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Social Contract

Volume 884: debated on Thursday 23 January 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

5.3 p.m.

I am glad to have this opportunity of initiating a debate on the need to preserve the social contract. We have just had exchanges on unemployment figures which will fit in nicely with the text of my speech.

My right hon. Friend the Secretary of State for Employment will need no reminding of the long arguments and discussions during and since the election, outside and inside the House, about what the social contract is. We had some lengthy exchanges on the matter at Question Time on Tuesday this week. My right hon. Friend, who, I presume, will be answering my debate, said then
"The social contract covers the whole range of Government economic policies."—[Official Report, 21st January 1975; Vol. 884, c. 1205.]
I start from the proposition that the basic aims of these policies are: first, to halt inflation; secondly, to redistribute the national wealth of this country; thirdly, to maintain, so far as we can, full employment; and, fourthly, to improve our competitive position as a world trading nation.

All these problems and others have been with us for at least the last 30 years, and no Government have ever come up with enduring solutions to them. Even during the years immediately after the war we as politicians played little part in damping down the expectations of our people of an automatic, steady, annual increase in their standard of living. We have tended to regard that automatic increase, year by year, as some God-given right. We have seen it as a hangover from the days of our imperialistic glory when for generations, even centuries, we sucked the blood of our colonial empire, and the private owners of our industry at home exploited their ill-organised workers who had never dreamed of the real power that lay in their hands.

Today all that has changed, and it is changing fast every day. We are witnessing a massive shift of power within the United Kingdom and in the world. The British Empire as it was known, and about which we were taught in school, has gone for ever. With it have gone our sources of cheap food and raw materials, and who in this House would regret that? Yet we still assume, or some still assume, that we could have access to that same cheap food and these same cheap raw materials.

All of us are having to learn the hard way that this is an illusion. The Arabs have got us by the anatomy where the pinch hurts most. Our long-suffering sugar suppliers in Jamaica and elsewhere are refusing to be exploited any longer by their former masters in the United Kingdom. One could go on applying these cold douches of the realities of the modern world in which we must fight for our standard of living and work for it. It is a world in which we have very few friends and still fewer philanthropists prepared to bail us out.

Internationally there are unmistakable signs of a shift in the balance of power from the rich and developed northern hemisphere—if I may generalise in that way—to the poor and under-developed southern part of the globe. There is a similar shift within our own boundaries. There is a transfer of power to those who produce the wealth from those who own it. Our sovereign Parliament—and we have heard a great deal about the sovereignty of it—is less sovereign than we in it care to think. To fear the loss of our sovereignty—and this fear has been expressed by certain Cabinet Ministers in recent weeks—from joining and remaining within the EEC is just about as credible as Zsa Zsa Gabor fearing the loss of her virginity as a result of her sixth marriage. That power has moved from this House to forces outside.

No British Government could today survive for long without the approval, support and co-operation of organised labour outside the House. That does not mean simply the leaders of the separate trade unions like Mr. Jack Jones or Mr. Hugh Scanlon. Still less does it mean the General Secretary of the TUC, the genial Mr. Murray. Twenty shop stewards in a key industry like electricity supply or a majority of one or two on the National Executive of the National Union of Mineworkers have more power in their hands than all the back-bench MPs in this House.

These seem to me to be the hard realities of our situation, and it is a recognition of those hard realities that produced the social contract.

Does my hon. Friend accept that the executives of unions have the power only so long as they have the support of the rank and file?

I am not dissenting from that. I am simply making the general proposition that the power to disrupt the country's economy lies not in what we do here but in what is done by people outside, including the trade unions, the CBI and other bodies that are not elected in the way that we are.

The recognition of that fact has brought our party to the point where we have sought to devise a contract, which we commonly call the social contract. It is easy to make jibes about it—about its vagueness, the ease with which it appears to be broken and the fact that some trade unions and their members have refused to accept it. The extreme Right and the extreme Left of the political spectrum seem to have one thing in common, which is to break both the letter and the spirit of the social contract.

Here I speak for myself and, I think, all responsible and reasonable people. All who have the welfare of the country at heart are concerned for the well-being of all our people and the protection of the weakest sections. All of us who accept that proposition must also accept the principle underlying the contract, which is to ensure that such sacrifices as must be made are fairly shared. That was a fundamental concept on which we fought and won the February election and the October election. But I find it hard to reconcile that principle with some of the things that have happened since the election.

I should like to give a few examples. The Government made what I can only describe, as politely as I can, as furtive announcements about substantial salary increases for the chairmen of nationalised industries, judges and the other higher-paid professional sections of our society. There was, equally surreptitiously, an announcement of increased school meal prices. It does not seem to me that those two announcements fit in with our concept of protecting those who cannot protect themselves, and demanding sacrifices from those best able to make them.

I hope that my right hon. Friend the Secretary of State will take what I say next in the spirit in which I say it. We had from him a harsh criticism of a recent pay award to certain members of the BBC, but there have been few such criticisms from him or any other Minister of any of the other substantial wage and salary awards made since October. My right hon. Friend the Chancellor of the Exchequer and other Ministers have told us that 75 per cent. of the claims met recently have fallen within the terms of the social contract. My right hon. Friend the Secretary of State repeated that point a Tuesday. Certainly many of the lower paid, especially in the public services, have had substantial increases which are thoroughly deserved and justified. As my right hon. Friend knows, I speak strongly and emotionally about the nurses and about the teachers. Increases to them and to postmen, old-age pensioners and the disabled fit very well within the terms of the social contract.

There has been rather slower progress towards equal pay than I would wish. I hope that my right hon. Friend will say something about that. We have had the freezing of rents, and there have been the food subsidies. I gather that there will soon be an announcement of a further increase in food subsidies.

By and large, and taking account of these factors, few can doubt that the Government have played, and are playing, their full part in keeping their side of the contract. We had a good example yesterday in the consideration of the Finance Bill. I compare the packed Opposition benches yesterday, when we discussed the capital transfer tax, with the presence of just two Tory back benchers now. When we were talking about taxing the very wealthy 3 per cent. or 4 per cent. at the top it was not possible to find a seat on the Opposition benches. Now that we are discussing something that is designed to protect weaker sections of our society and to build a more just society, which is what the social contract is about, not a Tory gives a damn about it.

Does the hon. Gentleman agree that the Government benches are also denuded? The number of Labour Members present can be counted on fewer than the fingers of two hands. There are far fewer present than when the capital transfer tax was being debated.

I am making the point that the Conservative benches were packed for the whole of the debate till half-past one yesterday morning, when Conservative Members would normally all have been tucked up in bed in the Savoy or the Hilton. They had important and privileged people to protect. That is the fundamental difference between the Conservatives and my party.

The invaluable work of the independent Advisory Conciliation and Arbitration Service has gone on, and is going on, largely unobserved, unpublicised and unappreciated. I hope that my right hon. Friend will do more to tell the people the value of what the service is doing and how it is doing it.

Despite all the progress on the Government side, the contract could be in grave danger of total collapse within the next few months. I think that my right hon. Friend is disturbed about that. There are ominous signs. My right hon. Friend gave us an indication about one of them, the increase in unemployment, this afternoon. I had a note only yesterday about youth unemployment in the county of Fife. Last January it was 343 boys and girls, and this month it had gone up to 731. If that kind of increase is spread over the country it is a matter of grave concern.

