Orders of the Day — Economic Situation

– in the House of Commons at 12:00 am on 7th November 1972.

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Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral 12:00 am, 7th November 1972

I have selected the Amendment in the names of the Leader of the Opposition and his right hon. Friends.

3.31 p.m.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I beg to move, at the end of the Question, to add: But, noting that Her Majesty's Government's mismanagement of the economy has caused the highest unemployment since the thirties, a massive increase in the cost of living and a substantial devaluation of the pound, humbly regret that the Gracious Speech does not lay the foundations for an effective attack on inflation by proposing changes in the Government's policies on food prices, housing and taxation. The Prime Minister's statement yesterday demonstrated that he has failed to carry out what he now admits to be his unique responsibility as Prime Minister, and that he has failed to fulfil the promise on which above all he fought and finally won the last General Election, namely, to protect ordinary men and women in this country from the impact of inflation. But his statement yesterday also marked the end of an epoch. It was a funeral dirge over the whole of his party's philosophy and programme. Less than halfway through his term of office he has finally admitted that his whole policy is a failure, that Conservatism simply does not work. To judge by the faces of his hon. Friends behind him when he made that statement yesterday, he must have recognised that it will never be bright confident morning again.

The Prime Minister is the first Conservative Prime Minister since the war who really took his party's philosophy seriously and who has made a genuine effort to apply its principles to the problems facing the nation. The policy with which he entered office just over two years ago involved, first, disengaging the Government from the management of the economy—the lame duck policy, the end of discrimination in favour of the regions and the abolition of the Industrial Reorganisation Corporation. This was the first casualty. Now he has sent the right hon. Gentleman who used to be Secretary of State for Trade and Industry off to Brussels, a scapegoat in a reshuffle that beats all records for irrelevance. It is just about as interesting and important as rearranging packets of cornflakes on the grocery counter.

The second element in the policy with which the Prime Minister entered office was an attempt according to Conservative philosophy to increase incentives in Britain by widening the differentials between rich and poor. The whole of the Chancellor of the Exchequer's tax policy since he took office has been devoted to a massive redistribution of wealth and income from the poor towards the rich—[Interruption.] It is perfectly true. The hon. Gentleman will not like a great deal of what I shall say, but I hope that if he speaks in the debate he will make some attempt to meet the points I am making.

The tax reliefs which the Chancellor gave to ordinary people have already in the main been wiped out by inflation, but no one could have done more to help the rich. I am defining the rich as those with incomes of over £5,000 a year. In his first two years in office the right hon. Gentleman has already given £330 million to the rich, so defined, in tax-free annuities, by reducing capital gains tax, by abolishing capital gains tax on death and on gains under £500 a year, by raising the level for estate duty, introducing tax-free interest on loans over £35, reducing capital gains tax by half on unit trusts, by introducing share options and by ensuring that there would be no surcharge on the first £2,000 of investment income. He took care when he was about to embark on an experiment of co-operation with the trade union movement to arrange in this year's Finance Act for a further give-away of £300 million to the rich, those earning over £5,000 a year, in the financial year starting next April. The changes he introduced in corporation tax will reduce the yield of that tax—the tax drawn from companies—by between £500 million and £600 million, unless he is prepared to increase the rate of tax on retained profits so as seriously to damage the ability of companies to invest.

On top of all those give-aways to the rich, the Chancellor and the Prime Minister presided over a massive rise in profits in the past two and a half years. The Financial Times pointed out that the September figures showed profits 17·4 per cent. higher than in the previous year and dividends 18·3 per cent. higher. The European management magazine Vision has pointed out that profits in Britain are higher than anywhere else in Europe. On top of that, we have had grossly excessive profits—admitted by the Chancellor to be so—by speculators in land and by asset strippers. They have done better still.

In fact the Government have produced an economic situation which has been a paradise for profiteers. It is not surprising that the Customs and Excise report last month showed that champagne and brandy clearances were up by one-third in July this year over July last year.

But in spite of everything the Chancellor has done in the past two and a half years, and which the Prime Minister has encouraged him to do, to widen the differentials between rich and poor and to redistribute the nation's wealth in favour of the rich, the fact is that the businessmen whom the present Government have set out above all to represent have shown no confidence whatever in the Government's ability to manage the economy. Investment fell by 7·6 per cent. in 1971 and by a further 7 per cent. this year. Fifty-nine per cent. of British firms are still operating well below capacity. The latest Department of Trade and Industry forecast suggests that there may be an increase in investment next year from the abysmal level to which it has fallen under the Conservative Government, but that increase will be between 2 per cent. and 5 per cent., which is scarcely sufficient in itself to make any impact on the appalling unemployment figures from which the nation is still suffering.

As a result of the failure of business, men to respond to the incentives offered them by the Chancellor of the Exchequer, the growth record of the present Government has been the worst of any Government since the war. We had only 1 per cent. growth in gross domestic product last year and over their first two years in office the average increase was only 1·7 per cent. a year. One reason for this is the fact that unemployment is now higher than at any time since the 1930s. This represents not only a tragic waste of human resources but an enormous renunciation of material wealth and welfare which the nation desperately needs.

Photo of Mr Christopher Tugendhat Mr Christopher Tugendhat , Cities of London and Westminster

I know that the right hon. Gentleman would not wish to misuse figures. Would he not agree that it is hardly surprising, given the rate of inflation, that there has been a sharp rise in money profits, whereas the level of profits as a proportion of gross national product is very much lower than it was a few years ago and very much lower than in Europe, and that this is what accounts for the lack of investment?

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

With great respect the article in Vision suggested exactly the opposite.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

The Prime Minister says that it was wrong. Then perhaps he will encourage his right hon. Friend the Chancellor of the Exchequer to give the comparative figures.

The third element in the Government's policy was an attempt to establish a basis for countering inflation by an all-out confrontation with the trade union movement. It is my contention, which I shall seek to prove, that business itself had very little confidence in the Government's ability to cope with inflationary problems in this way and that it has consistently refused to invest because it knew that the inflation rate would rise to an unacceptable degree. The basic reason why business is not investing is the belief that the present Government are quite incapable of controlling inflation, and that the means by which they have so far sought to do so—an all-out confrontation with the trade union movement—can only make the situation worse, not better.

There is no question that business is right in its belief because, entirely as a result of the way in which the Government have sought to deal with the problem of industrial relations, we have lost more days in strikes in the first nine months of this year than in the whole six years when Labour was in power. It was the Government's policy on industrial relations, combined with the consequent failure to control inflation, which led to the Government devaluing the £ only two years after inheriting the largest balance of payments surplus in our history. That devaluation in itself will next year add at least 2 per cent. to the cost of living.

I noticed that when speaking to the Conservative Party conference this year the Prime Minister pretended that he had never sought any confrontation with the trade unions. I remind him of what he said in the halcyon days of September, 1970, when he was being interviewed on Independent Television by Mr. Alistair Burnet. Mr. Burnet asked him: Do you still reject the idea of any direct control on wages and prices? The Prime Minister replied: Yes indeed—yes. He was then asked: Are you therefore prepared to stand up to strikes in industry this winter? (A) Yes, indeed.(Q) Besides in local government offices, the railway, the mines? (A) Yes indeed. Mr. Burnet then asked the following question: Would you face a general strike? The Prime Minister's answer to that question was, Yes. Ah. I've always made it plain that we were not going to have legal control of wages and prices and I have said that we are going to carry through the reform of industrial relations. There is no doubt whatever—and I have many quotations with which to supplement those I have already given —that the Prime Minister genuinely believed when taking office that he could face the unions out, that he could force them into a confrontation which he could win and that this by itself would be sufficient to bring earnings down and to force, as he thought, a fall in the rise in prices.

Photo of Mr Edward Heath Mr Edward Heath , Bexley

Nothing the right hon. Gentleman has quoted from what I said gives any justification for the last last part of his remarks, namely, that I was prepared to force the unions into confrontation. Is he saying that if there is a strike, even if it is unjustified, we should expect a firm or a public nationalised industry simply to give way to it? Is that what he is saying? If people are prepared to strike in an unjustifiable cause, that is not confrontation caused by the Government.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

The Prime Minister has a very short memory. He should not forget that he encouraged confrontations in the nationalised industries and then gave way. We had the Chancellor of the Exchequer squeaking and gibbering insults on the sidelines at most critical moment in every confrontation. If the Prime Minister really believed that he had the responsibility to face the unions out on these issues, why did he not do so He turned tail and ran away, and he knows that perfectly well. Again and again he forced the issue with the unions and then gave way. It was those two years of solid confrontation, fortified by the forcing through of the Industrial Relations Act, which have done nothing but harm to industrial relations and produced a situation in which the Prime Minister devalued the £ two years after taking office.

The plain fact is that after two solid years of kicking the unions in the teeth, the Prime Minister is now asking them to bail him out in the difficulties he has created for himself. Yet, as I shall seek to show, when he finally called in the unions for serious discussions and invited them, as he said, to become partners in the development of policies covering the whole of the economy, at the last moment he wrecked the talks by refusing to bring into the discussions those issues which the unions from the beginning had said were central to any solution.

Photo of Mr Edward Heath Mr Edward Heath , Bexley

I must say to the right hon. Gentleman straight away that there was no refusal to bring into the talks matters which the unions wished to discuss. On Thursday night, after I had presented the package, they were invited to discuss each individual item and the CBI gave its views on each individual item. I asked the unions to discuss it and they refused.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

If the Prime Minister really has so short a memory, I will refresh his memory and tell the House what he said yesterday afternoon when referring to food prices, rents and value added tax. In referring to my right hon. Friend the Leader of the Opposition, the Prime Minister said: Many of the other matters mentioned by the right hon. Gentleman—I must frankly say this to him—are political. They are not matters which directly affect the discussions which we have been having. Every Government has the right to carry through its policy. I told the CBI and the TUC that I was not prepared to repeal the Act taking us into the European Community, nor to repeal the Industrial Relations Act, nor to repeal the fair rents Act, but that the Government were prepared to take into account the results of that legislation."—[OFFIcIAL REPORT, 6th November, 1972; Vol. 845; c. 630.]

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

It is no good the Prime Minister wriggling in his seat and saying "Exactly". He agrees that my statement is an accurate repetition of what he told the House yesterday. In fact he refused to negotiate on those issues which the trade unions had put in the forefront of discussions from the middle of September. It was on that issue, and on that issue alone, that the discussions broke down last Tuesday. If he is to convince even his right hon. and hon. Friends that he has the slightest confidence in the policy that he put before the House yesterday, the right hon. Gentleman will have to do a little better than he has during the last few minutes.

The Prime Minister has now decided to impose a standstill on pay and prices for a period of up to six months, since, if the Bill that has just been read the First time takes a month to go through the House, the total period allowed by the Government for a freeze will be six months rather than five. He has done so despite his promises, which I shall not embarrass him by repeating, in his election manifesto and repeatedly made in the House and on television since the election, not to impose a standstill by legal means. Yet he knows, as he has repeatedly told the country and the House, that, unless the time is utilized in obtaining the co-operation of the trade unions and the CBI in a long-term policy for dealing with inflation, the standstill can only worsen the situation.

There is a serious problem here, not only on the trade union side. Some of the right hon. Gentleman's promises at the time of the last General Election he never intended to carry out. Indeed, the former Leader of the House told us last June that he did not expect the electors to believe the promises even when they were made. This proved to be the case with the reduction of the rise in prices "at a stroke". However, and here I hope that I am not doing the right hon. Gentleman an injustice, I believe that he genuinely believed in his promises about prices and incomes. Indeed, he told Mr. Robin Day on television yesterday that, in spite of having introduced this legislation, he had not changed his philosophy one whit. I believe that to be true, and that was why he was incapable of answering the question yesterday of my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins).

The Prime Minister has told us repeatedly that a short-term freeze can only render more difficult the long-term situation, similar in its effect to placing an ice block in the path of a river, in that it will hold for so long but a flood will follow. Not only has the right hon. Gentleman pointed this out again and again, but six or seven of his colleagues repeatedly said it during long debates on these problems during the period of the Labour Government. There is no question that there is a risk of the right hon. Gentleman being right. However, he has totally failed to explain why on this occasion he believes that everything he told the House in the past will prove to be wrong.

It is possible for the Government, in theory, to use the time gained to try to reach an agreement with the trade unions and the CBI on a long-term policy for dealing with inflation. However, no one who listened to the right hon. Gentleman yesterday, or who noted the reaction of his right hon. and hon. Friends, can believe that he or they have the slightest confidence that the policy they have now adopted will perform the function that they have ascribed to it. Indeed, the most honest statement of view was made some weeks ago by the hon. Member for Stratford-on-Avon (Mr. Maude), who said that he believed a prices and incomes policy was logically absurd but that, if the Government had no idea of what else to do, it was possibly worth a try in case it worked.

No one who has read what the Prime Minister was saying as recently as July of this year can deny that he has no confidence whatever that the policy which he placed before the House yesterday will produce a long-term solution to the problems facing the nation. Rather is it the gambler's last throw. However, I will concede—and no one in the past has insisted on this point more than the right hon. Gentleman—that the phrase "prices and incomes policy" is often used as a substitute for thought.

No country has operated a prices and incomes policy successfully over a very long period. We in the Labour Party were successful for a year or two, but it did not work very well during the last three years we were in office, although it worked a great deal better than the lack of policy of the present Government in the succeeding two years.

The only countries to have operated such a policy with any success for long periods are those, such as Sweden and Austria, that have established such close relations with their employers and trade unions that all questions of economic policy are continually discussed in a forum so intimate that those countries have not found it necessary to introduce detailed rules and regulations for the governance of incomes and prices.

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

The right hon. Gentleman quoted Sweden as an example of successful consultation. I know that that is freqently said. But has the right hon. Gentleman seen the latest OECD report showing that since 1964 Sweden has achieved the fastest rate of inflation of any country in Western Europe, even including ourselves?

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

But since 1964 Sweden has also had one of the highest growth rates: 7½ per cent. a year average since 1945. I concede to the hon. Member for South Angus (Mr. Bruce-Gardyne)—I am surprised that he did not make the point, because it would have been more effective —that the Swedish Government's policy has run into severe difficulties in the last two years. Those difficulties have arisen precisely because the Swedish Government has not succeeded in maintaining the close contact with working people through the whole range of occupations which it had succeeded in maintaining during the previous 15 to 20 years.

It is worth spending a moment or two this afternoon looking at the subject of prices and incomes policy from a certain distance, because—and let us admit it—no country has yet produced a wholly effective policy in this matter. Certainly no British Government have so far done so, including the Government of which I was a member. I believe that we can learn something from our experience and that of many other countries which have tried at various times to adopt such a policy.

I suggest that there are elements in the solution on which the two sides of the House ought not to need to disagree. The first is that wages form only a part of the problem. The Economist last weekend pointed out that wages account for only half of a manufacturer's selling prices. The rest is made up of profits, 20 per cent.; imports, 18 per cent.; and indirect taxes, 12 per cent.

The second factor on which I hope we agree is that trade unions are not the main cause of inflation. An interesting study by Professor Turner pointed out that there was no obvious correspondence between the rates and pattern of inflation in the world and national differences in union strength and militancy.

Countries such as France or Holland, which have a comparatively small proportion of their workers in trade unions, have occasionally suffered from worse inflation than has this country. The country where the trade unions are most subservient to government policy—Japan—has for many years consistently had the highest wage increases in the world.

Thirdly, and I believe that I have carried the House with me so far, I put a point which the Government consistently deny and yet which they appeared to accept when they invited the trade union leaders to talks at Chequers and Downing Street. Trade union leaders are the servants and not the masters of their members. When the Government are negotiating with trade union leaders, they are negotiating with the members those leaders represent. They are negotiating with the ordinary men and women who work for a weekly wage. Those members will exert pressure on their trade union leaders and the leaders will exert pressure on the Government as the cost of living rises, whether the rise occurs through increases in the cost of manufactured goods or food or from increased taxation, rents, rates or anything else.

The complement to earnings in any policy is not prices but the cost of living, and anything which affects the cost of living is directly relevant to the problem of dealing with earnings. I cannot help feeling that many people who have written and talked about wages and incomes policy in this country, not least the Government in the recent negotiations, have been far too influenced by national statistical averages. But what influences ordinary people and leads them to put pressure on their trade unions, whether at shop steward level or national level, is what is happening specifically to them, and the trade union movement was anxious to discuss questions like rent and VAT with the Government because the pressures to which they must respond from their own rank and file are determined by what happens to the rank and file as individuals.

It is true that a VAT rate of 10 per cent. statistically affects the cost of living very little more than purchase tax and SET which it replaces—about 1 per cent. more. But a family which has three or more children and then finds the cost of its children's clothes suddenly leaping £8 in the year, which will happen to millions of families in this country, suffers a tremendous impact on its cost of living which leads it to go straight to the shop steward or the union leader and ask for compensation.

Take the question of rents. It may be true, though I do not believe it, that the Minister who told us the other day that rents would go up on average only by 25 per cent. because of the Housing Finance Act was telling the statistical truth, but for hundreds of thousands, if not millions, of people they will go up by £1, and for those people that £1 increase will be an increase of 3 per cent. in their cost of living. Indeed, if they are on £20 a week it will be even more, though I concede that in that case they may well qualify for rent rebates.

What has vitiated the Government's approach to the talks with the trade union movement and the CBI is that those who have negotiated for the Government at Chequers and Downing Street have not the slightest understanding of how ordinary families live on £20, £30 or even £40 a week. It was this total failure in imaginative comprehension which in the end led to the breakdown of the talks.

Apart from these purely material factors in the cost of living, there is one element of prime importance in the approach of ordinary people to any appeal for sacrifice, and that is that sacrifices must be seen as being fair and equally distributed. One of the reasons why in the developed world we have seen such a rapid rise in wage earnings in the last five or 10 years is that the new mass media like television, the Sunday newspaper supplements and so on have given ordinary people a sense of how the rich live and they are not prepared to see the rich getting away with enormous and luxurious standards of life when they, because of a small difference in status or role in the economy, have to be satisfied with the crumbs that fall from the rich man's table. The ordinary people of the Western world, not only of this country, will not tolerate these gross inequalities of sacrifice.

Photo of Mr William Molloy Mr William Molloy , Ealing North

Does my right hon. Friend agree that what irritates people is that it is their labour which contributes so much to this luxury which they are not allowed to share?

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

Of course I do. I am grateful to my hon. Friend.

The Government know—although evidently many hon. Members on the Government side do not-that wage increases in the United Kingdom in the last three years have been very much in line with wage increases in the rest of Europe and in Japan, the countries which mainly compete with us. The disastrous effect of wage increases in Britain is due to the fact that we have had a very much lower increase in production and in productivity. But production and productivity depend to only a small extent on the efforts of working people. One million unemployed means a colossal loss in national wealth and in national production.

It is not the trade union member who is responsible for one million unemployed. Productivity depends overwhelmingly on investment and management, and neither of these is within the scope of control by the trade unions. Moreover, as the Bank of England pointed out the other day, British exporters have used devaluation to increase their profit margins rather than to increase the volume of their exports. Only two days ago the Economic Commission for Europe pointed out in its annual economic bulletin that in Britain alone among the industrial countries of Western Europe export unit values over the past year had risen faster than consumer prices, and substantially faster than elsewhere.

If we look at the figures, there is no question where the major responsibility for inflation lies. It lies with the employers, exporters, businessmen and Government of this country for refusing to deal as efficiently with the other elements in the equation as the Governments of competing countries have done. It is no good the Government attempting to maintain that everything that has gone wrong in Britain in the last two and a half years is the fault of the trade unions, particularly since they cannot succeed in deriving any benefit from their present standstill—and I think the Prime Minister and the Chancellor have conceded this in what they have said during the last day or two—unless they can re-establish a relationship with the trade unions which enables the negotiations which were halted last Thursday to continue and to produce a policy which has a chance of getting the consent of ordinary working men and women.

Therefore, if the Government are to derive any benefit from their standstill, they must make an effective attack on inflation, concentrating on all elements in the cost of living—those elements for which the Government's policy is responsible just as much as those for which the manufacturers and the workers are responsible. If the consent of ordinary people is to be obtained for the undoubted sacrifices in expectation and habit which will be required, the sacrifices must be seen to be fairly shared. It was because the Government totally failed to meet either of these conditions in the recent talks that the talks broke down. I believe that the Trades Union Congress was profoundly right when, in its subsequent statement, it ascribed the breakdown of the talks last Thursday to a major error of judgment by the Government.

The Government threw away a genuine opportunity for progress. Many of the elements in their proposals were, in my view, admirable and I said so repeatedly in public and at my party's conference. Each of the admirable elements in the Government's package was nullified by their failure to provide the preconditions for success. I am all in favour of compressing differentials as a uniform money increase would have done, but it is no good compressing differentials only among the earners of weekly wages and leaving differentials to race ahead among people getting over £5,000 a year. I am all in favour of a threshold agreement, but the threshold the Government fixed in the talks was too low to prevent a fall in the living standards of probably a majority of working people if prices rose by more than 7 per cent. I am all in favour of the Government controlling some key prices, even though this again is a deathbed conversion—they attacked us when we proposed it earlier this summer—but it is no good doing that if they ignore the results of their own policy on rents, food and value added tax.

Let us take the problem of incomes and prices. The Government cannot ask a man earning between £20 and £60 on a weekly wage to accept the fall in his standard of living which might he implied, certainly for people on over £40 a week, when the tax changes the Chancellor already has in the pipeline will give £300 million away next April to men earning over £5,000 a year. Simply by the operation of the Finance Act the Chancellor gives a man with £15,000 of investment income the equivalent of the average weekly wage on top of what he is now getting.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

Will my right hon. Friend invite the Chancellor to deny those figures?

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I am sure that the Chancellor will take the opportunity of denying any figures he is capable of denying; but, knowing the Chancellor's natural vigour and ebullience, I am sure that he would have leapt to his feet long before now if he found me saying anything with which he could honestly disagree.

The Chancellor, if he wants any chance of getting agreement in the talks which must start soon, must agree to cancel the tax give-aways due to come into operation next April. The Government are now suggesting that there may be some limitation on the distribution of dividends, but the new form of corporation tax which they are introducing is designed precisely to encourage the distribution of dividends and to reduce the tax yield by between £500 million and £600 million, unless the Government increase the rate on retained profits and so discourage businessmen even further from investing their money in higher productivity.

The Chancellor cannot go through with the proposals for stock options and share concessions which he made in his last Budget and which will increase the effective income of hundreds of top executives by tremendous figures. He cannot permit golden handshakes on the scale at which they are now permitted. I noticed, ironically enough, in The Guardian the other day that Mr. Aubrey Jones himself is to receive £60,000 as a golden handshake from the Laporte Company which he is just about to leave. Is it reasonable—I ask the Chancellor to use a little imagination—to expect ordinary people to limit their increases in earnings to £2 or £2·60 a week when they see the rich riding roughshod over every principle which the Government are trying to enforce on the poor?

What does the Chancellor intend to do, assuming there is dividend restraint, to mulct the rich of the capital appreciation of profits which are not distributed in dividends? We lave not had a word from the Chancellor, so far as I am aware, about this aspect of the problem. One of the things which I find immensely distasteful is the total gap between the way in which the rich think about themselves and the way in which they think about ordinary men and women.

The Times has been weeping treacle tears about the greed of the workers and the need for sacrifice. On the same issue, on the back page, the newspaper which contained such an editorial carried an advertisement from H. L. Thomson (Equity and Life Brokers) Ltd., headed Tax Concessions for the Private Company Director. The advertisement said: Under the new tax system the tax relief on contributions to a personal pension contract is determined by reference to total income, including investment income. The cost can be borne directly by the Company at the expense of Corporation Tax following the removal of the restriction on Directors' salaries. It then goes on with this mouth-watering invitation: Contributions are invested into a tax-exempt fund which provides full protection against inflation as the fund itself invests in both equities and property. This means that gross capital gains and income can be accumulated for the benefit of the investor. What a delightful prospect! And how it compares with the Government's generosity in offering a miserable £10 a week to the old-age pensioner—sorry, I mean a £10 total once-and-for-all payment to the old-age pensioner next year.

Photo of Peter Tapsell Peter Tapsell , Horncastle

The right hon. Gentleman keeps talking about the rich, but is it not an established fact that, if all incomes over £5,000 a year were confiscated, the contribution that that would make to the mass of people would be negligible, while the damage it would do to the industrial leadership of the country, on which we all depend, would be incalculable?

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I am afraid the hon. Gentleman's intervention illustrates better than any words of mine could the total lack of imagination of hon. Members on the Government benches. What the hon. Member does not understand is that, although the incomes of the rich are statistically negligible in relation to the gross national product, in relation to the readiness of ordinary people to respond to invitations for sacrifice from the Government they are of critical importance. Until the Government gets that into their heads, and until the hon. Member accepts it as a fact of social life in the second half of the twentieth century, there is no prospect of the Government, or the Conservative Party, ever receiving the sort of consent from ordinary people to a restraint on incomes which they regard as a precondition of success.

I turn to the question of prices. The CBI controls only about one-third of the totality of elements in the cost of living. The main components in the family budget are food, housing, clothes and footwear, which together in 1971 took well over half of total family spending. The Government have offered nothing on these things. They know that we shall have a 4 per cent. increase in food prices next year as a result of the common agricultural policy and the impact of devaluation on food prices and on the common agricultural policy. Yet the Prime Minister refused to raise this matter because he regarded it as political.

Photo of Mr Edward Heath Mr Edward Heath , Bexley

There was no refusal to discuss these matters. Indeed, the greater part of the talks were taken up with discussing precisely the question of how to control prices of manufactures and the impact of food prices on the arrangement which we offered, which was £2 across the board and £2·60 through earnings. There was not at any time any refusal to discuss these matters.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

As the Prime Minister has intervened yet again, missing the point of his own statement yesterday which I quoted earlier, perhaps I may ask him this: did he or did he not undertake in the talks with the TUC to go back to Brussels, as General de Gaulle or Chancellor Brandt would have done in a similarly acute economic situation, and ask for relief from the obligations which he has assumed in relation to the common agricultural policy?

Photo of Mr Edward Heath Mr Edward Heath , Bexley

I said that we would discuss with all Governments concerned, not only those of the Community, the question of prices of imported materials including food, I said that quite clearly. Incidentally, it is of interest that although the Germans have their difficulties, which are almost as great as ours, Chancellor Brandt has not asked the Commission to change the common agricultural policy.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

Chancellor Brandt has not asked Brussels to change the CAP; he has changed it unilaterally; he imposed border taxes a year ago and he is keeping them on because he believes it is necessary to break the common agricultural policy by retaining border taxes in order, in this case, to protect various aspects of his economic policy.

We want to know whether the right hon. Gentleman will undertake not to impose the food levies which he is required under the common agricultural policy to impose next year, and not to raise domestic food prices by 10 per cent. as he will be obliged to do the moment he pegs the £ and the common agricultural policy is fully in operation. Will the Chancellor of the Exchequer therefore tell us whether the Government will go to Brussels either to renegotiate the common agricultural policy in this regard, or announce their decision not to implement it? That is a straight question. Nothing would do more to reassure the TUC and the housewives of the Government's determination to keep food prices down.

On the question of value added tax, we have heard that the Government are prepared to reduce VAT to 8 per cent. or 7½ per cent. However, I hope that the Chancellor will tell us the point of introducing VAT at all if it is intended to reduce the rate so as to bring in £430 million less than the taxes it replaces? Undoubtedly the tax is an administrative nightmare. Today's Daily Telegraph points out that most of those attempting to fill in the forms, whether companies, shopkeepers or individuals, cannot understand them. In addition, the tax is excessively unpopular, crammed with ludicrous anomalies and expensive to administer. Surely it would be infinitely better to abandon VAT, or at least to postpone its introduction for a year, rather than to introduce it with all its attendant disadvantages—from which, incidentally, no one will suffer more than the Government in terms of electoral unpopularity—than to fiddle with the rate.

