Civil Service Pay: Inquiry (Hansard, 29 June 1981)

§ Lord Soames
My Lords, in the Statement which I made to the House about the Civil Service dispute on 8th June, I explained that our talks with the Civil Service unions had concerned both this year's pay increase and the future arrangements for determining Civil Service pay. I made clear that the Government were satisfied that it would not be right to increase our 7 per cent. offer for the 1981 settlement, but that in response to the unions' anxieties about the future we had told them that we were ready to set up an independent outside inquiry to advise on the best up-to-date arrangements.
I want to emphasise our concern to establish new and acceptable pay arrangements as soon as practicable. To this end the Government have appointed the right honourable Sir John Megaw, a retired Lord Justice of Appeal, as chairman of an inquiry into non-industrial Civil Service pay. Membership of the inquiry is being discussed with Sir John Megaw and will be announced later. The inquiry will have the following terms of reference:— Having regard to the public interest in the recruitment and maintenance of an efficient and fairly remunerated Civil Service, and in the orderly conduct of the business of Government and its services to the public; to the need for the Government to reconcile its responsibilities for the control of public expenditure and its responsibilities as an employer; to the need for good industrial relations in the Civil Service; and to recent experience of operating the existing arrangements for determining the pay of the non-industrial Civil Service: to consider and make recommendations on the principles and the system by which the remuneration of the non-industrial Civil Service should be determined, taking account of other conditions of service and other matters related to pay, including management, structure, recruitment and grading.". I have already given the unions an assurance of our commitment to genuine negotiations in 1982 without pre-determined cash limits. We will ask the inquiry to report by next summer, so that the recommendations 9 can be considered in good time before the 1983 Civil Service pay settlement.
The terms of reference for the inquiry take account of earlier discussions with the unions. They have been widely drawn to allow full consideration, without impediment, of all questions relevant to the determination of Civil Service pay. It is my earnest hope that the service will see this as opening the way to a constructive and honourable resolution of the important longer-term issues underlying the present dispute.
The setting up of this independent inquiry underlines in the clearest possible way the Government's concern to establish a fair and sound basis for the future determination of Civil Service pay. The public has a right to expect the Civil Service unions to respond now equally constructively by bringing their disruptive action to an end. I hope they will do so without further delay.

§ Lord Peart
My Lords, I am grateful to the noble Lord for making his Statement. I was once in a similar situation. I am glad there has been movement. Indeed, it would have been a tragedy if this dispute went on and on. Let us hope that this will be a turning point. I welcome the appointment of the right honourable Sir John Megaw, a retired Lord Justice of Appeal and a very distinguished person. I am proud to say I served under him as a gunner. He is a very fine man.
I hope that, arising out of this inquiry, there will be an early attempt to bring about the ending of the dispute which is harming so many of our people. I hope that the Government will be constructive and will recognise that there is a problem with the Civil Service. They are a fine body of people and, given the right leadership, they will respond.

§ Lord Rochester
My Lords, from these Benches I should like to join in thanking the noble Lord the Lord President for having made this Statement. No doubt it is right not only that the question of how the pay of civil servants is in future to be determined should be reviewed now, but also that in any such examination account should be taken of factors such as those referred to in the Statement. I must again remind the House that the Liberal Party believes that there is an urgent need to establish long-term arrangements for pay determination that go very much further than those required to cater for the Civil Service alone. I am afraid that we have no faith in the outcome of an inquiry—however eminent its chairman—which will be concerned with the pay of civil servants in isolation from that of other groups.
Does not all past experience show that whenever matters affecting the pay of a particular group are examined attention is concentrated on the problem from the viewpoint of that group rather than from that of others viewing the question from outside? Does this not lead to the conclusion that what is needed is the establishment by the Government, after consultation and preferably agreement with the employers and trade unions, of a single standing body to adjudicate on relativities in the pay of those employed in the public services generally?
In our view this should be one component in a comprehensive incomes policy covering both public 10 and private sectors. Irrespective of that, and the political complexion of the Government of the day, has not the time come for all concerned to enter into a commitment that the composition, the independence and, above all, the continuity of such a body will be guaranteed and its findings honoured in all the circumstances? How are we, except by agreement in such matters, to conquer inflation, improve our competitiveness and reduce unemployment?