The spectre of mass unemployment is a more daunting discipline than anything the House can put on the statute book. No one who has had first-hand or secondhand knowledge of unemployment can fail to understand the fear that working people have of it. The speech made a few weeks ago by Jack Jones expressed it in blunt and courageous terms. He said in effect that, to re-turn a phrase, one man's wage increase could mean another man's standing in the dole queue. There is not much point in a man's getting a big wage increase if it contributes to the bankruptcy of the firm in which he is employed or of someone else's firm. Many firms are finding it difficult to continue. The massive wage increases being handed out give further twists to the already frightening inflationary spiral, which results in a massive loss of confidence in our currency at home and abroad, and increasing discouragement to save, with resultant disastrous stagnation in investment, both public and private.

I want to ask about an article in a newspaper yesterday. It may have been mischievous, mendacious or without foundation, but I must put questions about it to my right hon. Friend. How does he see the social contract developing over, say, the next six critical months? I think that he said a little while ago that we could not yet judge whether it was failing or succeeding, and that we should have to give it another few months. Will my right hon. Friend give his views on that? Will he reassert, as I am sure he will, that it will never be the Government's intention to seek to reimpose a statutory incomes policy? Because of experience over the past few years, there are still suspicions, some of which are being voiced, perhaps within the Government, that there will soon come a time when some kind of statutory incomes policy will have to be introduced.

Thirdly, in what circumstances do the Government envisage a tightening up of the existing terms of the social contract, and how would such an exercise be undertaken? I think that Mr. Len Murray gave some indication of the way in which his mind was working. I presume that he was able to speak with some knowledge of the Government's thinking on these matters. Will my right hon. Friend give an assurance that over the next 12 months at least the Government will take all possible steps by fiscal or other means to ensure that no one in receipt of salaries of, for example, £5,000 will receive any increase in remuneration? The total sums that are involved in the increases proposed for the chairmen of nationalised industries, judges and the rest may not be large, but psychologically such increases can be particularly damaging. Whenever I go to my constituency and say to people "For God's sake, try to get your trade union to observe the social contract", I have the pay increases recommended by the Boyle Committee hurled at me. Many of my hon. Friends have had the same experience.

The amounts are large. It is not correct to say that they are not. The increases are of the order of 28 per cent. That is a higher percentage than most wage-earners are able to achieve. An increase of 28 per cent. on a salary which is already about £18,000 is a considerable increase. Even though my right hon. Friend the Prime Minister said that the increases should be put into effect in two stages, those involved will still receive them by a year next summer.

My hon. Friend is underlining and re-emphasising what I have already said. They are substantial increases. It is impossible for us to persuade ordinary working people to deliver the social contract while the Government accept that kind of policy. I should like my right hon. Friend to take more active steps to give the House of Commons more specific information about how the social contract is working and developing. By deliberate intent or otherwise, the Government are creating the impression that they are giving Members less information than they are giving to outside pressure groups on both sides, including the CBI and the TUC. In that sense we are becoming second-class citizens. We are getting our information about what the Government are up to either in answers to Written Questions or through the Press.

My right hon. Friend over the years has been a good parliamentarian. I think that he will accept the point that I have just made. We are anxious to be partners and to play our part in the great changes facing us as a nation. We are not prepared to be mere Lobby fodder groping in the dark for such information as we can find on what the Government are doing.

I hope that the Conservative Party will soon resolve its bloody civil war. One of our great difficulties and dangers is that we have no effective Opposition. The Tories have no leader and no alternative policy. Nothing whatever comes from them except negative belly-aching and the history of a three-day working week. That is all we have. That is bad for government. It makes for bad, indolent and incompetent government. That is a luxury that we cannot afford. I still have great faith in the social contract. I think that the most inspired appointment made by the Prime Minister—I hope that my right hon. Friend will not be embarrassed by this flattery—was to appoint my right hon. Friend to his present job. If there is anyone who can deliver the goods in this context it is him. We look to him to help us to help him and for him to help the Government in this great experiment. Until now no credible alternative has been put forward to the social contract. If it does not work I fear for the future of the country.

5.25 p.m.

There was a great deal in what the hon. Member for Fife, Central (Mr. Hamilton) said with which my hon. Friends and I were in considerable disagreement. However, we entirely agree with his central points, that the House needs more information about the social contract and that there is grave unease and uncertainty in the country about its workings.

The hon. Gentleman is to be congratulated not only on drawing first place in the Ballot but on bringing this important subject before the House and on putting questions to the Secretary of State which should certainly be answered. Some of the questions which I shall be putting to the right hon. Gentleman and some of the questions which will be put by my hon. Friends will be along the same lines as those put by the hon. Gentleman. As he said, there is growing concern about the way in which the social contract is working. There might well be concern as the figures published for the calendar year 1974 show that wage rates last year rose by 28½ per cent. The right hon. Gentleman and the Chancellor of the Exchequer—in other words, the Government—have admitted that one in four people who received pay settlements during the course of the year settled outside the terms of the social contract.

I now think back to the words of warning which the Prime Minister uttered in the summer of last year when he was settling down after his election victory. He said then that, while import prices had been a major cause of inflation up until last summer, the danger was that wages would become so. He warned very much about the dangers of wage-push inflation taking over from imports. He was right about that. He was right to warn the country, and his fears have been more than fulfilled. The 28½ per cent. increase in wages during 1974 more than fufilled the Prime Minister's worst fears when he was pleading for restraint during the halcyon days following his election victory.

It is not only the hon. Member for Fife, Central who has been expressing unease within the Labour Party. Before Christmas the right hon. Member for Battersea, North (Mr. Jay) wrote an extremely interesting article in the Financial Times about the social contract. In his article he put forward far-reaching proposals which he said were designed
"to prevent our economic difficulties from getting completely out of hand."
He argued that the Government should set up some form of authority to determine whether settlements had been or were within or without the social contract. He suggested that a White Paper should be published to give information to the House and to the country about the exact nature of the social contract. He also suggested that the CBI should be brought into the arena. He proposed that tax penalties should be levied on all working people to compensate for the pressures which excessive wage claims were bringing forward.

My hon. Friends and I are in agreement with much of what the right hon. Member for Battersea, North said. It is a matter of regret that the hon. Member for Fife, Central should have to make the kind of speech which he made today and that the Secretary of State did not respond earlier to the kind of suggestions that were being put forward by his right hon. and hon. Friends as well as by my right hon. and hon. Friends.

It is not only among the moderates in the Labour Party, if the right hon. Member for Battersea, North think of himself in that context, that there is grave uncertainty and concern being expressed. On Tuesday no less a figure than the hon. Member for Tottenham (Mr. Atkinson) was expressing some confusion about the way in which the social contract was working and about its purposes. The hon. Gentleman, a bastion of the Left wing of the Labour Party and, I understand, a close associate of the Secretary of State, seemed uncertain as to whether the social contract referred to take-home pay or to gross pay. That is a fundamental and central point. If the hon. Member for Tottenham, with all the advantages that he has during this present administration of being on the Left of the Labour Party, does not know the answer to that question it is clear that the Government have been not only less than frank with the House but less than frank with the Labour Party.

I hold the Secretary of State personally responsible for the confusion that has arisen. Since he became Secretary of State he has consistently failed to provide the House with sufficient information to judge whether the social contract is working. We are not here concerned with whether the guidelines are right or wrong. We are concerned about the fact that we do not have sufficient information to know whether the policy put forward by the Government is working.

