Orders of the Day — Incomes Policy

Part of the debate – in the House of Commons at 12:00 am on 4th July 1962.

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Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby 12:00 am, 4th July 1962

I have a good idea of the hon. Lady's Division record. She occasionally votes against the Government on specific issues such as nurses' pay, but she would never vote against the Government on a major wage policy from which the specific issues arise. That is why I say that she is constantly trying to get the best of both worlds.

Because of the Government's bias against wages and salaries in the public sector, they, like most other Governments in Western Europe, have no incomes policy for publicly-employed people. As was pointed out in the O.E.E.C. Report on rising prices, issued a year ago, in Britain, as in other countries, the Government are the biggest single employers of labour, and yet they have no incomes policy for their employees, nor even a policy of relating the wages of their employees to incomes outside. The only policy they practise is to react to an economic crisis in two ways. First, they cut investment, and, secondly, they try to keep down wages in the public sector. These are the two typical panic reactions to crises.

It is for those reasons that when there is an imposed pay pause like this there is an unjust bias against public service employees as opposed to employees in manufacturing industries outside the Government's sphere. The only answer to this is that the Government will have to accept two principles for the incomes of their employees. First, in broad terms they will have to accept the principle of comparability. Obviously this has been accepted in particular fields inside the public sector, but the Government still have, in broad terms, to accept that all remunerations in the public sector, whether salaries or wages, must go up steadily.

One reason why we get into difficulties in the public sector is the jerkiness with which this problem is dealt with. Teachers, or nurses, or bus drivers, or whoever it may be, are given a substantial rise. But then, for the next six or seven years no further increases are awarded to them and the Government suddenly wake up to the fact that these groups have fallen far behind everybody else. In private industry we have become accustomed to the idea that in probably most years wages and salaries go up by whatever percentage is necessary to meet rising costs, but we have not achieved the same principle in the public sector.

In addition to the principle of comparability we also have to accept the notion that in the public as well as in the private sector there has to be an annual increase in incomes. If it is an annual increase it need not be as large or as jerky as an increase happening once in every seven years. But I am certain that the principles of comparability and steadiness have to be accepted. It has not been accepted in the Government's incomes policy, and that is one of the reasons why it has been an appalling failure.

The hon. Lady said, quite rightly, that there was indignation in large parts of the public sector today and she made a comparison, which struck me as curious, with 1931–32. I think that the comparison with 1932 is that the Government have succeeded in creating indignation in the public sector which has not been known since then, and this has really been the most frightening result of the Government's so-called incomes policy. It may be that there is a case for a coherent national thought-out policy, including all forms of income—profits, dividends, wages, salaries, and so on. We know that other countries—Holland and Sweden in particular—have tried to operate such a policy. I think that there is some case for this but that there is a tendency enormously to exaggerate it. However, that is not relevant to our discussion today, because that is not the sort of incomes policy that we have had under this Government.

It has been a vague attempt to keep down incomes everywhere, the success or failure of this depending on the strength of particular bargaining groups. What is certain is that the Government have succeeded in keeping incomes down rather lower than they otherwise would have been, not as a result of a sensible incomes policy, but as a result of a measure of deflation over the last year. The Government's only real economic policy is by deflation, plus a certain amount of incomes policy following that, to keep down the rate of wage increases here to about two years below what they think they will be in most other European countries, to improve our relative position. It is the conscious policy of the Government to improve our competitive position at the cost, however, of two years' almost total loss of output and growth.

Hon. Members on this side of the House think that the price is too heavy. We do not think that this is the right way to proceed. The cost in terms of the loss of wealth and output and the cost in terms of injustice in the way this incomes policy works make the price very much too high, particularly as we do not get the advantage which we might get from deflation when we keep prices down. At the same time as this happens, prices keep rising. As the hon. Lady said, the cost of living index rose by seven points last year, and she rightly remarked that the cost of living index does not measure the true cost of living for many of the people that we may be talking about.

The Minister of Pensions and National Insurance gave a false impression the day before yesterday when he announced the new scales of National Assistance. He gave the impression that the cost of living index was a true measure of the cost of living of the people on National Assistance. Most people agree that those living on National Assistance spend relatively much more on two things—food and fuel—so that the cost of living for them is not measured by the index.

For all these reasons, we do not think that the Government are adopting the right policy when they create deflation in order to make our wages and prices more competitive. We on this side would much rather go for the alternative policy of rapid growth. This is the longstanding difference between the two sides of the House during the last ten years.

I want to be brief. I shall say only three things about growth. There are many things that we need for growth, but there are three things in particular, and because the Government are not putting their hand to any of them we are sceptical about their will power and their intentions.

The first necessity is confidence, plus planning. One of the most dangerous things that is happening now in this country—although to a lesser extent than in the United States—is that industrialists, both public and private, are beginning to lose confidence in any sort of prospect of steady and sustained growth. Even after the setting up of the N.E.D.C. we still have these stop-start policies, and we still have the depressing Budget speeches of the Chancellor, talking the whole time about soundness and never about growth. All the emphasis in his last Budget speech was on soundness, and all the rest. There is a serious danger that public and private industrialists will lose confidence in the nation and that we shall not have a steady and rapid growth in the next few years. This confidence can be restored only by positive Government planning through the N.E.D.C., but, so far, although we have had an enormous number of words there has been no definite sign of anything good coming out of it. I only hope that it will.

The second thing required for growth is more investment. We can argue between ourselves as to how much more there should be, and exactly how important investment is—but none of this matters. Everybody agrees that we need more investment in order to get more rapid growth. The real condemnation of the Chancellor's Budget speech was that he said that private manufacturing investment was to be lower next year than this, and did nothing about it. It was the most glaring omission in the Budget. We have had a reduction in investment, but the Government have not taken one step to correct the position.

The third and most serious requirement is for some kind of reform of the international monetary system. We have too few reserves; Americans have too few reserves, and the Canadians have too few reserves. Almost every major country either has too few reserves or thinks that it has. The danger of this position was brought out by a surprisingly progressive leader in the Economist a week ago. It referred to the recent Canadian increase in tariffs and cuts in public expenditure and home investment, and called this an unsavoury whiff from the 1930s, which it is. It does, for the first time since the end of the war, make one think of the thirties with competitive deflation and restriction—with one country starting it, a second having to follow suit, and so on right round the world. In the last few years we have had some co-operation among the central bankers, but this is not enough. If the central bankers ease the position of the Canadian dollar they will lay down conditions, which may lead precisely to this sort of competitive deflation. In the case of Canada it probably will lead to that.

This problem can be solved only by a considerable reform of the whole international reserve and monetary structure, and the serious indictment of the Government is that during the last two years, when, as the Financial Secretary knows, there have been all these discussions about the Triffin plan and the Bernstein plan, and elaborate proposals for major reforms, the British Government have never taken the lead but have always been content with relatively minor, small-scale reforms. It is becoming more and more certain that if that is all we are to get we simply shall not be able to have the rapid growth that we want.

I do not want to go on any longer. When the hon. Lady spoke she said that her intention was to improve the Government whereas ours was to destroy it. We seem to be in a majority in the country, since 61 per cent. of those questioned by the national public opinion poll showed themselves to be anti-Government. The real argument for not trying to improve but to destroy the Government is not that this is what most people want but that it is now too late for any improvement. Destruction is now the only possible course.