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Social Contract

Volume 888: debated on Monday 17 March 1975

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asked the Secretary of State for Prices and Consumer Protection if she is satisfied with the working of the social contract as it relates directly to her ministerial responsibility for controlling prices.


asked the Secretary of State for Prices and Consumer Protection whether she is satisfied that the social contract is working in the interests of the consumer.

In fulfilling the requirements of the contract for the consumer, the Government have contributed significantly towards curbing costs of primary concern to the poorer members of the community. But pay has over the past year been rising much faster than prices and the TUC recognises that there is little room for increases in real earnings if the Government are to be able to continue their contribution on other sides of the contract.

Now that the Secretary of State and the Minister are beginning to acknowledge the part that excessive wage claims are playing in breaching the social contract, what are she, he and the Government intending to do to exchange the social contract for an effective policy to tackle inflation?

We shall certainly not enter into a policy that will lead us to a three-day working week.

Does the Minister agree with the remark of the National Institute that the social contract is compatible with any rate of inflation? If not, why does not he agree?

The National Institute made its assessment. Everything depends on the degree to which unions observe the social contract. The TUC, the Chancellor of the Exchequer, the Prime Minister and other Ministers have made that clear.

With a voluntary contract, of course there will be breaches, but the Opposition must be realistic and ask themselves what they would put in its place, which would work and not be as disruptive as was the system which they were forced to abandon after the three-day working week.

As the statutory incomes policy which was introduced by the Conservative Government has been abandoned and the social contract has taken its place, will my hon. Friend say whether representations have been made by the Opposition to the Government suggesting an alternative to the social contract? Does my hon. Friend agree that wages have gone up because of the threshold agreements which were agreed privately and had to be honoured by the Labour Government?

Unfortunately, the Opposition are concerned solely with cheap political capital. They ignore the rĂ´le played by threshold agreements and the pent-up special cases of phases 1, 2 and 3 in stoking up increases above the normal criterion of the social contract. Conservative Members can by all means make political capital, but at least let them also be constructive.

Is it the view of the hon. Gentleman that a substantial rise in taxation would be consistent with the social contract?

That is a question on taxation, which the hon. Gentleman should put where it belongs, namely, to the Chancellor of the Exchequer.

Will the Minister confirm the answer which he gave a moment ago, namely, that an essential prerequisite for the success of the social contract is wage restraint by the unions?

Of course I confirm it. That was also confirmed by the TUC, which said that there could be no meaningful increase in real earnings during the period of the social contract. That is what it is all about, and that is why we are trying to alert those negotiators who do not seem to realise the risks which breaches of the social contract can produce.

Will my hon. Friend confirm that an important element in the social contract is price control and that the Government have no intention of relaxing that control? Will he also confirm that within the voluntary arrangement there has been a remarkable degree of success, in that 75 per cent. of wage settlements have been within the terms of the social contract?

My hon. Friend is quite correct. Until the end of January, 75 per cent. of the workers who settled did so within the social contract. As for price controls, my hon. Friend will know that we have recently introduced our revision of the Price Code, which may sectors of industry are still attacking as being too tight. We made these revisions to meet representations about the investment requirements of industry.


asked the Secretary of State for Prices and Consumer Protection whether she has ruled out as her policy for the indefinite future her proposal in paragraph 13 of the Consultative Document on the Prices Code to impose penalties on employers obliged to concede wage claims in excess of the social contract guidelines.

I cannot speak about the indefinite future. For the present and foreseeable future, I have made it clear to the House that a scheme for a differential productivity deduction depended on the consent of both sides of industry, and this was not forthcoming.

Is the Secretary of State aware that the Opposition would consider it extremely unfair to penalise employers in this way, particularly when they might be faced with bankruptcy by responding to such pressures? Does she further agree that measures of this kind would simply introduce by the back door the very statutory policy which the Labour Government have set their face against?

No, I do not accept that that is so, because there is already an element of diffential productivity deduction between capital-intensive and labour-intensive firms. The point raised by the hon. Gentleman was rejected by the CBI and has not since been pressed.