Pay Restraint: Chairmen and Chief Executives (Hansard, 23 April 1985)

§ Lord Beswick
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Minister Without Portfolio (Lord Young of Graffham)
My Lords, the Government consider it important that employers and employees should take account of the effect of pay increases on costs, competitiveness and jobs. Each company should consider carefully what it can afford, and what it needs to pay to recruit, retain and motivate its staff, including its senior staff. But it is for companies, not third parties like the Government, to decide what level of pay is right in each case.

§ Lord Beswick
My Lords, I thank the noble Lord for his Answer. Would he not agree that there is something repugnant—or "offensive", as, I think, The Times expressed it—in the implication that certain individuals will give of their best or show initiative only if they are paid in terms of hundreds of thousands of pounds a year? Can we really expect to move forward to a genuinely happy and stable society if these sums are paid to a few, while for those down below we say that pay increases must be restrained?

§ Lord Young of Graffham
My Lords, I slightly regret the emotive language of the supplementary question because the position is simply that unless we get men 1006 of proven talent and ability at the heads of our enterprises we shall not have the employment and the wealth creation which this country so sorely needs if we are to have a compassionate and caring society. It is no good comparing the salaries of those at the top with those below. What we have to compare is the profitability of the enterprises and the jobs that they grow. There is no use in having similar salaries and no employment.

§ Lord Thorneycroft
My Lords, will my noble friend continue to rub into the noble Lord, Lord Beswick, that there are men and women in all ranks of employment with rare skills, and who are in extremely short supply, who are vital to the creation of jobs in this country, and that the only way of attracting quality of this kind is, on some occasions, to pay over the odds; and that it is necessary to do so?

§ Lord Young of Graffham
My Lords, I am grateful to my noble friend for his observation, but I would also remind the House that although we are an island we live in the whole world and that if we do not attract the best talents to enable us to grow, other countries will do so—as they did in the 1960s and 1970s.

§ Lord Stoddart of Swindon
My Lords, is the noble Lord not aware that he really does show a complete insensitivity in his replies? Is he further aware that on the same day as the Chancellor of the Exchequer announced that he was either to abolish or emasculate the wages councils, which fix the pay of the lowest paid in our society, ICI announced—on that same day—that their chairman, Mr. Harvey-Jones, would have an increase in salary from £171,000 to £287,000 per annum—a 66 per cent. increase or a £2,200 per week increase? Is this not really offensive, as my noble friend Lord Beswick has suggested, especially when ordinary workers are being harangued by the Government and the CBI to accept low wage increases to save jobs? Finally, does it not apply similarly to those in high places—that if they have large salaries their jobs might be in jeopardy?

§ Lord Young of Graffham
My Lords, I will give way to no Member of your Lordships' House in my concern for the evils of unemployment in this nation. What I am concerned about is that we have a competitiveness and wealth creation to give jobs; and to give jobs we need the best talent. I think that the chairman of ICI is to be congratulated on the performance of his company and the way in which he has restored that once-great company to its position of greatness. He deserves it.

§ Viscount Massereene and Ferrard
My Lords, do not the salaries of these executives go back to the state in tax?

§ Lord Young of Graffham
My Lords, that is another question.

§ Lord Shinwell
My Lords, is the noble Lord the Minister aware that this wage reorganisation was first enacted in 1909 in the Board of Trade by no less a person than Winston Churchill? As a matter of fact, I know all about it because he made me the Scottish 1007 representative on the trade board along with J. J. Millen, a well-known social reformer, and the famous Miss Mary McArthur. The purpose was to abolish sweated labour, to prevent people on the lowest scale from being sweated. Is not what the Government are proposing to do to reintroduce wage restraint and reintroduce sweated labour?

§ Lord Young of Graffham
My Lords, I am grateful to the noble Lord, Lord Shinwell. I, too, recall that it was Winston Churchill who in 1909 introduced the wages councils. I stand in admiration of Winston Churchill, who was a far-seeing statesman. Indeed, I would remind the House that it was Winston Churchill, when he was Prime Minister in 1942, who asked the then Minister Without Portfolio to ask Sir William Beveridge to produce a report on social security. Upon that firm foundation we have in this country our system of social security which may well have transformed the position about wages councils. But I should remind your Lordships' House that the Chancellor made no announcement in the Budget speech and that my right honourable friend the Secretary of State for Employment has asked for a period of consultation (which expires at the end of May) in which to consider the future of wages councils. I believe that it behoves me, on this side of the House in any event, to wait until that period of consultation is over.

§ Lord Kennet
My Lords, regardless of what the Government have done or seen, can the noble Lord give us a figure which can be easily remembered for the relationship between the success of a company and the salary paid to its chairman or chief executive, comparing like with like?

§ Lord Young of Graffham
No, my Lords, because that is a matter which is solely the prerogative of the shareholders, and if the shareholders and the board of directors do not approve of the salary of their chairman or chief executive, they will take steps. It would, indeed, be a sad society if Government were to intervene in each and every such decision.

§ Lord Polwarth
My Lords—

§ The Lord President of the Council (Viscount Whitelaw)
My Lords, if I interpret the debate we had last week correctly, I think I would be doing less than my duty to this House if I did not suggest that we take one further question from one noble Lord and then bring our discussion on this Question to an end and move on to the next one.

§ Lord Polwarth
My Lords, since a particular company and an individual have been mentioned, may I, as a former director of the same company, ask Her Majesty's Government whether they would not agree that it would be quite unreasonable to expect an individual to lead a great international company based in this country which has performed so outstandingly for considerably less than he would obtain for doing the same in other countries and, in particular, in the United States of America?

§ Lord Young of Graffham
My Lords, it is not for me to comment upon relative pay scales, but I hope that noble Lords opposite will accept the Guardian as a good authority; and this morning I read with interest that one of our great companies has six employees in the United Kingdom earning more than £50,000 per year; overseas it has 273. I think that in itself may indicate something about relative pay scales.