Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 30th October 1957.

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Photo of Mr Alfred Robens Mr Alfred Robens , Blyth 12:00 am, 30th October 1957

It is not any use the Chancellor of the Exchequer shaking his head. I have a whole bunch of newspaper cuttings of speeches by members of his party—some of them Cabinet Ministers—who have led a tirade against the trade union movement up and down the country. I wonder whether the right hon. Gentleman has given any thought to the question of where pressure for increased wages comes from. I wonder whether he has ever bothered to look at the figures published by his own Department. Does he—does the House and the country—appreciate that nearly 17 million people out of the 23 million gainfully employed have a total income, before taxation, of less than £12 a week? I wonder whether he realises that in his generous gifts to the Surtax payer in the last Budget every Cabinet Minister received, in extra spending money, half as much a week as 17 million people have to provide for them their weekly meals. I wonder whether he appreciates that, and its effects upon those people when these exhortations come from him.

Is it not clear from the figures of the distribution of personal incomes that many millions of our people can hardly be said to be living in the lap of luxury, and that the reason why the Prime Minister can say, on the racecourse, "They never had it so good," is because he was comparing today with the days of unemployment, when he was the hon. Member for Stockton, which division he left rather rapidly in 1945?

We have another reason for increased wage pressure. At the beginning of this month rents went up—and they are due to go up again in six months' time. The effect of the Rent Act upon the 17 million workers to whom I have referred is inevitably bound to cause a tremendous pressure for further wage increases. They are faced with rent increases, so I understand, of anything up to 20s. a week. It is, therefore, inevitable that when these rent increases are paid—and this is the one thing that the people cannot save upon; they may save upon clothes, food and smoking, but they cannot save upon the rent—pressures are bound to come upon the trade union leadership to apply for increased wages.

The Rent Act is one of the most inflationary measures that the Government could possibly have taken. Bearing in mind the statement of July last, I wonder what chance there really is of the Trades Union Congress trying to persuade its members to exercise wage restraint. Was it really necessary for the Government to proceed with the Rent Act at a time when the overall effect cannot but be very harmful to the nation and make the present situation much worse? If the Government had been wise they would have had second thoughts about the implementation of that Act.

I now turn to something which the Minister of Labour said today apropos the Chancellor's speech yesterday. The Chancellor then made some general observations about wage increases and the danger to the country, if they were, to quote his words: unrelated to, and going far beyond, the general growth of real wealth within the country. Of course we recognise the problem, just as the Trades Union Congress recognised it in July, and we have frequently expressed our views in these last few years of the failure of the Government to deal with it. The difference lies not in whether or not there is a problem, but how, precisely, the problem should be handled.

That brings me to the new Government proposals in this field. As I understand—the Chancellor will probably deal with this point when he replies—what the Chancellor is now saying is that he will use the control over the supply of money to ensure that there is no rise in wage costs. He said this quite specifically about the public sector. I quote him again: If costs, including wage costs, go up, activity will have to be reduced and this will be the policy where the Government are looked to as the source of cash. I presume that this is also what he is advising the private sector to do because, again to use his own words, the Government should, where they are themselves the employer, seek to follow policies similar to those which they urge upon others."—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, col. 55–7.] Having got what the Chancellor has said about the public sector, about the Government as a direct employer and what, I presume, he has also said to the private sector, I want to ask him some questions as to how, precisely, it is intended to apply this doctrine. First, what exactly is the position in the public sector? It is clear from what the Chancellor and the Minister of Labour have said, taking it in its context, that they intend to use their financial power to force a certain wages policy upon the Transport Commission. They are saying to the Commission, in the words of the Chancellor, that in 1958 the Commission is to have no more money for investment or any other purposes above the ascertained deficit of 1957.

The clear implication of that is—and it is well known that the Transport Commission is the first to be met with wage applications since the announcement of this policy—that if the Commission grant a wage increase, no money will be available to finance it; or, alternatively, it must either refuse the wage increase or must finance it out of money that was intended for investment, so that it must cut back the investment.

These are the answers to the questions. [HON. MEMBERS: "No."] Certainly. The right hon. Gentleman's supporters are in the same position of bewilderment as we are. [HON. MEMBERS: "No."] Oh, yes. I have quoted exactly what the Chancellor has said, very accurately, I think. I am now drawing some conclusions, and I am asking the Chancellor whether these are the right conclusions. The Chancellor will be speaking later and will probably be able to answer them a little more accurately than the hon. Member who sits behind him.

