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Ford Motor Company

Volume 959: debated on Tuesday 28 November 1978

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asked the Chancellor of the Exchequer whether he will make a statement about the Government's attitude to the Ford pay settlement.

The Government have considered the pay settlement reached by the Ford Motor Company with its manual workers and have discussed the settlement in detail with representatives of the company. In the Government's view, the settlement cannot be reconciled with the pay guidelines contained in the White Paper "Winning the Battle Against Inflation" Cmnd. 7293. The Government have informed the company of this and expressed their regret.

The Government had previously made clear that in the event of the company reaching a settlement outside the guidelines, they would need to consider discretionary action against the company. After considering the settlement in the light of all the relevant circumstances, the Government have reluctantly reached the conclusion that such action should be taken and the company has been informed accordingly.

Does the Chancellor appreciate that this is a matter of some importance and that the House will certainly expect the Leader of the House to arrange an opportunity for us to debate the decision and its implications at an early date?

Will the Chancellor also be a little more forthcoming and tell us exactly what sanctions the Government intend to impose? Does he appreciate that there is very great difficulty in understanding how it makes sense to impose sanctions on a company which, at very substantial cost to itself, has done its best to resist a strike, which was called in flagrant breach of a pre-existing collective agreement, and that to proceed in that way makes as little sense as seeking to punish a householder whose house has been burgled? Does he not recognise the great sense of injustice in that approach?

There is a second matter that is equally important in understanding where the Government are going. If in this case, when the company has done everything possible, in fulfilment of the Government's behest, to resist a settlement, it is still to have sanctions imposed on it, notwithstanding the cost it has paid, is it not natural that employers will draw the conclusion that they would be far more sensible to pay up in the first place? Does that not demonstrate that the policy is not merely unjust but ineffective?

Will the Chancellor also address himself to the question the Prime Minister failed to answer, namely, the morality or justice of the policy being applied? Can he not see that the Government's refusal to say or do anything in relation to the TUC settlement —which is 20 per cent. for its employees—while imposing sanctions on Ford is the essence of arbitrary government with no sense of justice at all?

How far will the Government apply the policy consistently? If, for example, the BOC settlement is beyond the Government's guidelines, will they require the British Steel Corporation to purchase no oxygen? If the oil tanker drivers' settlement is beyond the guidelines, will the Government do the same for British Airways, or even the ministerial car pool? What consistency will there be?

Does the Chancellor realise that a policy that started as an exercise in tyranny is rapidly deteriorating into farce?

If I can remember them, I shall answer all the right hon. and learned Gentleman's questions. The Government and I regard this as an important matter and I look forward to an opportunity of debating the whole problem in the House. I am grateful to the right hon. and learned Gentleman for giving us a preview of his speech, even though it was rather lengthy.

On the question of the company's behaviour, Ford made clear within two weeks of the beginning of the strike that it proposed to negotiate outside the guidelines. For seven of the nine weeks of the strike, therefore, the company was, on its own admission, negotiating with no reference to the guidelines laid down by the Government.

The right hon. and learned Gentleman asked about the morality of the action that the Government propose to take. Let me remind him that for most of last year he was asking why we had not taken action against Ford for a much less serious breach of the then guidelines. He cannot complain that because we are now taking action there is something immoral about it, particularly, as the CBI has reported in today's newspapers, as more than 500,000 people have already settled fully within the guidelines.

For the Government to have allowed a breach of this size to pass without comment or action would have been a betrayal of the confidence that those 500,000 men and women have shown in the Government's policy and would have led, in many cases, some of which I know about, to attempts to renegotiate agreements already made. That would have been hopelessly contrary to the national interest.

The right hon. and learned Gentleman asked what action we were taking about the TUC settlement. The Prime Minister made clear earlier that there are no discretionary actions available to the Government in relation to that possible breach of the guidelines. The right hon. and learned Gentleman cannot have it both ways. He insists that our action should be limited to areas where we have total discretion on whether we buy from a company or not. That is the discretion that we are exercising, unfavourably to the Ford Motor Company because it has taken an action, after a warning from the Government and after seven weeks of negotiation outside the pay guidelines, which can result only in an increase in inflationary pressures within the economy. I believe that the whole of the British people will endorse the action that we have taken.

On a point of order, Mr. Speaker. I submit that the Chancellor of the Exchequer should have declared an interest in his last answer. It is well known that the TUC pays very large sums of money to the Labour Party and the action that has been taken—

Order. I shall try to allow as many hon. Members as possible to put questions to the Chancellor of the Exchequer. A Private Notice Question is an extension of Question Time. Perhaps the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) will wait until we have finished the questions and answers, so that I may deal with his point of order then.

You will be aware, Mr. Speaker, of my connection with the Transport and General Workers' Union. Can the Chancellor explain how, after the Prime Minister said in the House only last week that we were in a free collective bargaining position, he can object to a free collective bargain, agreed by both sides, and how he can justify penalising one of the most successful companies and one of the most productive work forces in this country, which are completely in line with the strategy, laid down by the Labour Party and the Government, of encouraging the successful, reducing our imports and solving our balance of payments problem?