We have only to look at the admissions made in the past few days by the Chancellor and by the Secretary of State, to the effect that 75 per cent. of wage settlements have been within the social contract, to see some of the problems. It is difficult to reconcile the fact that as many as 75 per cent. of settlements have been within the social contract in the light of other figures we have about the performance of the economy during the past year.

We know, for instance, that there has been a 28½ per cent. increase in wages and a 19 per cent. increase in prices. Those figures certainly suggest that rather more than 25 per cent. of wage settlements have been outside the social contract. Perhaps the Secretary of State is right. Perhaps the Chancellor is right. The only way for us to judge is by being given details of the wage settlements. The Secretary of State, as is his wont at the moment, attacked the Press, particularly The Times of Tuesday for what he called irresponsibility over its headline about the prevailing rate of wage settlements.

It is the Secretary of State who is being irresponsible. His Department has the details. It knows what is happening. How can it expect the Press, the House of Commons, even the hon. Member for Tottenham to know how the social contract is working, and whether it is working, if it will not publish the details? It is no good the Secretary of State or any other member of the Government resorting—and I am sure that the right hon. Gentleman would not wish to—to ministerial evasion. As members of the Labour Party, from the highest to the lowest, are for ever telling us, the social contract is the centre point of this Government's policy. It is the key to their attempt to overcome inflation and to get the economy on to a sounder footing.

The Foreign Secretary told the Labour Party conference that everyone was involved. In his television performance on Monday the Chancellor hinted that the gravest possible economic measures would follow if the social contract failed. He also suggested in that speech that it was vital for people to restrain their rate of wage increases because otherwise high unemployment would follow. That is a point of view with which I and my hon. Friends entirely agree. The Chancellor has recently been talking a certain amount of good sense on this subject. In his speech of 10th January he pointed out, quite correctly, that when the social contract was originally negotiated the world was a very different place. He pointed out that at that time both the economy of this country and the international economy were enjoying a boom, perhaps the greatest boom since the war. Now the international economy and, more particularly, the economy of this country are facing grave difficulties. It is not surprising, therefore—and this would apply to any form of contract—that a contract signed in the halcyon days of a boom should need alteration, tightening up and modification in today's changed circumstances.

It is difficult for us to know whether the Government are endeavouring to tighten up the social contract or whether they feel it needs tightening up. It is difficult to know what the social contract means when no information that could possibly cast light on the subject is ever brought before the House or, judging from the speech of the hon. Member for Fife, Central before the Labour Party.

There are two things which the Government ought to do in response to this debate. The first is to publish the relevant information for which we are all asking. Such information should be published immediately. We have been asking for it for many weeks, and now Labour Members are asking for it, too. Second, the Government ought to look back to their programme of June 1973 and to some of the wise words of Mr. Len Murray, whose counsels play such an important part in the Government's policy. In the Labour Party's programme of June 1973 the social contract was described as
"a contract which can be renewed each year as circumstances change and as new opportunities present themselves."
That is a sound proposition. Mr. Len Murray has also said that the contract was:
"comparable to an industrial agreement which was subject to modification from time to time from both sides in accordance with changing circumstances."
I know that the Secretary of State approaches economic problems from a somewhat different standpoint than that of the Chancellor, but I feel sure that even he would agree that circumstances have changed since the social contract was originally negotiated. He may even agree that circumstances have changed during the year or so that the Government have been in office.

As we know from the statement made earlier this afternoon, the Government believe in renegotiation. Renegotiation is a central part of their policy in some other areas. We would like to know what proposals the Government have for renegotiating the social contract in the light of changed circumstances, in keeping with their programme of June 1973 and in keeping with Mr. Len Murray's words in the Daily Telegraph of 23rd May 1974.

In this debate, when time is of no consequence, when the Secretary of State has all the time in the world to say whatever he wishes with no possible excuse for not saying something because it is not a suitable time—as he said earlier—we want to know how the social contract is working. We want the figures and details which are available from his Department and will enable us to form a judgment. We also want to know what, in the light of the changed circumstances, his proposals are for renegotiating the social contract.

5.37 p.m.

I am grateful to my hon. Friend the Member for Fife, Central (Mr. Hamilton) for raising this subject, which is of crucial importance to the whole of Government strategy. I am particularly gratified that my own subject for debate during the proceedings on the Consolidated Fund Bill has been usefully grafted on to this basic issue. The social contract concerns the whole relationship of the trade union and Labour movement to a Labour Government.

As my hon. Friend the Member for Fife, Central had said, it involves an irreversible shift of wealth from those who have been receiving it to those who actually create it. The debate on capital transfer tax last night provided us with a quite different picture. While we congratulate the Government on the thoroughness with which they are dealing with the Budget, may I remind them of their commitment to "open government"?

In spite of the political opportunism which has been shown on the Opposition benches, I have to say that some of us are less than satisfied with the method used to introduce one element affecting the social contract. My hon. Friend has referred to the wrong sort of psychological atmospere which this creates. I refer to the findings of the Review Body on Top Salaries and the way in which those findings were introduced to the House by means of a reply to a Written Question. As we all know, Written Questions can be tabled at useful points in time. I understand that the previous Conservative administration made plentiful use of this method, so that Conservative Members have no basis for criticism. But we want to be committed to a much more open and democratic system of government. It was imprudent and mistaken to put down a Written Question for answer on the last day before the House rose for the Christmas Recess. When the Written Question procedure is used in that way the House has no opportunity for debate before the policy is implemented.

The Government accepted certain sections of the Review Body's report, and those sections were implemented on 1st January, 13 days before the House reassembled. When this matter was raised on a previous occasion the Leader of the House said that it would be difficult to arrange for a great many statements to be made to the House. He said that it was a matter of judgment on what is important and what is not and whether a statement is justified. But I suggest to my right hon. Friend that matters relating to pay are of paramount importance because they are part of the key policy of the social contract. The Government should consider whether it is necessary for the House to sit earlier so that more statements may be made and issues debated.

I congratulate the Government on having stuck to the policy on which they went to the country on the necessity for a referendum. It is a matter for commendation that some degree of Cabinet dissension will be permitted, depending on the final outcome of the negotiations, so that the tradition of collective Cabinet responsibility on this unique occasion can be modified. If the Government can produce modifications on this scale they can surely produce modifications to ensure that the Government are open to the check, scrutiny and jurisdiction of the House.

When I talk to my constituents about the social contract they often say "What about these huge sums that have been awarded?" Sometimes they say "It was announced in the Commons." That phrase is often used by the media. People do not realise the academic complexities of the House. They do not realise that "an announcement in the Commons" means that a Press release is produced at 4 o'clock and an answer goes into Hansard which is not available until the following week, so that there is no opportunity for debate. I was criticised for not debating something which I had no opportunity to debate. It is essential that we must be seen to justify every Government decision.

The hon. Member for the City of London and Westminster, South (Mr. Tugendhat) said that the social contract had been breached by 25 per cent. of wage agreements. To put it in another way, 75 per cent. of agreements have been within the social contract. I wonder whether the social contract was borne in mind when the report on top salaries—which the Government inherited—was accepted. With the present economic uncertainty and gloom, that sort of award is not conducive to encouraging rank and file constituents.