This is the implication, as I see it. If, in fact, the Transport Commission can have no more money to meet the deficit than it had last year to grant increases in wages, they must come out of money available, and the Commission must cut back its investment policy. However, we will wait and hear what the Chancellor has to say.

The Minister of Labour went much further this afternoon, because he made it plain that this doctrine would apply even if an arbitration award was made in favour of a wages claim. I do not believe that any Minister of Labour has made such an amazing statement so easily as that this afternoon; and I am merely quoting these words from the Evening Standard to give an opportunity to the right hon. Gentleman to say that he did not mean those words or that he has been wrongly reported. These words are a direct quotation from what he said: We do intend to make clear to the British Transport Commission our continuing determination that we shall not finance inflationary awards whether these awards are secured by negotiation or arbitration. My first comment is this. It is not possible at one and the same time for the Minister to prevent the Transport Commission from carrying out an arbitration award and to say that he is not interfering with the principles of arbitration at all. It is true that the Minister introduced the phrase "an inflationary award," but my right hon. Friend the Leader of the Opposition immediately asked the Minister who is to decide when an award is inflationary or not.

The right hon. Gentleman, contrary to his usual practice, dodged the question. He did not answer, and I hope the Chancellor will answer it, because it is a very important question, not only for us in this House and for many millions of people outside who are involved in this matter, but also for those people who make up the arbitration tribunals. We are not going to waste the time of eminent men who are sitting and listening to cases for days on end, and giving decisions objectively, merely to find the Government saying, "We are not interested in objective arbitration decisions; we have decided that this is inflationary, and nothing will be paid."

It is important that the Chancellor should be clear in his replies to some of these questions. He did not reply to that question, but dodged it. I want to ask some more questions which I hope the Chancellor will answer. Alternatively, I shall be happy at any point in asking these questions to offer him the courtesy, which his right hon. Friend would not grant me this afternoon, of giving way if he would like to intervene and answer them.

Suppose the present claim of the railwaymen goes to arbitration and suppose an award is made on the basis that the cost of living has gone up. Does the Government's refusal to remit any more money to the British Transport Commission still apply? Suppose the award is based on the fact that wage rates in other industries have gone up and that the railwaymen are, therefore, entitled to some increase. Is this inflationary? Does the Government's refusal to allow the Commission to borrow money still apply? Is there any answer to that? No.

Suppose the railwaymen make out their case on the basis that there has been an increase in efficiency in the industry. Is that inflationary? And who decides? The arbitrators, the British Transport Commission or the Government? Who is to determine what is an inflationary award? The possibility is, of course, that any award given by an arbitration board will have been made upon a consideration of all these things. Really, the House of Commons and, in this case, the railwaymen, are entitled to know exactly what the Government mean.

I put this final question to the right hon. Gentleman. Do the Government envisage any circumstance at all in which they would be prepared to allow the Commission to borrow more? None?

Let us take another case. The Minister of Labour was very specific today about the position of the Government as employers. The Police Federation has an application for a 10 per cent. increase. It is a little difficult, I should think, to apply the test of production and productivity to that. That is a sort of application that is decided by a board. Assuming that the body which determines the wages of the policemen decides that there should be an increase. Are the Government to regard that as inflationary and refuse to pay it? Is there no answer? I cannot get a single mutter out of the right hon. Gentleman tonight.

What we are entitled to know is what is the criterion to be applied to determine whether in these circumstances a rise in pay is inflationary or not. Secondly, does this really mean that arbitration is now a waste of time? Are the Government really saying the unions must now by-pass arbitration and make it a trial of strength? Perhaps the right hon. Gentleman or his right hon. Friend will answer some of these questions, because that is certainly the impression which will be left in the wider trade union movement.

I should like now to turn to the private sector, where the position is much more obscure. We have been told much less about this, but we have been led to suppose that here the wage costs are to be kept down by a refusal on the part of the banks to advance more money. This is intriguing. What we now want to know is how exactly this is to work out.

We know that the Chancellor has asked the banks to freeze the level of advances, but what instructions are being issued on the basis of this request to the bank managers? Is the freezing of the advances a global one for the banks as a whole? Is it a global one for a bank as a whole, to determine for itself what the allocation of the advances shall be at each of its branches? Does each branch decide for itself? Is the overdraft position at each branch of a bank at a given date to be the frozen level? [An HON. MEMBER: "I hope not"] There will be many right hon. and hon. Members who will say a fervent, "Hear, hear" to that. Is the figure to be taken monthly or quarterly or half-yearly? Will it be different each year?