I do not raise these issues as an inquest on the past, for the Government, if they are to succeed in, or benefit from, their current standstill, will be forced to make changes in these areas. Unless a long-term agreement is reached with the unions and the CBI during the period of the standstill, it will be a disaster for this country and for much of the world to re-adopt a fixed parity for the £. Will the Chancellor therefore assure the House that he has no intention of giving the £ a fixed parity until he has seen how the post-standstill policy for dealing with inflation is working? I warn the right hon. Gentleman that if he attempts to re-peg the £ during the standstill—and he will be under heavy pressure to do so from some of his colleagues in the international monetary world—without knowing whether he can maintain control of inflation when the dam bursts and the standstill is ended, the country will face next year an economic crisis which would make this year's difficulties seem like a storm in a teacup.

We shall be discussing tomorrow the details of the freeze itself. I shall therefore confine myself to saying that it is already obvious that the Government will be incapable of controlling prices. We heard on the one o'clock news that the pathetic army of 28 civil servants in the Department of Trade and Industry is already overwhelmed by the Niagara of inquiries about price increases which have poured in. The Government have already admitted that they cannot control the prices of fresh foods. They have no intention of trying to control the prices of housing or mortgages. Worst of all, the legislation before the House suggests no punishment for those who raise prices illegally. Such people, if and when the Government discover those increases, will be asked to restore them to the requisite level. Meanwhile, they will be able to pocket all their ill-gotten gains.

The Prime Minister knows as well as anyone—and he has often told the House—that there will be a tremendous explosion of wages and prices at the conclusion of the present standstill unless he is able meanwhile to reach agreement on an alternative with the CBI and the TUC. When I say "agreement" I mean just that. The American example has often been quoted to us, but the House may well have noted the comments of Mr. Grayson, head of the Prices Board in the United States, who pointed out that the policy would have had no chance of success without the acquiescence of the American trade union movement. Yet the Government still refuse adamantly to negotiate on the central questions raised by the trade unions, on the ground that relevant legislation has already been passed.

Why is the Prime Minister, who has been prepared to reverse his policy on so many issues during the last two-and-a-half years, so rigid on these remaining issues? It cannot be because he is a dedicated supporter of the sovereignty of Parliament. He proved to us during the long passages we had on the European Communities Bill that that was far from being the case. Yet he must know that he cannot halt inflation in Britain—surely that is the lesson of the failure of the approach with which he took office two and a half years ago—unless he can reestablish confidence between the Government and the mass of the people who work for a weekly wage. That confidence cannot be established unless he is prepared to impose equality of sacrifice right across the board and deal with each single component in the cost of living.

We shall not solve the problem of inflation until we have a Government which can establish that type of relationship with ordinary working people. The doctrinal blinkers and party pride which the present Government still wear are an impossible obstacle to solving the problem of inflation. The Government have disqualified themselves a thousand times for any responsibility for managing the economy by their record of unrelieved failure. They have destroyed their credibility by their refusal to carry out solemn promises made to the electorate 2½ years ago and by repeated reversals of policy, of which we have by no means seen the last.

The Government have destroyed their authority by seeking to divide the nation. They have no confidence whatever in the policy which they put before the House last night. They embarked on that policy only because they could think of nothing else to do. There is only one service left which the Government can perform for the British people, and that is to resign.

4.26 p.m.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

Before I come to the main aspects of the debate—namely, the course of the economy, and in particular the decision announced by my right hon. Friend the Prime Minister yesterday—I should like to deal with two matters of importance.

The first concerns value added tax, not the rate of VAT which will be fixed in the next Budget, but one aspect of the transitional arrangements which is important in respect of prices. The Gracious Speech refers to the reduction and reform of taxation. The reduction of taxation—of income tax, purchase tax and selective employment tax—has over the past year played an important part in moderating the pace of inflation. The measure of that can, I believe, be judged from the fact that if we were introducing VAT to match the rates of purchase tax and SET in force when we took office the rate would be not the 10 per cent. provisionally fixed in the legislation but about 15 per cent.

Already, therefore, there has been a considerable reduction in taxes on spending, and this has been universally welcomed. However, there is one particular aspect to which I have given a great deal of thought in recent months. The matter was also raised in the tripartite talks last week. We are here concerned not with the rate but with the method of dealing with the transition to value added tax next year. The change—which I shall explain in a moment—will fully meet the request of the TUC and CBI, and many others, and is of great importance in our determination to tackle the problem of rising prices.

We have discussed the subject in the past, particularly when the last Finance Bill was going through the House, and the House has all along recognised that there is a considerable transitional problem with regard to the treatment of stock held by retailers and others. I am talking about stock which has borne purchase tax and which, if still unsold when VAT comes into operation, would then attract VAT as well. A similar problem would arise over stocks of goods subject to the revenue duties, if those duties are reduced to avoid increase in the total level of taxation on such goods when VAT comes into operation.

Clearly, as the House, knows, our intention throughout has been as far as possible to avoid any element of double taxation, especially as that could provide an excuse for otherwise unwarranted price increases. It is equally clear that the most straightforward solution would be to give all those concerned a complete repayment of purchase tax which had been paid on their stocks when value added tax comes into operation. That solution has always appeared to be impracticable and impossible. Therefore, at the time of the Budget I decided in favour of the simplest available formula, which combines the use of sale-or-return arrangements for readily identifiable goods. For other goods it involves the ending of purchase tax a short time before VAT is introduced—in other words, a purchase tax holiday. This formula was intended to give traders a broad measure of relief from possible double taxation, but it is by no means perfect because it cannot altogether avoid double taxation. Furthermore, even though there was no double taxation, an unscrupulous trader could always pretend that there was and put up his price accordingly and no one could prove the contrary.

The one scheme that all would have favoured as the simplest of all solutions was a straight rebate or repayment at the commencement of VAT of all purchase tax paid on goods held at that time, but, as I have said, this appeared impossible to administer. We have kept working away at this problem and, thanks to the tenacity and ingenuity of the Customs and Excise. I have now been able to decide that there will be a full rebate or repayment in respect of all tax-paid stock.

This is the ideal solution from two points of view: first, there will be no element at all of double taxation on the changeover and, secondly, it follows that no trader can adjust his prices on the pretence that there is any element of double taxation. The scheme will allow registered VAT traders to make a claim in respect of purchase tax paid on all goods which are held in stock for resale at 31st March next year. Purchase tax will accordingly continue in force right up to the start of VAT. Traders should retain the invoices showing the purchase tax on goods they purchase in order to support their claims.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I am grateful to the Chancellor of the Exchequer for accepting the advice that my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) repeatedly pressed on him in Committee and on Report on the Finance Bill, though I am bound to say that the fact that he did not concede when the arguments were originally put by the Opposition has involved millions of traders in the filling in of forms which now will appear to be totally nugatory and time wasting. Can the Chancellor assure the House that he will treat my suggestions earlier in the debate with the same sympathetic attention as was given to those made by my hon. Friend during the debates on the Finance Bill?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The right hon. Member for Leeds, East (Mr. Healey) is wrong on both points. If he looks up the record, as I have done, he will find that the proposals made by his hon. Friends are not the proposal which I am making today.

I stress that only registered VAT traders will be able to make a claim, because only in their case would the possibility of double taxation have arisen. It follows that those who have not yet applied for registration would be well advised in their own interests to do so on time, and, of course, if they wish to do so in advance of the alphabetical timetable suggested by Customs and Excise they may do that. Goods sold on sale or return arrangements will, of course, be outside the reckoning, since they will not have borne tax.

There is now no intention that sale or return should be the only solution available for particular classes of goods, even those listed in paragraph 27 of the VAT White Paper. On the other hand, Customs and Excise will be prepared to operate on the basis of appropriate sale or return arrangements if traders find this more convenient. Customs and Excise will be publishing further details of the arrangements in due course, but, briefly, the way repayment will be made is that claims will have to be lodged soon after 1st April, 1973, and the amount claimed will be set off against liability to VAT in the trader's first VAT return. I would only add that Customs has worked out a system of checks and verification, including an automatic computer cross-check to fit in with the VAT controls.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Glasgow Cathcart

Will these excellent arrangements apply to those who do not register under VAT? In other words, will a small shopkeeper with a turnover of less than £5,000 be entitled to a refund of purchase tax as well as someone who has registered for VAT?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

No. I think that my hon Friend misunderstands the position. The arrangements will apply only to registered VAT traders, because it is only in their case that there would be the possibility of any double taxation.

The new scheme has many advantages. It will resolve many of the problems of traders who have recently been expressing anxieties about the effects of the transition on their businesses. It will certainly minimise the fluctuations in retail stocks which would otherwise have arisen. It is, above all, important in the context of prices at the time of the transition.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

As a matter of curiosity, would the Chancellor explain precisely how his proposals differ from the proposals that some of us were putting forward in Committee? Does he realise that in future when we make representations and are told by the Treasury that it is impossible to do something, we shall be a little less credulous?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I said in answer to the right hon. Member for Leeds, East that he was wrong to say that it was the proposal of his hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) which I had accepted. We know only too well that the hon. Member puts forward every conceivable type of proposal of his hon. Friend the Memforward this. It does not lie in the mouths of the Opposition to criticise me for not finding means of achieving reforms which other people have found to be impossible. During the whole of their four years of office there was not a single reform of taxation of any consequence. We were told that the unification of income tax and surtax, although desirable, was impossible, and so on.

During the debate on the Gracious Speech, several right hon. and hon. Members, including the Leader of the Opposition, have referred to the Green Paper on the tax credits scheme which was published during the recess. It is fair to say that the Green Paper has been widely acknowledged as a major step forward in simplifying the relationship between taxation and social security. It is also true to say that it has in general been welcomed—not least by those such as the Child Poverty Action Group, whose concern is for the less fortunate. There has been widespread recognition of the help that would be given to the lower paid, especially to large families—where the need is often greatest—and to a considerable proportion of pensioners. The suggestion by the Leader of the Opposition that there should be a debate on the Green Paper can be pursued through the usual channels, but I very much hope that the House will agree to the setting up of a Select Committee so that we can have the considered advice of the House before we go forward to more concrete decisions and to legislation.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I think that it would be the wish of the Opposition to serve on a Select Committee, but I think we should also feel that it was desirable, before setting up a Select Committee on a matter of this importance, to have a general debate on the matter on the Floor of the House.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

My right hon. Friend the Leader of the House will have heard what the right hon. Gentleman has said and no doubt discussions can take place through the usual channels. I think that the right hon. Member would agree that a Select Committee would be an appropriate body to consider in depth the detail of these proposals. Of the total benefit of the scheme, a high proportion would go to families where there are children. I think that the scheme would make a valuable contribution to solving the problem of the poverty trap and it would make supplementary benefit unnecessary for many families. All this has been welcomed. So, too—and I think the right hon. Gentleman would agree—has the root and branch simplification of the tax system which would follow if a scheme on these lines were implemented.

I must clarify the question of whether child credits are to be paid to the father or the mother, or whether they are to be split. There is not the slightest truth in the suggestion that the Government have already decided this issue, and I state that emphatically. To pretend otherwise is to deceive. We have said in the Green Paper that there should be no doubt whatever that the Government regard this issue as entirely open. Indeed, this is one of the main points on which I would welcome the views of a Select Committee.

I turn next to monetary policy which, particularly during the past few months, has been the subject of considerable comment in connection with inflation, and rightly so, for there can be no doubt as to the vital importance of controlling the rate of growth of the money supply in any realistic attack on inflation.

Fair is fair; let me state the facts. In recent months the growth of money in credit has slowed down from the fast rate recorded earlier in the year. Between March and June the money supply, broadly defined as the so-called M3, rose by 8 per cent. In the next three months up to mid-September it increased by 5 per cent.

As some hon. Members know, this broad definition of money supply includes a large amount of interest-bearing term deposits which are not in any sense ready cash. It is in these that expansion has been most marked. It follows, therefore, that one should also look at M1; this is the narrower definition which consists of notes and coins in the hands of the public and current accounts at the banks. This problem reflects better the role of money as a means of payment.

The facts are these. In the three months April to June the growth of money supply on the MI definition was 5 per cent. In the later three months, July to September, M1 has grown by just under 1 per cent. I realise that international comparisons are often hazardous, but it is worth noting that the increase in the money supply over the past year on the M1 basis has been much the same whether we look at this country, at France, at Germany or at most other industrial countries. I mention this because, although it is absolutely right to consider the requirements of our own economy, it is also sometimes helpful to put matters into perspective by considering international comparisons.

There are those who seem to argue that a more restrictive monetary policy should be the principal means of controlling inflation. It is all a matter of degree. Monetary policy has a major role to play in the battle against inflation. Sometimes people talk as though it should be the principal means of controlling inflation, and I ask them whether they are prepared to accept the consequences—the consequences in terms of demand that would be cut back, the consequences in terms of output that would be forgone, the consequences in terms of lower living standards, the consequences in terms of the men and women who would be kept out of work; because these in fact would be the results.

This is certainly well understood by our partners in the enlarged Community. At their council meeting on inflation in Luxembourg last week, at which my right hon. and learned Friend the Secretary of State for the Environment was present, the E.E.C. Finance Ministers laid down certain guide lines for the monetary policy of the member countries. In a number of those countries there is already a high level of employment and some risk of excessive pressure of demand on resources. It was, therefore, decided that, in general, the rate of growth of money supply should be kept in line with the rate of growth of real output, plus the target rate of increase in prices. It is a simple rule of thumb that this makes good sense for countries with a high level of activity.

What I want the House to note particularly is that the Council resolution goes on to say that countries with too much unemployment and unused capacity may adapt or modify this objective in the light of their own circumstances. I mention this because the E.E.C. Ministers accept the point which I have often made that simply to hold down the money supply does not get at the root of the kind of cost push inflation which we have in this country and that it can work only by reducing activity and keeping men out of jobs.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

I am very sorry to intervene, but I want some clarification. I am not sure whether M3 includes the kind of credit facilities which we have seen increase in recent months, such as Access cards and various bank cards as distinct from bank guarantee cards. Surely this creates pressure because we are mortgaging the future by having the goods now. Would not the right hon. Gentleman agree that it was time that we controlled this kind of credit?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The definition in M3 includes that sort of credit, but in terms of the magnitudes we are considering that is not of any significance.

I recognise, as I have done all along, that an excessive expansion of the money supply continued for too long could add to the inflationary pressures. That is why, now that economic growth is firmly under way, we have taken steps to moderate the growth of the money supply. It is accepted that there are time lags in the response of the demand for money to changes in the situation and I do not believe—indeed, few hon. Members do—that it is practicable to expect some sort of fine tuning in this respect.

Certainly the effect of our measures on prices ought to be reflected in due course in the figures for money supply; and our purpose is to ensure that this is so. I have referred to the progress which has already been made in restraining the growth of money supply, and I shall not hesitate to take further action if and when the position requires it.

In particular, it will be necessary to ensure that the heavy Government borowing requirement expected during the remaining weeks of this year does not lead to an undue expansion of the reserve base of the banks. We have the weapon of calling for special deposits to meet such a situation; and, if and when it is appropriate to call for special deposits, we shall do so.

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

Can my right hon. Friend clear up one point? The Governor pointed out the other day that no monetary policy can at the same time stimulate expansion and restrain inflation. Looking forward, which emphasis does my right hon. Friend see that our monetary policy should have?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

Nothing that the Governor said—and I was present at the time—is inconsistent with the view that it is possible—indeed, this is what every country is attempting to do—to achieve a rate of growth of the money supply consistent with a tolerable increase in gross domestic product.

The next point concerns the external situation, which is also a very important point. The level of activity, the degree of slack in the economy, and the expectations about the future course of inflation are all highly relevant to the external side of our affairs. The latest trade figures have been distorted by the dock strike, but we have always recognised that the very high surplus which was previously achieved and which was associated with the high level of unemployment and with the restricted policies of the previous Administration would not, and indeed should not, be sustained.

As for the exchange rate, it is universally accepted that the principal cause of the fall in the rate was the fear of the course of inflation and also the uncertainty while the tripartite talks were going on. Now the world knows the action which my right hon. Friend the Prime Minister announced to the House yesterday.

The right hon. Gentleman asked about the circumstances in which we would return to a fixed rate of exchange. On many previous occasions I have made the position clear on the policy of the Government, and therefore he knows perfectly well where we stand.

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

Will the Chancellor tell the House whether he still believes what he said at the time of flotation, that 2·60 dollars to the pound is the appropriate rate to return to?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

What I said at the time still stands. If the hon. Gentleman looks at my words objectively, I think he will agree with me.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

Of course what I said still stands. It was valid at the time, and the hon. Gentleman, if he will be fair and objective, will agree that he would have taken the same view.

I come now to the overriding strategy of the Government. To refer to one point in the Amendment, I find it incredible that the right hon. Member for Leeds, East, if he is really serious, could put his name to an Amendment the operative part of which talks of an attack on inflation without even so much as referring to incomes. Are the Opposition really so naive as to believe that the level of pay settlements has no relevance to inflation? There is no reference to it anywhere in the Amendment. Do they not know that the TUC in the talks which we had recognised that the level of pay increases was an essential part of any package to defeat inflation? Not merely does the Amendment contain no constructive proposal to deal with the element of wage costs; it does not even mention it. The Amendment will be seen by the country for what it is, a destructive attempt by a negative Opposition to put political advantage before the national interest.

I come now to the overriding strategy of the Government's economic policy, our determination to maintain a faster rate of economic growth and, as part of that determination, the measures announced by my right hon. Friend the Prime Minister. All Governments, of whatever party, have the improvement of the living standards of the British people as a prime political purpose. I know, as does every right hon. and hon. Member in this House, that if we are to secure such an improvement we must both achieve faster economic growth and defeat inflation. These aims are shared by both sides of the House. The prime purpose of the previous Administration when they were elected in 1964 and again in 1966 was to achieve a faster rate of growth. Therefore, the aim of faster growth is one which we all share.

In my Budget this year I indicated that the prospects for expansion and for creating prosperity over the next five years must surely be better than they have been for a long time. The Budget was designed to set us on that path. Our initial target was a growth rate of 5 per cent. a year in the 18 months to the first half of 1973. I am not prepared to stand idly by and see all our hopes for economic growth undermined by inflation and all our hopes for prosperity eaten away by rising prices.

The right hon. Member for Leeds, East referred to the low growth rate which existed in the early part of our period of office. The right hon. Gentleman is right; it was low. The right hon. Gentleman gave one reason and I will give another, which is the true reason. That period of low growth was the consequence of the appallingly restrictive and deflationary policies of the previous Administration. Everything now suggests that we are achieving a 5 per cent. rate of growth. That is twice as fast as during the previous decade.

The massive tax reductions which have been made were designed to have an impact on consumer demand, and that they have done. Consumer expenditure has risen rapidly. The preliminary estimate of consumer expenditure in the third quarter was 6 per cent. higher than in the corresponding period in 1971. That is in line with the Budget forecast. Manufacturing investment in the first half of the year was, as the right hon. Gentleman pointed out, lower than expected. However, all the signs are that it will soon start rising. The last CBI industrial trends survey bears out that expectation. Rising sales are now being reflected in rising output. There has been some running down in stocks but industrial production for the latest three months for which figures are available have increased at the rate of 5 per cent. since the second half of last year.

The position was well summed up in the Financial Times survey which was published yesterday. The survey states: The main message of this month's survey is that all the major indicators point to the conclusion that a strong expansion in the economy is now well under way, and the chances of sustaining this over the next twelve months must be reasonably good. The right hon. Gentleman referred to the level of unemployment. He knows full well, whatever views he may have about the figures and the level, that it is true that no Government in the country's history have taken more action than the present Government to secure expansion and so to create employment. I am sure that the Opposition, including the right hon. Gentleman, were as pleased as the Government that the most recent unemployment figures showed another large and welcome fall in unemployment. Since March the seasonally adjusted total of wholly unemployed has fallen by over 100,000. I agree with the right hon. Gentleman that the level is still too high, but I am confident that the demand for labour is rising. The number of unfilled vacancies has risen each month during this year. At the last October count it was 40 per cent. higher than a year earlier. Taken together, the evidence shows that some eight months after the Budget we are on the target of a growth rate of 5 per cent. a year. Furthermore, we can maintain the present impetus.

I should have thought that the achievement of a 5 per cent. growth rate was a matter of some note. A faster growth rate was the main purpose for which the previous Administration entered office. I should have thought that, whatever our other differences, a faster growth rate might have been welcomed by both sides of the House. Yet how much time did the right hon. Gentleman the Leader of the Opposition devote to that subject, which is the whole basis of rising prosperity, in his speech which lasted almost an hour? He did not spend one minute on this subject, yet a faster growth rate is the only means of ensuring rising prosperity. That in turn is essential if we are to make a fair policy for pay and prices succeed.

We are now achieving a rate of growth and a rate of rising prosperity twice as fast as in the period of the Labour Administration. We are at last achieving a growing prosperity which we have long envied in other countries. It is this faster growth rate, this rising prosperity and this hope for the future that we are not prepared to sacrifice, bearing in mind that it is such growth which makes possible so many of the things which both sides of the House wish to do.

I was astonished at the sneering way in which the right hon. Member for Leeds, East referred to the lump sum payment to pensioners of £10 for a single person or £20 for a married couple. It is not as if the right hon. Gentleman does not know the facts. He was not on the back benches during the Labour Government but was throughout a member of the Cabinet. The fact is that, taking into account last month's increase, pensions are now 35 per cent. higher than they were when we came into office.

Photo of Mr Ronald Lewis Mr Ronald Lewis , Carlisle

What about prices?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

If the hon. Gentleman will listen, I will come on to that. That increase in pensions is roughly twice the increase in prices. The truth is that the pension has been increased more in the past two years than in the whole period of the Labour Government. I can tell the Opposition that when the pensioners receive their lump sum payments of £10 or £20, which will be tax free, they will take a different view from the sneering attitude of the right hon. Gentleman.

Mr. Eric S. Heifer:

rose—

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I must get on. Many hon. Members wish to speak.

In July, 1971, just over a year ago, the CBI produced its prices initiative. That initiative was matched by similar action which was taken by the nationalised industries to hold down prices and by the action which I took in making massive reductions in purchase tax. In the Budget this year I made a reduction in income tax equal to a flat-rate reduction of £1 a week to every taxpayer. While I am dealing with taxation, I say to the right hon. Gentleman that the assertion which he made about the £300 million cut in taxation, which will come into operation next April, going wholly to those earning over £5,000 a year is utter rubbish. The sooner the right hon. Gentleman realises that and stops repeating such nonsense the better. There is no truth in it whatsoever, as has been stated repeatedly by my right hon. Friend and myself. The right hon. Gentleman has repeatedly made this assertion in the country. I am bound to say to him that his assertion is untrue. I think he must know that. However, he goes on repeating that it is all to go to people earning over £5,000 a year. The simple truth is that the bulk of it goes to people earning under £5,000 a year. I hope he will repeat that.

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

The right hon. Gentleman has said that the great bulk goes to those with under £5,000 a year. What proportion of that great bulk goes to investment income?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

As the hon. Gentleman knows, we have eliminated the distinction between earned income and investment income. The bulk of the elimination of the differential between earned and unearned income goes to those with small investment incomes. If the hon. Gentleman would like further details, I will do my best to provide them for him. I hope at any rate that we shall not have any more of the sort of nonsense which the right hon. Member for Leeds, East is spreading around the country.

I come now to the contrast between the last Government and this one. Whereas the last Government put up indirect taxation—taxes on spending which affect the poor—time and again, including purchase tax, petrol tax, beer tax and, in- deed, every conceivable form of tax, our policy, as the country knows, has been to reduce both taxes on income and taxes on spending. We have done so time and again. I am not in the least surprised that the Amendment suggests that there should be a change in policy on taxation because we all know that the policy of the Opposition, which they put forward this summer and approved at their party conference, would involve vast increases in taxation and so make the whole problem of inflation far harder to handle.

As a result of our policy over the past year, the rise in prices has been substantially slowed down. In the first year following June, 1970—what I might call the "hangover period"—the retail price index rose by about 10 per cent. In the next year—the second year of our office, which corresponded with the first year of the CBI price initiative—the rise in prices slowed to 5·8 per cent. The period of CBI price restraint would have come to an end last July but was extended an extra three months.

The CBI's position then, understandably, was that it could not continue unilateral price restraint unless it was matched in some way from the union side. So for the past three months or so we have been holding the series of tripartite talks. We talked together at a succession of meetings for more than 40 hours. This time we failed to agree, but no man could have worked harder and no man could have worked with greater sincerity and determination than my right hon. Friend the Prime Minister has done over the past few months. The account which the right hon. Member for Leeds, East has given of part of these talks was a travesty of the truth, and everyone who sat round the table at Downing Street or at Chequers knows that that is so.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

Mr. Healey indicated dissent.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

It is no good the right hon. Gentleman shaking his head. He was not there. He says that we were not prepared to discuss the value added tax, or rents, or the Industrial Relations Act, and that is wholly untrue.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I will give way to the right hon. Member for Leeds, East if he wishes to challenge me.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

The right hon. Gentleman was here when I quoted what the Prime Minister said yesterday, which confirmed what I stated in my speech today. I agree that the Prime Minister discussed these matters. He was present when the TUC representatives raised the subjects and made remarks when they made remarks. But he made clear yesterday that the Government were not prepared to change any of the policies on which they had legislated.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The right hon. Member for Leeds, East has said that we were not prepared to change any of the policies on which we had legislated. I will read to him and to those of his right hon. and hon. Friends who seem to think that he may have a point exactly what my right hon. Friend said to the TUC about the Industrial Relations Act. My right hon. Friend said: The Government is fully prepared to discuss points of special difficulty with the unions or with the employers or with any other body which likes to make representations to it. He made it clear that it was open to the Government to introduce amending legislation if, as a result of these discussions, we came to the conclusion that it was reasonable to do so. That is not the only point. On a number of other points also to which the right hon. Member for Leeds, East referred, there is no truth in what he said.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I will quote to the right hon. Gentleman again what the Prime Minister said yesterday. Presumably the Prime Minister prepared his words in advance and the Chancellor may even have been shown them beforehand. The Prime Minister said: I told the CBI and the TUC that I was not prepared to repeal the Act taking us into the European Community, nor to repeal the Industrial Relations Act, nor to repeal the fair rents Act, but that the Government were prepared to take into account the results of that legislation. That was all that the right hon. Gentleman was prepared to say. He was merely prepared to take the results of the legislation into account. The Prime Minister claimed that many of the other matters which had been mentioned by my right hon. Friend the Leader of the Opposition were poltical and not matters which directly affect the discussions which we have been having."—[OFFICIAL REPORT, 6th November, 1972; Vol. 845, c. 630.] If the Chancellor is now denying that the Prime Minister said that, let him say so. If the Chancellor is denying that the Prime Minister meant what he said, then let him deny that,

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I will tell the right hon Gentleman something else. During the 40 hours of talks I do not recall a single occasion when a member of the TUC asked us to repeal the European Communities Act. That was a very different approach from the right hon. Gentleman's. The truth is that the right hon. Gentleman was not around the table and the discussions we had did not take place in the sort of political atmosphere he is always stirring up and engendering—and it is just as well.

The action we are taking is essential if we are to preserve our growing prosperity, and this we are determined to do. I have on many occasions voiced my own distaste for legislation to control pay and prices.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The hon. Member for Feltham (Mr. Russell Kerr) has been consistent throughout, as has a minority in the Labour Party. The Leader of the Opposition once said that a law prescribing wages was repugnant to all parties, and I myself do not believe that there is a single Member of the House who would not prefer a voluntary arrangement. But we have not been able to achieve it this time. The Labour Government reluctantly had to resort to compulsory powers and so have we, but there is a crucial difference.

