HL Deb 08 July 1986 vol 478 cc167-70

3.2 p.m.

Lord Rochester

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

The Question was as follows: To ask Her Majesty's Government what action they propose to take to reduce the extent to which increases in pay are currently far outstripping the rate of inflation.

Lord Young of Graffham

My Lords, Her Majesty's Government do not intervene in pay negotiations to which they are not a party. However, we are very concerned that pay rises are increasing unit costs and damaging employment prospects.

Lord Rochester

My Lords, may I take it from that reply that the Secretary of State accepts that there is an urgent need to obtain a more general awareness of the relationship between pay rises, and investment and of the beneficial effects which an improvement in productivity and reduction in unit costs could have on job creation? If he does, will he and his right honourable friend the Chancellor of the Exchequer make use of the National Economic Development Council, whose meetings are attended by representa-tives of Government, employers and trade unions, as a forum in which that educative process can be developed so that as far as possible the deliberations of the council are made known to the public at large?

Lord Young of Graffham

My Lords, I have been privileged to be a Member of the National Economic Development Council in a previous incarnation as well as in this one for the last four years. During that time the relationship between pay, pay rises and employment has been frequently on the agenda. It is not custmary to disclose the future agendas of the council, but I have little doubt that that will be on the agenda again. It is a matter which we consider to be of the utmost seriousness. There is a correlation between the two factors. Our unit costs are rising; those of our competitors are not. That is not good news for employment.

Lord Barnett

My Lords, does the answer of the noble Lord the Minister mean that he would prefer those in work not to have it so good?

Lord Young of Graffham

My Lords, I am very grateful to the noble Lord, Lord Barnett, for pointing out that when I was discussing those in work who have "never had it so good" I was drawing attention—as he has drawn attention in this House—to the fact that last year those in manufacturing industries had pay rises of about 7.5 per cent. when they needed only rises of 1.2 per cent. in order to maintain their living standard In the longer run this will mean fewer jobs, including jobs in industry. The answer to the noble Lord is therefore, yes.

Lord Bruce-Gardyne

My Lords, in view of our past calamitous experience with incomes policies, is not my noble friend and the Government entirely right to insist that the proper means of controlling future inflation is by observing an effective control and discipline over monetary policy?

Lord Young of Graffham

My Lords, we never cease to draw attention to the benefits of this Government's economic and monetary policies which have reduced inflation to 2.8 per cent. and which I hope will see low inflation in the future.

The Lord Bishop of Manchester

My Lords, will the noble Lord the Minister indicate whether there is also concern in Government circles—apart from linking pay and productivity—over the fact that very large sums of money are paid out regularly to certain individuals in this country, sometimes running to more than £200,000 a year, with large percentage increases? Will he agree that this has a very considerable psychological effect in the popular mind and that it makes it difficult to encourage pay restraint among those who are comparatively low paid?

Lord Young of Graffham

My Lords, what is of the utmost importance is that we have a productive industry and a commercial base where wealth creation is rewarded to the common good. What we have seen elsewhere in the world is that any society which endeavours to impose a limit does not grow in wealth. We must become as productive as our competitors We must become as well off as our neighbours in Europe We must look after the less fortunate in our society That is the policy of this Government.

Baroness Seear

My Lords, before he again gives us that answer as to the reason inflation has fallen, will the Secretary of State do a calculation as to how much the fall in inflation is due to the fall in oil and commodity prices, and how much it is due to monetary policies?

Lord Young of Graffham

My Lords, I would remind the noble Baroness that inflation had fallen and was kept down before the oil prices fell in the way they did in the last few months Of course we have had a boost from oil prices falling But there are those who wanted to follow an alternative economic policy and had that been done we may well have found that the reduction in inflation would not have occurred.

Baroness Macleod of Borve

My Lords, I wonder whether in future my noble friend the Minister will, for the benefit of all of us throughout the country issue the unemployment figures and the employment figures at the same time side by side?

Lord Young of Graffham

My Lords, I am very grateful to my noble friend, but I have to point out that I have been doing that all the months of this year. It just so happens that those in the media point out only the bad news and rarely point out anything that is of great interest. The fact that unemployment remains the same, goes up, or whatever, is always reported. The fact that employment is growing, and growing steadily, does not seem to attract quite the same attention.

Lord Beswick

My Lords, does not the noble Lord the Minister think that he should give a little more attention to what was said by the right reverend Prelate? Has the noble Lord the Minister seen in The Times this morning that £ 16,000 a year is offered to someone just leaving university going into the money market? When one has bright young things in their early thirties earning £50,000 to £60,000 a year just for wheeling and dealing in money and mergers, is there not something innately wrong in our social economy?

Lord Young of Graffham

My Lords, I must confess that I think there is something innately wrong in a view which looks to those who create the wealth of this country and says that they should not be rewarded.

Viscount St. Davids

My Lords, have we not yet learned the lesson of the Gadarene swine that if we are so bedevilled and insane as to try to keep level with each other, we shall all end up by running over the cliff?

Lord Molloy

My Lords, will the noble Lord agree that the last absurd proposal does not apply to the majority of people in British industry or in our services? What is required was mentioned in the point made by the right reverend Prelate. In addition to having a top salaries review board, can we have a very low wages review board so as to strike a balance between those who are drastically underpaid—such as nurses, who are slowly catching up—and those who have had excessive pay increases which amounted to more than a state registered nurse's year's salary?

Lord Young of Graffham

My Lords, I should point out that year after year wage increases—for the last four years or so—have on average gone up considerably above the rate of inflation in every single year. There have been real pay increases, which are to be welcomed; there have been considerable adjustments in the pay of the nurses. However, if we were to look only at those who lead our industries and only at those who lead our commerce, and if we were to make it so unattractive for them to do their jobs, we would find that unemployment and wealth creation would suffer. Nothing which the noble Lords opposite can say will alter that basic fact of human nature.

Lord McCarthy

My Lords, will the Minister please believe the horror that is felt on this side of the House whenever he tells us that the poor cannot create wealth, that only the rich create wealth; that we need them to create wealth so much that they can receive pay rises which are two, three or four times the rate of increase in the cost of living, but the poor must receive rises of only half the increase in the cost of living because the noble Lord believes that the poor cannot create wealth and only the rich can? The point is that the poor can create wealth, but they cannot keep it.

Lord Young of Graffham

My Lords, that is nothing to the horror I feel when I hear the noble Lord, Lord McCarthy put in my mouth words about the poor which I have never said. I am endeavouring to bring home the basic facts of human nature—that if you ensure that those with enterprise do not lead our great industries, we shall not have great industries. The noble Lord should look back on the 1950s, the 1960s and the 1970s for proof positive of that premise, and look forward to the growth of our industries today and realise that if we reward the few for their great endeavour and work, we shall benefit the many. There is no getting away from that principle.

Lord Hatch of Lusby

My Lords, is the Minister aware that whenever he speaks of unit costs he seems to imply that unit costs are composed entirely of wages? Is he not aware that management and investment are at least of equal importance in unit costs? Is the noble Lord further aware that over the past six months, while the unit costs in this country have been rising, in comparable terms those in West Germany have been falling, although the wage levels in Germany are much higher than they are in this country?

Lord Young of Graffham

My Lords, I have always referred to unit labour costs being concerned only with the labour content of the cost of goods. I have at all times pointed out that our unit labour costs must be competitive with those of our neighbours, and that our unit costs themselves must be competitive with those of our neighbours, and they have not been recently.