The report makes one a little uneasy. On the list of people who gave evidence to the Review Body I can find no reference to engineers or textile workers giving their opinion on the salaries that judges and chairmen of nationalised bodies should receive. Nor can I find evidence from boiler firers in the Central Electricity Generating Board or porters on the railways on what they think their respective chairmen should receive. But, in the light of the social contract, that is the sort of discussion there should be. It is not simply a question of doling out large amounts of money to a tiny group of people. The people who gave evidence to the Review Body represented an élitist approach.

A group of people have received an increase of £2,650, which is more than many people in my constituency earn in a full year. During 1975 the economic climate of this group of people will be cushioned by an additional £3,000. In another instance the first increment is £3,325. People feel that increases of that size are unfair. Members of Parliament receive a copy of the "Low Paid Bulletin." The issue dated January 1975 points out that in 1974 nearly 3,750,000 men and women were paid poverty wages. That calculation was based on statistics provided by the Department of Employment. Just under 3 million were men working a full week but receiving less than £30 a week, overtime excluded, and 800,000 were women employed at wages below £17 a week.

I was approached in my constituency by a member of the public who showed me his wage slip, according to which he was taking home £32 after working a week of 52 hours. When we talk of the social contract and the shift of wealth we have to bear in mind that, on the one hand, awards of £2,500 are doled out and, on the other hand, people are taking home £32 a week. According to a weekly magazine, the doormen of London luxury hotels are getting £24 a week. When people realise this discrepancy they do not believe that we are moving towards a more just society. They regard the people who gave evidence to the Review Body as an élitist group who do not represent a cross-section of working people. When the decisions which are based on the evidence given by the élitist group are accepted by a Labour Government people feel that the social contract and the irreversible shift in wealth which we were promised at the last election are being undermined.

The Labour Government should not accept the market theory of wages, which is that to get the best talent and the best ability we have to go into the market place. It is a good thing that that theory has never been applied to nurses. Nurses over the years have given their skill and ability for a pittance. If the nurses and other members of our community can make that kind of contribution to our society, it is reasonable to ask those in the higher income income groups to make the same sacrifice to make it clear to everybody that wealth is being redistributed.

If the Labour Government govern with flair and courage, we need not worry about their replacement by a Conservative Government for many years to come. But that flair certainly is not exhibited by the report on top salaries. I believe that the Labour Government should set an example by taking a cut in salary. It would not be so extraordinary and would be very much to their credit throughout the nation. I subscribe to the theory that if top salaries were curtailed at £7,500, it would be a symbol of our endeavour to solve our economic problems.

I should like to turn to the subject of the nationalised industries. We have a very large public sector, and if the social contract is to work people must be shown that they are involved in decision making in the nationalised industries and that there is not a highly-paid elite making decisions in which the people play no part. I know that my right hon. Friend the Secretary of State for Employment regards participation in decision making as an important part of Labour's programme. I am pleased that the Labour Government have set up a Royal Commission on pay, but I believe that the pay of nationalised board chairmen should be looked at carefully so that the people who sweep the platforms and drive the trains feel that the industry for which they work is their own industry and that the Government are not merely perpetuating the existing system.

The curbing of wage demands is not the sole answer to the problem of making the social contract work in order to solve our economic difficulties. We expect working people—those who create the wealth of the nation—at least to keep abreast of living standards. No Labour Government could stay in office if they were to try to cut living standards of the vast body of working people who helped to elect them. We must at least maintain living standards and ensure that the lower paid receive wage increases to keep abreast of inflation. But we must do more. We must seek increases in productivity—and that means increases in investment, too, for this has not happened in the private sector. It means that we must introduce the National Enterprise Board as a matter of urgency as a key weapon in ensuring that both investment and productivity are raised. If we raise productivity, the increased wealth can be distributed among working people. Furthermore we must consider some form of selective import control. For example, in the textile industry the scale of cheap imports has been such that the situation can almost be classified as dumping.

The Government must look at all these weapons in their economic armoury and say "We are prepared to employ these weapons and to have a much greater control over the economy". They must seek to ensure that market forces which have such a great effect on our economy are diminished. They must decide that our salary and wage structure must be so organised that the people on top salaries set an example by taking cuts, or certainly not by accepting increases in salaries.

If we keep faith with the policies on which we were elected in February and October of last year, we shall retain people's faith. We shall then ensure that the social contract, which will bring about an irreversible shift in wealth, will succeed and in future elections we shall fear no opposition whatever.

5.55 p.m.

I apologise to the House for the fact that I was not in the Chamber to hear the beginning of the speech made by the hon. Member for Fife, Central (Mr. Hamilton). I also apologise in advance for the fact that, owing to a somewhat pressing engagement in an upstairs Committee room a little later, I shall probably not be able to hear the complete reply of the Secretary of State for Employment.

I support the hon. Member for Keighley (Mr. Cryer) on the matter of open Government. He drew attention to the way in which the top salaries report had been published. He will also be aware that his right hon. Friend the Secretary of State for Industry used an even more devious method, since he published a Written Answer on the day before the Christmas Recess—in fact it was not even a proper answer; it was a document which he put in the Library. One copy was deposited in the Library—at 5.30 in the evening after all hon. Members had left the House—on the subject of the IDP co-operative. I regarded that as the most devious way of trying to avoid publicity, and I believe that it is a matter which the Leader of the House and all hon. Members should take seriously. Ministers should make statements in the House and have the courage to stand by them and defend them here rather than to hide matters in documents in the Library.

I accept the hon. Gentleman's general point that more statements should be made in the House. However, I am sure he will agree that the matter of the Kirkby Co-operative had been extensively discussed and was not a matter which was totally unknown to the House. It was quite different from the case of the top salaries report. In regard to the co-operative, deputations came to see the Secretary of State and there were wide consultations.

I am not sure the hon. Gentleman is aware of what was put in the Library. I refer to a statement of dissent by the advisory board on the unwisdom of the whole project. That board was not just a board of top industrialists, but included a distinguished trade unionist, and there was no note of his dissent from the view of the Secreary of State for Industry. That was an extremely important report, and the way in which it was produced did no credit to the Secretary of State for Industry.

The hon. Member for Keighley said that the Government should not allow any cuts to take place in the living standards of working people, but the truth is that they are now suffering a cut in living standards. I should like to know what percentage of the present working population is now undergoing a cut in living standards. The answer might surprise the hon. Member for Keighley. Certainly the hon. Member for Tottenham (Mr. Atkinson) has at last woken up to the real impact of the situation. The hon. Member for Wolverhampton, North-East (Mrs. Short) has spoken in the past about a level of increase of 28 per cent. for people on top salaries. However, since they probably pay tax on 83 per cent. of their increase, they are suffering in effect a 12 per cent. cut in their standard of living. That point is rarely mentioned or bandied about. Anybody on a higher salary in the last two or three years has unquestionably suffered a cut in his standard of living. If inflation continues at a rate of 20 per cent. per year at the present rate of tax, a person who now earns £10,000 will, in four years' time, need an income of £40,000 to retain the same net spending power.

Such is the effect of the combination of the high rate of inflation and our high rate of tax. On that basis, there may be something else to put into the pot for the hon. Member for Keighley to consider—whether taking 12 per cent. off our living standard is not making a marginal contribution to the working of the social contract.

I support what my hon. Friend the Member for City of London and Westminster, South (Mr. Tugendhat) said about our approach to the social contract. I am one of those who have never knocked the contract. I am a great believer in it. We have all worked away at it. The Conservative Government, through endless tripartite discussions, by threshold payments, by improvement of pensions, and so on, made tremendous efforts to feel their way towards establishing a social contract, although perhaps their aim was not so presentationally beautiful, and was not given a nice name.