When the Labour Government introduced their legislation, their assessment of the situation was that it was necessary to accompany it with massive deflationary action designed to hold back the improvement in living standards. Hon. Members who were here at the time will remember that the brakes were slammed on, output was cut and taxes were increased across the board. Beer went up by 1d, petrol by 4d. a gallon, the wines and spirits tax was increased and purchase tax went up by 10 per cent. all round. There were also cuts in public expenditure. When they did that, they even abandoned their target—and it was still only a target—of a rate of growth of 4 per cent.

Today the economic situation is very different. Taxation has been slashed, a growth rate of 5 per cent. is being achieved, and output is rising fast. The two alternatives which face the Government can be simply stated. Either once again we slam on the brakes and return to the same old dreary treadmill of stagnation, or we take the action that we have taken to safeguard our rising prosperity. In choosing the second course, we know that we are right, and the country knows that we are right.

5.9 p.m.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

One would think from the speech of the Chancellor of the Exchequer that there was nothing at all wrong with the economy, and if the discussions with the TUC were so amicable and harmonious, why did they break down? The right hon. Gentleman has made all sorts of claims. What he has not done is answer any of the specific questions put to him. He could not give us the taxation figures for which he was asked, and he made no reply to the question of whether the Government, in pursuit of this policy, are prepared to go back to Brussels and ask for major adjustments in our commitments on food prices and their effect on the economy.

I believe that what is happening now is that the economic realities of entering the EEC are beginning to assert themselves. After all the smooth talk and the predictions that we have had, the facts are now emerging. I believe the basic fact is that the Government's economic policy is incompatible with their EEC commitments. We have been told again today that the Government are aiming at economic growth, at a prices and incomes policy and at a balance of payments surplus, while Ministers go to Brussels or Paris and commit us to huge burdens on sterling, a vast rise in food prices and a fixed parity for sterling.

One has only to look at the contrast between some of the reckless promises that we had in the 1971 EEC White Paper and the hard facts today. The very prospect of joining the EEC, we were told, would produce a great leap forward in productivity and investment. In fact what the prospect has brought this year is falling industrial investment, rising food prices and the lowest level ever for the pound.

Nor is this very surprising, because the Prime Minister's promise of substantial growth is wholly inconsistent with the promise of a return to fixed exchange parities that he has given to Mr. Pompidou and which is repeated in the Queen's Speech. Similarly, the wholesale surrender to the dear food policy of Brussels and the ever more unpopular VAT are wholly incompatible with the prices and incomes policy which the Government have announced this week.

If we now read the White Paper of 1971 and the popular version of it they are revealed as another fraud on the public. Let us take industrial investment as an example. The White Paper told us: The Government are confident that membership of the Community will lead to much improved efficiency and productivity in British industry, with a higher rate of investment…". Here is the fact which the Chancellor of the Exchequer did not deny today. In the first half of this year, with the prospect of entry before us, manufacturing investment in the United Kingdom is 7 per cent. below even the dismally low level of the second half of last year. Nor is it cheering to find that one major firm, Monsanto Chemicals, is transferring a major plant from Ruabon in Wales to Brussels and the employment with it. It is likely that there will be other cases.

Next, let us look at food prices. We were told in the White Paper that the common agricultural policy would add only 2½ per cent. a year to food prices due to EEC policies. Now we find that retail food prices, partly due to the preparations for entry, have already risen 21·7 per cent. in 26 months. If we are told that this is all due to rising world food prices and has nothing to do with the EEC, what absolute folly it is to add an unnecessary rise on top of an unavoidable one.

Have Ministers yet grasped this fact in the prospect before us? The fall in the value of the pound means that the rise in food prices due to CAP must be far steeper than we were told, and that every fall in the value of the pound in future means an automatic rise in food prices here. I expect that the Chancellor of the Exchequer has grasped that, but I do not know whether all his supporters have.

The estimate that we had last week from the then Minister of Agriculture of a 2 per cent. a year rise in food prices due to joining the EEC is an underestimate because it fails to take account of the fall in the value of the pound in recent weeks and it assumes both that the levy system will continue if we do not join the EEC and that the present exceptional world shortage of grain will continue indefinitely. Neither of these assumptions is justified.

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

Is my right hon. Friend also aware that on the very same day the then Chancellor of the Duchy of Lancaster disputed the figure given by the then Minister of Agriculture? In other words, you pays your money and you takes your choice on food prices.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

Whatever the Chancellor of the Duchy of Lancaster may have said, I am disputing what the, Minister of Agriculture said.

Let us look at steel prices. Having deprived themselves of the power to control steel prices in the EEC Bill, the Government are now proposing to give themselves those powers back in the Bill that we shall be considering tomorrow.

Let us look at the VAT. Today the Chancellor of the Exchequer took great pride in having solved with remarkable ingenuity a problem that he himself created by introducing the VAT. He cannot take much pride in that. Here the Government are gratuitously raising the cost of living by imposing on the public one of the worst and most unpopular and inefficient taxes ever conceived. It is unjust, it is economically damaging, and it is extremely regressive. There is no reason for adopting it other than the Prime Minister's subservience to Mr. Pompidou in almost every issue of policy.

How can one expect an agreed incomes policy while these damaging and disruptive measures of food taxation and VAT are being forced upon us? I am a convinced, if reluctant, believer in the necessity for a prices and incomes policy, if necessary backed in the last resort by statutory legislation, provided that it is comprehensive, fair and impartially administered. Incidentally, what folly it was to abolish the National Board for Prices and Incomes. But I do not believe that the TUC would have been justified in accepting an incomes policy unless the Government had abandoned the VAT and the EEC's dear food policy completely. It is really the common agricultural policy which forced the breakdown in the Downing Street negotiations.

Realities are beginning to emerge, therefore, in our balance of trade and our balance of payments. The Government told us in the 1971 White Paper that they were confident that the effect of joining the EEC would be positive and substantial, though, characteristically, they said that they could not put it into figures.

What is happening today is that the trade balance with the EEC is bound to move against us because our labour costs will be forced upwards. The main Commonwealth countries—and we have heard nothing about this from the Government—are now announcing that next year free entry and preference for British goods will begin to disappear. Australia, one of our largest markets, is terminating the British preference on a large range of goods from 1st February, 1973, and is planning to abolish the preference on most other British exports later. New Zealand has announced the phasing out of British preferences completely over the next few years. This is happening against the wishes of most people in Australia and New Zealand and at a time when, contrary again to all that we were told, our exports to the Commonwealth Preference Area are increasing as a proportion of our total exports. At 31·8 per cent. in 1971. the percentage going to the preference area was higher than in 1969 or 1970, and in 1971 the EEC percentage fell back to only 21 per cent.

It is quite clear in these circumstances that as a result of these policies we are again moving, this time unnecessarily, towards trade and payments difficulties, if not into a deficit. The fall in the value of the pound increases still further the budget tribute that we have to pay to Brussels. Here the Prime Minister has directly misled the House about the so-called regional aid.

The budget payment that we have to make to Brussels was estimated by the Government in July, 1970, at £470 million a year. That was the then prevailing rate of sterling. The fall in the value of the pound has already taken that to near £500 million. The Prime Minister therefore was simply showing himself ignorant of these facts when he said in the House on 23rd October that £500 million was an exaggerated figure. Against this, according to all the Press reports, the figure suggested for regional aid is £20 million a year divided between nine countries. So we pay out £500 million a year and get in return perhaps £2 million, £3 million or £4 million a year—nothing is settled—to which we may, I gather, have to contribute ourselves.

To represent that as a great diplomatic triumph for the Prime Minister is to trifle with public opinion. If those figures are wrong, perhaps we shall be told this evening what the Government believe the true figures are.

No wonder, with these burdens threatening the balance of payments, the pound has fallen to its lowest level ever. Of course, the Chancellor tries to blame it on the trade unions, because that is the only argument he can think up. But bankers and exchange dealers, not just on the Continent but in the United States, Japan, and all over the world, know that these Brussels commitments will force us into a payments deficit. They know that in future every fall in the pound will force up food prices. They know that next year—incredible folly though this is—we are committed to abandoning all exchange control on flights of funds from this country into the EEC.

On top of all this, what does the Prime Minister do? Again, acting not from common sense but from his EEC obsession, he commits us to return to a fixed parity for sterling. The Chancellor, at least, a few weeks ago said that it was a "fixed but adjustable parity". Perhaps one day he will tell us what that means. But in the Queen's Speech and statements of the last few days it has become "a fixed parity for sterling as soon as circumstances permit".

To drive us into deficit by assuming immense and gratuitous burdens, to abandon exchange control and then to commit us to a fixed parity is not merely to sacrifice all real hope of sustained growth and full employment but to invite disaster. It is indeed economic madness. Yet the Prime Minister's speech and the Queen's Speech blithely tell us that all these problems will be solved by 5 per cent. growth, ignoring—no doubt sincerely—that the policies being pursued will make sustained growth impossible.

No Government since the war have pursued economic policies so contradictory and utterly at variance with common sense. We are doing all this when the other EFTA countries—Sweden, Finland. Switzerland, Austria, Portugal, and now almost certainly Norway—have achieved their aim of an industrial free trade area not merely with the rest of EFTA but with the EEC. Norway expects to have it all fixed up by April next year. If we had had the elementary wisdom of any of these countries we could thus have obtained, and still could obtain, all the advantages without the hideous burdens, the damage to the Commonwealth, and the loss of our political freedom which we discussed on the European Communities Bill, which is now a threat. On that basis, I believe we could have had a united nation. As it is, we are throwing the whole chance away and gaining nothing in return.

It is sobering to think, contrary to the glowing but entirely misleading picture the Chancellor gave us today, of the economic and social difficulties into which the Government are driving us this winter and next year. I am a believer in a fair and agreed incomes and prices policy based on low food prices and progressive taxation, and I do not like seeing a divided nation. I would support the standstill Bill if the Government would abandon VAT, the common agricultural policy, the fixed parity and the Rent Act. However, if they will not, the only advice that I can give to organised labour in this country is that there is no alternative but to fight it out.

5.24 p.m.

Photo of Mr Robin Turton Mr Robin Turton , Thirsk and Malton

I congratulate my right hon. Friend the Chancellor of the Exchequer on the announcement about the repayment of tax on stocks held that have borne purchase tax. During the debates on the Finance Bill, many of my hon. Friends and I pressed him to relieve that burden because it was thought to be an obstacle to trade through the danger of double taxation. My right hon. Friend is to be congratulated on persuading his advisers that they were wrong in the advice they had previously given to him.

I found the speech by the right hon. Member for Battersea, North (Mr. Jay) a tempting oration, because I have sympathy with his views on the inflationary consequences of joining the European Community. However, I believe that the position today is far too serious for bickering between the parties or even within a party.

We must try to get the whole problem in perspective. When I first entered the House, just after the return to the gold standard, there was such a restriction on the increase in money supply and so many goods and services in excess available that we had the consequences of widespread unemployment and poverty. There were some who suggested that this might be cured by an increase in the money supply. The Treasury described such people as "cranks". I rather feel that certainly some who have held the office of Chancellor of the Exchequer have continued to take such advice from the Treasury. Even today the Chancellor, although he was more receptive to the common sense of this argument than any of his predecessors, still retained a little of what those old Treasury advisers, who must be near, if not in, their graves, were saying 50 years ago.

During the last eight years we have been suffering from inflation brought about by an increase in our money supply far outstripping the increase in goods and services. In some respects, it is similar to what happened in Germany after the First World War. The Labour Government attempted to deal with this problem by siphoning off demand through increased taxation and a prices and incomes freeze. There were two consequences: first. a 31 per cent. increase in the cost of living index between 1964 and 1970, and, secondly, a stagnant economy.

I should like to remind the House of what Lord Cromer said on this matter in 1966, because I think it is relevant today. Speaking at the first annual dinner of the Confederation of British Industry in May, 1966, he said: Practically every country has had the intractable problem of inflation to deal with—very often encouraged, certainly made easier, by allowing the money supply to increase faster than production, to the accompaniment of excessive wage increases and excessive increase in imports. This surely is one of our basic problems—for last year"— he was talking of 1965— our money supply increased by some 7½ per cent. against an increase in the real output of about 2 per cent. We, unfortunately, have a system under which Exchequer financing can and does lead to the creation of money quasi-automatically to the extent that the requirement of the Exchequer are not met by genuine savings or taxation. I believe that those words are relevant today. By June, 1970, Lord Cromer's increase of 7½ per cent. had gone up, in the quarter to the election, to 12 per cent. and the economy was frozen and stagnant.

Today we have a rise in output of 5 per cent. per year, but we have an increase in money supply in the last quarter of this year of 22 per cent. per year. The Chancellor, when he talked about quarterly increases, was hiding the fact that he was talking of an annual increase in output and a quarterly increase in money supply. In my view we have got into a dangerous situation. There has been a cost of living increase of 17 per cent. As I understand the Chancellor's argument, and he put it in an interrogatory form, it is: "What are you advocating? Are you going to create massive unemployment by turning off the tap completely?" Of course I am not. I am arguing for a selective control of the money supply. I do not believe that one creates unemployment if one exercises proper selective control of the money supply.

Since the election in June, 1970, there has been an increase in the money supply of £9,300 million—M1 and M3—and an increase in personal liquidity of £7,500 million. Where has it gone? Between May, 1970, and August, 1972, the figures for outstanding advances to manufacturing industry increased by 36 per cent., for outstanding personal advances by 156 per cent., for advances to hire-purchase companies by 163 per cent., and for advances to property development by 200 per cent. Clearly, selective control of the money supply will deflect credit from speculation into industrial development.

I see one other problem with which we have to deal, that of interest rates. The average yield from investment in equity shares is today 3¼ per cent., but investment in debentures will bring in 10 per cent. or, on short-term deposit, 8¾ per cent., and the August inter-bank lending rate was 8 3/16 per cent. If someone invests in land or antiques, he gets a profit in a year of 60 per cent. to 100 per cent. This is a moneylenders' paradise.

Interest rates have been increased in sympathy with increases in the bank rate due to overseas pressure. I congratulate my right hon. Friend the Chancellor of the Exchequer on abolishing Bank Rate, but I urge him to take the further steps of divorcing internal lending rates from the external ones. The rate of interest to be paid to a foreign lender is an international matter, but the rates of interest that we pay to each other are a matter of social justice and can be an obstacle to industrial and social progress. In my view, a maximum of 5 per cent. internal lending rate, if no risk is involved, should be the Government's objective, as an absolute maximum. If that could be achieved, a great deal of the £35,000 million of personal liquidity would be attracted to industrial investment instead of sitting idly on deposit earning high interest rates.

I believe that the country is behind the Prime Minister in his courageous resolution to halt inflation. I believe that the people will accept the need for a 90-day standstill if it is demonstrated that it is fair to all and is carried right across the board. But this policy cannot be fair unless it is accompanied by a strict and selective control of the money supply and definite action to reduce interest rates.

The effect of dividend limitation will be to attract money away from equities into debentures, into these short-term deposits and into bank lending. Can we justify an income and prices freeze when the price of land and inflation-proof assets is going up from 60 per cent. to 100 per cent. in a year?

The disease of inflation is caused by a lack of confidence in the future purchasing power of money. No prices and incomes policy, whether voluntary or compulsory, can possibly succeed unless the nation's money supply is brought into relationship with the output of goods and services and strict control is placed on money lending.

This has always been ancient English policy. We have never in this country, until recently, been in favour of usury. There is a social justice about the Government's proposals, and I believe that the country is deeply anxious that the Government should show their determination to get, during the standstill and after, a fair system so that the speculator and the financier are not the ones who succeed but the ordinary people of this country get an increase in their standard of living and a higher output for the nation.

5.36 p.m.

Photo of Mr William Rodgers Mr William Rodgers , Stockton-on-Tees

A feeling that we often have in economic debates is that we have all been here before. It is a feeling that is overwhelmingly shared by many right hon. and hon. Members on both sides of the House today, particularly by those who were involved closely in the debates on the Prices and Incomes Bill in the summer of 1966. Certainly we are fully aware of the irony of the Prime Minister's statement yesterday and of our debate today, and no doubt of the Second Reading of the Bill tomorrow.

Some of the principal participants in the debates during that summer of 1966 have gone. They include, for example, my then right hon. Friend, now Lord George-Brown, whose policy it initially was, and also the late Iain Macleod, but we still have as members of the Government the right hon. Member for Leeds, North East (Sir K. Joseph), who shares responsibility for the policy announced yesterday, and the hon. Member for Worthing (Mr. Higgins), the Financial Secretary to the Treasury, who was here earlier this afternoon.

Those two members of the Government led for the then Opposition during the long days and nights of the 1966 Bill, and I am sure that they will appreciate a reminder of what they then said. Speaking on the Third Reading of the Bill, the right hon. Member for Leeds, North-East described it as a new instrument of tyranny. He said that it was a law more fierce against individual liberty than that in any free country", and he went on to condemn the principle of the Bill, its practicability and its timing. It was, he said an evil and unnecessary Bill."—[OFFICIAL REPORT, 10th August, 1966; Vol. 733, c. 1732–41.] I thought at that time that the right hon. Gentleman was wrong, and I believe that such a view is wrong today.

There is nothing of substance in what I said in winding-up the Second Reading of the 1966 Bill or in moving the Third Reading—although it was not wholly acceptable to all hon. Members on my side of the House then—which I should wish to withdraw, but I shall come to the course of events following 1966 in more detail in a moment.

I want to make one further reference to what was said during those debates—this time by the now Financial Secretary. He referred to the Bill as totally unacceptable and abhorrent, because it strikes at the very basis of free trade union bargaining and at the price mechanism on which we inevitably rely in the absence of rationing or direction of labour for the allocation of the resources in our economy."—[OFFICIAL REPORT, 10th August, 1966; Vol. 733, c. 1818.] That was the hon. Gentleman's view in the summer of 1966. If it is still his view he should not remain a member of a Government who are proposing to introduce the Bill that we shall see tomorrow.

I would claim—it is a bold claim to make—a degree of consistency, in that I believed that the policy was necessary at that time, and I believe in a prices and incomes policy today. Had the Labour Party won the 1970 Election I believe that we would have searched for a new formula to reinvigorate the existing policy. There is a heavy responsibility on both management and trade unions to contribute to the control of inflation—and I do not rule out compulsion, inevitably with rough justice, in extremity.

But the present Government are culpable for ostentatious—

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

Would my hon. Friend make it absolutely clear that the point of view that he is expressing is his personal point of view, accepted by certain sections of the Labour Party but rejected by the Labour Party Conference?

Photo of Mr William Rodgers Mr William Rodgers , Stockton-on-Tees

I have no intention of trying to mislead the House, on this or any other occasion, into thinking that these views are other than ones that I sincerely hold. It is open to my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) to do today what he did in those debates in the summer of 1966—to express a different point of view. I would welcome it, because the debate on a prices and incomes policy must go on. I will not argue dogmatically for any one policy that the Labour Government followed, but I believe that the principle of a policy is right and therefore that we should debate it intelligently between ourselves, even though we may have points of difference.

My hon. Friend will, I think, agree that the present Government can claim no support whatever for introducing this Bill, in view of the way in which they ostentatiously turned their backs on a prices and incomes policy after 1970 and ignored the many lessons of Labour's own period in Government. They deserve no sympathy, either, for seeking now, once again with dramatic intensity, to elevate prices and incomes policy to the centre of economic strategy. We have had two years of wasted opportunity and the Government have no right to expect either sympathy or support.

Now may I say something about the policy of the Government between 1964 and 1970? I think that there is room for argument about whether the emphasis was always right. Certainly there is room for argument about whether the timing was right. Despite that, it seems to me that the policy upon which we embarked in the autumn of 1964 was fundamentally the right policy. It arose, of course, from the tripartite discussions which we had at that time, involving the TUC and the CBI, which led to what was known as the Declaration of Intent and the setting up of the Prices and Incomes Board.

In fact, the first stage of the policy was from October, 1964, to July, 1966. The second stage included the year—from the summer of 1966—of freeze and severe restraint, and the period up to devaluation. The third stage was the three remaining years of the Government.

The achievement, and perhaps even the purpose, of the first stage was to make widely understood the relationship of incomes to prices and the relevance of both to Britain's overall economic situation, including unemployment at home and competitiveness abroad. I certainly played my part at that time, with many other right hon. and hon. Gentlemen, in seeking to persuade many people that the prosperity to which they aspired and the jobs which they rightly demanded depended, in part at least, upon having an effective prices and incomes policy.

In addition, in this period, as I have said, we established the Prices and Incomes Board, which became an institution widely, if sometimes grudgingly, accepted. The Prime Minister's bald reference yesterday to the board having been "anathema" to much of the TUC shows how far his understanding of realities falls short. It is difficult to measure exactly what success the policy had in those early years, but if it resulted only in a 1 per cent. smaller growth of incomes, which seems possible, it meant £100 million on the balance of payments.

The conclusion from this period of experience is threefold—first, the difficulty of carrying conviction and the unreasonableness of expecting results unless real impact were made on prices, second, the struggle involved in helping the lower-paid workers and, third, the necessity for Government intervention to prevent what one can only call the conspiracy whereby management agreed to raise the wages bill and pass on the consequences to the consumer while complaining in public about trade union pressures, or pretending that it could all be absorbed through productivity.

I remember the strenous battle which Ministers had—particularly Ministers in the Department of Economic Affairs—to persuade others to recognise the importance of prices. It is fair to say, with no disrespect to other Ministers then involved, that the Board of Trade found is exceedingly difficult to abandon its traditional attitudes and to operate on prices as an essential part of the package. It was philosophically hostile to the whole idea that one could operate on prices without unacceptable distortions.

It is equally fair to say that when it was part of the policy to do what we could to help the lower-paid workers there were times when it became clear that some trade union leaders still wished to widen differentials or were militantly opposed to a policy which might threaten the status of unusually well-paid managerial or technical staff. There was a fight to seek to make the policy understood and fully recognised among those who, quite naturally, were initially hostile to it.

In the second stage, of freeze and severe restraint, there was clear success for the time being. In the year July, 1966, to June, 1967, wage rates rose only 2·8 per cent., earnings by less, and retail prices by 2·5 per cent. But the point, which is relevant to the situation we face now, is that the freeze and severe restraint, whether or not one agreed with them, followed a period of close and continuous consultation among Government, management and unions, and was the response to a critical balance of payments situation.

The outcome, a large measure of success, was due to the fact that it was based on a degree of consent, or at least of acquiescence; but the situation was very different from the situation that we have today.

The third stage of the policy was really a series of stages, during which the policy achieved a degree of success, while certainly falling short of the often stringent targets that we set for it. In the period January, 1969, to September, 1969—which was a sticky one, for a number of reasons—wage rates rose at an annual rate of 4·3 per cent., earnings by 6·6 per cent. and prices by 5·1 per cent. Compare that—I am choosing not a period which strengthens my argument but a fair example—with the first half of this year, when wage rates rose by an annual rate of 8·8 per cent., earnings by 14·1 per cent. and prices by 6·6 per cent.

But important conclusions also emerged from this third stage. Once freeze and severe restraint were over, there was an acute problem in dealing with the pent-up flood of claims and price increases. In fact, until very recently, that was the argument of the Government, as hon. Members on this side of the House have pointed out. Their case against the freeze was the problem which followed it. Frankly, that was a problem which the Labour Government faced and one which they failed to solve. Certainly, with devaluation shortly afterwards, we found that it was exceedingly difficult to maintain the policy, with patience and goodwill largely exhausted.

Finally, and critically—again, this is relevant to our present situation—the whole episode of "In Place of Strife" destroyed the patience of the unions and sapped the determination of the Government.

To work, the policy required a large measure of trust and compromise. To say simply that the Government must govern is meaningless in a free society. The law, or the threat of the law, is no substitute for understanding and cooperation.

This account of the Labour Government's experience can be embellished or amended. It is clearly not wholly acceptable to some of my hon. Friends. I am sure that it is not wholly acceptable to some right hon. and hon. Members on the Government side of the House.

Photo of Mr Stan Orme Mr Stan Orme , Salford West

For very different reasons.

Photo of Mr William Rodgers Mr William Rodgers , Stockton-on-Tees

For very different reasons. A policy which was initially well conceived foundered mainly through the failure to devalue in either October, 1964, or the summer of 1966. To place the policy central to our economic strategy was an error. Then, at the very time when it would otherwise have been reasonable to require, request and expect support from the trade unions, they very reasonably said, "We have had enough". Further, the upset of "In Place of Strife", over which I shall not express further views now, undermined the essential co-operation between the Government of the day and the trade unions, which was then and is now a part of any pattern of success.

I draw the following broad conclusions from the experience as a whole. First, a prices and incomes policy requires steady development with a high degree of continuity. It ought not to be simply a dramatic policy for emergencies. If it is, it will not work.

Secondly, to elevate it to the status of central economic strategy is to demand more from it and from those upon whom its impact mainly falls than it or they can reasonably give. Thirdly, there is no chance of acceptance, because no one will believe in it unless the policy makes a clear impact on prices and charges of all sorts. This requires going further in the direction of controls than logic or practicalities, or what is normally called economic common sense, may otherwise recommend.

Fourthly, Government Departments are wholly ill-equipped to monitor the policy. In 1966–67 some Departments, including the Ministry of Agriculture, seemed to be more amenable to operating the policy than, for example, the Board of Trade. It remains the case that the structure and management of any Government Department, and its position within Government, make it quite unsuitable either to monitor the policy or to be an arbiter of it. There has to be an outside institution. It is a matter of deep regret that, with all its imperfections, the PIB was not given another lease of life to seek to develop a logical prices and incomes policy of this kind. Had the Government been prepared to pursue this policy after 1970 they would not have been faced today with a policy that is so unacceptable to so many people.

Fifthly, there is a limit to the degree to which the TUC and the CBI can be pushed. While neither can be ultimately expected to accept responsibility which is properly the Government's, the closest continuing co-operation over all matters of common concern is essential if business is to be done today, tomorrow and the day after.

I am convinced of the necessity for a prices and incomes policy, though I cannot claim—I believe that no one can claim—to have found a wholly satisfactory way to put it into operation. In that sense I hope that for the sake of the nation any reasonable measures designed to reduce inflation now succeed. Beyond that, however, the Government have forfeited any right to assistance from the Opposition.

I started by referring to debates in the summer of 1966—six year ago. Those of us who were then involved will remember the ridicule and abuse from hon. Members now on the Government side. The then Opposition, led by the right hon. Member for Bexley (Mr. Heath), voted against the Second Reading and Third Reading of our Prices and Incomes Bill, and voted against it on 50 other occasions. It is nonsense to expect any of us to help the present Government now with an emergency policy, isolated between the clumsy disdain of 21 years of indifference and the obscurity of their future plans. Let us try to save the nation—but saving the Government cannot be any part of that package.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

On a point of order, Mr. Speaker. Given that there are, I think, 13 Ministers attached to the Treasury, the Department of Employment and the Department of Trade and Industry, is it not right that one of them should be present in the Chamber?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

That is not a matter for me.

5.55 p.m.

Photo of Peter Tapsell Peter Tapsell , Horncastle

The hon. Member for Stockton-on-Tees (Mr. William Rodgers) speaks with special authority on these matters With the respect that I have always had for the hon. Member, I was very interested, although not surprised, to note that he, at least, in Opposition, is still saying, on prices and incomes as on Europe, what he and his then colleagues used to say when they were in Government.

Photo of Mr John Biffen Mr John Biffen , Oswestry

But not with his feet.

Photo of Peter Tapsell Peter Tapsell , Horncastle

No, not with his feet. But all of us who have been in the House for some time—I am no exception to this—have found that what we say and how we vote do not invariably coincide.