§ Lord Soames
My Lords, I am grateful to the noble Lord, Lord Peart, for what he has said. He went through not dissimilar problems a couple of years ago and he knows the complexities and difficulties of them. Of course I hope with him that this inquiry may well lead to the unions deciding that this can prove to be the end of what has been a long road. There were three areas of anxiety: one was this year's 7 per cent., and the Government have made abundantly clear there can be no move away from our 6 per cent. cash limit and that 7 per cent. is the most that we feel we can offer within the 6 per cent. cash limit. The second was next year, where we have said that we will have genuine negotiations with them without a predetermined cash limit. So that is done. Now hopefully, this will resolve the longer-term discussion. With the amount of distress and trouble being caused to our fellow citizens by the industrial disruption, I hope most sincerely that this will help to bring matters to a rapid conclusion.
As to the noble Lord, Lord Rochester, perhaps the best is the enemy of the good. The reason that we have set this up is because the Civil Service have traditionally had their own arrangements for fixing the pay of the Civil Service. They are the direct employees of the Government, which is not so for the whole of the public service, many of whom are employed, for instance, by the National Health Service, by local authorities and the like. The Civil Service is sui generic in terms of its relationship with the Government. It had its own arrangement and we feel that it is right in time after 25 years, where the old system had lost the confidence of the general public as well as of the Government and, to a large extent, the unions themselves, to have a new one. This will be a wide-ranging inquiry. Of course, there will be time enough then to see whether lessons can be drawn from this that might include other elements of the public service. But this inquiry is for the Civil Service. If we can resolve that, that will already be something.
Of course there is a fundamental difference between the noble Lord and myself on the question of a comprehensive incomes policy because we have seen what has happened to comprehensive incomes policies in the past. They have lasted for two or three years and then they have been followed by a wage explosion.

§ Lord Houghton of Sowerby
My Lords, while I welcome this announcement very warmly indeed, may I ask whether the noble Lord is aware that this committee will begin its work in very unfavourable circumstances so far as the Civil Service side is concerned? Can he offer some further hope that this announcement will pave the way to a restoration of peace in the Civil Service and greater harmony and understanding 11 throughout the public service by going further about what he said about the year 1982?
I do not comment for the moment upon 1981; I do not comment for the moment upon 1983. But the noble Lord has mentioned that genuine negotiations can take place in 1982 without any predetermined cash limits. So far so good. However, does he realise that unless he is prepared to give an assurance about the availability of arbitration in 1982, he is leaving the Civil Service without any principles for fixing their pay for three years and no redress, no opportunity, of going to arbitration in the case of disagreement?
They are entirely at the mercy of the judgment of the Government between now and 1983, unless he is prepared to write into his announcement that the Civil Service will at least have some opportunity of appealing to outside arbitrament in the event of not being able to reach agreement as the result of the genuine negotiations which the noble Lord offers for 1982.

§ Lord Soames
My Lords, I am grateful to the noble Lord, Lord Houghton, who has knowledge which goes long into the past on these matters. He talked about whether this would lead to harmony. It takes two to arrive at harmony. The Government regard the setting up of this inquiry, its terms of reference and all that we are hoping from it and have made public that we are hoping from it, as a considerable contribution to harmony. We hope it will be responded to by the unions. As to 1982, we have said a lot—for instance, that we will have genuine negotiations without a predetermined cash limit. As to having recourse to arbitration, now in 1981 is not the time to decide whether or not that will be necessary. I hope that it will not be and that we shall be able to get reasonable negotiations and a reasonable fulfilment of those negotiations. But that does not mean that the Government should let out of their own hands the final determination of pay. Whether they will look to arbitration or not is something that will have to be decided at the time. I do not think it is wise, before we even open negotiations and when we are still talking about 1981, to talk about what we intend to do in the event of a breakdown in 1982. I do not think that would be wise.