Would the hon. Gentleman describe the three-day working week as progress towards a social contract?

It was an attempt to try to restrain the total monopoly bargaining power of one trade union—to give the community some protection against it—so that the country could at least start to take a stand against inflation. The figures of unemployment announced today are part of the price we shall pay for our failure to face that challenge now. The Secretary of State knows—he cannot be looking forward to it—that in successive months he will be announcing worse and worse figures. The figure which worries me most, and which the right hon. Gentleman was not able to give, is the short-time working figure. This is an increasing problem, perhaps in the constituency of the hon. Member for Wolverhampton, North-East as well. All these things are bound up in the same problem.

During the election campaign the Prime Minister said, that all "God's chillun" wanted a social contract, and he caused great laughter. I think that it is true. If we are to succeed, there must be, whether named or described, a social contract of one form or another. I hat is why my hon. Friend the Member for City of London and Westminster, South was right in saying that we do not know enough about it—that half the nation has not been taken into the confidence of the Labour Party or the TUC about what the contract really is. If it is going to work—and something along these lines, whether Socialist or a Conservative, is desperately needed—it must be done by the Government and in such a way that everyone, as far as possible, feels involved.

That was the point made by the hon. Member for Keighley when he said that certain people do not feel involved because of the top salary situation. I do not necessarily agree with him, but certainly the social contract has not been properly explained by the Government. They should take every opportunity of explaining it.

The great glaring absence from the contract is the involvement of industry—of directors and managers of companies. I know that there are those who feel that these people are a terrible relic of our feudal industrial past, but that is an obsolete idea. In a modern industrial society, managers are, in reality, very often worker-directors, having risen from the shop floor and worked their way up, establishing themselves on their merits. It is against this background that if the balance is tilted too much in one direction, one side will feel left out.

I recognise the efforts which the right hon. Gentleman makes with the unions and the very close contacts he has with the TUC as a whole, but the impression I get from my contacts with industry suggests that his great weakness at the moment is that the management side of industry has no confidence in him. This is not based on any dislike of him as a person, or, necessarily, of his political views, but the impression rife in industry is that he is the kept man of the TUC—its front man. I withdrawn the phrase "kept man", because that has a connotation I would not want to make, but let us say that he is the personal representative of the TUC—that he is really there to implement whatever recommendations come from the TUC.

In the old days, however, St. James's Square was regarded as a place where genuinely independent judgments were made—where the two sides could go for a fair and impartial hearing. However, during the last Government I often heard the same criticism made of St. James's Square and the rôle of the Secretary of State. If the balance was too much the other way in those days, it has gone completely in the other direction, and now the other side does not feel involved—does not feel that it is being consulted.

The Employment Protection Bill and the preparations for it are an example. There were discussions with the TUC, and then the CBI was effectively told what had been decided. The right hon. Gentleman does not have to justify himself to me, but—

Neither does the hon. Gentleman have to listen to anything that I say.

I shall read it with interest. I recognise the problems of the Secretary of State for Employment, who, with his natural courtesy, friendliness and personal charm, can make people believe that we are all getting along swimmingly—that people can come into his office and it will all seem friendly and nice—but I am sure that he is much more worried about what people are really thinking, and whether there really is a measure of confidence.

The hon. Member for Fife, Central (Mr. Hamilton) spoke of the seriousness of the industrial situation generally and the problems facing us. If ever there was a time when, in the national interest, a Government should be gathering people together and sayings, "You are all important; you all have a rôle to play, and we shall only solve our problems if we can do so together", it is now. But at the moment appeals are being made to the shop floor, while another significant group is feeling singularly left out. The right hon. Gentleman should make an effort to see whether something can be done to bring in people who are a little less disruptive, a little less feudal and a little less traditional in their views than he expects. He should start the process of the growth of confidence again. He could be a great help to these people, and I am sure that they could help him.

6.8 p.m.

The hon. Member for Bridgwater (Mr. King) said that he would have to leave before he heard me reply, but he has not been so lucky. He will have to wait a minute or two now. I shall give him an immediate reply—or shall attempt to do so—and then he can depart, although I thought that the election was not until the week after next or a little later. I shall liberate him as soon as I can.

I repudiate at once the suggestion that the Department of Employment has not acted with perfect courtesy towards employers who wish for its assistance and advice in dealing with various problems. We had the newspaper proprietors with us a few days ago and did our best to assist them in their very difficult circumstances. I do not think any one of them went away saying that we had not done everything possible to listen to their case and get a sensible settlement of the dispute. Many other employers have been to see us at other times, either when there have been disputes or with other problems which they have wanted to put to us.

My hon. Friend the Minister of State has spent many hours listening to representations made by employers. When we were still pursuing a statutory control of wages, we had groups of employers coming to us and pleading with us to help them in the difficulties in which they were encoiled by that system. We did our best to assist them, too. When I went up to Aberdeen and saw some of the employers' organisations, they passed a vote of thanks to me, much to my amazement. They said "If you had not abolished the Pay Board, we would either be in prison or be bankrupt."

Many employers have had assistance from the Department. Therefore, they cannot say that we have not treated them fairly. It is true that they do not like some of the proposals—or, rather, the employers' organisations, such as the Engineering Employers' Federation, do not like some of the proposals—in the Employment Protection Bill. That does not mean that we have not listened to their representations about it.

I have explained to them that we have commitments to the social contract. Many of the measures figuring in the Employment Protection Bill are part of the social contract. The employers knew full well that we were going to carry them through and that we had a special association with the trade union movement. That has never been concealed. I do not think that the employers have any reason to protest about the way in which we have proceeded in this matter.

Of course, we have closer associations with the trade union movement. That is a political fact. It is part of British history, but it does not mean that we have conducted the Department of Employment in a way which has in any sense injured the possibility of getting sensible agreements to try to get on with the job of helping to secure the nation's recovery.

My point is exactly the same as the right hon. Gentleman has made. The Department behaves with perfect courtesy. The right hon. Gentleman has friendly relations, because of his personal charm. It all looks fine. I am saying to him—this is an outsider's warning; it is up to him whether he takes it—that under his leadership the Department of Employment is not regarded by employers as a place to which to have recourse except possibly in emergencies, where it is the only place they can go. I should like there to be a situation in which people looked upon the Secretary of State for Employment as a real aid and asset.

It seems that there is some misunderstanding of the situation amongst many employers, as the hon. Gentleman has represented it. All I am trying to say, with some evidence on my side, is that his charges are baseless in fact. Of course it is the fact that we have different views from many employers' organisations. Nobody should be surprised about that. Nobody should be surprised at the fact that my hon. Friend the Minister of State and I do not immediately see eye to eye with the Confederation of British Industry on many political questions. We would not be members of the Government if we did.

We won an election on a different programme. We are seeking to carry out that programme. Within the terms of carrying out that programme, in particular the social contract, we certainly wish to establish and sustain the best possible relations with employers' organisations and those who speak for them. We at the Department of Employment have sought all the way through to secure that. I could give the hon. Gentleman instance after instance—I know that he is eager to get away—to refute his suggestion.

