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Inflation (Minister's Speech)

Volume 884: debated on Tuesday 21 January 1975

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asked the Prime Minister whether the public statement on inflation made in Washington, DC, on 10th December by the Secretary of State for Prices and Consumer Protection represented Government policy.


asked the Prime Minister if the public statement on inflation by the Secretary of State for Prices and Consumer Protection in Washington, DC, on 10th December represents the policy of Her Majesty's Government.

I would refer the hon. Members to the reply which I gave to the hon. Member for Mid-Sussex (Mr. Renton) on 19th December.—[Official Report, 19th December 1974; Vol. 882, c. 528.]

In her statement on 10th December the right hon. Lady forecast inflation at a rate of 17 per cent. We now have a rate of 19 per cent., and wage rates have risen by 28 per cent. What has happened to the Prime Minister's newfound determination in this matter? How could Ministers yesterday go to the TUC and tamely say that they are satisfied with guidelines which have produced this disastrous combination of figures, which, so far as I can see, are without parallel in the Western world?

The hon. Gentleman has read a particular report of my right hon. Friend's speech. I have read what she actually said, which does not bear out the hon. Gentleman's summary. With regard to the meeting with the TUC yesterday, we did not say that we were satisfied with the situation. We said exactly what I said in the House last week—namely, that we should like to see more compliance with the social contract. I remind the hon. Gentleman that the figures which have been published by the Government show that two-fifths of the increases in the past year have been due to the threshold payments under agreements reached in accordance with the Conservative Government's statutory policy, which on thresholds we supported. In addition, some of the special increases awarded since then were in respect of people who had suffered serious anomalies under statutory controls, such as the miners, the railwaymen and the postmen—and London weighting had not been substantially reconsidered for some seven years.

Is my right hon. Friend aware that there is considerable confusion about the purpose of the social contract? Does he think it appropriate to spell out the purpose of the terms contained within it? Does he agree that if it is the purpose of the social contract to maintain workers' living standards—workers whom the Labour Party are here to represent—then what the social contract refers to is take-home pay and not gross wages? Does this not suggest that it is take-home pay that should equate with rises in the retail price index?

There is no ministerial responsibility for any confusion that there may be in my hon. Friend's mind. There is no confusion whatever, as was made clear yesterday by the leaders of the TUC with whom my colleagues and I discussed these questions.

Will the Prime Minister not answer the question put to him by the hon. Member for Tottenham (Mr. Atkinson)? Will he not inform him that there is no possibility whatever that take-home pay can be maintained in the corning year?

No, Sir. The argument yesterday, the argument last week in the House, and the argument throughout, has been about the guidelines. We consider those guidelines to be right. We believe that they will make a marked impact on the rate of inflation that we inherited from the Conservative Government—[Interruption.] We believe that this will happen. We should like to see greater compliance with the social contract than the 75 per cent. figure we have seen so far. The House will have seen the report made by independent commentators—not members of the Labour Party—showing that in the latest period the rate of increase has been falling. The fact that the rate of increase has been higher in public industries than in private industries is due to the essential catching-up operation, which was inevitable after the statutory policy pursued by the Conservative Government.

Is my right hon. Friend aware that the social contract has had a far greater impact on local bargaining than could ever have been expected in the circumstances in which it was introduced after the Tory repressive legislation? Is he aware that local trade union officials throughout the country are doing their best to ensure that it will succeed?

Yes, Sir. My hon. Friend has had much more experience of these matters, in terms both of national and local bargaining within the trade union movement, than most of those who have been putting questions this afternoon. I entirely agree with him. He is, of course, concerned with one of the public industries that were gravely attacked by the previous Government, not only during the statutory period but during the period of the Leader of the Opposition's confrontation with the Post Office workers a little earlier.

Is the Prime Minister aware that there is no justification for the argument that he constantly puts forward that threshold agreements are the cause of the massive increases the figures for which were published yesterday? The guidelines of the TUC are that the threshold payments should be taken into account in settlements which are now being made. The plain fact is that the threshold agreements are not being taken into account—hence the very high figures that we saw yesterday. As, in the lifetime of the present administration, since March last year, the rate of price increases has doubled and the rate of wage earnings has more than doubled, and the Secretary of State for Prices and Consumer Protection says that in this year it will get worse, when will the Prime Minister have the political courage to take action, instead of merely talking?

In the first place, I do not accept the right hon. Gentleman's statement about thresholds. The latest increases—those which appeared in yesterday's figures—included a considerable number in which the threshold system was incorporated into the wage settlements. This was inevitable; the Leader of the Opposition must have had it in mind when he introduced thresholds. I do not accept that either prices or wages—this is what the right hon. Gentleman said—are double what they were a year ago. He is totally wrong about that.