Four main criticisms have been made of the decision to use statutory controls to combat the inflationary crisis which threatens us, to which the Gracious Speech refers. First, there is the criticism of timing, that it should have been done earlier. Second, there is the criticism of theology, that it is contrary to Conservative principles. Third, there is the criticism of history, that it has always failed before and must, therefore, always fail again. Fourth, there is the criticism of the constructive alternative, that there is a better way of achieving the same result. I want briefly to comment on these criticisms.

I come first to the timing. I suppose that outside what one might call the ranks of professional controversialists there is now widespread national agreement that it would have been better if we had frozen a year or more ago—better, because sterling was then strong; better, because industrial relations had not then been embittered by the miners' strike; better, because this year's massive rise in the money supply had not then occurred; and better, above all, because the repute of our parliamentary system requires that Governments should be seen to impose their will on events rather than to respond with courage to disaster. But this is no time for nostalgia. In politics we have to deal with situations as they are and not as we might have willed them to be.

Fully to savour the charms of back bench life, it is helpful to acquire a certain fatalism. Ministers are there to pick up their predecessor's pieces. Private Members can only point to where the pieces are lying and occasionally draw attention to the proximity of the still surviving china.

The second criticism, that controls are contrary to Tory principles, is perhaps more suitable for discussion in a party forum than in the House. But as I have the great pleasure of sitting next to my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), perhaps I may say that in the house of a great political party there are many mansions. The Tory Party I joined was the party of Wilberforce and Shaftesbury, of Disraeli and Macmillan, none of whom hesitated to use the statutory powers of Parliament to protect the weak and safeguard society from danger. To me, the one overriding and abiding Tory principle is the protection of the national interest. All other considerations must be subject to that, whether the current economic fashion happens to be favouring mercantilism or laissez-faire. So I believe that the Prime Minister has this week proved himself, in the best tradition of his Tory predecessors, as a truly national leader. I believe that this is appreciated by the great majority of people of this country, including a majority of trade unionists.

Third, I turn to the criticism that controls have always failed in the past and must therefore fail again. It was fashionable at one time to say that all past freezes have failed, that they dam the flood only for a short time and that when it bursts the situation is worse than before. I always felt that this was an over-statement of a half truth. One must look at cause and effect. There have been three freezes, each of which achieved considerable initial success. None of them, in my view, was responsible in itself for the inflationary flood which followed.

The Stafford Cripps freeze of 1948–50 achieved a remarkable impact. The inflation which followed was largely due to the sharp movement of the terms of trade against us, and against all industrial countries, caused by the Korean War after, interestingly enough, the present Leader of the Opposition had made his famous bonfire of controls. The last Conservative freeze or wage pause in 1961–62 avoided a devaluation and halved the rate of inflation. The inflation which followed it was due to the deliberate reversal of economic policy heralded by the "night of the long knives" and the decision to expand production at all costs, irrespective of the balance of payments. The George Brown freeze of 1966—here I follow the ground trodden by the hon. Member for Stockton-on-Tees—virtually stabilised retail prices for a year. The subsequent wages explosion, which is still the root cause of our problems today, did not happen until the latter part of 1969, when the then Prime Minister deliberately took off the brakes on wages in a vain effort to win the 1970 General Election.

In my view, the case against any freeze is essentially libertarian rather than economic. If this freeze and the policies which follow it appear eventually to fail, I am prepared to hazard the forecast that it will be due to an ultimate failure of political nerve rather than to any error in today's economic judgment. Too often this is the price the country pays—with increasing reluctance, let us note—for our present political system of intensely divisive partisanship.

A freeze at this time is a freeze in circumstances unlike any previous freeze. In this country, freezes have always in the past been introduced to check excessive demand. Today we are suffering from the opposite problem. We need to stimulate demand and investment. Thus, a prices freeze in today's situation of under-employed resources and high unemployment is calculated to stimulate demand, to stimulate investment, to stimulate employment and to stimulate productivity, as did the freeze introduced last year by President Nixon in America in very similar circumstances.

The fourth criticism is that there is a better way to deal with inflation, by a stringent use of the money supply alone. The rate of increase of the money supply is an extremely important factor in influencing the state of the economy and the rate of inflation. I was at one with those of my hon. Friends who, in the early months of this year, were extremely concerned about the fast rate at which the money supply was being allowed to rise, just as in the autumn of 1970 I expressed concern about the effect on future employment levels of the tight money policy then being pursued.

Therefore, I am far from dissociating myself from the monetarists. I argue that, just as physical controls need the support of monetary policy, if they are to succeed are interdependent—so monetary policy needs the support of physical controls if it is to be practicable.

A really drastic tightening of the money supply would—I agree with my right hon. Friend the Chancellor on this—if pursued with sufficient ruthlessness, certainly bring prices and wage rises to a halt. But it would be at a terrible and, in my view, unacceptable social and economic cost in terms of bankruptcies, unemployment, postponed investment, and loss of production. Inflation is bringing into question the very fabric of our society, our law and our constitution. But I believe that a Draconian tightening of the money supply would have the same effect. It would have to be Draconian at this stage if it were unbacked by other methods of control.

I conclude by reiterating my support for the new policies on which the Government have embarked. I do not like controls, but I dislike injustice more. The likely rate of inflation which would have engulfed this country in 1973 if there had not been this fundamental sea change of policy would have caused injustice to millions of our people on an intolerable scale. The freeze can only be a temporary expedient. But it gains time for the country to put its economic affairs into a new form of order. Much will depend on the use made of the time gained.

But in the end the material measures will probably stand or fall—as most great issues in politics do—on a moral judgment: whether or not Ministers are seen to be genuinely and even passionately determined to build a fair society.

6.7 p.m.

Photo of Mr Norman Atkinson Mr Norman Atkinson , Tottenham

It is difficult to follow people's arguments when they attempt to project them according to the degree of freeze or the kind of freeze. We have at present a sort of rent-a-freeze, or dial-a-freeze arrangement, depending on the degree of heat or coldness with which it is applied. The hon. Member for Horn-castle (Mr. Tapsell) referred to a hot freeze. He intimated that it was all right if it was in an inflationary period, and that it was different from a cold period, and that therefore there is a difference, economically, between a hot and a cold freeze. Presumably that is the sort of argument that we shall hear developed in the debate today and tomorrow. Tomorrow's Bill will be a hot Bill, and it will he projected in that way, as totally different from anything that has gone before.

First, we should put the record right concerning Socialists and the question of money supply. I know of no Socialist who is an advocate of an overall reduction in money supply. I have not heard that argument advanced by anyone in the Socialist movement, unless it is to talk about the conditional reduction of control of available money and money stock generally.

We as Socialists have said clearly that we welcome the shift over the last four years from share capital to loan capital. The massive extension of loan capital could have come about only because there was adequate money supply. Therefore, that is one change in the whole capitalist structure that we welcome. It is also by way of an explanation of what is in fact a diminishing share of the economy going to profit—it is because much investment today is a result of fixed-interest loan capital rather than the massive extension of share capital that we saw prior to 1965.

We advocate strict control of the use of money for speculative purposes. It should not be easy for any speculator to claim money or credit to speculate, particularly for speculation in property and land development. We have said that the money supply should be used and controlled mainly for manufacturing and the development of the Welfare State. In this situation there should be no restriction upon credit and the use of our resources for extending our welfare provision and our manufacturing industry.

Labour Party policy, as defined by our last annual conference, is strictly to control essential prices. We also believe that there should be overall price restraint throughout the economy. We believe in the distortion of the prices of services given by the public sector. We recognise that price restraint, in itself, must inhibit wage negotiation, for wage negotiation can no longer be free if there are price ceilings. But it is wrong to say that it is irresponsible to argue such a case, because we are arguing for restraint and negotiation within a framework of directly-controlled prices.

If to that we couple wage negotiation, which must go on affecting some 64 million workers in the public sector, we are saying that there should no longer be a free-for-all. We are not arguing for complete freedom in negotiation we are arguing for a recognition of certain social needs and social priorities, and therefore the kind of redistribution within the economy that we have urged. This can be done only by imposing price restraint upon the private sector and negotiating wages quite freely against those price ceilings, at the same time coming to a clear understanding about what sort of wages should be negotiated in the public sector.

We also recognise that it may often by necessary to impose price restraints on the services provided by public enterprise, and in that situation the Government would be responsible for the provision of subsidies to make up the difference between a high-wage policy in the public sector, of which we are advocates, and a restrained price level for the services in that part of the economy. We argue an overall case in order to bring about the kind of balanced economic development of which we we have already spoken. We think that that is the responsible policy and one which we advocate with enthusiasm, knowing as we do that it would lead to a better balance within the economy and a greater share to those we represent.

Before discussing the talks in Downing Street, I think it necessary to spell out one or two hard statistical facts of the last couple of years. The Prime Minister and the Chancellor of the Exchequer have already referred to the price rises in the retail trade since August, 1970. From August, 1970, to 1971 there was a retail price increase of about 10¼ per cent. followed in 1971–72 by a rise of 6½ per cent., making 17 per cent. in all. Figures given from a number of Government sources show that the total wages derived from employment over the same period have risen by not more than 19 per cent. If the Treasury spokesman wishes to contradict that, he should now do so.

We are talking about a difference of 2 per cent. in the life of the Government—that is, the difference between prices and the total amount derived from employment over the same period—19 per cent. for wages, and 17 per cent. for prices. Again I give the opportunity to the Treasury spokesman to contradict that figure and to stop misleading the nation with fallacious ideas of inflated wage bargaining. It is not true, and the Treasury knows it. We are talking about a difference of that kind. Again, quoting from the October issue of Economic Trends, there is an increase in gross trading profits of private trading companies of no less than 22 per cent. over the same period. Figures from Government publications show that starting from the quarter following the election up to the second quarter of 1972, income from rent and self employment has risen 19 per cent.

The story told by some of these figures is very different from that which Members opposite attempt to project in justification of their pursuit of some unfair policy. We have to expose what is happening instead of allowing this statistical manipulation. One could say much about the reality of the present situation in answer to the accusation that wage negotiators have behaved irresponsibly and that the trade unions have taken more from the economy than that to which they are entitled. However, the Government's argument is shattered by the statistics, and the Government know that.

They know that trade unionists are not responsible for the present state of the economy and that conclusions such as those reached by the Chancellor of the Exchequer, particularly in speeches prior to last week, are eroneous. When those figures are used the Downing Street case appears very different from that presented by the Press and the Government.

The TUC never asked to go to Downing Street. It was not making any request of the Government; it was clearly the other way about. The 26th September package was something the Government wanted the TUC to accept. How the situation arose is only too clearly understood. In the Chancellor's own words in his speeches prior to last week, there is disappointment among members of the Cabinet that massive unemployment has not solved the Government's problems for them. Wages have not been restrained. It was thought that 800,000 unemployed would mean that the economy could be managed. That policy has failed. Unemployment has not cured inflation even though it has been the greatest unemployment figure ever, coupled with the steepest inflation, of post-war years. That is the situation the Government have come to recognise. Nor has the introduction of the Industrial Relations Act contributed to a solution of these difficulties.

What surprised the Government most was that in the beginning they were misled by the CBI, the very people who were talking in Downing Street. At first the CBI advised the Government that it was possible to solve the wage problem by introducing industrial relations legislation. But the Government were misled because not one major employer was prepared to use that legislation. It is now widely recognised that no major employer is prepared to go to court using that legislation.

Therefore, it is necessary to think of other legislation. We now have the compulsory control of wages and prices. It is the beginning of a long process. If it is not likely to end after 90 days it is not likely to end in six months. It is now an integral part of the Government's thinking about managing the economy. It is the first stage of a different kind of management technique.

We should therefore recognise why the policy has changed and why the Industrial Relations Act has failed to have any effective influence upon wage bargaining. We may then get some understanding of what is likely to happen.

The T.U.C. was not invited to take part in the talks; it was invited to discuss the original Government package offer of a £2 flat rate and an effort to keep prices within a ceiling of some 5 per cent. That is what the talks were about. There are great dangers if the talks become negotiations. They have so far remained talks, but if there is any suggestion that they become negotiations, the majority of Opposition Members will be in total opposition to such political negotiations—

Photo of Mr Norman Atkinson Mr Norman Atkinson , Tottenham

—particularly because of our special power in the political pull and because of our party construction and the relationships between the trade unions and the Labour Party. We are more or less the same people. The Labour Party was created by the trade unions as its political wing. More or less the same people decide policies once a year at our annual conference. It is now the aim of every Opposition Member to achieve unanimity between the T.U.C. and the annual conference of the Labour Party. If there are to be negotiations at Downing Street along these lines, and if the conclusions must be endorsed by the TUC, with unity between the industrial and political wings, those negotiations will be the forerunner of acceptance by an annual conference of the Labour Party. If it is our purpose to ensure that a future Labour Government carry out policies decided by both the TUC and the Labour Party, one appreciates the political weakness of such a system.

Therefore, we are suspicious when the so-called talks at Downing Street are suggested as a means of future negotiation. The Prime Minister must be careful that he is not leading the country into a situa- tion in which negotiations in Downing Street are encouraged by what, in employers' terms, are non-representative bodies. We are in a changing situation. The structure of capitalism has changed so much that the CBI can no longer represent the employers' point of view. The whole process of mergers, enlargement of companies, the introduction of multinationals and so on, means that the CBI is a diminishing representation. Therefore, it is a small group of men, without a representational base, meeting the Government and the trade unions in what could become a political negotiation. That has tremendous political implications.

We welcome talks in Downing Street about wage restraint and economic problems, but every trade unionist must be wary about the idea that the unions are in a position to negotiate political bargains. We make that distinction in the hope that people will realise the seriousness of what could develop from the discussions in Downing Street.

We have reached a new phase of economic management. I hope that the Labour movement and particularly the trade unions will not be inhibited by accusations. Those accusations are baseless, as the figures prove. Trade unions should hold their heads high and feel confident, in future wage negotiations, that they have a long way to go before they take their fair share from the economy.

6.28 p.m.

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

The speech of the hon. Member for Tottenham (Mr. Atkinson)—he will be the first to accept this as a compliment—was a thoroughly Socialist speech. He reminded the House that since prices are one of the great levers of the economy it is an essential part of logical and consistent Socialism to control them.

The hon. Gentleman spoke at one stage of a prices and incomes policy as a means of achieving real economic changes and shifts. But it is not for that purpose, nor in that sense, that four times in the last quarter of a century Governments of both parties have adopted a prices and incomes policy, at first voluntary, then less voluntary, and in two cases statutory. I say "statutory" rather than "compulsory" because there are senses in which a voluntary policy can be just as compulsory, though lawlessly and wantonly compulsory, as a statutory policy.

Those four policies were all adopted for the same purpose—the endeavour to stem inflation; and they all arose from a simple analysis, indeed a simplistic analysis, of the cause of inflation. They were all based upon the assumption that inflation occurs—that is, that prices in general rise—because people raise their prices and because people raise their wages; because trade unions demand, and employers concede, excessive increases in wages. That is the assumption which lies behind this present prices and incomes policy—the Bill and whatever is to follow—and the similar policies which have preceded to.

Of course, if it were true—if that assumption were well founded—these policies would flow from it logically. But then we should all long ago have lived happily ever after. If prices in general rise because people put up individual prices, one need only tell them to stop it, and if, when they are told to stop it they refuse, then force them to stop it. If the assumption were well founded, so far from a counter-inflationary Bill under that or any other name, being a rara avis—a rarity and an exception—it would be just as natural and normal as laws against burglary or murder; for if this general evil were caused by individuals or groups deliberately doing what they have it in their power to refrain from doing—namely, increasing a price or a wage unduly—it would be a natural maxim of state to prevent them. The law of prices and incomes would be a normal part of the system of law.

However, the assumption is not merely a simplistic assumption; it is a ludicrous one, which cannot be matched with reality or with experience. The desire of people to get the maximum price for the goods or services which they have to offer, the desire of workers, individually or in combination, to negotiate the maximum wage and remuneration that they can obtain from their employers, is not something new, something which has been escalating at a breathtaking rate. It is part of human nature—a constant, if ever there was a constant. The monopoly power of the trade unions, of which we hear so much—and there are senses in which there is a quasi-monopoly power in some trade unions and in some circumstances—is not new. It would be a bold man who would argue that the monopoly power of the trade unions has increased—I do not refer back 50 or 100 years, although I think I could do so—in the last five or 10 years in the ratio in which inflation has increased during the same period. Whatever may be the monopoly power of the unions, whatever the natural greed and folly of individuals, these are constants, and cannot explain the phenomenon that confronts us, which is not a constant, which not merely fluctuates but in recent experience increases alarmingly.

If we are to explain that, we must find something which is not a constant, something which also changes, both rapidly and on a great scale. There is no secret about what that is. In order for all prices to rise—in other words, in order for the value of money to fall—it is necessary, it is elementary, that the supply of money, whatever precisely is meant by that, or whatever precise measurement is applied to it, should be increasing relative to the supply of goods and services; and since the supply of goods and services, however unsatisfactory we might find its growth, is certainly not diminishing, we are clearly confronted with the effective consequences of a growth in the money supply. Indeed, in a modern economy, long-term inflation—that which we have experienced in the past and of which we are experiencing an acute phase at the moment—can be explained or accounted for only in terms of the rate of increase of the money supply.

There was a time not so long ago when that proposition, which the House has accepted at any rate without violent tumult, was regarded as a way-out, esoteric theory. I have even heard it treated as if it were a personal possession or patent of my own. That time has passed. There was a remarkable passage—not the first of such passages, but the most remarkable of them—in the speech of my right hon. Friend the Chancellor of the Exchequer this afternoon. A major assertion of the importance of money supply also came today from my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton). But I think that the most significant recent assertion of money supply as the con- dition sine qua non of inflation was made last week at Luxembourg by the Finance Ministers of the Six.

They were addressing themselves to "measures to tackle the problem of inflation." The House might care to recollect that there was nothing about prices and incomes policy, statutory or voluntary, in the conclusions they arrived at. They agreed on three points. They agreed first on a target: they would aim provisionally at 4 per cent. inflation only. Then they said how this was to be achieved. They decided that increases in the supply of money should be cut back by the end of 1974 to the same level as the real growth in gross national product after allowance, of course, for whatever degree of inflation, in consistency with their target, they were prepared to admit.

They therefore agreed to identify the congruence of the rate of increase of the money supply with the rate of increase of the real gross national product as the prescription for stable money values. The Finance Ministers of the Six said, in effect, "If you want to diminish inflation or eliminate it, you have to bring back the rate of growth of the money supply towards, and eventually to coincide with, the rate of real growth of the national product."

They then went on to put their finger upon the cause of undue increase in the supply of money. They agreed—we were not among the Six for this purpose—that increases in budgetary spending should not exceed growth in the gross national product. In other words, they agreed that the cause of excessive increase in the money supply is excessive reliance by Governments on inflationary financing of their expenditure.

There they stated, in classic form—I am not above going for wisdom to anywhere I can find it, even to Luxembourg—the proposition that in a modern economy long-term continuing inflation is the result of excessive increases in the money supply produced by inflationary financing of Government expenditure. That is the proposition, that is the interpretation of the nature of our common enemy, inflation—I shall deal with the qualifications in a moment, for I listened to my right hon. Friend's speech with great attention—to which Governments and others are coming more and more, not only in this country but throughout the world.

At this point, however, the spectre of unemployment raises its head. A challenge was issued to me this morning in a leading article in The Times:We can see no evidence that inflation can be controlled simply through the money supply without abandoning full employment as an objective. Nor is Mr. Powell prepared to state the price in unemployment he would have to accept. Once again, it will be noted, money supply and Enoch Powell are treated as almost interchangeable expressions. To that challenge, issued to me and to the increasing throng who also believe that unless money supply is controlled inflation cannot be controlled, I shall respond in their name. The connection between the control of inflation and unemployment is that if a substantial level of inflation is in operation and that level is reduced, then to that extent it is inevitable that transitionally unemployment should result. I say again: it is inevitable that controlling inflation, in the sense of reducing or eliminating it, causes transitional unemployment—

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

I do not really believe that connection is open to dispute. The conclusions hon. Members may draw from it may be different, but I do not think that the connection itself can be disputed. It arises from the disappointment of the expectations which are maintained during a period of inflation.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

The right hon. Gentleman must realise that he is speaking about additional transitional unemployment, as he calls it, against a background of 800,000 people who are already unemployed. That is the point he has to answer.

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

I well realise what the hon. Member interjects; but may I for a moment, with his permission, identify the mechanical connection between the control, reduction or elimination of a going inflation and the occurrence of transitional unemployment? During any period of inflation expectations, calculations, plans are bound to be based upon an extrapolation of that degree of inflation. After all, we all extrapolate—we have to form notions of what is to come from what has just gone. Then, if inflation in fact tails off or is eliminated, a certain proportion of those expectations are defeated, in some cases disastrously; and until resources have rearranged themselves and expectations have re-formed themselves upon the basis either of reduced inflation or of stable money values, there will be transitional unemployment of resources, including labour.

Anyone who purports to reduce or end inflation without causing transitional unemployment is either deceiving himself or deceiving others; and those who object to a method which undeniably holds the key to inflation that it would cause unemployment—

Photo of Mr John Mendelson Mr John Mendelson , Penistone

Additional unemployment.

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

—additional unemployment—are really saying, though they do not dare to do so openly, that they would rather inflation continued than that additional, transitional unemployment should be incurred; for if inflation is slowed down or eliminated by whatever means—by prayer, by magic, by prices and incomes policy, or by control of the money supply—that is the result which will follow.

It is tragic that today we should be denied the opportunity openly to debate and that the nation should be denied the opportunity openly to decide where its true priorities lie. My right hon. Friend the Chancellor of the Exchequer referred, in connection with the decisions at Luxembourg which I have just quoted, to the special allowance which was made for Britain and Italy—that is the company we keep—in that the other countries would get ahead with stopping their inflation faster than we would be expected to do. That was because in Luxembourg the Finance Ministers accepted what I have been saying to the House—that the rate at which inflation is reduced has something very significant to do with the incidence of unemployment.

But it is the rate at which inflation is reduced and the fact of its being reduced which is the relevant connection with unemployment. It is mere falsification to pretend that it can be reduced by one means with no effect upon employment, whereas if it is reduced by another means—given the same rate and given the same publicity—employment will be affected. We are engaged in deceiving ourselves if we imagine that prices and incomes policy or anything else will slow down and eliminate inflation without consequences for unemployment. It is spoof if a freeze, a statutory policy, a counter-inflationary Bill is presented as though it could bridge that gap and resolve that contradiction.

There is worse still in the course on which we are about to embark tomorrow—as the hon. Member for Tottenham said, "The first stage, I suspect, of several stages"—a course of legislation based upon false analysis of the causes of inflation, legislation which therefore is strictly irrelevant to the purpose to which it purports to be directed. It is not on that account merely futile. It will not be merely a waste of time, effort spent for nothing; it will have worse consequences than that, and the worst of the consequences will be to create friction and to intensify conflicts where none need be raised or need exist.

If the analysis behind this legislation tells one group of citizens that the evils from which they suffer are due to the behaviour of another group of citizens, and if they are encouraged to believe that by bringing duress to bear upon their fellow citizens they can be liberated from those consequences, then we bring into relations—and not merely industrial relations but political relations in this country—a conflict which need not be there—a conflict which is based upon bogus assumptions but which will have practical results.

The importance of the true cause of inflation, as it is now well enough known and widely enough recognised, being acknowledged by the Government, is this—that only when the true causes of inflation are recognised can all elements in society and the economy co-operate genuinely by each performing its own function. It is only when the Government perform their function, of controlling what they alone have the power to control—the supply of money—that the employer, the manufacturer, the entrepreneur can do their work in society and in the economy, and that the trade unions, in the freedom that they ought to have, can bargain on behalf of their members to obtain the largest share available in the market as a reward for their contribution. So far from being a doctrine of academic or mechanical interest, recognition of the true monetary cause of inflation is the essential key to restoring a much greater degree of national unity than exists at the moment and to achieving, if not peace, at any rate tolerance, between the elements of society.

6.50 p.m.

Photo of Mr Patrick Duffy Mr Patrick Duffy , Sheffield, Attercliffe

In his speech today the Chancellor of the Exchequer clearly attached the greatest possible importance to the expected upturn in the economy for the success of the freeze. He seized the growth target that he projected to the House, as well as the expected rise in productivity, as providing fruitful conditions for the success of the freeze. At this point it is difficult to resist the thought that the Chancellor and the Prime Minister see as their model the package of a year ago of President Nixon in the American economy, and we all know of the success that has attended that policy.

Neither the Chancellor nor the Prime Minister, however, has dwelt on one ingredient of that package that some would argue was a vital ingredient, namely, not merely the level of unemployment but the consequential rise in unemployment. This, presumably, is what the right hon. Member for Wolverhampton, South-West (Mr. Powell) has in mind, among other things. It is an argument very difficult to meet. I see it on this occasion as an issue between him and the Chancellor as well as the Prime Minister. They have responsibility for meeting it, and neither has even openly considered it as yet. It must be clear to the right hon. Gentleman that his argument had an effect on hon. Members on this side of the House. I should be surprised if it did not have a profound effect upon his own Front Bench.

The Chancellor, in the closing passage of his speech, claimed that no one tried harder than the Prime Minister during the 40 hours of tripartite talks. I do not doubt that. After all, who had more at stake than the Prime Minister? Indeed, who had the greatest responsibility for the outcome? Who had greater responsibility for the climate in which those talks took place, and for the lack of response on the part of the trade unions?

It was the pursuit of divisive policies by the Prime Minister during his first two years in office which destroyed the climate in which the tripartite talks might have succeeded. He made consensus politics impossible just when he was dependent on them.

It must be clear even to those of us who inevitably are Prime Minister watchers that he is a changed man. He is more co-operative—I say that in the kindliest sense—and less abrasive, and this is reflected in his policy attitude. But it is now too late, and he paying a big price. Even now I am not sure that he appreciates the changed nature of trade unionism, unlike his right hon. Friend the Member for Barnet (Mr. Maudling) in that most interesting memorandum in The Times on 12th September, which has been available for more than a year.

We know that the trade unionist of today—certainly the young trade unionist—is not the trade unionist of 10 years ago, still less of his father's generation. A sea change has taken place, not merely in the temper of trade unionists; but I suppose the Government are aware of that, though they prefer to represent it in anarchic terms. It is not confined; it extends to a change of nature and therefore of expectation and consciousness of power, and, as the right hon. Member for Barnet acknowledged, of education. They could not have reacted differently to the recent talks. Why should young men now in the trade union movement agree to moderate their wage claims unless in the first place they are given cast-iron guarantees that prices will be stabilised?

For a man earning the average wage of £30 per week a £2 increase, after allowing for income at 30 per cent., will actually reduce his living standards if prices rise by 5 per cent., and if the increase is £3 his living standards will rise by only 2 per cent. or 3 per cent. Lest hon. Gentlemen opposite should say that the figures that I am quoting are unreal, let me tell them that they are the wage levels in my area of Yorkshire. The latest statistics from the Department of Employment Gazette for October, published yesterday, will not surprise any of my hon. Friends representing the Yorkshire and Humberside region. We agitated for the first debate on the regions that took place on 19th June because, although superficially Yorkshire has been doing well, we knew that things were not all that they should be and that we were falling behind other regions.

We told the House in June what the Gazette now confirms: engineering workers in Yorkshire and Humberside are paid the lowest average weekly earnings in the country. Average weekly earnings for time workers, including overtime pay are: skilled, £31·66; semiskilled £27·82; and labourers, £25·10. For those on the payment-by-results scheme they are £33·48 for skilled; £31·52 for semi-skilled; and £24·60 for labourers.