§ Lord Mottistone
My Lords, may I thank my noble friend the Leader of the House for making this Statement, which I very much welcome. He was referring very much to the future. Can he tell the House whether it is the Government's intention still to leave on the table the existing offer they have for this year?

§ Lord Soames
My Lords, if the industrial action continues the Government obviously will have to consider what further response they should make, including reconsideration of the operative date of the present pay offer. Obviously it would be preferable not to penalise those who have not taken industrial action but who have continued to work normally—and even harder than usual in some cases—during 12 this period. On the other hand, it could be a very difficult administrative task to pay the increase from different dates to different individuals. This is something which has not yet been decided, and I hope very much that the question will never arise.

§ Lord Molloy
My Lords, may I ask the noble Lord the Leader of the House a few questions? Were the terms of reference of this inquiry agreed with the trade unions and was the choice of chairman and other members of the inquiry agreed with the trade unions? Would he not agree that ultimately there may have to be some arbitration in future disputes or disagreements from this inquiry, and therefore would it not be a very good thing, in order to create the ideal atmosphere, that the present dispute should now be referred to arbitration while this inquiry is sitting?

§ Lord Soames
My Lords, in answer to the last bit, the answer is definitely, no. In answer to the first bit, the terms of reference were discussed with the unions, which is the Government's proper role in these matters. The Government have to discuss them and then have to agree them themselves after discussion.

§ Lord Shinwell
My Lords, the noble Lord the Leader of the House has referred to a wide-ranging inquiry. May I say in passing that I think that, in the minds of the public and of the Members of your Lordships' House, following the announcement about a wide-ranging inquiry, the civil servants would be regarded as grateful if they brought the dispute to an end? May I also ask the noble Lord whether the distinguished person who will conduct the inquiry will not encounter some inhibitions because of the recent statement attributed to the Chancellor of the Exchequer that in future pay settlements may not exceed 3 per cent? Will that not be an inhibition from which the chairman of this inquiry may suffer?

§ Lord Soames
My Lords, if I may say so, I think the noble Lord is reading too much into what my right honourable friend the Chancellor of the Exchequer said. He did not talk in terms of 3 per cent. or indeed of any other percentage. What he did say was that it was vital for the long-term interests of this country that wage settlements as a whole should be brought considerably lower than they are today, that they should be more closely related to production than they have been in the past and less closely related to the rates of inflation, that it was this which would make a considerable contribution to the competitiveness of British industry as a whole and that Government and the public services also had to take these matters into account when playing their part, such as it is, in determining these issues.

§ Lord Houghton of Sowerby
My Lords, is the noble Lord aware that a large part of the prospect of settling this dispute lies in the confidence that the Government can offer for the future? The Civil Service has been denied arbitration in the present dispute: there can be no argument about that. The Government have refused to allow the operation of the normally agreed procedures for a reference to the Civil Service arbitration tribunal. Right: now I am asking about 1982. 13 Do I understand the noble Lord to say that in the unhappy, and I hope unlikely, event of disagreement following the negotiations in 1982, the opportunity of going to arbitration in the normal way will not be ruled out? That is the question that I am asking.

§ Lord Soames
My Lords, what I am saying is that they are not being ruled in or ruled out. What I am saying is that now is not the time to make these decisions and I cannot give any commitment.

§ Lord Molloy
My Lords, would not the noble Lord the Leader of the House agree that, to set this inquiry into proper perspective and gain the confidence of the Civil Service, which I know he desires, it would be in the interests of all concerned to settle the present dispute through the time-honoured method of arbitration?

§ Lord Soames
My Lords, the Government do not think it is right in the present circumstances. Having fixed the cash limit at 6 per cent., it means that it has to be kept to within 6 per cent., and the Government do not think it right to put the question of the cash limits into the hands of anybody else other than the Government themselves.