Clause 1. — (Finance for Revenue Deficit.)

Part of Orders of the Day — Coal Industry Bill – in the House of Commons at 12:00 am on 4 December 1961.

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Photo of Hon. Richard Wood Hon. Richard Wood , Bridlington 12:00, 4 December 1961

Before the 20 questions fade from my memory, I would like to give an opinion on them. I will be only too delighted to answer them seriatim, but not on this occasion.

As my hon. Friend the Member for Kidderminster (Mr. Nabarro) will know, I was first for Oral Questions last week, and I would have been delighted to answer all his questions if he could have persuaded nine other hon. Gentlemen to join him in putting them down. I will certainly give him answers, but I would not like to prolong the debate, in which other hon. Gentlemen want to take part, by answering seriatim at the present time.

The debate has been introduced in what I believe we all thought was a wide-ranging speech. You, Sir Gordon, have said that it was all in order. It is my defence for ranging rather less widely that I hope I can answer my hon. Friend's points by confining myself rather more narrowly than he did.

During the Second Reading debate, I did my best to explain the purpose and the justification of the figure of £50 million which occurs in the Bill. I explained that its purpose was to bridge the gap between the total accumulated deficit and the Board's internal funds available to cover it. I also explained that this gap could vary according to movements either in the internal fund or in the deficit. I then went on to try to justify the figure of £50 million by estimating the likely size of the gap at the end of this year and by foreshadowing the probability of its continuance into 1962.

I used the words to which my hon. Friend has already referred. I said: At the end of this year, the Board's internal funds will probably be about £60 million, and the accumulated deficit is likely to be rather over £90 million."—[OFFICIAL REPORT. 29th November, 1960; Vol. 650, c. 450.] My hon. Friend will appreciate that there is very little time left in this year for these prospects to change. I think that from today we have only 27 days, including Sundays, left in 1961. Therefore, the possibility that it is £25 million and not rather more than £30 million which is to be needed is, to put it mildly, exceedingly remote.

It may be suggested that the Board could borrow from the banks under the temporary borrowing powers of £20 million provided by Section 27 of the 1946 Act, but I have already explained that the Board is not a regular customer of the banks because it happens to borrow from me to meet day to day needs under Section 26. For these reasons, it was unable to borrow from the banks at the end of last year, and in the present conditions of increased credit stringency it is clear that the Board would not be able to do so this year.

I conclude this part of the argument against the suggestion that the figure should be £25 million instead of £50 million by saying that there is no way in which the Board could finance its likely gap in 27 days' time of rather more than £30 million other than by the provisions of this Bill. If £25 million were substituted for £50 million, I would not be able to continue to meet the day to day needs which are going to be evident in 1962, and it is an essential part of the Bill that it contains a provision for next year.

Therefore, the first Amendment would not only remove the marginal provision for 1962 but would also, for reasons which I have given, make the provision inadequate for the needs of 1961 as well. In this way, as I hope my hon. Friend will agree, the Amendment would frustrate the whole purpose of the Bill, which he himself supported on Second Reading. Therefore, I would like to ask him, in due time, whether he would be willing to withdraw the Amendment.

I now turn to the second Amendment which my hon. Friend embraced. I have already said that the Government seem likely, under the Bill, to advance something over £30 million to the Board at the end of this year. If the Board, sometime between now and the end of next year, granted a wage or salary increase, in the words of the Amendment, . not directly related to increases in productive efficiency the effect of this Amendment would compel me or my successor to recover from the Board the sum by which the increase was supposed to exceed the increase in productivity.

My hon. Friend specifically said that his second Amendment was aimed at the maintenance of the pay pause. I want to point out that, although I am sure the Amendment has that intention, I am bound to take the view that the Amendment as on the Notice Paper would, in itself, do nothing to preserve the pay pause.

I have already said before how important I regard the maintenance of the pay pause, and certainly, whatever follows the period of the pay pause, conformity of wages and salaries, on the one hand, with increases of productivity, on the other, will be an essential tenet and objective of British economic policy. Therefore, I can willingly give assent to the idea expressed by my hon. Friend in the Amendment—that wages and salaries should not rise out of proportion with the increase in productivity.

The Amendment, however, would not achieve this object. It would not preserve the pay pause, because it clearly carries the implication that the Board could grant increases at any time if based on improved productivity. If the Government accepted the Amendment it would not, I think, be unnatural to draw the inference that the Government would have no objection to increases in wages being granted at once if the necessary conditions of increased productivity were fulfilled.

That, of course, is not the Government's position. The Government attach the greatest importance to the maintenance of the pay pause, and they believe that there should, for the time being, be no increases at all. I would also emphasise the difficulties that would arise from an attempt to write a formula of this kind into the wage negotiations between the Board and the unions. The essential yardstick against which my hon. Friend suggests that wage claims should be judged is itself rather uncertain, because it is very difficult to be quite certain of what exactly is meant by increases in productive efficiency. For instance, if output per man shift went up from 30 to 32 cwt., would that be an increase in productive efficiency of one-fifteenth or 6·7 per cent., or are there other factors which should be considered?

During the Second Reading debate, I pointed out that output per man shift in the first three-quarters of 1961 had increased by 2½ per cent. That was before the larger increase I mentioned later. I pointed out that this was insufficient to offset increased costs, and, therefore, if increases in productive efficiency are equated with improvements in output per man shift, an Amendment like this one might do nothing to prevent the Board from offering increased rewards even out of declining revenue. This is an argument against the inclusion of this particular formula in wage negotiations.