The Department of Employment divides the country into 10 regions. They show higher earnings for engineering workers elsewhere than in Yorkshire and Humberside. I could put forward figures below those earned by engineering workers. I cited the case of a worker earning £30, showing how, if he were to accept the Prime Minister's package, he would suffer a cut in living standards. Why should workers accept such a cut? Why should a man agree to settle for this when tens of thousands of people no better than he, and who work no harder, can live in comfort off inherited wealth—dividends, capital gains, and higher fees and salaries which the accident of birth has made available to them? Why should Sheffield and South Yorkshire workers, given Government figures, behave differently? Why should they agree to settle for a sum that would mean a cut in living standards?

The right hon. Member for Wolverhampton, South-West said that he recognised that every man should be free to use his talents as best he may to improve his own position. Presumably the right hon. Gentleman acknowledges the right of trade unionists to do just that. He said so. Why should some of his parliamentary colleagues appear to be shocked, and why should some of them go further, and breathe fire and brimstone, because trade unionists have behaved as they have during the last week? It would have been asking too much for them to have done otherwise. That does not mean that hon. Members on this side of the House do not believe that the recognition of the wealth of the individual and acknowledgement of his appropriate reward—and, consequentially, the distribution of income on a rational and just basis—represents the biggest challenge of our times. I also believe that none are better disposed or equipped to face up to that challenge than Socialists.

That does not mean that I think that it will be easy. That is why I was so interested in the argument of my hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) who thought that this would be a long haul. Certainly, so far as development is possible, I believe—this is my view and not my hon. Friend's—that it should be done on a voluntary basis because that is appropriate to our national characteristics and obligations.

Having said that I still hope, and I listened carefully also to the remarks of my hon. Friend the Member for Tottenham (Mr. Atkinson) and took his point, which was directed largely to the part of the TUC at the tripartite talks, about the dangers of negotiation. I hope that there will be talks. I hope that the trade unions will talk as much as possible. That is where trade union leaders can make more headway than we can here. As I put it to the Prime Minister earlier today, he has a responsibility to initiate the resumption of talks as soon as possible so that the trade union representatives can state as their price a radical change in the way the country's wealth, income and power ax distributed. I see that as the minimum starting price.

Photo of Mr Norman Atkinson Mr Norman Atkinson , Tottenham

I want to make it absolutely clear that I was saying that as democrats we would object to anyone negotiating a political package in those circumstances.

Photo of Mr Patrick Duffy Mr Patrick Duffy , Sheffield, Attercliffe

I recognise the force of that point. Nevertheless, where the living standards of our people, and especially of those with whom the Labour movement is concerned, can be improved I will welcome the discussion, and I do not mind whether at that particular moment the impetus comes from the trade union movement or from this House. I do not want to seem to be too hard on some of my colleagues who were here when I was not, but the longer this Parliament goes on and the more I am invited to look at the record of the last Parliament, the more tempted I am to look to the trade union leaders to make the kind of stand and the kind of representations they made recently to produce the sort of package which, interestingly enough, has been forthcoming even from a Conservative Prime Minister, although I want to see those trade union leaders bid up that package.

I also recognise that to some extent the Government are justified in believing that they may be more successful than were the last Government in their freeze because, fortuitously, it has taken place when there is an upturn in the economy. The Chancellor of the Exchequer clearly attaches the greatest importance to the end of uncertainty, although he must recognise that this uncertainty has been a function of his own Government, that it is the responsibility of this Government that business men have been deterred from making investment decisions in the last year, and that although there may be a revival now the fact that it did not come sooner is the responsibility of the Government.

I hope that the optimism of the Chancellor of the Exchequer will not be overdone. The confidence shown by return of investment, of which there is some evidence, is an uneasy confidence. There is an upturn of investment, but we have still a long way to go. As my right hon. Friend the Member for Leeds, East (Mr. Healey) pointed out, a stock reduction has been taking place and it is a Micawber view of our economy to think that what is now happening will necessarily lead to expansion of productive capacity.

The fact is that manufacturers obviously believe that they have enough productive capacity to meet any increase in demand that they can foresee. It is significant that spending in the motor vehicles industry is at the present low level and, incidentally, that the multinational auto firms have taken care to protect themselves against any price freeze by price increases which for the most part have come before the freeze.

We have, in fact, much too low a level of industrial investment, but in the en- gineering industry, so important to our economic welfare, we have a situation, much to be welcomed, where rising output is checking costs, according to the NEDC mid-October reported forecast, though even here caution should be exercised. The upsurge is confined to those areas where the Chancellor's generosity to selected sectors could be expected to work—construction equipment, farm machinery and plant for consumer durables.

On the other hand, the basic industries in our economy, the nationalised industries, still remain in limbo as to their investment future. The steel industry review is overdue; it has been under way now for two years. The interdependent electricity generating and coal sectors have not yet had their admittedly conflicting claims decided upon by the Government. These are two vital areas of capital expenditure and sustenance of our basic industrial infrastructure which will underpin a great many decisions to be taken in the private sector. Will the Government take the called-for lead? Will the Government give these basic industries some indication of their investment possibilities for the remainder of this decade?

In the debate on 19th June on the Yorkshire and Humberside region we secured an acknowledgement from the Minister that though there is not a special case for the whole of the region there is for the coalfield, and I say now that the Yorkshire coalfield could be given a shot in the arm at once by deciding to proceed with DRAX "B" as a coal-fired power station using the coal reserves on which it actually stands.

The steel industry and all the engineering facilities that attend upon it need to be removed soon out of sustained uncertainty, but to peg steel prices would be the worst possible thing for the morale of the industry. Not only would it put the industry back in the red but it would have a devastating effect on morale not only at management level but throughout the industry.

The Government had an opportunity in 1970 to enter into dialogue with the unions but they were not willing to do so because they were led by a man who thought it was not necessary. Any dialogue was also stopped by other men and by a woman in his Cabinet who thought that the economy could be managed otherwise. They think differently now, but if the change of view does not carry conviction the responsibility of the Prime Minister is greater than that of anyone in the country.

7.9 p.m.

Photo of Mr Peter Hordern Mr Peter Hordern , Horsham

I thought that the hon. Member for Sheffield, Attercliffe (Mr. Duffy) spoke very moderately about the country's challenges and difficulties except, perhaps, in his peroration, where he would not expect me to agree with him. I have been impressed in this debate by the modesty with which hon. Members on both sides have forborne to make quotations about previous prices and incomes statutory orders, but I have no doubt at all that the time for such quotations will come quite soon and that we shall hear a good deal of them.

I do not intend to indulge in any such quotations myself, except to say that there is a very real field indeed for such quotations which I have no doubt will be dug very deeply. My hon. Friend the Financial Secretary will recognise that he will be a rich mine of quotes. Suffice it to say that there is no question but that the Government have reversed their policies and their attitude on prices and incomes. I regret that it is the fact that the official Opposition have reversed their policy towards a prices and incomes policy. That reversal should not bring any comfort to this House.

It will be widely recognised outside that both parties have, to some extent, taken to standing on their heads. The overall impression outside the House will not be particularly good.

It is the case that my right hon. Friends the Prime Minister and the Chancellor of the Exchequer strove as hard as they could to secure a voluntary agreement on a prices and incomes policy. It is true that they were negotiating from a base from which they were able to claim a rate of growth of some 5 per cent. That is a rate which has not been attained for some years. But it is also clear that these discussions took place against the background of a floating currency. The discussions might well have been brought to a rapid conclusion had the currency been fixed in the way that it was some years ago.

I am in favour of a floating currency and I hope, that whatever arrangements are arrived at when we join the European Community, we shall recollect and bear in mind the good example that has occurred by having the virtue of a floating currency in critical conditions. We have been able to carry on the discussions without having to concern ourselves with the balance of payments. We would delude ourselves if we thought that the voluntary negotiations could have succeeded without sacrifice and cost.

We now find ourselves giving subsidies to the most inefficient companies in the most inefficient industries. That is not what we said we would do. We are subsidising nationalised industries, which again is not what we said we would do. When the White Paper on public expenditure is released, I suspect that public expenditure as a proportion of GNP will be found to be rising well above the original estimates for the next two or three years. Again, that is not what we said we would do. In all these cases the cost of operating the new policies will be borne by the taxpayer and not by the consumer. That is a directly inflationary process and will lead to inefficiency.

I know that such measures have been taken to allow an agreement to be reached with the CBI and the TUC. I recognise the importance that is attached to that aim. The Government have been prepared to pay a high price to secure an agreement—for example, deferring rent and rate increases. I do not imagine that the Government are prepared to enter into meaningful negotiations with the TUC and the CBI unless they are prepared to offer some compensation or to alter some proposals which they had previously indicated to this party and to the House as being essential or necessary in the national interest. They seem to be suggesting that they are unfit to determine what is in the national economic interest, except by negotiating directly with the TUC and the CBI. I do not think much of that proposition, and I never have done.

I agree with the hon. Member for Tottenham (Mr. Atkinson) that when a negotiating party negotiates with either the TUC or the CBI one is concerned with the results of those negotiations and the status upon which the negotiations are entered into in the first place. The hon. Gentleman voiced his doubts about the TUC being able to speak on behalf of the trade union movement. I think that my right hon. and hon. Friends should be careful in thinking that the Government should be free of any kind of restraint from this side of the House when they try to secure an agreement with the TUC and the CBI. For example, the voluntary proposals included an automatic compensatory increase if prices should rise over 6 per cent. The proposition was that 20p would be paid weekly if prices rose by over 6 per cent. But that increase was to be paid to whom? It was to be paid to wage and salary earners and not to those who live on fixed incomes. I am talking not about pensioners but those who live above the level of pensioners who have no means and no ability to compensate for the increase in the cost of living which is given or which would have been allowed to those who are able to secure such an increase; namely, the wage and salary earners.

I understand that after the appropriate cooling-off period discussions will resume. I have no objection to further discussions taking place. However, what matters is what comes out of any further discussions. What comes out of them must be judged not by what sort of deal it was possible to obtain but whether the outcome makes sense in relation to the Government's stated objectives. That very much remains to be seen.

I am unable to accept the thesis of some people that there is no economic policy objective beyond the securing of an agreement with the unions and the CBI. If that thesis is taken to a logical conclusion, where does the process end? For example, while we would be solemnly debating the Budget, the Finance Bill or the White Paper on public expenditure, the TUC and the CBI would be drawing up their proposals—they would be making the real negotiations. I do not think that is right and I do not believe that we have been reduced to such an extremity that we must make a deal with these other parties.

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

Does my hon. Friend agree that that is precisely what has already taken place? In fact, we have had indications that discussions were taking place with the TUC about the contents of my right hon. Friend's Budget next year.

Photo of Mr Peter Hordern Mr Peter Hordern , Horsham

I do not know about that. I do not know what discussions took place. I very much doubt whether my right hon. Friend the Chancellor of the Exchequer was prepared to reveal anything contained in next year's Budget. However, I am sure that he is prepared to listen to what was said. If that is to what my hon. Friend is objecting, I do not share that objection. I am concerned with what comes out of the discussions and that is what we must be in a position to judge.

It will be said that because the talks broke down that the orthodox ways of managing the economy have been tried and have failed. However, I do not believe that to be the case. The fact is that an effective and appropriate monetary policy has not been tried over the last year. I know that there are those who say as soon as "money supply" is mentioned that anybody who believes in monetary policy believes ipso facto in deflation and unemployment. But that is a considerable overstatement of the case. The truth is that for a long time monetary policy has been an object of real suspicion in the United Kingdom amongst economists and the Civil Service. I remember the Radcliffe Report on the monetary system which appeared in 1958—which described the monetary system more or less as a residual of demand. The report was widely accepted at the time. It is interesting that monetary policy, let alone money supply, was not mentioned in the Budget speeches of my right hon. Friend the Member for Barnet (Mr. Maudling) in 1963 and 1964.

It was not until the previous Labour Government made such a disastrous mess of their handling of the economy that monetary policy came in to fashion. That came about only because the balance of payments was in such trouble that the IMF was able to appoint inspectors who inspected our economy at quarterly intervals and there came into existence a proper monetary policy based on money supply.

That is why statistics appear at all. They start from 1966, which is the year when the problems experienced by the Labour Government came to a head. There is no question but that the Labour Government had to pay close attention to money supply. There is also no question of the close relationship that occurred between the increase in the money supply and the current retail price index.

In 1969 the M3 increased by 6 per cent. and prices by 3 per cent. Of course, it is wrong to talk about increases in a single year, but in that year the increases in money supply and in prices were close and that was in a period of deflation. But it is wrong to argue that because rigid control of money supply is essential at a time of deflation no attention should be paid to the money supply in a period of expansion. That is what has brought us to this position in that far too much money has been introduced into the economy.

I know that the Government had praiseworthy motives and were determined to boost employment and make sure that industrial companies were not short of funds. But there never was difficulty in borrowing by industrial companies at the beginning of the year. The simple fact is that they were not inclined to borrow unless and until they had orders on the books to which they could work. Under the new system of credit competition, what were the banks expected to do except to lend to those who wanted to borrow—and those who wanted to borrow were those who wanted to buy houses or land or other assets? If anyone wants to judge the effects of a lax policy on money supply, he has only to look at the prices of houses and land. The Government cannot escape a share of direct responsibility for the high prices of land and housing, and it was largely, though not entirely, caused by the failure to control the money supply.

So far as I can ascertain, we are the only country which counts monetary policy as being of such little value. Listening to my right hon. Friend the Chancellor of the Exchequer, I hope very much that this seeming lack of care about monetary policy will now change and that a proper and more effective policy will now be pursued. We do not need to have a restrictionist monetary policy so much as one which is appropriate to our rate of inflation and growth. Nor can it necessarily be done quickly, given the Government's enormous borrowing requirements at present.

But if the Government are really earnest about their intention to reduce the rate of inflation, they will have to reduce the rate of growth of the money supply—and it will not have escaped my right hon. Friend that that is what the European finance ministers think as well. The money supply does not have to be of a restrictionist or deflationary level, but it must have some relationship with what is going on in the economy, and unless there is some relationship no prices and incomes legislation of whatever character will cure inflation.

I do not like this freeze. I do not think that it would have been necessary if better policies had been pursued. But they have not been pursued, and in my judgment this freeze is therefore essential. It is what follows the freeze that is so important. I trust that we shall not be so committed to getting voluntary agreement on prices and incomes that we forget what the Government set out to do, for these other objectives and their attainment are vital if we are ever to have an enduring and vigorous economy.

7.23 p.m.

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

Our debate today and the Prime Minister's statement yesterday, both in the House and on television, seem to me a recurrence of an old nightmare. I have been here before, although perhaps not under exactly the same conditions. Much of the argument I have heard has been used before; even the phrases which have been used—for example, that the Government must govern—have been used on previous occasions by previous Prime Ministers. Therefore, I believe that we have to go more deeply into the situation than the Government are doing.

There obviously is inflation—no one denies that. But it is not the type of inflation—the runaway inflation—which existed in Germany after the First World War. Even inflation with unemployment has not been unknown. It existed in Germany. The Germans had both runaway inflation and mass unemployment. This led to the complete breakdown of the democratic structure, a complete social unheaval. The answer in the last resort was that either the country went along the road of Government intervention on the basis of Socialist planning or it went along the road of dictatorship of the Right through the Nazis—and it was, of course, the latter which happened. So when we discuss the question of inflation we have to look at past situations and at the nature of the crisis as it exists today in British society.

The Labour Government's answer to the crisis was a statutory prices and incomes policy with penal clauses. Some of us said then that we were not opposed to a prices and incomes policy if it could be worked out on a voluntary basis, which meant that the centre of the voluntary basis was the TUC itself. Even that would have been exceedingly difficult, because the TUC does not speak, unfortunately, even with all its affiliated organisations, for all the employed workers. That in itself would have been a difficult problem to solve. But we argued that a statutory policy was a slight step towards the corporate State concept, where one has the various parts of society in their rightful place—the employers in theirs, the workers in theirs and the Government in theirs—with wages, which is what we are primarily talking about, strictly controlled on the basis of statute, decrees and decisions, giving a bit here and a bit there according to the view of the Government at the time. We said, of course, that the Labour Government's policy on prices and incomes had not reached that stage but that it nevertheless represented a tiny step in that direction.

Now, the whole thing is happening again. We hear the Prime Minister arguing for the same sort of step towards the corporate State concept. I do not believe ever on. I think that this was one of the biggest high-level confidence tricks ever foisted on the people. It was well known that the talks at Downing Street were months ago. Every national newspaper—certainly all the quality newspapers—were saying months ago that at a certain stage we were going to get a statutory prices and incomes policy.

Of course, even the Prime Minister could not quite do that sort of somersault without first going through the process of apparently reaching agreement with the trade unions and the CBI, and it was quite clear that they understood that the package being put to the Trades Union Con- gress was quite unacceptable because of what had happened before. It was not possible to have ultimate meaningful discussions about the acceptance of such an agreement because the Government had started out in any case with a series of measures designed to bring about wages control in an entirely different way. That is what the Industrial Relations Act was about: it was about controlling wages. In a sense, that is what the Housing Finance Act was about. But these measures, the Industrial Relations Act especially, had not been entirely successful.

The trouble with the British working classes today is that they have got up off their knees. They will no longer crawl about on their knees. They want—

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

Let me tell the hon. Member for Oswestry (Mr. Biffen) that when I first went into industry we accepted a great deal more than workers will accept today. The other day, my hon. Friend the Member for Penistone (Mr. John Mendelson) made an interesting point in my constituency where a group of workers is engaged in a sit-in. When he met the shop stewards he said that they were more like doctors of philosophy. That is quite true. That is the type of shop steward that we have in industry today. He is not the uneducated person that he was before. The working classes have become educated, and they are not so easily bamboozled. They want wage increases which will not only keep up with the cost of living. They want more than the cost of living. They look round, and they go out once in a while on a Saturday evening. They have nice meals. They like the pheasant and the port wine. They have looked at others, and they say, "The others have been having it for too long. We want some of it." What is wrong with that? What is wrong with working people getting the fruits of their labour?

That is not compatible with the type of society that we live in today. It the profit motive is the basis of all society, higher wages mean lower profits. No one argues that there is a falling rate of profit, but anyone who has not understood that higher wages mean lower profits has not understood the ABC of Marxism. Karl Marx explained it a long time ago. A growth of constant capital as against variable capital means a fall in the rate of profit. It is all part of the technological revolution and, as that technological revolution goes on, the fall in the rate of profit goes on as well. Of course, bigger profits are always possible. However, I am talking about the fall in the rate of profit.

For my part, having looked at this package, I see it as a step again in the direction of the corporate State. I am not saying that it is a big step. It is not a seven-league step. But it is getting us back on the right road. It is a beginning.

Perhaps I am anticipating tomorrow's debate, but we have before us a remarkable document. One has only to take the point about prices and charges. It says that wholesalers and retailers are expected to do everything possible to avoid any increase in prices. It goes on to refer to certain prices, especially to those for fresh foods, vegetables, meat and fish. However those are foods that the working classes eat all the time. They do not eat anything else. They eat fresh food, vegetables, fish and meat, though the amount of meat that they are eating is becoming less because they cannot afford to buy it. But those foods will not be controlled. I have a picture in my mind's eye of an auction at a small country fair. Beef is being auctioned. Who will control the price? Who is to determine what happens following the initial sale? The hon. Member for Oswestry knows about such matters. He comes from a country constituency. But how will the price be controlled?

Charges have to be controlled. With any luck, we may get the lawyers to restrict their charges—we may. But what about the small builder at the end of my road? If he does a plumbing repair for Mrs. Brown and charges her £3·50 and then does a similar job for me and, thinking that I have a bit more money, charges me £5·50, how am I to know which is the right charge? How are these charges to be controlled?

Then there are those in higher management. They are covered as well. But such people have expenses, subsistence allowances, travel allowances and no doubt entertainments allowances. There is the possibility of promotion: if a man is only a minor director he can be made a major director and as a result be given another couple of thousand pounds.

Once again the people affected by this proposition are those in the organised trade union movement, the workers who negotiate their wages and conditions through the trade union movement. We said last time that a proposition of this sort was grossly unfair. It is not made any more fair because it comes from a Conservative Government.

There are ways of dealing with the fundamental problem that we face. If I suggest one of them I am sure that I shall not carry right hon. and hon. Gentlemen opposite with me. However, I believe that the answer is to recognise that we need to go along the path of increased planning on a Socialist basis. The next Labour Government will have to concern themselves with the financial levers of power in this country. That means that we shall have to control the banks and the insurance companies. We shall have to extend public ownership. We shall have to have that sort of control. Even so, the trade unions must remain free. I do not want them to become part of the State apparatus like trade unions in the Soviet Union. Sometimes they need to be free to defend themselves from their own organisation and their own State.

We face a fundamental problem. My answer is to proceed along the lines of Socialist planning. I am delighted that all right hon. and hon. Members on this side of the House have been converted. I am always willing to accept converts. I am prepared at any time to do that. It may be that the circumstances are different. Certainly those who have said that the Government cannot expect any support from this side of the House, purely on the basis of their policies of the last few years, are right. However this problem is deeper and more fundamental. We believe that this proposition has to be defeated.

7.40 p.m.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Glasgow Cathcart

It must be acutely depressing for those outside this Chamber who are concerned with tackling inflation to know that in this long debate, with many fundamental and important speeches, apart from the excellent speech by my hon. Friend the Member for Horncastle (Mr. Tapsell), no one has spoken with any real enthusiasm about what lies before us tomorrow with the new initiatives which have been taken on prices and incomes. It is representative of the despair in this House at the problem of tackling inflation in a free and expanding economy; but our despair will be as nothing compared with that of the general public who already wonder what is happening in this place and in British politics, in the last Parliament having seen orders presented by a Labour Government night after night at 10 o'clock stating that certain wages must not be increased and the Conservative Opposition voting against them, and now shortly to see a Conservative Government bringing in identical orders and the Labour Opposition opposing them. This situation will obviously cause a great deal of confusion to the general public.

Is there a better answer? It was depressing to hear the hon. Member for Liverpool, Walton (Mr. Heffer), in a thoughtful speech, putting forward as his answer a kind of economic theory called mercantilism, based on the assumption that there were certain goodies, pheasants, wine and money going around which both the rich and the workers could share after a battle between the two as to who got what, but without any allowance being made for the dynamic effect of expansion in the global sum to be distributed.

The new initiatives upon which we have been asked to embark are akin to inviting or instructing a kettle not to boil but at the same time forbidding anyone to turn off the gas underneath it. This is the fundamental inconsistency in the policy which might lead to real difficulties. I fear that the 90-day freeze may simply be a temporary expedient to carry us over the period when we move from a floating exchange rate to a fixed parity. Many people are afraid of what will happen afterwards if we have a severe balance of payments problem. That is why there might be a better argument for saying that we should turn down the gas slightly at this stage, when we have a sound balance of payments position and a floating exchange rate, rather than in a few months to face a severe balance of payments problem and to have to turn down the gas acutely, with all the damaging consequences for economic prosperity and employment.

There have been many attempts at a proper prices and incomes policy, and some have failed. Listening to some of my hon. Friends, I thought of the lesson that we learned at school in the old days about King Canute, who believed that he could turn back the tide. Uncharitable people might have scorned his endeavours. Others, like myself, might have said, "People have tried this before and failed. If you feel that you can succeed, good luck to you. However, it would be wise to make contingency plans in case it does not come off".

If we are to have this kind of policy it is essential to make the best of it and to ensure that appropriate steps are taken to minimise the harsh consequences of possible price rises.

Some newspaper reports suggest that there might be a reduction of the VAT rate from 10 per cent. to 7½ per cent. The argument for or against VAT is a separate matter. However, if we were to reduce the rate from 10 per cent. to 7½ per cent. we should simply be adding substantially to the inflationary pressures which already exist.

Apart from that, when we move to VAT precisely how shall we operate effective control over prices? We have instructed the housewife to watch prices in the shops, and, if they rise, to report them. We are told that strong action will then be taken. But what is the housewife to do on the introduction of VAT? She must make a calculation of the reduction which should have taken place with the removal of purchase tax, allow for the transitional arrangements which the Chancellor has explained, make an allowance, presumably, for the extra administrative charges involved in VAT, allow 10 per cent., and then pose the question: has the price risen or not?

If we are thinking of a prices and incomes policy applied by the housewife, how can this be done when VAT is introduced, replacing SET and purchase tax? The housewife will have to work out the change from purchase tax, allow what change should be made in the price because of the abolition of SET, consider how many part-time employees are engaged in a shop and how many men are over 65 in working out the price of an item.

All this must be done. If the housewife does not do it, who will? Are we to have mini-prices and incomes boards in shops, with computers and adding machines working out what the different prices should be?

I am not trying to be unduly destructive. I ask the House to recall the confusion we had at the time of decimalisation. I suggest that by introducing VAT we will have acute confusion, because the average person will not have a clue whether prices are going up or coming down. If we are to have a prices and incomes initiative the sensible thing is to postpone the introduction of value added tax. Meaningful price control is not possible during a changeover to VAT.

We also have metrication coming along. The Metrication Board has tried to explain to industry what is involved. Metrication has been introduced in some nationalised industries, and they have brought it in very effectively in their opinion. British Rail has recently announced that it is to move towards metrication by accepting all parcels given in metric weights. It will then, by ready reckoner, translate to Imperial weights and charge customers according to an Imperial price list. British Rail is taking this meagre step in that direction. Others are going even faster.

But in the aircraft industry we still have Imperial measurements. Computers are based on international Imperial standards. If metrication is to come into the shops, so that instead of buying in pounds and ounces people buy in grammes, how will the average housewife know whether she is being charged more or less, unless we have some effective help for her? The obvious method is unit pricing. I plead with the Government not to go ahead with metrication in the shops unless or until something is available to protect the housewife. I suggest that this must be unit pricing. I hope that my right hon. and learned Friend the Minister for Trade and Consumer Affairs will ensure that any such changes will contain some protection for the housewife.

The most basic price of all affecting manufacturing industry is that of steel. What will happen to steel prices? The hon. Member for Sheffield, Attercliffe (Mr. Duffy) said that steel prices must not be held down; they must find their natural level. But I was delighted to hear the reply by the Prime Minister yesterday, in which he said that the new price restraints would apply to all nationalised industries. I asked what would happen during and after the 90 days. However, we know that we are going into the ECSC and there are obligations there. If there is free movement of steel across the frontiers, will it be possible for us to retain control of our steel pricing? Will we move to the basing point system on 1st January? We must have a clear indication.

The general public is enthusiastic about a freeze on everything. People generally say, "Let us have no more increases in wages or prices. It is splendid." However, after the first few weeks if problems like VAT, metrication and the price of steel are not resolved effectively the plan could be in very real difficulty.

The other thing that we have to remember is that on the last occasion of a freeze it was not so much—or exclusively—the trade unions and shop stewards who burst through the Bill; the employers were largely resopnsible for that happening. I know, because it happened in my industry, in the shipyards. If we want to hold men who are thinking of leaving, if we have difficulty in getting the right men for the job, how are we to do it if we do not pay them more money? We know what happens. There is an increase, but not in piecework rates as such. There is a "reappraisal", to take account of new things being produced—a new piece of furniture or, perhaps, a new window frame. Because it is new, we have to revise the piecework price, and the net effect is to pay the men concerned £2 or £3 more, which is what they were asking for in the first place.

Another method is to have bogus promotions. The hon. Member for Walton seems to know more about boardrooms than workshops. He talked about reclassifying directors from mini-directors to maxi-directors. The same kind of thing happens on the shop floor. Instead of a number of employees being unskilled they suddenly become semi-skilled. The semiskilled suddenly become skilled, leading hands suddenly become foremen, and so on. Those are the real problems that will arise.

We know that we start with great good will from the public, who always welcome this kind of initiative. They welcome strong measures being taken in an endeavour to contain inflation. But we should be deluding ourselves if we did not at the same time ask how we shall tackle the practical problems that will inevitably arise. Unless we face the fundamental problems it will be very difficult to find a solution to them.