I am very grateful to my hon. Friend the Member for Fife, Central (Mr. Hamilton) for introducing the debate in the way that he did. He said that neither he nor others of my hon. Friends must be regarded as Lobby fodder. I have never regarded my hon. Friend the Member for Fife, Central—still less my hon. Friend the Member for Keighley (Mr. Cryer)—as Lobby fodder. If we had regarded them as Lobby fodder in this Parliament we were in for a starvation diet, and I am not looking forward to that prospect. I would not be so foolish as to place reliance on any such thing.

I do not complain at any of the criticisms my hon. Friends made, or about their raising matters in this debate, because this is one of the special arrangements in the House whereby subjects which it has not been possible to raise by other means can be raised on this Bill. I am grateful to my hon. Friend the Member for Fife, Central for raising the subject of the working of the social contract. I hope that I shall answer almost every one of the questions he asked. I shall not go into what he said at the beginning of his remarks about the fading of the British Empire, and the wider topic that he then introduced. I shall try to deal with the specific questions dealing with the social contract.

My hon. Friends asked, first, a question about unemployment. I refer to that because of the figures I gave the House earlier and the statement made by others that over the coming months we may have to face figures that are even worse in some respects than those we have to face today.

I certainly do not minimise the significance of these dangers, in any sense. Of course, if unemployment were to soar upwards, it could do the greatest possible injury to the operation of the social contract, apart from any other objections that we would have to such a happening and all the human considerations that are involved.

I assure my hon. Friend and everybody else that we do not regard these figures with any complacency, and that we wish to do everything in our power to guard against them. As I said in my earlier remarks, the Government have already taken some steps to guard against these dangers, particularly in the areas which are most threatened—the regions in which unemployment is traditionally higher. In the middle of last summer the Government took measures which will have some effect now. I refer to the measures taken in the mini-Budget.

Many people said that my right hon. Friend the Chancellor of the Exchequer should not have embarked upon those measures at that time, but my right hon. Friend had the courage to do so, and some of those measures, such as the doubling of the regional employment premium, were taken deliberately to try to ward off some of the dangers of unemployment this winter and this coming spring. Many of the measures that were taken by my right hon. Friend the Chancellor of the Exchequer in the Budget were designed for that purpose as well.

No doubt we will have to consider other measures—emergency measures, if you like—to try to deal with many of these dangers. As part of the social contract the Government will be considering the proposals which have been put forward by the Manpower Services Commission and other such bodies, because we see absolutely eye to eye with what Mr. Len Murray said the other day, namely, that fighting against unemployment is also an essential part of the social contract itself.

It is the case—we must keep our fingers crossed on this—that we have guarded against it better than some other countries in the western world have. I am sorry to say that they have higher unemployment figures than we have. That is not beneficial to us. I am not saying this in any sense of boastfulness—of course not. We wish to see those countries taking measures to bring down their unemployment. Nothing could assist us more in dealing with our own unemployment than that they should do so. That is also an essential part of the Government's policy and the policy that my right hon. Friend the Chancellor of the Exchequer has pursued. I hope that that deals with what my hon. Friend said on the subject of unemployment.

My hon. Friend then raised a general question about the information given about the social contract, and the hon. Member for City of London and Westminster, South (Mr. Tugendhat) pressed us even more closely, suggesting that in some way or other we are denying evidence or information on this subject to the House of Commons. We have no desire to do so. I should like to try to explain what is the Government's view about it and why we take the attitude that we take.

The right hon. Member for Lowestoft (Mr. Prior) wrote me a letter the other day accusing me of engaging in some form of Government censorship, or of seeking to withhold information from the House of Commons on the subject of wage settlements and the operation of the social contract guidelines generally.

We have no such desire and no such intention of withholding information in that sense at all, but we are not in favour—I do not say that this is an absolutely cast-iron view for all time—of having a system whereby the Government publish a judgment on every wage settlement that goes through, with the Government putting a stamp of approval on some, saying, "This settlement is inside the social contract" and saying of others "This one is outside the social contract", with figures being published on that basis.

We do not want to do that for a variety of reasons. If we were to set up such an elaborate system, many people would believe that it was part of the preparation for the reintroduction of a statutory incomes policy. That is one of the reasons why we do not want to do it. One of the dangers that we have had to guard against—this was one of the reasons, perhaps, for some of the special difficulties that occurred in Scotland soon after the election—was the fear that a statutory policy was to be brought back at any moment. We have done our best—I certainly have—to guard against that fear. But there are other reasons why we think that it would not be satisfactory to publish information along the lines hon. Members opposite have suggested.

Let me say a few words on the famous 75 per cent. figure. When I replied to the right hon. Member for Lowestoft in the House yesterday, I said that if only he had looked at my speeches in the House he would have seen that I had referred before to the 75 per cent. figure. It was certainly my belief, when I said it, that I had quoted the 75 per cent. figure in the House on more than one occasion, but that does not appear to be the case. I have quoted it elsewhere in several speeches—for instance, earlier in the week, at the Industrial Society. I have used it on so many occasions that it never occurred to me that I had not used it in the House. If any inconvenience was caused to the right hon. Gentleman on that account, I apologise for it. I should like to get the facts absolutely straight.

I have told the House before that my Department is reasonably well informed about the details of major pay settlements. There are gaps in our knowledge, but we have reasonably full information about settlements covering about two-thirds of the working population. Leaving aside the special cases—miners and nurses—covering about 1 million people, roughly 75 per cent. of the people covered by settlements about which we have reasonably full information settled within the TUC guidelines.

It must not be assumed that the settlements about which the Department has limited information, or no information at all, were all outside the guidelines. That would almost certainly be wrong. A more likely assumption is that the pattern in the areas where we are not well informed is much the same as the pattern in the areas where we have reasonably full information. That is another reason why we do not believe that we can publish a Department of Employment section of the Department of Employment Gazette on social contract wage settlements in the same way that we publish unemployment figures or other kinds of figures, because the figures are not available to the same degree and, moreover, the comparisons are not so precise.

It may be said that the comparisons of whether settlements are within or without the social guidelines cannot be precise because the guidelines are not tight enough. One of the virtues of the guidelines is that they are not inflexibly fixed. With fixed guidelines which were absolutely precise, so precise that one could publish statistics week by week or month by month on exactly what had occurred—not that the TUC would ever have been prepared to do so because it laid down the guidelines—one would not be able to achieve settlements in many cases and one would not be able to use the flexibility of the system to bring common sense back into our bargaining system.

What we have been trying to do in the past few months—it is not an easy job—is to escape from all the follies, stupidities and rigidities of the statutory system. One of the great vices of the statutory system is that it is difficult to get out of it. When hon. Members ask why we do not publish in the way they have described details of this or that settlement, they still talk in terms of the old statutory system, as though the Department of Employment was some kind of undercover pay board which was dealing with these matters. We are not dealing with them in that way.

We want to get back to a much more flexible and intelligent collective bargaining system. It takes some time, and we do not believe that the process would be assisted if we were to create the kind of elaborate machinery which right hon. and hon. Members opposite suggest.

I have followed the right hon. Gentleman's argument as closely as I can. However, I do not think that he entirely appreciates our point. We are saying that there is considerable misunderstanding about the present situation and that we do not have the information necessary to judge whether the 75 per cent. figure is accurate. The remarks of the hon. Member for Tottenham (Mr. Atkinson) demonstrate that. Misleading figures are sometimes published in the newspapers. If the right hon. Gentleman would give us the Department's information, at least the argument would take place on a basis of common statistics.

That is not so. If the Government did what the hon. Gentleman suggests, they would have to publish the details of every wage settlement, with a Government stamp on it showing whether it was within the guidelines. In my view, so far from assisting us in carrying out our policy, that might disrupt it.

