Lord Chancellor's Salary Order 1986 (Hansard, 3 July 1986)

§ Lord Barnett

My Lords, I was astonished to see the noble Lord sit down so soon. Normally, when you pay someone £77,400 you are entitled to say a few words. After the little debate I have just had with the noble and learned Lord the Lord Chancellor, I should not wish to stop him getting an increase in salary even if he is not taking it—and I gather he does not. I thank the noble Lord for explaining the link and the reason why this modest little increase is before us in this order.

Unlike the noble Lord, Lord Young, I should like to take the opportunity—and I hope that the Minister will take the opportunity to reply—to say a few words about public sector pay, for the Lord Chancellor's pay must be seen in the context of the consequences for others in the public sector, in the whole of the legal profession and, indeed, on a wider scale. Clearly one cannot criticise the present incumbent because he does not take anything like the amount he is entitled to take 1087 under this order or under previous orders. My noble and learned friend the former Lord Chancellor perhaps might be entitled to feel a little bitter about the present level of salary that the Lord Chancellor is allowed. When my noble and learned friend unfortunately left office in 1979 the salary was £20,000 a year. However fond we are of the present incumbent, I would personally much rather see my own noble and learned friend sitting on the Woolsack again.

The fact is that there are obvious consequences for others in the Lord Chancellor's department and elsewhere in the public sector flowing from the level of pay that is decided in this kind of order. As the noble Lord, Lord Young, said, when we debated this last year in a somewhat different context—the noble Lord said a "less calm atmosphere", though I am not sure I would necessarily say "less calm"—your Lordships kindly agreed to an amendment I moved. Your Lordships supported me in a very calm and rational way, and agreed with what I said in the amendment I put to your Lordships' House. But we were talking then of a 16.6 per cent. increase as opposed to a 3 per cent. increase now. It is a different situation. Nevertheless, it is also a fact that there are many in your Lordships' House, especially those who spoke last year, and outside the House on all sides, who recognise the unfairness of the policy that exists in this country in relation to incomes generally both in the public and private sectors and who believe that it is not the responsibility just of one party or of one Government but that it has existed for a long time.

This year, when this order was debated in another place, a small number voted against it, including one or two from the noble Lord's own party—or, at least, they abstained or spoke against it. They did so because they felt, as some of them made clear in the debate, that it was somehow wrong to be making available for one man £77,400, whereas others were having to make do with considerably less.

The plain fact is that anybody would have to accept, looking at public sector pay, that the policy that exists on public sector pay is a shambles. I want to make it quite clear that all parties have a responsibility in this sphere. Few have been able to find the solution to the shambles in relation to incomes, but the problem is serious. It is easy to simplify it by arguing that it is wrong to give increases to all those in the top salary brackets—which was a view taken by a few on both sides when this was debated in the other place. That, in my view, is a simplistic argument which ignores the real problem.

The heart of the problem is that the high salaries in parts of the private sector—not just at the top end of the private sector, but in the professions and in the City—make it extremely difficult to attract the right kind of people to the public sector initially and to enable movement to take place between the public and private sectors because of this disparity in incomes. For example, when the Government wanted a first-class man to go into the Ministry of Defence to run a very important part of that department, they were obliged to pay a very high salary of some £96,000.I make no criticism of that as such. I gather he is a most able man doing an excellent job, but that is an indication of the problems that we create for 1088 ourselves in this country with the level of pay that we try to impose and the inflexibility that inevitably applies in the public sector.

I have long felt that there is a great need for an interchange between the public and private sectors. We do it on a small scale in this country. Somehow, other countries manage it rather better. For example, in the United States many people are willing and able to come out of the private sector into the government sector to work for a few years and then go back again. We do not manage to do that in this country, and I find it rather sad because we have some excellent people in both the public sector and the private sector with contributions to make on both sides of the divide—and it is a shame it is a divide—which would help in the running of our country.

When the salary increase was debated in another place points were made about the unfairness of paying nearly £80,000 a year to the Lord Chancellor while there were so many low-paid, pensioners, unemployed and so on. We were being told that workers were pricing themselves out of jobs. That may be an understandable view to take, but it ignores the central problem that all Governments face. If we did not give the proper level of salary at the top it would solve nothing. Indeed, it would make the position much worse. When one of my honourable friends in another place said it would be much better to have flat rate increases so that then it would be fairer between the bottom and the top, my mind went back to the first of our pay policies in the last Labour Government, when we had a £6 a week pay increase across the board. Many of the low paid workers in my old constituency then received increases of a size that they have never had in their lives. But we could not continue it for another year, not because the Government did not want to but because it was narrowing differentials, and that was unacceptable to the trade union movement.

That narrowing of differentials is the problem that we create for ourselves all the time in the way we run our public sector pay policy; and no Government have been able on a long term permanent basis to get to grips with what is a most serious and difficult problem. I know the Government recognise that overall pay increases now—certainly not for everybody, but the general level of pay increases—are such as to be building up enormous problems for any economic management in this country.

I realise that this is not the time or the place for a major debate on how we can achieve a sensible incomes policy, but I think it is right that I should refer to it and bring it to the attention of your Lordships, and I hope even to a wider field. I think that the Lord Chancellor's proposed increase in this order simply highlights the nonsense of the way that successive governments have handled pay policy, or, rather, failed to handle pay policy. For myself, I can only hope that one day someone will face up to this most serious problem before the endless cycle of spiral increases in pay continues to such an extent that we ruin the economy that we all want to see improved.

§ Lord Young of Graffham

My Lords, I am, as ever, grateful to the noble Lord, Lord Barnett, for what I must take on balance to be his welcome of the Lord 1089 Chancellor's Salary Order 1986. Perhaps I may say to him that, by chance, I happen to be an example of one who moved from the private sector to the public sector before I was "translated"—if that is the correct word— to a third state. The noble Lord draws attention to a very real and very serious problem: how do a government manage public sector pay, and, indeed, what, I suppose, do Ministers say to the private sector who appear at times determined to pay what seem to be almost suicidal pay increaes? We live in a changing world, a world where we shall have to recondition ourselves to a different rate of inflation. I suppose that the simple truth is that for the last quarter century we have been used to substantial inflation and we have been used to annual pay rises. I can remember the time when that was not the norm, when we looked only for merit pay increases. Indeed, I recall during the last 10 or 15 years working in other countries where there were no pay increases and they waited until the cost of living increase had gone over 5 per cent. before that would even trigger a discussion on pay.

I suppose that it is a problem on which government have to set an example. In regard to the whole of this year's review board we have seen an endeavour, certainly in relation to the judiciary, the armed forces and the higher Civil Service, to achieve pay increases approximating to the rate of inflation. This is a difficult problem to solve. It is one which we had to solve in a world where, looking at the pay and tax increase, we required only 1.2 per cent. to maintain our living standards and where, in industry, we paid ourselves over 7.5 per cent.—adding more in real increase to labour costs than I suspect we have done in any year since the war.

The solutions are not easy. We have tried pay policies; we have tried exhortation. I suppose that the best and most effective way is to run an economy which keeps inflation down to zero. And the rate of inflation has been going down steadily. I hope very much that all will listen to the words of the noble Lord, Lord Barnett, and will look very carefully before coming to consider pay increases in the future. That is all that the Government can do today. I hope that all in your Lordships' House will look with favour on the draft Lord Chancellor's Salary Order 1986. I beg to move.