy. These are the simple facts of the situation".—[Official Report, 19/6/79; col. 845.]

§ Lord Rochester
My Lords, shall we not continue to fail to match pay increases with productivity improvements or to alleviate unemployment until the Government, employers and trade unions are prepared together to establish agreed long-term arrangements for pay determination?

§ Lord Cockfield
My Lords, we do not agree with the noble Lord's approach to this matter. The ends that he seeks to achieve, of course, are the ends which are shared, I think, by all of us. However, experience shows that a formalised incomes policy unfortunately does not produce the results that he expects of it. We regard the responsibility as falling on the respective employers and the representatives of the workforce. In our own field, so far as the public services are concerned, we are, in fact, taking a firm line on this, and 693 we hope that the private sector will similarly face up to the realities of the situation as, indeed, it appears to be doing.

§ Lord Shinwell
My Lords, if it is in order to ask Questions on the Order Paper making reference to speeches that have been made by past Prime Ministers, would it be in order for me to ask Questions about Mr. Gladstone and Benjamin Disraeli, or, to be more modern, to ask Questions about Mr. Harold Macmillan, and even go so far—although I do so with the utmost respect—as to ask Questions which refer to the activities of the noble Lord, Lord Home? Would that be in order?

§ Lord Cockfield
My Lords, I regret to say that the noble Lord also does me less than justice, because if he reads one of my earliest speeches, he will find quotations in it from Mr. Gladstone's speeches. So far as the Question on the Order Paper is concerned, I have, of course, no responsibility for the terms in which it is phrased.

§ Lord Gisborough
My Lords, can my noble friend confirm that Sir Harold Wilson did, in fact, say what he is alleged to have said?

§ Lord Cockfield
My Lords, I do not know whether I need detain the House on this, or whether the House would appreciate my detaining it; but what Mr. Harold Wilson, as he then was, said in a speech to the Durham Miners' Gala—a function, of course, with which the noble Lord, Lord Shinwell, has been associated in a very distinguished way—on 19th July 1975 was as follows: I have never been allowed to forget that phrase 'one man's wage increase is another man's price increase'. In these grim days, it is more than that: one man's wage increase could mean another man's ticket to the dole queue".

§ Lord Elwyn-Jones
My Lords, is not the noble Lord's continuing demand that justice should be done to him rather a dangerous request?

§ Lord Cockfield
Not in the least, my Lords; I frequently read my own speeches to my own great benefit.

§ Lord Pargiter
My Lords, the Question refers to "real wages". Can the Government distinguish between the increases in real wages and the increases which are due purely to catching up with inflation?

§ Lord Cockfield
My Lords, as a statistical matter, it is perfectly possible to distinguish how much of an increase in money wages represents a real increase in income, and how much represents merely an inflationary increase. It is a simple matter of statistical arithmetic.

§ Lord Molloy
My Lords, would the noble Lord agree that when the world was confronted with the horrendous problem of unemployment in the 'thirties, the then United States President, Franklin Delano Roosevelt, accepted the policies and philosophies of Maynard Keynes and Kenneth Galbraith which were based simply on spend and prosper? By adopting 694 that philosophy, he overcame unemployment. We followed in this country the policy of spend and prosper. Would it now not be fair—in so far as the Government have had a long run and have failed lamentably—that they might try to tackle this extremely serious problem with the policies and philosophies of Keynes and Galbraith?

§ Lord Cockfield
No, my Lords; the world has moved on a great deal in the 50 years since 1931. Repeated attempts in the last 30 years to spend our way out of recession have merely resulted in higher levels of inflation and higher levels of unemployment.

§ Lord O'Brien of Lothbury
My Lords, would the noble Lord agree that in 1931 and the years following prices were falling, although unemployment was high? The situation nowadays is entirely different: although we have high unemployment, prices are still rising. That is the problem with which we are trying to cope.

§ Lord Cockfield
My Lords, I entirely agree with the noble Lord. While lessons can and ought to be drawn from history, one thing we always need to remember is that circumstances today may be, and indeed are, very different from what they were half a century ago.

§ Baroness Wootton of Abinger
My Lords, will the Government discourage the practice which is now so common, of justifying increases in price by saying that they are necessary in order to keep up with the rate of inflation, as though the rate of inflation was a natural phenomenon, or an act of God or of the Devil? There is no more certain way of maintaining inflation than by using the pretext for raising prices.

§ Lord Cockfield
My Lords, I entirely agree with the noble Baroness that one of the most important things to do is to break inflationary expectations. A number of major speeches have been made by my honourable and right honourable friends in another place, and have been designed to try to displace many of the inflationary expectations which, unfortunately, have grown up over the years.

§ Lord Molloy
My Lords, when he speaks of the world having moved on 50 years, would the noble Lord not agree that his Government are pursuing a policy of Adam Smith? The noble Lord is really saying that it is better to keep nearly 3 million people out of work and pay them something, rather than to have them gainfully employed, keeping their dignity and making a contribution to our nation.

§ Lord Cockfield
My Lords, I entirely reject both the allegations and the arguments of the noble Lord.

§ The Lord President of the Council (Lord Soames)
My Lords, I think the House feels that we should move on to the next Question.