Directors' Salaries: Private Sector (Hansard, 16 May 1990)

§ The Parliamentary Under-Secretary of State, Department of Employment (Lord Strathclyde)
My Lords, it would be wholly inappropriate for the Government to offer such advice to businesses in the private sector. Pay is a matter for those who negotiate and determine it.

§ Lord Molloy
My Lords, is the noble Lord aware that the CBI has indicated its support for wage restraint, and says that managers and directors should not pay themselves more in dividends and salaries than they earn; in other words, it cuts all ways? Do the Government agree with that principle?

§ Lord Strathclyde
Yes, my Lords.

§ Baroness Turner of Camden
My Lords, does the Minister agree that it is bad for industrial morale if workers see people at the top of their companies awarding themselves large increases when the workers are told that they should keep their claims within the rate of inflation? Is it not inevitable that our competitive position will be damaged if industrial morale is damaged in that way?

§ Lord Strathclyde
My Lords, on the question of pay, the most important thing to remember is the main principle of pay; namely, the need to recruit, retain and motivate the right people for the job within what businesses themselves can afford. That must be true whether you are at the lower level of the pay scale or at the very highest level.

§ Lord Renton
My Lords, is my noble friend aware that in the past 40 years the trend under governments of both complexions has been to get the Government away from fixing incomes, even in the public service? Does he agree that to have government interfering in that way in private industry would be most unwise?

§ Lord Strathclyde
My Lords, my noble friend is absolutely right. I am not sure whether noble Lords opposite are suggesting that we should interfere.

§ Lord Tordoff
My Lords, will the noble Lord explain why it is inappropriate for the Government to advise managers to keep their wages under control when they constantly advise other workers to keep their wage claims under control?

§ Lord Strathclyde
My Lords, we are entering the area of semantics. The Government have always maintained that pay increases should be affordable and should be decided by businesses. That is right and that is what the Government have continually done. That is what the CBI has done too.

§ Lord Jay
My Lords, are the Government aware that, as long as they tolerate company chairmen payingthemselves half a million pounds a year, there is no chance whatever of the working population generally listening to the Government's appeals for pay restraint?

§ Lord Strathclyde
My Lords, we are not talking about levels of pay, but about pay increases. On that subject there are numerous examples of major British companies whose directors have taken pay cuts. A noble Lord opposite, from a sedentary position, asks me a supplementary question about naming those companies. The figure for Guinness was 18 per cent. lower, for Pilkingtons 21 per cent. lower and, for the National Freight Corporation, 11 per cent. lower. The list goes on.

§ Lord Hatch of Lusby
My Lords, does the noble Lord realise that his answer contradicts that of his noble friend Lord Caithness, who has just left the Chamber and who told the House on what figures wage claims should be based? If that is so for wage claims —he gave us specific answers, as will be seen in Hansard tomorrow —why cannot the Government say something of the same kind about the claims for directors' fees?

§ Lord Strathclyde
My Lords, I believe that my noble friend the Paymaster General was comparing the tax and prices index with the retail prices index, which are two different things. The Government, including both my right honourable friend the Prime Minister and my right honourable and learned friend Sir Geoffrey Howe, have said that leaders of industry should set a good example in pay determination. I entirely endorse that approach and believe that noble Lords opposite agree with that view.

§ Lord Stoddart of Swindon
My Lords, are not the Government to blame in this matter because they have set the position and given the lead where greed and avarice thrive?

§ Lord Strathclyde
My Lords, that is a disgraceful suggestion.

Lord Bruce of Donington
My Lords, has not the Government's wages policy always been made clear; namely, that wage increases should be kept within the rate of inflation and preferably below? Has not that policy been pursued by the Government in relation to those who are employed in the public service? Have not the Government also resolutely refused to reproach those who advocate the restrictions and who at the same time pay themselves £1,000, £2,000 or £3,000 more a week, apparently with impunity? Is the noble Lord aware that, speaking in Tokyo only a couple of days ago, Mr Nicholas Ridley, the chief of the Department of Trade and Industry, said: Britain also has one of the lowest labour costs in EEC"? Next time the Government seek to give advice to ordinary working people, will they bear those observations in mind?

§ Lord Strathclyde
My Lords, I am suprised that, with his wealth of experience, the noble Lord should confuse two issues—first, the new unit price of labour costs and, secondly, the level of pay. The two are not connected. The Government have always made the same statement on the question of pay; namely, that the companies should be able to afford it and that they must pay regard to international competition when setting those wage levels. That is important and that is why we had one of the highest productivity growth economies in the 1980s.

§ Lord Molloy
My Lords, is the noble Lord aware that, whenever the Government make a statement about inflation, they refer 99 times out of 100 to the wage earner? Will they continue to take the same attitude in support of the CBI which believes that managers and directors should not give themselves excessive pay rises on the one hand and call for 302 restriction on the other? Is he further aware that 43 per cent. of the work-force of Great Britain consists of lower-paid workers, two-thirds of whom are women? Is it not about time that those at the very bottom should have a break and those at the top should, as the CBI argues, hold hard to give other folk a chance to catch up?

§ Lord Strathclyde
My Lords, I can only repeat that pay is for businesses themselves to decide. However, we have always maintained that leaders in industry should set a good example in their own pay determination.