The Government have expressed confidence that the measures will ensure continued growth and the spread of prosperity. For people in Scotland the vital issue is whether the prosperity will extend to their area and whether the new policies will bring benefits to the whole nation. During the last year the dramatic oil finds off the east coast have transformed morale and expectations in the North-East, but a question mark still hangs over the West of Scotland, where our traditional industries are facing decline and where there is real concern about several major industries. The fear that has haunted many of us is that the impact of structural change and entry into the Common Market could make the West of Scotland the West Virginia of Europe.

We have many fears about the future of the steel industry, Lord Melchett, the boss of the national British Steel Corporation, recently announced his ideas for what was to happen with rationalisation. It is crucial—particularly in view of the new pricing policies that will be brought in on entry into the EEC—that Scotland should have a substantial steel industry producing a wide range of products.

We have been impressed by the fact that the Norwegian Government have ensured that Norwegian manufacturers will produce more than a fair share of the products required by the oil companies. Are the Government considering measures to ensure that those firms which get concessions have an obligation to buy British, or to buy Scottish, if the goods are available at the right time?

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Did the hon. Gentleman notice the totally negative answer which his Prime Minister gave me at Question Time today on this issue, when he said that we had nothing to learn from the Norwegians?

Photo of Mr Teddy Taylor Mr Teddy Taylor , Glasgow Cathcart

I appreciate that my right hon. Friend gives many positive and helpful replies, but sometimes that is not possible when there is nothing to be said. The hon. Gentleman should look at this in an encouraging way, because very often when there is nothing to be said it is because matters are under active review. I am sure that the hon. Gentleman and I—in fact, all Scottish Members—hope very much that the active review which I am sure will take place because of the representations made by the hon. Gentleman and others, will result in firms which get oil concessions having an obligation written into their contracts to buy British goods where they are available.

The final matter that I wish to raise concern the consumer. In his excellent opening speech the Prime Minister said that the measures to be taken for consumer protection would be the toughest and most important that had ever been proposed to promote competition. Laws can be effective for consumer protection. There is no better example of that than the Trade Descriptions Act. It has been extremely effective. It has ensured that prosecutions have taken place when traders have deliberately misled customers, but something more is needed than that Measure and the fair trading law which will be introduced shortly.

We need more provisions to help those for whom the law provides no real remedy. Let me give one example. Suppose the hon. Member for Walton buys a secondhand motor car which is advertised as having 20,000 miles on the clock. Having taken possession of the car he finds, to his horror, that the car has done 50,000 miles. What can he do? He can contact his local weights and measures inspector and report the facts, and the firm will be fiercely prosecuted. It may be fined several hundred pounds, but what can the hon. Member then do to get redress of his grievance?

All that can be done by someone in that situation is to take the case through the courts, but that can be expensive, and it might result in an appeal to a higher court, involving even more costs. Many people are simply terrified of the courts.

They are terrified of the expense. They are terrified of becoming involved in something which could ruin them. What we need are not just more laws on fair trading and trade descriptions, but readily available justice for people who are misled or diddled by shopkeepers or traders.

I am convinced, as are my hon. Friends with whom I have produced a pamphlet, that the only effective answer is to have a consumer arbitration service which would provide for decisions to be made on these matters in return for a deposit—to be paid by both parties—of, say, £2, in order to prevent frivolous claims. This is something along the lines of the excellent scheme that is operated voluntarily at Manchester. It is something that is needed, because unless there is such a body the individual will not get any redress for the grievance that he has suffered, even though the person who sold him the defective goods, or whatever it is, is condemned by the law and fined.

In the same way, we would like to have consumer advice centres, not to provide more advice or more officials but simply to bring together in one place all those officials who can give people help and advice on consumer problems.

There are already consumer consultative councils in the electricity and gas industries. Tax inspectors have inquiry offices, weights and measures inspectors are available to help people, and legal aid officers are available to give help and legal advice to those who need it, but far too often people do not know the right place to go to with their problems. It would be of great help if there were consumer advice centres at which all these services were available for those who needed them. I hope that the Government will listen to what I and others have said about this.

I have one final appeal to make. The prices and incomes mechanism is being started with the support of public good will. Let us early, and not late, think about some of the real, practical problems that are bound to stem from it.

7.58 p.m.

Photo of Mr John Grant Mr John Grant , Islington East

We have heard quite a few fond remembrances about incomes policies in the past, and that has all been relevant. I thought that my hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) made a particularly interesting contribution to the debate, but I do not want to go back as far as he did. I propose, instead, to say something about the things that led to the Downing Street talks.

One should say straightaway that any Conservative Government dealing with organised labour starts with a considerable handicap, because most of the trade unions regard a Conservative Government at best as some kind of employers' nark and at worst as their outright enemy. When, on top of that, the Government come into office and bluster, swagger and take the dictatorial attitude of saying "We know what is good for you", then that natural handicap becomes virtually impossible to overcome. This Government did not merely throw down the gauntlet to the trade unions. When they came to office they threw their entire attire at them. They stood there quite naked in an anti-union posture.

In fact, it was not just a question of their being anti-union. The Government have shown an overall prejudice against ordinary working people to an extraordinary extent. If we consider the record, the action on rents, on school milk and meals, on schooling generally, their attitude to students and towards employment and industrial policy and their obsession with competition—that is a word which hon. Members opposite seem to have dropped from their vocabularry these days—we can understand the situation at Downing Street.

As my right hon. Friend the Member for Leeds, East (Mr. Healey) said, what we have seen is a redistribution of wealth in favour of the better-off in society—the surtax payers and the stock option holders—which has been little short of an incitement to trade union leaders. Then, of course, having "socked it to them" in this way, the Government decided to change course. They realised that they were getting themselves into an increasing mess, and they changed their slogan, saying "If you can't beat them, woo them." Superficially at any rate, the words lately have been much more soothing, even if mouthed by the same protagonists.

Whether they really wanted a deal at Downing Street is a matter for conjecture. I share the view of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer)—on balance, it was something of a cynical public relations exercise. That is why the Government refused to budge on the £2 figure at the end of the talks, a figure which up till then everybody had expected to be negotiable.

The message from those Downing Street talks was that it was too little and too late. It is no good pretending that the last two years just have not happened or that, after some of the things which transpired over that period, the climate could now be altered sufficiently.

We now come to the splendidly titled Counter-Inflation (Temporary Provisions) Bill, with its freeze and its fines and its court proceedings, the whole lot comprising the policy which the Prime Minister so blithely opposed in 1966 and thereafter. It is, however, fair to say—there is a real distinction here—that the situation then was not set against the background of the handouts to the rich that I have mentioned.

It is time that the Prime Minister or the Chancellor or the Leader of the House, if he is to wind up, considered standing up to say that their attitude in 1966 was wrong. They could not have been right then and right now. That just is not possible.

Many of us on this side—I would say the majority—certainly including myself, believe that a prices and incomes policy is necessary, and we will certainly work for one under a Labour Government. We have a party conference decision to the effect that that is the way we should be going. It is also worth mentioning that several countries now have statutory control of prices to a considerable extent without similar control on wages.

But such a policy cannot hope to succeed if it is rushed in in a crisis as a short-term expedient. In that case, it is bound to be an exercise in futility. Nor can it be seen as the central plank in any Government's economic platform. It cannot take that kind of strain. That was probably the major mistake of the last Labour Government, and it is one which this Government are repeating. They simply have not learned any of the lessons of that period. It certainly cannot work unless the social and economic background is right—and that lets this Government right out.

There will obviously be some long and fierce debates before that Bill is through the House, and I do not intend to try to anticipate them, except to say that it seems quite clear that, on the basis of the Bill as published, there is to be a control of wages far more rigorous than anything which is envisaged for the prices. We have heard a fair example from the hon. Member for Glasgow, Cathcart (Mr. Edward Taylor) of the difficulties in any kind of price control. Certainly, as envisaged by this White Paper, even on the basis of one day's evidence, the Bill is a nonsense in this respect. There is also the question of dividends. A dividend frozen today can be paid out tomorrow. Wage earners cannot catch up in that way.

It is against this whole background of Government social and economic policies that we on this side are united in saying that this package is totally unacceptable. The legislation will serve only to embitter still more the feelings in industry. It will certainly do nothing to contribute to the long-term development in economic management which the White Paper rather touchingly describes as "agreed objectives".

Finally, I emphasise that it is pointless for the Prime Minister once again to try to shift the blame for this situation to the trade unions and to talk so glibly about "acting in the national interest". This is a crisis of the Government's own making. There may be international implications, but the real crisis of confidence is that of ordinary people in the Government. They are bewildered by the incredible twists and turns of this Government which led even The Times political correspondent to describe the Prime Minister as a "pliant pragmatist". That was a correct description but it did not go far enough. The Prime Minister is now revealed as both pliant and dishonoured: he may be described as the "Dodger of Downing Street".

This House and, even more, the electors who returned the right hon. Gentleman to office are entitled to a straight answer to the question that he constantly avoids—he avoided it again at Question Time today—why he pledged the utter rejection of statutory wage control in his election manifesto. On this, as on so many other matters, this self-styled "man of honour" has betrayed his mandate. I share the view of my right hon. Friend the Member for Leeds, East that it is high time he gave the country the chance to show what it thinks of him.

8.8 p.m.

Photo of Mr Christopher Tugendhat Mr Christopher Tugendhat , Cities of London and Westminster

As the hon. Member for Islington, East (Mr. John D. Grant) said, many hon. Members have been giving us their reminiscences of freezes. This is the fourth that we have had since the Second World War. The score is two-all, two from the Labour Party and two from us, but they still have the lead in devaluations.

No one, I think, would disagree with the contention that every Government which introduces a freeze do so as a last resort, when other policies which they would have preferred to see succeed have failed, and they do so reluctantly and with sorrow.

When one hears people talking about previous freezes one is reminded of the military strategists of the First World War, those gentlemen whose troops were permanently stuck in the mud, who constantly reverted to the big set-piece battles of the Somme and so on, who gained a few yards but then quickly lost the ground which had been taken.

The four freezes since the Second World War show that we are, in terms of economic strategy, in much the same position in many ways as the military strategists were during the First World War. The break-through then, did not come until they developed the tank. Perhaps we have the tank now in the fact that this freeze has been introduced at a time of rapid expansion.

One does not have to rely only on Government figures to support this claim. Independent surveys of business opinion—those of the CBI and the Financial Tunes—show that unemployment is falling and seems likely to continue to fall, that investment is rising and that order books are filling up. They show, in other words, that the real wealth of the community is increasing. Much can be made of statistics and doubt can be cast upon them, but that is an encouraging aspect of our present situation. This freeze, unlike previous freezes, has been introduced at a time of rapid expansion. But most of us on the Government side of the House in this debate have accepted the point that the policies which the Government are now dedicated to pursue will succeed only if considerations other than economic policy are also brought into play. The country must feel that Government policy across the whole area in which it operates, not just the economy, is fair and reasonable to all.

Fairness is a very subjective concept, long enough to take up a speech the length of that of the shadow Chancellor or even the Leader of the Opposition. I would not wish to impose that on the House. I should like to touch only on two aspects which are critical if the country is to accept that our policies, not only economic but across the whole area of Government policy, are fair and reasonable.

The first aspect can be described as the property market and landlordism in general. The Secretary of State for Trade and Industry, formerly the Secretary of State for the Environment, and the Chancellor of the Exchequer, have expressed strong views on the subject of the property market from time to time and the abuses that have taken place in it. The abuses to which they refer and the problems we see in the property market are much easier to identify than to solve. If, however, our policies are to carry the credibility necessary for their success it is of the utmost importance that action is taken in this area without delay.

In the debate on the Gracious Speech the former Secretary of State for the Environment put forward some interesting ideas, which have also been advanced by other hon. Members, regarding the treatment of the hoarding of development land. That is the most immediate of the measures which must be introduced very quickly if people are to be reconciled to the type of policies and sacrifices for which we are now asking. This is not the time to go into a great harangue about what has been happening in the propery market, but it is of the utmost importance that action should be taken quickly.

It is equally important that action should be taken quickly over the scandal that is so obvious in London, though no doubt it occurs elsewhere as well: the sale and resale of residential property blocks. This causes immense disquiet in London and in the rest of the country. The vast profits made from these sales and resales look very peculiar when set against the rises in rents that take place and the shortage of residential accommodation in those areas in which these blocks are being sold and resold. This, too, is an area in which the Government must act.

There is doubt among some Conservatime supporters that the Government fully appreciate the urgency of this sort of problem. I was distressed to see that the White Paper specifically excludes the rents of unregulated tenants. I thought that because the White Paper had been prepared in such a hurry that must be an oversight and that it would be put right later. The draft Bill, however, is a little unclear. From soundings I have taken it seems that this omission was deliberate. A group of tenants, to be found in my constituency and elsewhere in London, seem to be singled out at present for rather harsh treatment. I look to the Government for some modification on this point as the Bill goes through Parliament.

My second point is that previous freezes have suffered from the great disadvantage that there has been a very clear distinction between the private and public sectors. The people who work in the public sector have, on the whole, felt that they have been more harshly treated than those who work in the private sector. This feeling has sometimes been exaggerated, but there have been some extremely striking comparisons between what has happened in, say, the motor industry, on the one hand, and in respect of postmen on the other. This, too, is a problem which is much easier to raise than to solve. It is easier to point to the difficulty than to find a solution. But if our policy is to succeed, if people are to believe that our policies across the whole area of Government responsibility are fair and reasonable, it is of the utmost importance that the private and the public sectors are treated in an equal and evenhanded fashion.

Interesting ideas have been advanced about this. One idea which first saw the light of day in this country in one of the bank journals last year was a tax on companies that concede too much. This has obvious attractions, although if a company has conceded too much and then has to be taxed on top of that, its ability to invest will be reduced, and that would be a great disadvantage to the country. Another possibility is that if a trade union submits and pushes a claim in excess of the norm or the guideline laid down by the Government. the Government should subsidise the company that resists that claim. That idea, too, has attractions, but plainly some difficulties as well. A combination of the two would perhaps provide a promising area of exploration. Be that as it may, the fact that the public and private sectors must be treated equally is essential to the success of our policy.

In conclusion, the prize we have within our grasp is a considerable one. We have already achieved a rate of growth faster than that seen in Britain for many years. It is up to the best standards of almost all our rivals. We have already seen real disposable incomes rising by 10 per cent. in two years. We have an opportunity to secure a position in which we can make a determined and lasting attempt to solve the problems of poverty and pollution and the various other difficulties that afflict our society. We have an opportunity to secure the material wealth which will enable us to pursue vital nonmaterial ends. If, however, democracy fails to solve the twin problems of inflation and unemployment, we have much to fear. We have only to look at the fringes of the two major parties in the House to see that extremism is much stronger than it was a few years ago and that doubts about our institutions are much greater than they were a few years ago. If we fail to solve these problems and remain stuck in the Flanders mud of the economy, constantly reverting to policies which have been tried and found partially successful with the gains soon given up, the country will not look any more favourably on us than it looked upon those generals of the First World War who stayed four years in the same position.

8.18 p.m.

Photo of Mr Donald Stewart Mr Donald Stewart , Na h-Eileanan an Iar

The hon. Member for the Cities of London and Westminster (Mr. Tugendhat) will forgive me if I do not follow him into his diagnosis of the courses proper for the solution of the troubles of the British economy. I do not regard that as my function here. I wish to make a suggestion for solving the problems of Scotland. It has also been advanced by a leading Scottish trade union official, Mr. John Boyd, who said that he had come to the conclusion that the solution for Scotland's economic problems is a Scottish Government.

As the hon. Member for Liverpool, Walton (Mr. Heffer) said, today's debate has pre-empted tomorrow's debate to some extent. I make no complaint about that. I shall be dealing with two points omitted from the Gracious Speech.

I am obliged to the right hon. Member for Kilmarnock (Mr. Ross), who reminded us in his speech last week of the Prime Minister's declaration in Dundee on 9th September, 1969, when he said: We shall act to bring new life to these areas suffering from high unemployment and depopulation. At that date my constituency had the highest unemployment and rate of depopulation in the country. The situation after more than two years of the present Government's period of office is exactly the same. If the Government cannot bring new life on the small scale—about 30,000 people—that my constituency would require, what hope is there for realising the right hon. Gentleman's promise elsewhere in the United Kingdom?

Nor is there any mention in the Queen's Speech of the date for establishing the Scottish Assembly, launched with such a great fanfare at Perth a few years ago. How ridiculous is the propaganda that puts forward the Prime Minister as a man of principle, entirely different from the Leader of the Opposition with regard to keeping promises. I find them birds of a feather. I feel sorry for England which, despite Rochdale, is virtually obliged to choose between the two of them. Fortunately, we in Scotland and Wales have other, and infinitely better, options.

The hon. Member for Glasgow, Cathcart (Mr. Edward Taylor) mentioned Scottish steel, a vital, basic Scottish industry which is now within sight of extinction. The Secretary of State for Scotland, speaking in Wednesday's debate, said, quite correctly in my view, that he had spoken of his fear that nationalisation of the industry would trample on the interests of Scotland. Certainly nationalisation, not of itself but in a British context, did exactly that. Even allowing for the Labour Government's doctrinal priorities, there was no reason for setting up one large British nationalised steel industry.

The Benson Report in 1966 pointed out that the Scottish steel industry was a self-sufficient, self-contained, organic unity. Mr. David Murray, the leading Scottish expert on steel, has been forecasting for a long time that the present situation would eventually come about as a result of the nationalisation of the Scottish industry on a British basis. Unfortunately for Scotland, that prognosis has proved entirely accurate.

I am sorry that protest on the part of many Scottish Members who represent steel constituencies has been very muted. On the Labour benches, it was obviously felt that the sacred cow of nationalisation was involved. Let us hope that the forthcoming Scottish Trades Union Congress Assembly will speak for Scotland on the steel issue. More than jobs will be lost with the passing of Scottish steel. Vital skills will be lost, together with the pride they engender, as well as the basis of many industries using steel and a basic and vital part of the Scottish industrial scene.

I turn now to the question of Scottish oil. The Secretary of State for Scotland in his speech last week said: Britain has decided to proceed as fast as resources in technology and investment in the international oil industry can manage."—[OFFICIAL REPORT, 1st November, 1972; Vol. 845, c. 312.] Indeed they have! The Government's policy with regard to Scottish oil is smash and grab, and a quick getaway with the loot.

Other oil-producing countries from time to time suspend or slow down the production of their oil on policy grounds. What factors suggest that it is in Scotland's interest to proceed as fast as resources allow? A Scottish Government may decide to husband those resources. The British Government will squander them as the entrance fees to the Common Market. The EEC countries are furious at not laying their hands on Norwegian oil. If the Scottish people have as much regard for their own interests as have the Norwegians, they will ensure that the EEC countries will not lay their hands on Scottish oil.

The hon. Member for East Stirling-shire (Mr. Douglas) believes that the figures of the value to a separate Scottish economy of the oil resources are exaggerated. The Secretary of State said that the figures were grossly exaggerated and the hon. Gentleman expressed his gratitude to the right hon. Gentleman for his intervention. They are in alliance in selling Scotland short. As I have said before, the Tory-Labour fight across the Floor of the House is for the most part bogus. It resembles television wrestling—there is a tacit understanding that a good show must be put on for the customers, but that no one must become damaged in any way.

Photo of Mr Dick Douglas Mr Dick Douglas , Clackmannan and East Stirlingshire

The hon. Gentleman says that I say that the figures are exaggerated. Would he care to project the price of a barrel of oil landed from the Scottish oilfields in 1980 and the profit from that barrel, and state the revenue that we might expect in terms of royalties and/or corporation tax from that? If the hon. Gentleman can give us that figure, we might be able to project the revenues that would flow to the Scottish economy and say whether his party's figures are exaggerated.

Photo of Mr Donald Stewart Mr Donald Stewart , Na h-Eileanan an Iar

No, I shall not be drawn into figures. Dr. Charles Thiebaud, the former exploration manager with Shell, said that the figures were grossly underestimated. Apart from that, I believe that it would in no way be in the interests of Scottish Members of Parliament to mark down the country's resources.

Photo of Mr Donald Stewart Mr Donald Stewart , Na h-Eileanan an Iar

No, it is not a question of that at all. The hon. Member has no figures, any more than I have. If Scottish oil is left to the British Government's plans, future generations in Scotland may come to regard the discovery of Scottish oil as a tragedy and claim that it did enormous damage to the environment, the fisheries, and so on, and produced the minimum benefits for Scotland and her people.

As I said at the beginning, I regret the omission from the Gracious Speech of those important matters, which some hon. Members have already touched on. The solution to Scottish economic problems is a Scottish Government.

8.26 p.m.

Photo of Mr John Biffen Mr John Biffen , Oswestry

With his views, the hon. Member for the Western Isles (Mr. Donald Stewart) would, I know, count it an incursion if I were to follow him, so he will acquit me of discourtesy if I do not. Inevitably, a great deal of our discussion today has been a curtain raiser for the debate we are promised tomorrow. Although we do not have a prices and incomes policy or legislation every year, every year the Gracious Speech contains that touching penultimate sentence: Other measures will be laid before you. Never has that sentence been more pregnant than on this occasion! Therefore, following in the spirit of today, I will confine my observations largely to that.

Anyone who has listened to today's deliberations would conclude first, that the House is fully seized of the great significance of yesterday's statement; secondly, that we are living in circumstances where there are no easy answers. There are no quick and painless remedies which hitherto we have carelessly overlooked. My hon. Friend the Member for Horncastle (Mr. Tapsell) talked of a sea change. I am not sure that I would concur with that description, but there can be no gainsaying the immense significance of the events of the last 48 hours, and of the events which preceded them—the Chequers talks, transferred as they were to Downing Street.

Even those of my hon. Friends who view the developments of the past few weeks with some reservations have all extended to my right hon. Friend the Prime Minister, as, indeed, they should, a great deal of charity. They have said "All right, here we have legislation which is to some extent unexpected." Apparently, the editor of The Times has been calling for this legislation for many months. Some of us who felt that the Government were well able to resist blandishments from that direction have been disappointed.

None the less, the argument has been that the important feature is that time has been bought. One might say, in other words, that the legislation for tomorrow is a ticket for a journey the destination of which still gives rise to apprehension. But the apprehension, understandably, is muted.

One simple feature which has run through many speeches from this side of the House, especially the speeches of my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton) and my hon. Friend the Member for Horsham (Mr. Hordern), has been the concern about the rapid expansion of money supply. I suppose that in a sense the arguments have been particularly well demonstrated in a publication called "Memorial to the Prime Minister", a submission by a number of well-qualified academics, a contribution in no sense polemical, but in every sense thoughtful and considered.

Naturally enough, they, no less than the Finance Ministers at Luxembourg, have concluded that there is a close relationship between the Government's budgetary policy, their net borrowing requirements and the money supply. I want to use this occasion only to place on record the following couple of sentences from the memorial pamphlet. Referring to the net borrowing requirement, it says: From 1945 to 1970 it averaged only about £200 millions a year. In 1971 to 1972"— that is, the first full year when my right hon. Friend was Prime Minister— it was five times more than the previous year, namely, £500 millions compared with £100 millions for 1971. This year it was estimated to be £3,000 millions, but by now you probably know, as we suspect, the true figure will be nearer £4,000 millions. The authors of that observation include people such as Professor Alan Walters, Dr. Malcolm Fisher and Mr. Brian Griffiths. They are all academics and I could quote others of considerable distinction. It is not a polemical contribution, but it provides further evidence of the growing concern that we shall not even begin to apprehend the causes of the agonies which are now going to convulse the House of Commons until we more correctly relate the money supply to the behaviour of prices and incomes.

Many of my Friends who feel that time has been bought by the Bill that will be presented tomorrow hope that the Government will use that time for major action and major policies precisely in the direction that has been pointed by the authors of the "Memorial". I think that they would conclude that there have been various times in the post-war history of our neighbouring countries when decisive economic policies have had to be pursued—pursued rigorously and to some extent unconventionally.

One may look at de Gaulle's stabilisation programme in 1958–59 or Erhart's dash for freedom as examples of Governments using a situation to pursue decisive and distinctive policies. I think that many of my hon. Friends hope that the breathing space being purchased will be used to that direction.

I do not share that optimism, because of the very terms of the White Paper and because of the very conditions that preceded the publication of that White Paper; namely, the negotiations at Chequers and Downing Street. It is much more likely that in the time ahead the movement from the first stage to the second stage will be a movement to some kind of closer and more cosy relationship with the TUC and the CBI, or some more formal and regularised relationship with the TUC and the CBI.

I should have thought that an examination, for example, of the measures proposed by the Government in response to their talks with the TUC and CBI at Chequers, elaborated in the Government statement from Downing Street on 26th September, reinforced the growth in the net borrowing requirements which so much worried the authors of the "Memorial". I am inclined to think that those of the TUC and CBI with whom the Government are consorting will be urging on my right hon. Friends a policy very much in the opposite direction to the policies which many of my hon. Friends wish the Treasury Bench to pursue. That is my understanding of many of the remarks of my hon. Friend the Member for Horsham.

One of the further consequences of today's debate is that after the speech of my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) none of us will be left under any illusion that the slowing down of inflation is not a painless process, by whatever means it is achieved. Therefore, we are confronted by the question whether the TUC will be in a position to wish to be associated with what are essentially painful processes.

That is one of the realities of the situation and it will be a most mistaken policy for the Tory Party to tread a stony path which will comprise stage two or stage three of an incomes policy, at the end of which there will be not one of the mansions referred to by my hon. Friend the Member for Horncastle in one of his speeches, but a cul-de-sac, no less than there was a cul-de-sac at the conclusion of the prices and incomes legislation of 1966, 1967 and 1968.

There is the other danger that in this whole process we will further fragment the authority of and respect for Parliament and extend the principle of subcontracting out to others policy decisions and executive actions and authority which rightly belongs to this Chamber. In pursuit of that policy—I do not say this in any sense of superciliousness—many of my hon. Friends, and I am no doubt equally guilty with them, all too often do not fully apprehend the dynamic and changing relationships within the trade union movement itself. Shop floor power is a growing reality, and the idea that somehow or other one can woo a tame set of trade union moguls who can sit down and answer on behalf of their members in talks at Chequers or Downing Street or anywhere else is a proposition of the grossest potential delusion, not only for this party, but for the elitist social democrats who sit so thick on the benches opposite.

I realise that in making these observations I am saying nothing particularly new. It is not as though this situation is so novel. The hon. Member for Liverpool, Walton (Mr. Heffer) and myself have traded thoughts.

Photo of Mr Timothy Raison Mr Timothy Raison , Aylesbury

Over the port and pheasant?

Photo of Mr John Biffen Mr John Biffen , Oswestry

I fear not. I look forward to experiencing the new nuance of industrial life on Merseyside so tantalisingly revealed by the hon. Gentleman.

Over the week-end I did a little preliminary homework on the debates that lie ahead, and there is a veritable treasury of past quotations to be plundered, and that can be a wholly destructive, babyish exercise and it is not one I seriously commend to the House.

However, following what I said about the dangers of sub-contracting authority away from the House, I cannot forbear from commenting that I was interested to see how early on in the previous sequence of debates on this question this very danger was apprehended by some of the most influential and significant of my right hon. Friends. My right hon. Friend the Secretary of State for Employment could say in the early days on 10th August, 1966: On the TUC and the CBI, according to the Government, will rest the main responsibility for implementing Stage 2 of this policy". —he was referring, of course, to the Prices and Incomes Bill which was then before the House— regardless of the effect that will have, the conflict of loyalties and the almost intolerable position in which it will place both management and labour."—[OFFICIAL REPORT, 10th August, 1966; Vol. 733, c. 1777.] Even more relevant is that after we have had the full range of experience of this policy and the corrosive implications it carried, no less a person and no less a perceptive moderate than my right hon. Friend the Home Secretary could say this on 21st May, 1968— … one has only to look round the world during the last generation to realise that trade unions and employers' associations which have become agents of central government are a distinguishing feature of the authoritarian State."—[OFFICIAL REPORT, 21st May, 1968: Vol. 765, c. 318.] Therefore, when the House considers the policies which will be evolving, not merely tomorrow, but in the months ahead, we have these warnings already written large before us. This will, I suppose, be my first contribution to the new series. I do not suppose that it will be my last.

