Productivity, Prices and Incomes Policy

Oral Answers to Questions — Economic Affairs – in the House of Commons at 12:00 am on 4th April 1968.

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Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton 12:00 am, 4th April 1968

asked the Secretary of State for Economic Affairs if he will make a statement on the Government's policy for prices, incomes and productivity.

Photo of Mr Iain Macleod Mr Iain Macleod , Enfield West

On a point of order. In view of the great importance of this Question, and so that we may have more than the minute or two that we will otherwise have, I wonder whether the Minister will agree to answer this Question at the end of Question Time?

Photo of Mr Peter Shore Mr Peter Shore , Stepney

I think that we have substantial time in which to deal with this Question—[HON. MEMBERS: "Windy."] It is for Mr. Speaker to decide how long he wishes this Question to go on, but we have at least 10 minutes in which to deal with it, and I start by saying that the White Paper on Productivity, Prices and Incomes Policy in 1968 and 1969 was, as my hon. Friend the Member for Heywood and Royton (Mr. Barnett) knows, published yesterday.

Photo of Mr John Biffen Mr John Biffen , Oswestry

On a point of order. As I am particularly anxious to reach Question No. 24, and do not want 10 minutes spent on this Question, may I ask whether it is true that I can terminate answers to this Question by merely saying that I shall seek to raise the matter on the Adjournment in view of the unsatisfactory nature of the reply?

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

Does not my right hon. Friend think that he may avoid considerable industrial disruption if he concen trates on the basic voluntary part of the statement in paragraph 11? In this way he will use his compulsory powers only in the last resort, indeed if at all.

Photo of Mr Peter Shore Mr Peter Shore , Stepney

I am clear, as are the Government, that there has to be a tremendous reliance on voluntary cooperation if this policy is to work. We look on these powers which we foreshadow in the White Paper as being the buttress to what is still essentially a voluntary policy.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

Will the right hon. Gentleman explain how he proposes to keep the net result of wage negotiations at four separate levels, as indicated in the White Paper, within one ceiling?

Photo of Mr Peter Shore Mr Peter Shore , Stepney

This is basically a problem for those who are concerned with direct negotiations, but I have no doubt that this will prove practicable.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Is my right hon. Friend aware that this is an ill-thought-out piece of work, with very confused ideas indeed? As this is bound to lead to industrial antagonism among trade unions and workers, I appeal to my right hon. Friend—and I mean genuinely appeal—to take this back and drop the whole concept of a policy of compulsory wage legislation.

Photo of Mr Peter Shore Mr Peter Shore , Stepney

I always listen with great care to my hon. Friend, but I am afraid that I cannot give him the assurance for which he asks. There are problems in a policy of this kind, but I think that he is exaggerating the difficulties we will encounter.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

Is the right hon. Gentleman aware that in his White Paper he is trying to restrict all incomes to a certain level, including individual incomes, while the Chancellor of the Exchequer, under the close company regulations issued under the 1965 Finance Act, is at this time instructing the Inland Revenue that close company directors must take more income during this year and next, whether they like it or not?

Photo of Mr Peter Shore Mr Peter Shore , Stepney

The hon. Gentleman has pointed to a well-known contradiction in policy. It has existed ever since 1945. The reason why my right hon. Friend wants close companies to distribute more of their profits is so that he can tax them all the more, whereas they would avoid taxation if they simply ploughed back profits.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

As the White Paper allows for increases above the 3½ per cent. norm if there is an increase in production and output, may we take it that if professional agitators cause more strikes, and foster more strikes, they will be entitled to claim increases for this work?

Photo of Mr Peter Shore Mr Peter Shore , Stepney

That is rather difficult to foresee, but no doubt if a serious claim were made on behalf of agitators for pay increases above 3½ per cent. I would have to refer it to the National Board for Prices and Incomes.

Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , South Angus

As the right hon. Gentleman has said that the Government's disasters of the past three years have been caused, not by soaring wages, but by stagnating production, and also by soaring Government expenditure, is not the effect of the White Paper going to be that when the whole policy explodes it will destroy confidence at home and abroad, quite unnecessarily?

Photo of Mr Peter Shore Mr Peter Shore , Stepney

The lesson is clear that the main emphasis of policy must be to get productivity up in this country. The difficulty here, and the reason why the short-term need is so great, is that we cannot get a sustainable substantial increase in productivity year by year over the next 18 months. We can get some increase, but we cannot get an increase of the order that will make it unnecessary to have an incomes and prices policy.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

Is it not the ca e that the 3½ per cent. ceiling is by no means rigid, and that the Budget proposals provided for the contingency of an increase of more than that figure?

Photo of Mr Peter Shore Mr Peter Shore , Stepney

As my hon. Friend points out, there is an upper case forecast for the increase in production this year. But the policy, as he says, is not a rigid one. In so far as increases in income can be genuinely attributed to increases in productivity, then, of course, they can go through the ceiling. I think that this is a very important and constructive element in the new policy.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

Does not the right hon. Gentleman appreciate that it is the appealing complexity of this mass of statutory and non-statutory legislation which will in fact militate directly against that which he has just said is his primary aim—to increase productivity and get expansion going? Does he not realise that he would do much better by listening to many of his hon. Friends, and hon. Members on this side, and scrapping this statutory policy?

Photo of Mr Peter Shore Mr Peter Shore , Stepney

I have not heard much wisdom from the other side of the House, though I have heard some interesting suggestions from behind me. Incomes policy and prices policy are complex matters and they remain complex whether one is relying wholly on a voluntary system or on a voluntary system buttressed by statutory powers.

Photo of Mr Victor Yates Mr Victor Yates , Birmingham, Ladywood

Are the proposals outlined in this White Paper regarded by the Government as a permanent feature of our national life? If not, why is my right hon. Friend seeking powers to renew them at the end of 18 months.

Photo of Mr Peter Shore Mr Peter Shore , Stepney

The White Paper makes it clear that we are seeking powers for the next 18 months, which is the crucial period, during which we expect to get this massive switch of resources into the balance of payments. We also say in the White Paper that we are leaving open, and leaving ourselves with, the possibility of renewing all or some of the powers at the end of that 18 months. This, of course, indicates the obvious fact that one cannot be absolutely certain of the time scale at the end of which we shall have achieved this victory in the balance of payments which we are seeking.

Photo of Mr Iain Macleod Mr Iain Macleod , Enfield West

But is the right hon. Gentleman not aware that his predecessor told the House that the previous legislation was for one year and that that was the critical period? Those promises have been broken; why should we believe him?

Photo of Mr Peter Shore Mr Peter Shore , Stepney

The right hon. Gentleman knows that, in the intervening period, we have had to face this great problem of devaluation of the £—[HON. MEMBERS: "Why?"] This is not the occasion to go into all the causes of that, but, if we did, a lot would be said about the handling of the British economy by right hon. Gentlemen opposite. I do not know of any independent or serious observer of the British scene who denies that, in this year, after devaluation, we need a prices and incomes policy—and I think that, in their hearts, hon. Gentlemen opposite know it too.

Photo of Mr John Biffen Mr John Biffen , Oswestry

On a point of order. In order to terminate these unfair Parliamentary blood sports against the Secretary of State, I beg to give notice that I will raise this matter on the Adjournment, in view of that unsatisfactory Answer.