The guidelines were laid down not by the Government but by the TUC. The TUC understood and appreciated the economic circumstances which the Government presented to it in our discussions and, in response, said, "We shall give guidelines to our negotiators on how best we think we can assist the country and the trade union movement". The TUC does its best to sustain the guidelines. If the Government said, "Let us see whether this settlement comes within or without the guidelines", it would reintroduce some of the disadvantages of the statutory system.

That does not mean that we want to withhold information from the House. I repudiate that charge. That is one of the reasons why we have given the House the figures and why we shall answer as best we can the questions put to us in the House, as I am seeking to do now. We wish to give the House every scrap of information we can. But we are not in favour of setting up the elabarate statutory system for which hon. Members opposite hanker.

My hon. Friend the Member for Fife, Central asked for a fresh assurance about our determination not to introduce a statutory policy. I am eager to give him that assurance. What I had temporarily mislaid—all matters are dealt with very speedily in the Department of Employment, and I have it now—was a copy of the Financial Times, which seems to be coming round to the view which I have expressed ever since I have had this job. I have been bitterly opposed to a statutory system, and I have said many times in the House and outside that we shall not return to it. We have had to stand un to a barrage of propaganda from hon. Members opposite and from members of the Liberal Party—who have so much interest in the social contract that none of them is attending this debate—who have been going round the country saying that within a few weeks or months of the election the clamp would come down and we would be back to a statutory system. One newspaper after another said the same.

We have always denied that. Therefore, I am glad to welcome the article written by Mr. Samuel Brittan in the Financial Times today, not because his political and economic views accord with mine—very few of them do—but because he has belatedly reached the same conclusion that I reached some time ago. He took the low road, I took the high road. I wish to read the article to the House, because it was not written by a wicked opponent of statutory policy such as myself or other members of the Labour Party. Not only does Mr. Brittan object to the idea of a freeze or a statutory policy; he goes on to say:
"Similar objections apply to milder suggestions, such as that of the independent umpire to referee the 'Social Contract'—the favourite consensus idea endorsed this week by Mr. Robert Carr. The direct effect would be small and would be more than outweighed by the false sense of reassurance it might engender".
I recommend hon. Members to read the whole article because here at last—it has taken a long time—the pundits of the Financial Times are coming round to the view that it is not sensible to talk about trying to reintroduce a statutory policy and that even the mild measures and the latest wisdom of the right hon. Member for Carshalton (Mr. Carr) are to be condemned. Therefore, I hope that we shall have better informed discussion on this matter throughout the country. The Government have no intention whatsoever of reintroducing a statutory system. We think that would be a gospel of disaster and despair. We are not proposing to do it. We are very glad to see that others are now coming round to our point of view that this would be a foolish way for us to proceed.

By chance, I have Mr. Samuel Brittan's article by me. Will the Minister say whether he agrees with my distinguished ex-colleague in what he says, in the article, about monetary policy and employment? Since the whole article should be read as one, perhaps the right hon. Gentleman should devote some time to monetary and unemployment aspects.

If the hon. Gentleman had listened with his usual care he would have heard me guarding myself against that by saying that I disagreed with Mr. Samuel Brittan about many things. The Times, the Daily Telegraph and The Sunday Times have been coming forward drearily as the advocates of the reinstitution of the statutory system in one form or another. However, a gleam of wisdom is now emerging from the Financial Times. I hope that will be taken into account.

I apologise for having been unavoidably absent during the earlier part of the Minister's speech, being involved in the Standing Committee on the Finance Bill upstairs. But I have long been interested in this subject and I recall writing articles against a statutory incomes policy, while the right hon. Gentleman trooped through the Lobbies in favour of the statutory incomes policy introduced by the previous Labour Government. So I do not think he should argue as to who got there first, because the road is rather tortuous. There is neither a high nor a low road, since the road goes up and down.

In addition, is it not the case that we should take the argument put forward in the Financial Times as a whole? An alternative to the statutory incomes policy is put forward in the article. I believe that it is the only serious alternative. I do not believe that the Government have an alternative. If the Government have an alternative, I should be interested to hear from the Secretary of State what it is.

The hon. Gentleman should have made his own speech at another time—not in the middle of my speech.

The hon. Gentleman is misinformed about my trooping through the Lobbies in defence of statutory policies. The complaint of my right hon. Friend the Chief Whip at that time was that I was not doing very much trooping through the Lobbies. On some critical occasions I did, but I always held the view that that was the wrong way to proceed. I am glad to say that the rest of the members of the Labour Party have since come to the same view.

As for swallowing Mr. Samuel Brittan's article as a whole, I have never made such an outrageous suggestion and I trust I never shall. He should be taken in small doses. This is one good dose today, which may be a sign of better doses in the future.

My hon. Friend raised the central point regarding top salaries, as did my hon. Friend the Member for Keighley (Mr. Cryer). I appreciate their feelings on the subject. They make a powerful case. I do not think that the recommendations of the Boyle Report accord with the TUC guidelines in any sense. Indeed, the report was drawn up before the guidelines were in operation. The Government were faced with the difficulty that the recommendations in the Boyle Report bore very little relationship to the guidelines. It is not the case that the Government accepted the Boyle Report. The Government modified many parts of it. Some of those modifications may have brought the recommendations nearer to the guidelines. There is no doubt that it presented considerable difficulties for the Government. I appreciate the views held by my hon. Friends on the subject. I understand the warnings they have given about the future. I take the warnings to heart. We shall see what can be done.

As regards the constant apologies being made for the Boyle Report, the reason that the Government put this forward, and felt, on balance, with certain modifications, that it had to be done, was that they recognised that there was also a certain equity in the case. If there was collective responsibility, why has the right hon. Gentleman made no attempt to give any justification for the Boyle Report? He slithers around it, apologises, looks embarrassed, and does nothing. He has not even made the elementary point that everyone on the top level receiving those increases will take a 12 per cent. cut in their living standards this year. Why did the Minister not say that?

I shall not enter into the whole discussion on that subject with the hon. Gentleman. There are many other aspects which could be cited. I said, and it cannot be disputed, that the Boyle Report presented the Government with considerable difficulties because the principles on which the report is based bear very little relation to the TUC guidelines.

Let me give one further illustration. The whole principle of comparability does not figure in the TUC guidelines. That is another of the problems which arise.

I turn to a further aspect of the argument on this subject put by my hon. Friend the Member for Keighley when he talked about low pay. I fully agree with my hon. Friend on that subject. Indeed, the emphasis on low pay is one of the essential parts of the TUC guidelines. The £30 target was adopted at the last congress of the TUC and it became an essential part of the guidelines. Within a matter of a day or so, the Government agreed with the TUC that we would do our best to sustain that part of the TUC recommendation. I think we have carried out that obligation faithfully. That means that, so far as the Government has any influence in this matter, we recognise that there must be a move towards the £30 target. Many settlements have been reached on that basis.

Looking back over the past year, whatever deficiencies we may have had, low-paid workers have been better treated under our incomes policy—if we can call it that—than in any previous period, partly because we took direct action to deal with the cases of some of the people who were worse treated of all, such as nurses, teachers and postmen. However, they were not the only ones. Some of the others were paid similar or even lower wages. They were covered by the £30 target negotiations taking place. The Government claim that we have sought not only to abide by the social contract in the general legislative measures being carried out to try to fulfil it but to do our best to carry out, under those conditions, the Government obligations of the social contract. In my opinion one of the most important aspects of Government policy over this period has been the way in which we have sought to deal with those problems.