Further, how do these instructions relate to the wages situations? Are we to understand that when a firm asks for an overdraft or an increase in the present overdraft, the branch manager presumably is to inquire what is happening about wages? If he finds that the wages are going up, does he refuse the advance? Suppose that that is the case. Let us take the position of the steel industry and the building industry. If wages go up because they are tied to the cost of living by agreement, does the bank manager then refuse to advance the money necessary to pay those wages? Suppose that the wages in the private sector have gone up on an arbitration award, what does the manager do then? Does he refuse?

Are we to understand that the bank manager is to grant an overdraft when there has been an increase in productivity and not otherwise? How is the bank manager to judge whether the overdraft facilities should be granted on the basis of increased productivity or refused because the wage advances are inflationary? How do the Government control in the private sector the bank advances in this matter as they are able to control them in the public sector?

What happens to all the service industries? If there is increased productivity in engineering and a case for increased wages is granted and overdraft allowances are made to pay for them, what happens in the service industries where productivity cannot enter into it? It is hardly necessary for me to remind the Minister of Labour that arbitration awards and wage decisions generally over the past forty years have not been made solely on the basis of productivity, but also on the basis of relative wages, the cost of living, and, to some extent, profits in a particular industry.

The more I think of this idea of using restriction on the supply of money as a method of stopping the so-called wage spiral, the more doubtful it seems to me in practice. Either bank managers are to be given an impossible task of administering policy or it does not mean anything at all in the private sector. The Minister of Labour spoke this afternoon of this policy in general terms, as though its application to the private sector was on a global basis, but he knows as well as anybody else that wage claims are made by individual industries and trades.

It is individual firms who have to meet them and raise the money to do so. If bank advances are not to be decided on individual cases, on the basis of the wage situation in a particular industry, how does the supply of money affect the wage position at all in the private sector? And if, in the private sector, individual applications for bank credit are not considered in connection with wages, is there not here a very gross discrimination against the public sector, and particularly the Transport Commission?

There are, of course, other objections to the whole idea. In some cases, higher wages will be passed on in higher prices and a call will not be made on the banks. In other cases, investment will be cut down, and in other cases higher wages will be paid and financed by a fall in material prices. There will be no control by the Chancellor of the Exchequer in any of those cases.

Our criticism of the Government is not that they are not concerned about the whole problem of the wages-prices-profits spiral. Our criticism is that they are tackling it in the wrong way, by attempting to impose a crude, arbitrary and unjust instrument from above. I do not believe that we shall get a solution to the problem which would satisfy the aim which we all have in mind, namely, to create full employment without inflation, except on the basis of co-operation between both sides of industry and the Government.

I believe that if the Government made a real effort to get that co-operation and adapted their policies accordingly, they would probably get the response to it which is most desirable. Unfortunately, their whole record, particularly in the last two years, suggests that they are bent on the alternative of a solution imposed from above, which they are now putting forward.

This debate was arranged because of the exchange crisis of last month and the measures announced by the Chancellor on 19th September. The crisis itself was clear evidence of the weakness and the failure of the Government's international economic policy over the past few years. It revealed all too vividly the great dangers of trying to run a world banking business on the basis of totally inadequate reserves. It also showed up the foolishness of the Government in continuing to relax foreign exchange controls, with disastrous consequences to those reserves.

The Chancellor's speech revealed something else. There never was a more trenchant indictment of the Government's policy in causing inflation at home than the Chancellor's speech of yesterday, and it is astonishing to me that the right hon. Gentleman should have the effrontery to make such a confession and retain his position as Chancellor of the Exchequer.

Now as to the right hon. Gentleman's policy. I repeat what my right hon. and hon. Friends have said: we could not object to a high Bank Rate as an emergency measure to deal with a temporary speculative attack on the £, but we cannot accept a 7 per cent. Bank Rate as a long-term measure coupled with a credit freeze and cuts in public investment. We do not believe that it is necessary or desirable. We cannot accept that the right way of handling the nation's economic problems is to cut back production and investment, especially in view of the current world situation.

What we need today is a policy which will encourage production, high productivity in industry on the basis of democratic planning and social justice. That is exactly what we on this side of the House demand and what the country needs. What we are getting is a policy which threatens jobs, discourages output and promotes industrial friction on the basis of a discredited Tory freedom and social reaction. Because of these things, we shall divide the House tonight.