I conclude with one observation and one hope. The observation is partly born of my reading of the "Memorial" to which I referred earlier. Sooner or later we will be dragged back to the simple realities of economic life and the Treasury Bench will learn that it cannot spend its way to price stability. My hope is that in the painful process of re-education we on these benches do not mortgage our political credibility or trade away the role-making authority of this Parliament.

8.43 p.m.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

Like the hon. Member for Oswestry (Mr. Biffen), I do not intend to delve into any past statements made by either side of the House.

I was disturbed by the speech of the Chancellor of the Exchequer. His audience were left with the impression that there was no crisis of any kind. There was a degree of complacency about his speech which was astonishing and disturbing. Whether we blur the edges or not, the economic lifeblood of Britain is dependent upon whatever measures we can put into effect between now and mid-1973. I believe we shall once again be in deficit in mid-1973 in our visible and invisible exports.

In this situation, I should have thought that the Chancellor of the Exchequer, instead of indulging in a complacent speech intermingled with party polemics, would have taken the opportunity to spell out to both management and trade unions the difficulties facing us. If there is no crisis, if there are no difficulties, then there are no grounds for introducing the Measure to which the Prime Minister referred yesterday and which has dominated the whole of today's debate and which we are to debate tomorrow.

If there are no price controls, there is no point in having a prices and incomes Bill, or whatever we like to call it. The Bill is designed to restrict incomes and prices. It is an anticipatory Measure, and if it is effective—the hon. Member for Oswestry believes it will not be—it envisages what might take place over the next few months. I do not believe it will have such an effect, nor do I believe it has relevance. But the Government believe it has.

With respect to the question of money supply, I raised with the Chancellor of the Exchequer the growth in the distribution of bankers' cards, such as the Access card. What I think is inflationary is the growth in the credit principle of buying today and paying tomorrow, by way of Access cards, Barclaycards and similar cards. But the Chancellor of the Exchequer is not perturbed. [Interruption.] I see that the Chief Secretary does not agree with me. If I were not short of time I would allow him to intervene. It is more inflationary to have such a credit system than the reasons put forward from the Government benches.

The Bill which is to be presented to us is based upon the assumption that we are living in a high-wage economy. That is the biggest nonsense I know. Britain is not a high-wage economy. One of the greatest criticisms we can make of the British trade union movement is that it sets its sights too low.

On the basis of existing labour costs, a recent survey proved that, taking the total costs per hour, which is the real test of labour costings—that is, insurance plus payment for wages—this country was 25 per cent. cheaper on average than the whole of the Common Market countries.

Listening to right hon. and hon. Members opposite, as well as to the Press, one of the most remarkable features of the discussion on the economic situation is the treatment which the Prime Minister has received in these circumstances compared with the treatment which my right hon. Friend the Member for Huyton (Mr. Harold Wilson) would have received had he been Prime Minister. I think that my hon. Friend the Member for Hamilton (Mr. Alexander Wilson) put his finger on the pulse when he referred yesterday to the increased profits—from £997,000 to £1,992,000 in two years of the Beaver-brook Press. The sycophantic Press and television media treatment of the present Prime Minister, compared with that of my right hon. Friend when Prime Minister, is fantastic. Thus, we have a situation of double-think, not only on the Front Bench but in the Press and other media. [Interruption.] The Chief Secretary is muttering. If he wishes me to give way, I shall do so.

The new Bill purports to control prices and wages. Which prices will it control? When the House examines the Bill tomorrow, it will be found that there are so many exceptions that the houswife, as far as prices are concerned, will not be aware of its existence.

I understand that the 26 telephone lines to two centres in London have been inundated today. The telephone has never stopped ringing. If my constituents, who are constantly telling me about the fiddles concerning price increases, have their way, the telephone will have been jammed from West Gloucestershire alone. We are to have value added tax. There is to be an increase in the cost of living in the shape of food levies arising out of our entry to the Common Market. There are to be rent increases. The Prime Minister says, that arrangements will be made with local authorities not to increase rates. There is to be a property revaluation at the end of this year which will increase rates, although I know that the question of poundage enters into the question. In practice, at the end of the day there will be an enormous increase in prices.

It is amazing that the Government have failed to recognise that prices have been gradually rising during the last three weeks. If, for example, right hon. and learned Members opposite had studied some of the trade journals during that period they would have seen the editors, in editorial after editorial, have advised their readers to increase their prices in anticipation of VAT. A classic example is contained in the current issue of the Hairdressers Journal. Recent issues of the distributive trades journals reveal that prices are already being increased, not in relation to the Bill but in relation to the forthcoming VAT.

We cannot possibly avoid the opposition of work-people to measures such as this, and if there is opposition we just do not have sufficient prisons to deal with it. Trade union officials may say "Look, lads, we cannot have an increase in wages", but if the lads decide that they will have an increase, an increase they will have, and if that happens we know that we have not enough courts, warrants and prisons to deal with them. The Government must realise that as a fact, because when it comes to the push what determines the attitude of work-people to wages is not the aspirations of which we have heard from the other side but how far those wages go in letting wives meet the household bills.

Prices will go up whether or not we have the Bill because there are many exceptions, among which are fish, meat, vegetables and any imported commodity. This provision is a charade. The Government know full well that they cannot control prices. They know full well that prices, or at least prices that are of vital importance to the average wage earner, will go up. They know that, but what they are saying in practice is that even if prices do go up not only should work-people's wage rates be restricted but there should not be any reduction, even of half an hour, in their working week.

I believe that people like myself, and people far richer than I, could well have done without the concessions given by the Government in the past two years. When one considers those concessions that we and others have had and then considers the increases in the standard of living of the average worker one can never say that there has been the creation of a climate of fairness, and unless there is the creation of a climate of fairness there can never be any control of incomes or of wages.

In any case, everyone knows that those who are not wholly controlled by PAYE—the top executives, the middle executives, and a lot of other people—can get fringe benefits of various kinds without any wage increases. Everyone knows that what is proposed is an unfair method of controlling incomes. Again, to defer the payment of dividends is, in practice, to benefit those owning the shares concerned, because such deferment increases the value of the shares. But once a wage increase is forgone it is forgone for ever. There is nothing fair about it at all.

It is about time that we realised that when we talk of economics we are talking about people: we are not talking in the abstract. We ought to be organising society so as to ensure that irrespective of where people live, whether it be in the North-East, the North-West, in Scotland, or in the South-East or London, each and everyone of them ought to have the maximum opportunity of a decent standard of living. That cannot be said of the present situation. Nor is it true of the Government's policies. We need so to arrange our affairs as to ensure economic viability region by region. That might well mean having to apply certain concessions to some regions and concessions of a different kind to others, particularly if we are to maintain their competitive position when we enter the Common Market.

All Governments, whether the present Government or the Labour Government who are bound to take office after the next General Election, in examining the economic problems of the nation should begin to think about how far the economic policies which they put forward are concerned with the happiness of people. We shall not get that attitude from the present Government. If the complacency of the Chancellor of the Exchequer, who has now belatedly come into the Chamber, is the barometer of the attitude of the Government, the sooner they go the better.

9.1 p.m.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

The right hon. Gentleman the Leader of the House has already made a brief intervention in his new capacity and will shortly make his first major speech in that capacity. I offer him the traditional congratulations. I am sure that he appreciates the many reasons why his arrival in his present office is received with such acclaim in different parts of the House and throughout the country. I assure him that whatever the future may hold for him, however he may rise, on the stepping stones of his dead self, to higher things, nothing will be able to expunge from the public's memory his record-breaking years in charge of the nation's food. In the years and generations to come, when old men turn to talk to their children, they will say, when the right hon. Gentleman staggers by, "There goes 21 per cent. Prior"—or maybe we will have the up-to-date figures by then, and they will say "There goes 23 per cent. Prior". I am sure that the right hon. Gentleman appreciates how firm is his hold on the imagination of the country.

There are many aspects of the debate on the Queen's Speech which I should like to mention, but our proceedings have been dominated by a discussion on economic affairs and I shall direct myself to that. However, I should not like the right hon. Gentleman the Leader of the House to think that the Opposition are neglectful of many of the other aspects of the debate.

For example, many of us are deeply concerned by the proposals in the Queen's Speech for the overhaul of the National Health Service in England and Wales. If the proposals of the Government follow what has already been indicated they will be bitterly contested by the Opposition. We do not believe that the Government are fit to be entrusted with the overhaul of the National Health Service.

It was misleading of the hon. Member for the Western Isles (Mr. Donald Stewart) to suggest that hon. Members from Scotland and the Scottish steel constituencies have been neglectful in placing their views before the House and the Government. The hon. Gentleman cannot have attended any of our steel debates if he thinks that that is the situation. However, the Labour Party, which represents almost all the steel constituencies, is deeply concerned and alarmed by the rumours and suggestions that it has heard. It may be that the affairs of the steel industry will be one of the matters that will dominate some of the forthcoming debates.

Right hon. and hon. Members on both sides of the House—including my hon. Friends the Members for Tottenham (Mr. Atkinson) and Liverpool, Walton (Mr. Heffer), and the right hon. Member for Wolverhampton, South-West (Mr. Powell) and the hon. Member for Oswestry (Mr. Biffen)—in different ways have raised the very important question of the relationship between discussions at Chequers and Downing Street and debates in the House of Commons. This is a matter which must be debated much more fully in the House. We on this side are not prepared to see the development of a corporate State. We are not prepared to see a situation develop in which the major decisions about the economy are made outside the House of Commons.

Of course I agree with the Government when they say that a Government must govern. Of course they have to govern. Of course they have to get their Measures through the House of Commons. This is primarily the place where they have to report, and I believe that we have to do much more in defining the relationship between the House of Commons and the kind of negotiations or discussions which have taken place outside in the past two or three months.

I want also to comment on the different approaches to our economic problems revealed in their speeches by various Ministers, who have also given different estimates of the point at which we have arrived. Most of us agree that the economic situation is extremely grave. But that is not the implication of many of the speeches we have had from Ministers. I do not apply that stricture to the Prime Minister. He, I think, recognises that what he has proposed to the House marks a bitter defeat for the policies he has been pursuing.

On the other hand, the Chancellor of the Exchequer takes a different view. He described most of the indices in our economy as going extremely well. He emphasised strongly the growth in the economy, which I certainly welcome. It has not gone on for very long so far and therefore we should not place too much reliance on it. But I hope that it continues.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

Mr. Barberindicated assent.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

The Chancellor nods his head about the growth of the economy. That is not the only claim that he has been making. Shortly after the Summer Recess he claimed that the standard of living of our people had been consistently improved over pretty well the whole period of office of the Government.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

The Prime Minister also nods his head in apparent agreement. In other words, the Prime Minister and the Chancellor are claiming a consistent improvement in the standard of living over the whole period of their office. But if that is so why do they now change their policy? Why change a course of action that is having such beneficent results?

But, of course, when the Chancellor tries to pass off these figures he does not explain exactly how he has concocted them. The figures explaining how there has been an improvement in the standard of living over the past two years, according to the Chancellor, include increased wages in those past two years. In other words, all the settlements against which the Government protested at the time are included in the figures of which he now boasts.

We all remember the fight that we had about the Wilberforce settlement. The 18 per cent. goes into the right hon. Gentleman's figures. We all remember the trouble we had when it was said that the leaders of the railway unions did not represent their members. They got their increase, and that, too, is tipped into the right hon. Gentleman's figures. Then there was the coal strike. If all those earnings figures had not been there the Government would not have been able to claim that the standard of life had increased in their period in office.

We were told that they were all defeats. Now we are told that they were victories. The Chancellor of the Exchequer is always proving too much. Most of us, in a charitable frame of mind, had thought that the combination of record inflation figures, record unemployment figures and record low investment figures was a terrible chapter of accidents. However, the Chancellor of the Exchequer insists on saying that he has done it all on purpose. He says that it was all going fine up until the last moment; everything was beautifully arranged until the last few weeks. His doctrine seems to be that everything in the garden would be looking lovely if it were not for the earthquake.

I point this out to distinguish the Chancellor of the Exchequer from the other members of the present Administration. Some of the others have argued quite properly that these problems cannot be dealt with exactly in this way. Many have argued that the Government cannot be judged solely on outward appearances, and that they must not be judged on the implication that the Industrial Relations Act was intended to injure the trade unions or that the Housing Finance Act was intended to injure the position of council tenants. Some Government supporters say that the Administration must not be judged too much on their outward appearances because, all the time, despite the apparent abrasive character of these actions, the Government were working behind the scenes to secure a quite different agreement with the trade unions and the rest of the community. In the words once used by Julius, they have done good by stealth—the rest is on the record.

The Prime Minister is in a very different situation from his colleagues in this matter. I am sure that he would not represent what he will be proposing to this House tomorrow as a great victory. He did not wish it to happen. He would have moved almost heaven and earth to avoid it. It is not a policy that he wanted in any sense.

Whatever the delusions of the Chancellor of the Exchequer, the Prime Minister is fully aware that he has made the journey to Damascus. However, just as I do not think that he has carried out his conversion as gracefully as it might have been done I do not believe that the Apostle Paul would have held such a considerable place in history if, immediately having been hit by the blinding light he had held a Press conference to announce, "I wish you to know that it has never been my policy to persecute the Christians. So far from ever wanting to bash them, I have been in favour all along of a programme of full-hearted consultation." If that had been the result of the original journey to Damascus we should never have heard the story.

As I say, the Prime Minister recognises that he has suffered a major defeat. I shall not quote his own words to him. That would be superfluous. Everyone in the country knows that he fought against the idea of a compulsory wage policy. Indeed, as was said by my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins), he has not merely fought against it, but always argued that it would be a remedy worse than the disease. The right hon. Gentleman has always argued: if we start it, when we call it off the situation gets worse. So, at some time or other, the right hon. Gentleman owes us an explanation not merely why, but when, he changed his mind, because it affects these negotiations.

This is an important matter about not only the past but the future, because the Prime Minister claims that, as the most essential part of his policy, he wants to build on this first stage; he wishes to renew the discussions with the trade unions at the earliest possible date. Therefore, the question of good faith between the Prime Minister and trade union leaders is of considerable importance.

My charge against the Prime Minister is that the reports that he has given to the House and to the country on this matter are twisted and disingenuous accounts of what really happened in the discussions. Indeed, all through the discussions the Government and their propagandist machine were saying one thing in public, or semi-public, and another in private, or semi-private. In public they tried to pretend for a while that they were dealing fairly with the trade unions, but in private they were preparing to put the blame upon them. It is no use right hon. and hon. Gentlemen shaking their heads. Mr. David Wood, reporting in The Times on 30th October, following the first or the second bout of talks—not the last lot; I will come to those in a moment—said: When the usual press conference took place, at 12 Downing Street, in the small hours of Friday morning, Mr. Barber, the Chancellor of the Exchequer, Mr. Victor Feather, general secretary of the TUC, and Mr. Campbell Adamson, director general of the CBI, presented their customary smooth front. In public Ministers supported the smooth front. In private ministers lowered their guard and showed their disappointment. For the first time they laid blame for lack of progress on TUC intransigence, and did not struggle to avoid hints that the TUC side had started to resort tactics that raised serious doubts whether they now wanted a voluntary agreement". So, according to Mr. David Wood they were saying something different in private from what they were saying in public. They were already trying to put the blame upon the trade unions.

The Prime Minister said in the House this afternoon—as he said before, but more directly this afternoon than on previous occasions—that the TUC was responsible for breaking off the negotiations or the discussions, for they were not negotiations at all. Nobody knows better than the Prime Minister that they were not proper negotiations. He put the whole responsibility on the TUC; he himself did not take any responsibility in the matter. That is not the view of the trade union leaders with whom he was negotiating. However, they can answer back. They will deal with the Prime Minister.

I understand that when the trade union leaders went back to consult their General Council they drew up a series of points, which they brought back to the Government on the Wednesday. before the negotiations broke down on the Thursday—points that they wanted discussed, including many of the points that the Prime Minister was either indicating had not been raised by them before or were not to be allowed in the discussions. They came back with these proposals on the Wednesday. If the TUC had followed the Government's tactics they could have published their 12 points then and the whole country could have seen what they were.

But in response to the request from the Government, as I understand the situation, the TUC members said: "We will not publish it because we understand that we are to continue discussions upon them", and they did continue discussions upon those proposals during the next day, on the Thursday. But the discussions, according to the TUC, were broken off on the Thursday evening, not by the TUC, but by the Government who by that time had arranged what they had been seeking to arrange—as I have already indicated according to the account of Mr. David Wood—namely, to put as much of the blame as possible upon the trade union leaders.

Photo of Mr Edward Heath Mr Edward Heath , Bexley

As the hon. Gentleman has raised this in public, I shall have to give the true account of what happened on that occasion. [Interruption.] Perhaps the House will listen to this.

The true account of what happened on that Monday night is that the TUC members were asked whether they were prepared to have an agreement which was entirely voluntarily, or an agreement which was backed by statute, for which Parliament would have to ask for authority, right across the board. It was in the Press. The TUC members said that they could not give a decision then, that they would have to go to the General Council. When they came back from the General Council on Wednesday afternoon they presented the document, which the hon. Gentleman has mentioned, which did not answer that question.

They gave no answer at all to that question, and the result was that on the Wednesday the discussion between the TUC, the CBI and the Government was taken up further with this question, and it ended on Wednesday evening with the CBI and the Government saying that they could continue discussions only on that basis. The TUC members were asked whether they would continue discussions on that basis also. They replied that they understood the position and they would continue the discussions. They then asked that the document should not be published, and that their understanding of the basis of future discussions should not be published either. We accepted that, and that is the reason why that document was not published and why we did not state the basis on which they were continuing the discussions.

Hon. Members:

Withdraw.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

I am not going to withdraw a word of what I have said, because what I have been saying is the truth. My accusation against the Prime Minister was that he had no right to come to the House of Commons this afternoon and tell us that these discussions were broken off because of the action of the TUC members. The TUC members said to the Government "We will continue the discussions on the terms that we have proposed", but the Government said "Oh, no; we will continue only on our terms."

Photo of Mr Edward Heath Mr Edward Heath , Bexley

The hon. Gentleman has got his timetable wrong. I am talking about the position on Wednesday night. The TUC members agreed that they would continue the discussions. They accepted that perfectly clearly, and we, too, accepted it. It was not published at the time because we were continuing discussions on the Thursday. On the Thursday we continued the discussions with my making the offer to them. It included the whole package, and it was there for discussion. The package included the wage award, the social service benefits, local government rates and the Industrial Relations Act. When I had presented that, the TUC members adjourned to discuss it. They came back and said that it was not a basis for discussion and negotiation, and they broke off the discussions.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

What they said was that they were not prepared to take back the Government's proposals and recommend them to the General Council. The right hon. Gentleman's propaganda stunt has misfired because he was much more concerned to try to pretend—

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

It's a pack of lies [Interruption.]

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

If the Chancellor of the Exchequer uses that unparliamentary expression—[An HON. MEMBER: "We do not trust your account."] We do not trust any account of—[Interruption.]

Hon. Members:

Withdraw!

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

The Chancellor of the Exchequer is better fitted for the Conservative Central Office than for the office of Chancellor. I prefer—

Hon. Members:

Sit down!

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

I prefer the word of Jack Jones and Hugh Scanlon to that—[Interruption.]

Photo of Mr Edward Heath Mr Edward Heath , Bexley

The answer to the hon. Gentleman is that my good faith has not been challenged by either the TUC or the CBI.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

We will see what is the truth about the matter. What I am saying is that the Prime Minister came to the House this afternoon and tried to pretend—if he had had the grace to withdraw it, we would not have got into these difficulties—that the whole responsibility for the breakdown of the discussions rested with the TUC, and he has not been able to sustain his case.

Of course, there is another reason why we know that the Government turned to this method for trying to deal with the situation. I do not need to quote even Jack Jones or Hugh Scanlon to prove this. Let us try the Daily Telegraph—perhaps that will suit hon. Gentlemen opposite. What did that paper say was the reason why the Government introduced the freeze? On 6th November, it said: Mr. Heath, therefore, finds himself in almost solitary command. There is no need for him to go to the country to seek a fresh mandate, and no reason for supposing that he intends to do so. That part of the article, unfortunately, appears to be true. What the country now wants, what it is Mr. Heath's duty to provide, is—if we may coin a phrase—the smack of firm government. Disraeli put it better: Like all weak Governments, they resort to strong measures. But the Prime Minister will well remember the occasion when the Daily Telegraph first used the phrase "the smack of firm government". It used it as its instruction to Anthony Eden, who was the Tory Prime Minister of that time. A few weeks later, we had the smack of firm government in Suez, which the Prime Minister remembers so well, and a few weeks later still, the Government, who had been instructed and who had carried out the proposal for governing with the smack of firm government, were out of office themselves. I say that that is the position of the right hon. Gentleman.

The right hon. Gentleman knows that he has spent ten years of his life telling the people of this country that it is impossible to govern on the basis of a compulsory wage and prices freeze. That has been the philosophy, the doctrine, of the Prime Minister, which he has preached during the whole of this period. Now he comes forward and says that he is going to do it. He knows that his electoral undertakings are in ruins, he knows that his mandate is worthless, he knows that the words that he repeated to the country time and again are repudiated in the measures that he has introduced, he knows in fact that he has debased the very words that are so essential to enable any such policy as this to succeed—the consent of the people. The Prime Minister does not dare to use the word "consent" of the people—even less the "full-hearted consent"—because he knows that the whole country would laugh him out of court.

So the Prime Minister ought to understand that not only is his election pledge broken: his political honour is besmirched beyond recovery. One of the reasons why he will get so little sympathy in the country is that he always showed so much self-righteousness in denouncing others for what he is now doing himself. Let him tell us what truly happened in these negotiations, and tell the country what happened. Let the country choose whether we are to have a Prime Minister who has dishonoured his own reputation and that of his party as well.

Photo of Dennis Skinner Dennis Skinner , Bolsover

On a point of order, Mr. Speaker. Is it in order for the Leader of the House, in his new capacity, to speak twice in this debate, after having spoken on Friday?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

This is a debate on an Amendment.

9.30 p.m.

Photo of Mr James Prior Mr James Prior , Lowestoft

The hon. Member for Bolsover (Mr. Skinner) must at least do us justice for having done that degree of homework.

I start by thanking the hon. Member for Ebbw Vale (Mr. Michael Foot) for his kind remarks to me in taking over my new job. They did not take quite as long to make as the remarks of the Leader of the Opposition yesterday, and for that I am thankful. But I must tell the hon. Member for Ebbw Vale that his speech tonight bore all the relics of the sort of speech that he used to make very well from below the Gangway. It is a remarkable fact that he managed to speak for 30 minutes without once telling the House or the country where his own party stood on the whole question of prices and incomes. He built up his whole case on two articles in The Times and the Daily Telegraph. I suggest to him that if he thinks that the country will be impressed by a party which hopes to become the Government of this country one day without one of its members being able to make one constructive suggestion the whole way through a speech, he has a lot still to learn.

On my first page of notes—[Laughter.] I have it written that I hope I shall not be unduly controversial. But I am afraid that already I have overstepped the mark by commenting on the hon. Gentleman's speech.

As the hon. Members for Stockton-on-Tees (Mr. William Rodgers) and Liverpool, Walton (Mr. Heffer) said in their speeches—I was sorry to miss the speech of the hon. Member for Walton—we have been here before. I agree with them. The problems that we are discussing have been with us for some years, and it is plain that up to now no solution has been found.

In replying to the debate I shall try to deal with the points raised not only today but on other days of the debate. However strongly one holds one's views it does not and should never make one intolerant, in the House, of the views of others, and that is the spirit I shall try to maintain as Leader of the House. I shall try in this great office to serve the interests of back-bench Members on both sides of the House. I certainly hope that one of the things I can do is to persuade my colleagues—I hope that the same thing applies to right hon. and hon. Members on the Opposition Front Bench—not to speak for too long. [HON. MEMBERS: "Sit down, then."] thought that what I suggested would help.

My right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) made a speech which I confess I found very difficult to follow. What he said appeared so simple that I wondered why it had not been tried before. Then I came to the realities. To restrict the money supply as he suggests would, I have no doubt, destroy all confidence in businessmen to invest. It would certainly increase unemployment enormously, and it would still leave the monopolies of labour or capital able to extract their premium. Those with money would, of course, be all right, but the mass of the country would suffer. I do not believe that that is the right way to unite the country.

My right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton) got on to a similar point but in a rather milder way. He talked about the selective use of money supply and particularly the restrictions that it would have towards property and land. I think that we all share a worry at the growth in the use of money for the purposes of property and land. The Governor of the Bank of England has issued a Letter of Instruction to the banks to restrict lending for property for speculative purposes, and I am told that there are already signs of this having some effect.

My hon. Friend the Member for the Cities of London and Westminster (Mr. Tugendhat) had some strong words to say on the subject of unregulated tenancies operating in the City, and we have taken careful note of what he said. This is obviously a matter of great concern to many people living in London.

We have inevitably been debating the Address in the context of the tripartite discussions and of the announcement made by my right hon. Friend the Prime Minister. But we should also consider the Gracious Speech in the context of the very real and lasting legislative achievements over the past two years—the reform of virtually the whole of the system of taxation, together with the reductions in tax from which every taxpayer has benefited; the reform of the law on industrial relations and the reform of regional policies, so that those areas which have suffered most from the evils of industrial decline now have the strongest help they have ever had. That is the basis on which the programme outlined in the Gracious Speech is built.

A number of hon. Members on both sides of the House have pointed out in the course of this debate that a keystone of this programme is the new proposals for industrial training. I believe that our proposals will give greater opportunities than ever before for men and women to learn the new and different skills which will be needed to maintain the economic expansion now under way.[Interruption.]

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. Traditionally this is a rather exuberant occasion—but not too much so.

Photo of Mr James Prior Mr James Prior , Lowestoft

Others of my hon. Friends, including the hon. Member for Glasgow, Cathcart (Mr. Edward Taylor), have rightly pointed to our proposals to deal with monopolies and consumer rights. My hon. Friend will know that the reforms proposed in the consumer field will be the toughest and most important of their kind ever put forward. But all these measures go together. They are all part of a policy which will help us to create the kind of prosperous, thriving economic base that we need for all the other things that we have to do. They are all part of a policy to see that this country is equipped to take advantage of the opportunity now opening before us in Europe.

In the same way, the proposals in the Gracious Speech on matters of social policy extend and develop what we have done over the past two years. In that period we have already done more for many of the neglected groups of our society than' the Opposition did from the beginning to the end of their last Administration. As a result about 2 million people, in varying degrees, are receiving hard cash help which they did not receive before—the low-paid families, the younger widows, the severely disabled, the chronic sick wage earners, and the very old.

It is from this Government, not the last, that pensioners have for the first time had a solid undertaking that their pensions will be reviewed every year, and not just one year in two. The old-age pension today is worth over £1 per week more in real terms for a married couple than it was in March, 1970, and, in addition, there will now be the lump sum of £20.

