Orders of the Day — Industrial Relations

Part of the debate – in the House of Commons at 12:00 am on 6 February 1958.

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Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby 12:00, 6 February 1958

The hon. Member for Keighley (Mr. C. R. Hobson) began his speech by saying that our real problem was how to get full employment and stable prices. We know that either, by itself, is easy to get, but no Government in this country, and I would go further and say that no Government in any free country, has yet completely solved that real problem. The hon. Gentleman said that it required economic planning of a high order, and with that I entirely agree. He also said that it required physical controls, and there I shall show where I disagree.

The right hon. Gentleman the Member for Blyth (Mr. Robens) expressed some doubts about the arbitration machinery at the present time. For rather different reasons, I share those doubts. I realise how useful it has been in the past, and will be again, but I think that in recent years we have expected too much from arbitration. In present conditions, we cannot get a long-term settlement of our problems by arbitration when there is not a proper balance between the country's money incomes and its resources. Indeed, I believe that it is the prime duty of the Government to get demand into the proper relation. That is their first economic duty, and about the most difficult job they have to do.

I would make two assumptions which would, I think, meet with general agreement. The first is that wages must go up as productivity increases. The second is that we are quite certain to have inflation if the average level of wages rises faster than the average increases in productivity. In that, I can call for the support of the right hon. Gentleman the Leader of the Opposition because, in Encounter, in November, 1955, he wrote: When wages rise faster than productivity manufacturers tend to pass on higher costs in higher prices and are able to do so because of the increased demand generated by the rise in wages. Roughly speaking, the Government have three alternatives. The first need only be stated to be rejected, and it is that they should so contract demand, as happened in the inter-war years, as to achieve stability in that way. I am quite sure that none of us, on whichever side of the House he sits, wishes to buy stable prices at the cost of mass unemployment, poverty and slump. I believe that as long as we get the raw materials our knowledge today is such as to cut that possibility out altogether. There is no longer any question of mass unemployment, except when we cannot get the raw materials. I believe that that bogey ought to be laid at rest, because it does a great deal of harm in encouraging unnecessary restrictive practices.

The second alternative for the Government is so to manage expenditure that whatever the wage level there will be sufficient demand for labour to maintain full employment. My right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) told us earlier in the week that that had been the policy of all recent Governments until quite lately. I think that is the policy of the right hon. Member for Blyth, who opened the debate, and of the Leader of the Opposition. I mean the policy of stepping up demand and restraining wages by voluntary arrangement. As reported in column 1292, the Leader of the Opposition said: I would say to the right hon. Gentleman that he must seek understanding with the unions on the basis of all-round restraint relating to all incomes—dividends, salaries, and everything else."—[OFFICIAL REPORT, 23rd January, 1958; vol. 580, c. 1292] I think that this is the difference between myself, those who think as I do—and I will include in this, although it may embarrass him very much, the hon. Member for Leeds, West (Mr. C. Pannell)—and, on the other hand, the right hon. Gentleman the Leader of the Opposition and others who think like him. I do not know how many do think like the right hon. Gentleman.

I am not at all sure that a wage freeze or a dividend freeze is desirable. I am fairly sure that in a condition of excess demand, such as we have had lately, a wage freeze—which, after all, could not be an earnings freeze—is impracticable. I believe that in their anxiety to keep labour employers would find ways round it, and I also believe that trade union leaders would have to press for more wages when their rank and file knew that they would succeed in getting them. It is only human nature.

We have not reached that state of perfection when we can have voluntary restraint of that sort, and I think we must make our plans on the assumption that men are not as we should like them to be but as they actually are. I feel sure that so long as employers know that demand is so great that they can push up their prices, so long will they give increases in wages out of all proportion to or regardless of the increase in productivity. If that went on long enough we could have a runaway inflation—not just an inflation which, as at present, causes great suffering to those with fixed incomes but an inflation which was catastrophic.

In talking about catastrophic inflations in Europe—and we know that they have happened in Germany and elsewhere—the Leader of the Opposition once said. "It could happen here." I believe that they were very wise words, and I think we have to recognise that nothing in this island makes us immune from such a situation. We could push things so far that we had not merely a painful inflation but a disastrous inflation. I believe that a boom, which in its first stages is a more comfortable illness than a slump, could in the long run be just as fatal.

The third alternative, which I may describe as the "new look" in economic policy, is that the Government should manage expenditure so that demand is sufficient to ensure a high level of employment at wage rates which do not increase more rapidly than productivity. If employers cannot raise their prices, then they can give wage increases only by being more efficient or by cutting down their numbers.