My hon. Friend then asked what was the Government's attitude towards the tightening up of the guidelines of the social contract. We had discussions with the representatives of the TUC General Council on Monday. I do not believe that there was any great secret about the common approach to these problems. We do not believe there can be a situation where the guidelines can suddenly be twisted or tightened up in that sense.

I do not think that that is a proper approach. On many occasions I have said to the House, to the TUC, and in public that I believed that we must have a stricter allegiance to the terms and principles of the guidelines. That means that we must carry out those guidelines in a sense which does not stretch them. I believe that to be the way in which Mr. Len Murray has spoken during the last day or two. One of the most important principles in this respect is that wage settlements should not be made on the basis of anticipating increases in the cost of living over the future period. Different aspects can be taken into account but that is not to be applied as a general principle. Mr. Len Murray has stated that clearly in the last two days. It was not a question of closing a loophole that had been there all the time. It was a question of re-emphasising what had been the understanding of the TUC and of the Government. We do not say there have not been some breaches of that principle, although we deny what was said in the National Institute report, which read as if the loophole was one of the TUC guidelines. That was never the case. Nor was it the case that settlements were generally being made on that anticipatory basis. That is why we deny forcibly what the institute says.

I come now to the false figures, and why I am so angry about them. I was rebuked for being so concerned about these figures in the newspapers, as if I had some mania to attack the newspapers about them. I have no desire to attack the newspapers for the sake of attacking them, but when we are seeking to carry out the social contract and to say how we propose to apply the guidelines of the social contract, what the newspapers say and what individual politicians say on the subject is a matter of great importance.

If the general impression is spread throughout the country that wage settlements are taking place at a level of, say, 40 per cent. when the figure is, say, half that, as a national average, it creates a dangerous state of affairs. Many people may believe it. During the election campaign, the Leader of the Opposition was saying, in speeches throughout the country, that the general level of wage settlements at the time was 40 per cent. It was not true. It bore no relation to the facts. It was based on a statistical fallacy which was pointed out to him at the time. But he was too eager proclaiming how he always told the truth to admit that he was telling a lie on that occasion. However, the lies of the Leader of the Opposition outside this House are perfectly in order, so Opposition Members need not get too het-up about it. But that is what happened.

Now the same fallacy is repeated by The Times. A great many people regard it as a reputable source of information on these matters. I do not say that trade unionists are poring over their copies of The Times in order to see what wage increases to claim, but if they are told that earnings are rising at the rate of 37 per cent. a year, they may believe it. However, it is not true.

The claim of the Leader of the Opposition and the statement in The Times are both based on a simple statistical fallacy. The figures published on Monday show an increase in the wage index of 28½ per cent. to December 1974. According to The Times, earnings may be rising at the rate of 37 per cent. The latter is based on the rate of increases over the past few months. These produce alarming results, because the monthly increase depends on how many people get an increase in that month as well as how much they get. If a large number get even a small increase in a given month, the index will show an appreciable rise. To talk of increases at an annual rate of 37 per cent. is quite nonsensical, especially when the figure is based on increases in the past few months when large numbers of people have been receiving threshold payments. Stage 3 threshold payments were triggered for the last time in November, and there is no question of increases of this kind continuing at the same annual rate.

I hope that we shall not have to destroy this statistical fallacy again. It was pointed out that it was a complete fallacy when it was raised by the Leader of the Opposition. I have pointed it out again now. I have received no apology from The Times. But we shall not be rebuked, as a Government, by newspapers or by an Opposition who are so loose in their figures that they think it proper to tell people that this is the rate at which settlements are being made when the facts dispute it.

Yesterday and again earlier today, the Opposition were squealing at me for not providing sufficient facts. We provide the facts, and we correct the Opposition when they get them wrong. We have shown that what the Leader of the Opposition said about wage settlements during the election was falsely based. They continue to get the figures wrong. We have said the same to The Times. The Times continues to get them wrong. But I hope that I have now repudiated this statistical fallacy once and for all.

It is perfectly true to say that the rate of wage settlements presents difficulties for the conduct of the Government's economic policy, but matters are made far more difficult if people who should know better, now that they have been told, continue to spread throughout the country stories of settlements which bear no relation to the facts.

Is the right hon. Gentleman really saying, at a time of unparalleled economic crisis, with rampant inflation at an unprecedented and accelerating rate, that our sole protection is a socal contract which is so fragile and feeble that one or two newspaper reports can blow it to pieces? That is a most alarming suggestion.

I have never suggested that. I have indicated some of the measures which the Government seek to take to enable the social contract and the guidelines of the social contract to operate, and I have reported the discussions that we have had with a view to seeking a stricter allegiance to those guidelines, but it stands to reason that if false estimates of wage settlements are being peddled round the country, it makes it more difficult for people to hold to their agreements. It must be remembered that what happens in wage negotiations is that people make comparisons with settlements being made in other places. If, over the coming critical six months, people are going into wage negotiations accepting at face value what The Times puts on its front page, it will be much more difficult to reach sensible settlements.

What, for example, will the miners think? Let us suppose that they believe what they read on the front page of The Times. Will that make it easier to resolve the mining dispute? I think that we shall get a settlement with the miners which is honourable to them, to the Government, and to the community, but matters are not made any easier when a newspaper publishes figures of this kind, based on a statistical fallacy which can easily be disproved. Even I can disprove the statistical fallacy, so it must be very easy to do.

Wage negotiation is only one part of the social contract. All my right hon. and hon. Friends understand that, even if the Opposition do not. The National Enterprise Board is another essential part, and the sooner we get it into operation the better. The sooner we can get into operation many of the other measures that we wish to secure, the better. But we have to get from this critical economic situation to the situation in the middle of the year, at the end of the year and at the beginning of next year. We have to get through this period. During it, our economic success will depend greatly on the respect that there is for the guidelines laid down by the TUC. We shall have constant discussions with the TUC as to how best we can fulfil the guidelines. I believe that the overwhelming majority of trade unionists—their leaders and the rank and file—are eager to assist the Government and the country to ensure that we overcome these difficulties.

If there is one criticism of the Government, it is that, perhaps, we have not put together all the measures being taken and explained them sufficiently so that people may understand how one part relates to another and how essentially this part of the social contract relates to avoiding unemployment. If that is so, we can be rebuked and we shall see whether we can do it better in the future. One of the purposes of this debate is to be able to set these matters in a different context and to do so over the coming months in a more ambitious and sensible way than we have so far done.

None of us underrates the scale of the crisis that this country has to overcome. It is a crisis of complexity unparalled in the whole history not only of this country but of many others. The western world has never faced such problems in such a way. In this country, thanks in some respects to the social contract—not only that: there are other assets in the Government—I believe that we have a better chance than some other countries of overcoming these problems.

We should not be defeatist in facing our problems. I repudiate all such suggestions—particularly the idea that we are seeking to hide from the House or the country what we mean by the social contract, what the TUC means by it, and how we seek to co-ordinate our ideas. It is not a question of the Department or me surrendering to the TUC. It is a question of a proper understanding. We cannot have a democratic Government unless the Government understand the unions, and vice versa. I believe that that understanding is closer and stronger than ever before, and that that is one of the foundations on which we can overcome our economic problems.