There has been a great deal of talk about the need to improve the conditions of the poor. I must tell the right hon. Member for Newcastle-upon-Tyne, Central (Mr. Edward Short), the deputy Leader of the Opposition, that I thought he painted a grotesque picture, last night, of the plight of the less well off. There are many whose living standards we need to improve, but the right way to tackle this is not by the constant redistribution of wealth but by the creation of new wealth in which all can share. And all do share. The tax thresholds for families have been raised in two successive Budgets. As a result, about 2¾ million people who would otherwise have paid tax for 1972–73 will not do so. The cost of this valuable help to the lower-paid worker is estimated at about £1,500 million for a full year at current income levels. I hardly think that that can be described as redistribution in favour of the rich.

Listening this afternoon to the right hon. Member for Leeds, East (Mr. Healey) and his attack on the £5,000-a-year wage earner or income earner, I could not but wonder why any good young executive should stay in this country. The right hon. Gentleman said that such men should set an example and that it was their example that really mattered. All I can say is that, if they are ever faced with the implementation of the attitude which he expressed today, the only example they will be likely to set will be with their feet as they leave the country. [Interruption.] That is exactly what will happen if we do not properly consider those who create the wealth.

The unfairness of the right hon. Gentle man's approach to the proposals that we have put forward was shown in his failure to pay any attention whatever to the Chequers tripartite discussions, in which the purpose for this year was to give a flat increase of £2 across the board, from the poorest to the richest, which would certainly have been a great help, this year, in doing what we all want to do.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

The right hon. Gentleman should recall, if he was awake this afternoon, that I spent the bulk of my time discussing precisely those proposals. If he is in favour of a flat increase of £2 for everyone, why has he just defended give-aways to people earning over £5,000 a year many times in excess of that figure through tax reliefs alone next year, in the middle of his proposed freeze?

Photo of Mr James Prior Mr James Prior , Lowestoft

As for giving great giveaways to people earning more than £5,000 a year, I have already explained that what the Government have done already in tax matters has reduced the burden of tax at the lower end of the scale by no less than £1,500 million. There is nothing but nonsense in the view put forward by the right hon. Gentleman today and his right hon. Friend last night.

We have set a course for expansion and we are determined to stick to it. Growth alone can help not only the poorer people but the poorer regions. To me regional policy means tackling squalor in many of our cities, particularly in the industrial north, clearing derelict land, building new schools, providing retraining centres, finding the extra jobs and making it possible for people to enjoy the countryside. But growth will not come without a sustained effort, or without control of inflation.

Some pessimists, looking at our economy and thinking that they know our people, say that Britain no longer has the will or the strength to expand, and that in a few years it will he overtaken by other countries whose standard of living has never come within striking distance of our own. I cannot believe that that is the legacy we wish for our children, and I refuse to accept that our people will react in such a way. That is why, in the past two years, we have devised measures to improve the nation's growth and performance, and why, tonight, we do not shirk the adoption of a measure that we all earnestly wished to avoid.

The Government proposed a package to the CBI and the TUC. That package must be considered as a whole. It was not a series of proposals conjured out of the air. It was always envisaged as being open to discussion, but there was a clear limit to the room available for com- promise if we were to avoid jeopardising the three agreed objectives—the maintenance of a high rate of growth and improvement in real incomes, an improvement in the position of the low paid and the pensioner, and moderation in the rate of cost and price inflation.

I come now to the Amendment to the Address in the name of the right hon. Member for Huyton (Mr. Harold Wilson) and others. The suggestion that the Government's policies do not lay the foundations for an effective attack on inflation is astonishing. It is even more astonishing because the Motion was tabled before the Opposition had a chance even to hear what our proposals were. The view expressed in the Amendment is certainly not shared by the people of this country. [HON. MEMBERS "Try an election."] All week Labour Members have been talking about an election, but when it comes to Lincoln they will not face one. If they have all that courage they should try it out. [Interruption.] There is no doubt that the proposals which the Government have put forward have the overwhelming support of the people. Even the so-called Socialist Press—

Photo of Mr James Prior Mr James Prior , Lowestoft

—with the exception of the Morning Star, has given the Government's proposals a good write-up.

It is abundantly clear that the effectiveness of the attack that we are launching upon inflation is generally recognised and welcomed, especially because it is happening in the context of expansion. That, of course, is one of the main differences between the situation in the 1960s and the present situation. I therefore entirely reject the proposition that the Government's policies have held back the fight against inflation. On the contrary, the Government's policies have brought the control of inflation in a time of economic expansion—the most glittering prize of all—within our grasp. There is a further prize, too, for what we are trying to do—the prize of more jobs.

In his speech the other day the right hon. Member for East Ham, North (Mr. Prentice) referred to the problem of unemployment, as also does the Motion we are debating today. I share his concern, as does every hon. Member. We can all be glad about the considerable fall in unemployment which recent figures have shown. But, equally, none of us can be content with the level which remains, or, indeed, with a record which was causing much concern even when the Labour Government bore responsibility for these matters.

Where I take issue with the right hon. Member for East Ham, North is in his apparent belief that inflation and unemployment today are in some way separate problems, giving rise to a choice of priorities. It seems to me crystal clear, in the light of the last few years experience under both Governments, whatever may have been the theories of the past, that these two things are bound together.

Nor is there any mystery about the links. One is the sheer size of many wage increases, far outrunning any increase in productivity. At one and the same time these have forced up prices—

Photo of Mr James Prior Mr James Prior , Lowestoft

—and have led managements into the search for economies in their labour force in a desperate attempt to restrain costs. If the hon. Gentleman does not believe that, I do not know where he has been in the last few years.

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

Will the right hon. Gentleman explain the astronomical increase in price of old houses as a result of the increase in workers wages, when the workers who built those houses have long since died?

Photo of Mr James Prior Mr James Prior , Lowestoft

For one thing, there has been an enormous demand for housing, and that we want to encourage. I am surprised that hon. Gentlemen opposite do not accept the view that I am putting forward. Their behaviour contradicts what the right hon. Gentleman said—that one man's wage increase was another man's price increase. That, I should have thought, was one point in my speech with which they could agree.

The tide of worry about inflation has meant chronic uncertainty about the prospects for growth and stability. It has persistently undermined confidence and damaged the will to invest and expand. This is my answer to the right hon. Member for East Ham, North—this is my answer to the Amendment—this is the basic truth: in fighting the battle against inflation we are also fighting the battle for confidence, for investment, for growth and for full employment.

Deep down in their hearts the members of the Labour Party know that they cannot, in all conscience, continue to oppose simply for the sake of opposition. Deep down they must know that if they hope to play a constructive part in providing a better life for the people of this country and in Britain's contribution to the world at large, they must put on end to the squabbling and divisiveness which make them so sour. Neither the world as a whole nor this country by itself is so powerful that it can afford the kind of divisiveness that diminishes our strength or weakens the bonds of our society. In the end the Labour Party cannot shirk the challenge of Europe.

The Labour Party cannot stand aside when violence and disruption try to take over. They cannot be neutral when confronted with the wreckers who are concerned only with their own political and sectional interests and not with the interests of the nation. They cannot give encouragement to those who break the laws of Parliament. If we are to protect the weak we have to take action of two sorts. We have to take positive action in favour of the weak and we have to take firm action to restrain the strong who would use their power to exploit the rest of the community.

That is what the Government have been doing. This is what the Gracious Speech outlines for this Parliament. It is these policies uniting our society, strengthening the bonds within us, that give strength to our country. It is for these reasons that I am confident of the support of this House and the country and I ask the House to reject the Amendment.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

As many as are of that—[Interruption.] Is there a point of order?

Photo of Mr James Wellbeloved Mr James Wellbeloved , Erith and Crayford

On a point of order, Mr Speaker. It is now three minutes to Ten o'clock. My hon. Friend the Member for Ealing, North (Mr. Molloy) was on his feet trying to catch your eye.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

If there was any hon. Member on his feet trying to catch my eye I did not see him.

Hon. Members:

Oh!

Photo of Mr James Wellbeloved Mr James Wellbeloved , Erith and Crayford

Disgraceful. On a point of order—

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I have put the Question.

The House proceeded to a Division—

Photo of Mr William Molloy Mr William Molloy , Ealing North

(seated and covered): On a point of order. When I tried to catch your eye a moment ago, Mr. Speaker, it was not 10 o'clock. As I understand it, the debate does not have to finish till 10 o'clock, and the right hon. Gentleman—[Interruption.]—

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. I cannot hear the hon. Member.

Photo of Mr William Molloy Mr William Molloy , Ealing North

The point I was making was that I understood that the debate could go on to 10 o'clock. The right hon. Gentleman the Leader of the House decided to terminate his speech at six minutes to Ten, whereupon I thought it right and proper that I, too, should make a contribution to the debate. When the Division was called it was far from 10 o'clock, and it seemed to me that the

House could have continued debating this matter for another six minutes. It seems to me that if someone on the Front Bench can finish his speech at six or seven or eight minutes to the time for the end of a debate, and that if debate is then supposed to have finished, we on the back benches will be in great danger of our opportunities to speak being eroded.

I would ask you, Mr. Speaker, to be good enough to consult the Clerk, who has a clock. There are hon. Members on both sides of the House who saw me on my feet at six minutes to the hour, seeking, according to the rules of the House, to catch your eye. No one else stood up, and I think that I should have been allowed to make a contribution.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I got up to put the Question, and when I got up I did not see any hon. Member on his feet. I did not see the hon. Member himself on his feet. The hon. Member has made his point, but I think it is a very academic point—

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. I think it is a very academic point, because one of the hon. Member's hon. Friends would have proposed the Closure very soon after the hon. Member had begun his speech.

It is an academic point.

The House having divided: Ayes 274, Noes 308.

Division No. 4.]AYES[10.0 p.m.
Abse, LeoCant, R. B.Delargy, Hugh
Albu, AustenCarmichael, NeilDell, Rt. Hn. Edmund
Allen, ScholefieldCarter, Ray (Birmingh'm, Northfield)Dempsey, James
Archer, Peter (Rowley Regis)Carter-Jones, Lewis (Eccles)Doig, Peter
Ashley, JackCastle, Rt. Hn. BarbaraDormand, J. D.
Ashton, JoeClark, David (Colne Valley)Douglas, Dick (Stirlingshire, E.)
Atkinson, NormanCocks, Michael (Bristol, S.)Douglas-Mann, Bruce
Bagier, Gordon A. T.Cohen, StanleyDriberg, Tom
Barnes, MichaelColeman, DonaldDuffy, A. E. P.
Barnett, Guy (Greenwich)Concannon, J. D.Dunn, James A.
Barnett, Joel (Heywood and Royton)Conlan, BernardDunnett, Jack
Baxter, WilliamCorbet, Mrs. FredaEadie, Alex
Beaney, AlanCox, Thomas (Wandsworth, C.)Edelman, Maurice
Benn, Rt. Hn. Anthony WedgwoodCrawshaw, RichardEdwards, Robert (Bilston)
Bennett, James(Glasgow, Bridgeton)Cronin, JohnEdwards, William (Merioneth)
Bidwell, SydneyCrosland, Rt. Hn. AnthonyEnglish, Michael
Bishop, E. S.Crossman, Rt. Hn. RichardEvans, Fred
Blenkinsop, ArthurCunningham, G. (Islington, S.W.)Ewing, Harry
Boardman, H. (Leigh)Cunningham, Dr. J. A. (Whitehaven)Faulds, Andrew
Booth, AlbertDalyell, TamFernyhough, Rt. Hn. E.
Bottomley, Rt. Hn. ArthurDarling, Rt. Hn. GeorgeFisher,Mrs.Doris(B'ham,Ladywood)
Bradley, TomDavidson, ArthurFitch, Alan (Wigan)
Broughton, Sir AlfredDavies, Denzil (Llanelly)Fletcher, Raymond (Ilkeston)
Brown, Robert C. (N'c'tle-u-Tyne,W.)Davies, G. Elfed (Rhondda, E.)Fletcher, Ted (Darlington)
Brown, Hugh D. (G'gow, Provan)Davies, Ifor (Gower)Foley, Maurice
Brown, Ronald(Shoreditch & F'bury)Davis, Clinton (Hackney, C.)Foot, Michael
Buchan, NormanDavis, Terry (Bromsgrove)Ford, Ben
Callaghan, Rt. Hn. JamesDeakins, EricForrester, John
Campbell, I. (Dunbartonshire, W.)de Freitas, Rt. Hn. Sir GeoffreyFraser, John (Norwood)
Freeson, ReginaldLoughlin, CharlesRichard, Ivor
Galpern, Sir MyerLyon, Alexander W. (York)Roberts, Albert (Normanton)
Garrett, W. E.Lyons, Edward (Bradford, E.)Roberts, Rt.Hn.Goronwy(Caernarvon)
Gilbert, Dr. JohnMabon, Dr. J. DicksonRobertson, John (Paisley)
Ginsburg, David (Dewsbury)McBride, NeilRoderick, Caerwyn E.(Brc'n&R'dnor)
Golding, JohnMcCartney, HughRodgers, William (Stockton-on-Tees)
Gourlay, HarryMcElhone, FrankRose, Paul B.
Grant George (Morpeth)McGuire, MichaelRoss, Rt. Hn. William (Kilmarnock)
Grant, John D. (Islington, E.)Mackenzie, GregorRowlands, Ted
Griffiths, Eddie (Brightside)Mackie, JohnSandelson, Neville
Griffiths, Wi[...]l (Exchange)Mackintosh, John P.Sheldon, Robert (Ashton-under-Lyne)
Hamilton, William (Fife, W.)Maclennan, RobertShore Rt. Hn. Peter (Stepney)
Hamling, WilliamMcMillan, Tom (Glasgow, C.)Short,Rt.Hn.Edward(N'c'tle-u-Tyne)
Hannan, William (G'gow, Maryhill)McNamara, J. KevinShort Mrs. Renée (W'hampton, N.E.)
Silkin, Rt. Hn. John (Deptford)
Hardy, PeterMallalieu, J. P. (Huddersfield, E.)Silkin, Hn. S. C. (Dulwich)
Harper, JosephMarks, KennethSillars, James
Harrison, Walter (Wakefield)Marsden, F.Silverman, Julius
Hart, Rt. Hn. JudithMarshall, Dr. EdmundSkinner, Dennis
Hattersley, RoyMason, Rt. Hn. RoySmall, William
Healey, Rt. Hn. DenisMayhew, ChristopherSmith, John (Lanarkshire, N.)
Heffer, Eric S.Meacher, MichaelSpearing, Nigel
Hilton, W. S.Mellish, Rt. Hn. RobertSpriggs, Leslie
Hooson, EmlynMendelson, JohnStallard, A. W.
Horam, JohnMikardo, IanSteel, David
Houghton, Rt. Hn. DouglasMillan, BruceStewart, Donald (Western Isles)
Huckfield, LeslieMiller, Dr. M. S.Stewart, Rt. Hn. Michael (Fulham)
Hughes, Rt. Hn. Cledwyn (Anglesey)Milne, EdwardStoddart, David (Swindon)
Hughes, Mark (Durham)Mitchell, R. C. (S'hampton, Itchen)Stonehouse, Rt. Hn. John
Hughes, Robert (Aberdeen, N.)Molloy, WilliamStrang, Gavin
Hughes, Roy (Newport)Morgan, Elystan (Cardiganshire)Strauss, Rt. Hn. G. R.
Hunter, AdamMorris, Alfred (Wythenshawe)Summerskill, Hn. Dr. Shirley
Irvine, Rt. Hn. Sir Arthur (Edge Hill)Morris, Charles R. (Openshaw)Swain, Thomas
Janner, GrevilleMorris, Rt. Hn. John (Aberavon)Thomas, Rt.Hn.George (Cardiff,W.)
Jay, Rt. Hn. DouglasMoyle, RolandThomas, Jeffrey (Abertillery)
Jeger, Mrs. LenaMulley, Rt. Hn. FrederickThomson, Rt. Hn. G. (Dundee, E.)
Jenkins, Hugh (Putney)Murray, Ronald KingTinn, James
John, BrynmorOakes, GordonTomney, Frank
Johnson, Carol (Lewisham, S.)Ogden, EricTorney, Tom
Johnson, James (K'ston-on-Hull, W.)O'Halloran, MichaelTuck, Raphael
Johnson, Walter (Derby, S.)O'Malley, BrianUrwin, T. W.
Jones, Barry (Flint, E.)Oram, BertVarley, Eric G.
Jones, Dan (Burnley)Orbach, MauriceWainwright, Edwin
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)Orme, StanleyWalden, Brian (B'm'ham, All Saints)
Jones, Gwynoro (Carmarthen)Oswald, ThomasWalker, Harold (Doncaster)
Jones, T. Alec (Rhondda, W.)Owen, Dr. David (Plymouth. Sutton)Wallace, George
Judd, FrankPadley, WalterWatkins, David
Kaufman, GeraldPaget, R. T.Weitzman, David
Kelley, RichardPalmer, ArthurWells, William (Walsall, N.)
Kerr, RussellPannell, Rt. Hn. CharlesWhite, James (Glasgow, Pollok)
Kinnock, NeilParker, John (Dagenham)Whitehead, Phillip
Lambie, DavidParry, Robert (Liverpool, Exchange)Whitlock, William
Lam born, HarryPavitt, LaurieWilley, Rt. Hn. Frederick
Lamond, JamesPeart, Rt. Hn. FredWilliams, Alan (Swansea, W.)
Latham, ArthurPendry, TomWilliams, Mrs. Shirley (Hitchin)
Lawson, GeorgePerry, Ernest G.Williams, W. T. (Warrington)
Leadbitter, TedPrentice, Rt. Hn. Reg.Wilson, Alexander (Hamilton)
Lee, Rt. Hn. FrederickPrescott, JohnWilson, Rt. Hn. Harold (Huyton)
Leonard, DickPrice, J. T. (Westhoughton)Wilson, William {Coventry, S.)
Lestor, Miss JoanPrice, William (Rugby)Woof, Robert
Lever, Rt. Hn. HaroldProbert, ArthurTELLERS FOR THE AYES:
Lewis, Arthur (W. Ham, N.)Reed, D. (Sedgefield)
Lewis, Ron (Carlisle)Rees, Merlyn (Leeds, S.)Mr. James Hamilton and
Lipton, MarcusRhodes, GeoffreyMr. James Wellbeloved.
Lomas, Kenneth
NOES
Adley, RobertBiggs-Davison, JohnBryan, Sir Paul
Alison, Michael (Barkston Ash)Benyon, W.Buchanan-Smith, Alick(Angus,N&M)
Allason, James (Hemel Hempstead)Berry, Hn. AnthonyBuck, Antony
Amery, Rt. Hn. JulianBiffen, JohnBullus, Sir Eric
Archer, Jeffrey (Louth)Blaker, PeterBurden, F. A.
Astor, JohnBoardman, Tom (Leicester, S.W.)Butler, Adam (Bosworth)
Atkins, HumphreyBody, RichardCampbell, Rt.Hn.G.(Moray & Nairn)
Awdry, DanielBoscawen, Hn. RobertCarlisle, Mark
Baker, Kenneth (St. Marylebone)Bossom, Sir CliveCarr, Rt. Hn. Robert
Baker, W. H. K. (Banff)Bowden, AndrewCary, Sir Robert
Balniel, Rt. Hn. LordBraine, Sir BernardChannon, Paul
Barber, Rt. Hn. AnthonyBray, RonaldChapman, Sydney
Batsford, BrianBrewis, JohnChataway, Rt. Hn. Christopher
Beamish, Col. Sir TuftonBrinton, Sir TattonChichester-Clark, R.
Bell, RonaldBrocklebank-Fowler, ChristopherChurchill, W. S.
Bennett, Sir Frederic (Torquay)Brown, Sir Edward (Bath)Clark, William (Surrey, E.)
Bennett, Dr. Reginald (Gosport)Bruce-Gardyne. J.Clarke, Kenneth (Rushcliffe)
Cockeram, EricHornsby-Smith,Rt.Hn.Dame PatriciaPage, John (Harrow, W.)
Cooke, RobertHowe, Hn. Sir Geoffrey (Reigate)Parkinson, Cecil
Coombs, DerekHowell, David (Guildford)Peel, John
Cooper, A. E.Howell, Ralph (Norfolk, N.)Percival, Ian
Cordle, JohnHunt, JohnPeyton, Rt. Hn. John
Corfield, Rt. Hn. Sir FrederickHutchison, Michael ClarkPike, Miss Mervyn
Cormack, PatrickIremonger, T. L.Pink, Bonner
Costain, A. P.Irvine, Bryant Godman (Rye)Pounder, Rafton
Crouch, DavidJames, DavidPowell, Rt. Hn. J. Enoch
Crowder, F. P.Jenkin, Patrick (Woodford)Price, David (Eastleigh)
Dalkeith, Earl ofJennings, J. C. (Burton)Prior, Rt. Hn. J. M. L.
Davies, Rt. Hn. John (Knutsford)Jessel, TobyProudfoot, Wilfred
d'Avigdor-Goldsmid, Sir HenryJohnson Smith, G. (E. Grinstead)Pym, Rt. Hn. Francis
d'Avigdor-Goldsmid,Maj.-Gen.JackJones, Arthur (Northants, S.) Quennell, Miss J. M.
Dean, PaulJopling, MichaelRaison, Timothy
Deedes, Rt. Hn. W. F.Joseph, Rt. Hn. Sir KeithRamsden, Rt. Hn. James
Digby, Simon WingfieldKaberry, Sir DonaldRawlinson, Rt. Hn. Sir Peter
Dixon, PiersKellett-Bowman, Mrs. ElaineRedmond, Robert
Dodds-Parker, DouglasKershaw, AnthonyReed, Laurance (Bolton, E.)
Douglas-Home, Rt. Hn. Sir AlecKimball, MarcusRees, Peter (Dover)
Drayson, G. B.King, Evelyn (Dorset, S.)Rees-Davies, W. R.
du Cann, Rt. Hn. EdwardKing, Tom (Bridgwater)Renton, Rt. Hn. Sir David
Dykes, HughKinsey, J. R.Rhys Williams, Sir Brandon
Eden, Rt. Hn. Sir JohnKirk, PeterRidley, Hn. Nicholas
Edwards, Nicholas (Pembroke)Knight, Mrs. JillRidsdale, Julian
Elliot, Capt. Walter (Carshalton)Knox, DavidRippon, Rt. Hn. Geoffrey
Elliott, R. W. (N'c'tle-upon-Tyne,N.)Lambton, LordRoberts, Wyn (Conway)
Elliott, R. W. (N'c'tle-upon-Tyne,N.)Lamont, NormanRodgers, Sir John (Sevenoaks)
Emery, PeterLane, DavidRossi, Hugh (Hornsey)
Eyre, ReginaldLangford-Holt. Sir JohnRost, Peter
Farr, JohnLe Marchant, SpencerRussell, Sir Ronald
Fell, AnthonyLewis, Kenneth (Rutland)St. John-Stevas, Norman
Scott, Nicholas
Fenner, Mrs. PeggyLloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)scott-Hopkins, James
Finsberg, Geoffrey (Hampstead)Lloyd, Ian (P'tsm'th, Langstone)
Fisher, Nigel (Surbiton)Longden, Sir GilbertShaw, Michael (Sc'b'gh & Whitby
Fletcher-Cooke, CharlesLoveridge, JohnShelton, William (Clapham)
Fookes, Miss JanetLuce, R. N.Simeons, Charles
Fortescue, TimSinclair, Sir George
Foster, Sir JohnMcAdden, Sir StephenSkeet, T. H. H.
Fowler, NormanMacArthur, IanSmith, Dudley (W'wick & L'mington)
Fox, MarcusMcCrindle, R. A.Soref, Harold
Fraser,Rt.Hn.Huah(St'fford & Stone)McLaren, MartinSpeed, Keith
Maclean, Sir FitzroySpence, John
Fry, PeterMcMaster, StanleySproat, Iain
Galbraith, Hn. T. G. D.Macmillan,Rt.Hn.Maur'[...]e(Farnham)Stalnton, Keith
Gardner, EdwardMcNair-Wilson, MichaelStanbrook, Ivor
Gibson-Watt, DavidMcNair-Wilson, Patrick (New Forest)Stewart-Smith, Geoffrey (Belper)
Gilmour, Sir John (Fife, E.)Maddan, MartinStodart, Anthony (Edinburgh, W.)
Glyn, Dr. AlanMadel, DavidStoddart-Scott, Col. Sir M.
Godber, Rt. Hn. J. B.Marples, Rt. Hn. ErnestStokes, John
Gooahart, PhilipMarten, NeilStuttaford, Dr. Tom
Gorst, JohnMather, CarolSutcliffe, John
Gower, RaymondMaude, AngusTapsell, Peter
Grant, Anthony (Harrow, C.)Maudling, Rt. Hn. ReginaldTaylor, Sir Charles (Eastbourne)
Gray, HamishMawby, RayTaylor,Edward M.(G'gow,Cathcart)
Green, AlanMaxwell-Hyslop, R. J.Taylor, Frank (Moss Side)
Grieve, PercyMills, Peter (Torrington)Taylor, Robert (Croydon, N.w.)
Griffiths, Eldon (Bury St. Edmunds)Mills, Stratton (Belfast, N.)Tebbit, Norman
Grylls, MichaelMiscampbell, NormanTemple, John M.
Gummer, J. SelwynMitchell, Lt.-Col.C.(Aberdeenshire.W)Thatcher, Rt. Hn. Mrs. Margaret
Gurden, HaroldMitchell, David (Basingstoke)Thomas, John Stradling (Monmouth)
Hall, Miss Joan (Keighley)Moate, RogerThomas, Rt.Hn. Peter (Hendon, S.)
Hall, John (Wycombe)Molyneaux, JamesThompson, Sir Richard (Croydon, S.)
Hall-Davis, A. G. F.Money, ErnieTilney, John
Hamilton, Michael (Salisbury)Monks, Mrs. ConnieTrafford, Dr. Anthony
Hannam, John (Exeter)Monro, HectorTrew, Peter
Harrison, Brian (Maldon)More, JasperTugendhat, Christopher
Harrison, Col. Sir Harwood (Eye)Morgan, Geraint (Denbigh)Turton, Rt. Hn. Sir Robin
Haselhurst, AlanMorgan-Giles, Rear-Adm.Van Straubenzee, W. R.
Hastings, StephenMorrison, CharlesVaughan, Dr. Gerard
Havers, MichaelMudd, DavidVickers, Dame Joan
Hawkins, PaulMurton, OscarWalder, David (Clitheroe)
Hay, JohnNabarro, Sir GeraldWalker, Rt. Hn. Peter (Worcester)
Hayhoe, BarneyWalker-Smith, Rt. Hn. Sir Derek
Heath, Rt. Hn. EdwardNeave, AireyWall, Patrick
Heseltine, MichaelNicholls, Sir HarmarWalters, Dennis
Hicks, RobertNoble, Rt. Hn. MichaelWard, Dame Irene
Higgins, Terence L.Normanton, TomWarren, Kenneth
Hlley, JosephNott, JohnWeatherill, Bernard
Hill, John E. B. (Norfolk, S.)Onslow, CranleyWells, John (Maidstone)
Hill, James (Southampton, Test)Oppenheim. Mrs. SallyWhite, Roger (Gravesend)
Holland, PhilipOrr, Capt. L. P. S.Whitelaw, Rt. Hn. William
Holt, Miss MaryOsborn, JohnWiggin, Jerry
Hordern, PeterOwen, Idris (Stockport, N.)Wilkinson, John
Hornby, RichardPage, Rt. Hn. Graham (Crosby)Winterton, Nicholas
Wolrige-Gordon, PatrickWorsley, MarcusTELLERS FOR THE NOES
Woodhouse, Hn. ChristopherWylie, Rt. Hn. N. R.Mr. Walter Clegg and
Woodnutt, MarkYounger, Hn. GeorgeMr. Victor Goodhew.

Question accordingly negatived.

Main Question put and agreed to.

Resolved,That an humble Address be presented to Her Majesty, as follows:Most Gracious Sovereign,We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.