I am well aware of my hon. Friend's interest in this matter as a member of the Transport and General Workers' Union. He must recognise that the Ford Motor Company was severely penalised by a nine-week strike by the union while pressing its claim. If my hon. Friend speaks as a representative of the TGWU and seeks to justify a settlement of more than 17 per cent. by Ford's profitability, can he assure the House that, through his union, he will seek a settlement at British Leyland which is commensurate with the profitability of that company?

Will the Chancellor of the Exchequer now tell us what the sanctions are? Will he also tell us what is the common sense and what is the national interest in imposing sanctions on a company which says plainly that the deal can be covered by productivity and that it will impose only 5 per cent. on any price increases in respect of labour costs?

I apologise, as I did not answer a similar question which was put to me earlier about what action will be taken. First, purchases under some existing Government contracts may be stopped. These are cases where existing contracts do not oblige the Government to continue purchases year by year. Secondly, the Government will take account of the breach of pay policy by Ford when considering the placing of future contracts and the granting of discretionary financial assistance, such as sections 7 and 8 Industry Act grants, temporary employment subsidy and section 2 export credits. This could mean that the company does not get future contracts and future discretionary assistance.

The hon. Member asked me about the productivity deal. When the company began to negotiate with the manual workers it made an offer which involved a 5 per cent. increase in basic rates and about 10 per cent. on productivity. The company finally concluded an agreement which involved an 11½ per cent. increase in basic pay, with holiday pay, and an increase of about 6 per cent. which is related to an attendance scheme, the final effect of which cannot be judged at this time. It agreed to make these payments before it had any means of knowing whether they would lead to increased productivity.

Under the productivity agreements payments are not to be made until the productivity is proved. If such payments have been made and the productivity is not achieved, the payments can be clawed back.

One cannot base a wages policy simply on increases in unit labour costs. If that were so, a capital-intensive industry could make awards of 200 per cent. without affecting ultimate prices. But the effect of such awards could be catastrophic on wage claims made by workers in contiguous areas. It would also be possible for a company to give increases of 100 per cent. to a handful of senior managers, again on the grounds that they did not lead to significant increases in labour costs.

Is my right hon. Friend aware that I and many like me are completely bewildered at the Opposition's attitude? They say that they want to bring down inflation but they immediately sneer and jeer at any action that is taken by this Government to achieve that.

Does my right hon. Friend agree that as a result of this settlement it is inevitable that Ford and other companies like it will wish to put up the price of their vehicles in order to recoup this extraordinarily large increase in pay? That has always happened in the past. Will my right hon. Friend give an assurance that he will be equally tough with any attempt to put up prices when the company could meet this increase out of its substantial profits?

My right hon. Friend will be aware that the Government have no powers to interfere with Price Commission decisions about which pre-notified price increases to investigate, or to interfere with the course of investigation. What the Price Commission does in this regard is within its own power.

My right hon. Friend was right to be puzzled about the Opposition's attitude. They are not interested in bringing down inflation. They want to bring down the Government. That governs all their behaviour on every issue at this time.

Does the Chancellor of the Exchequer recognise that he is a late but welcome convert to the view that pay policies without sanctions are useless? Does he recognise that all sanctions should be imposed by the force of law and not at the whim of the Executive?

Does the right hon. Gentleman also recognise that a pay policy which is enforced by sanctions on employers alone is also likely to be useless? Is he aware that the President of the United States has imposed exactly the same sanctions on the major companies that the Chancellor is now imposing upon Ford? However, he is asking Congress for tax rebates for those employees who abide by the guidelines. Will the Chancellor do the same and ask the House for those powers?

I am always grateful for congratulations from the hon. Gentleman. He will be aware that I have supported discretionary action in support of pay policy since the Government introduced the £6 limit nearly four years ago. I understand his views on using the tax system to support pay policy. On many occasions I have explained to him why I do not believe that that is possible. As the hon. Gentleman admitted, the United States Administration is making this proposal but it has not yet been accepted by Congress. It is unclear how it will operate if it is accepted. I am grateful to the hon. Member for pointing out that the withholding of Government contracts is already part of American pay policy. as it is of pay policy in France.

Does my right hon. Friend recollect the vote that was taken on the Government White Paper last July and the assurances given at that time by the Leader of the House, that in no way could that vote be misinterpreted as a vote authorising the Government to pursue a wage policy based on 5 per cent.? Where does the Chancellor get his authority to impose sanctions on the Ford Motor Company?

My hon. Friend is correct to remind us what the Leader of the House said about that vote. My hon. Friend asks from where the Government derive their authority. They derive it from the support of the overwhelming majority of trade unionists and the British people. This was illustrated by the vote at the recent by-election at Berwick-upon-Tweed.

Will the Chancellor tell the House what the Ford Motor Company should have done? On what criteria will the Government base their future purchases of motor vehicles if they are not to take price into account?

It is not for me to say how the Ford Motor Company should have conducted its negotiations, thank goodness. We made it clear to the company management, even before the negotiations began, that a settlement outside the guidelines would cause the Government to consider discretionary action. We have kept closely in touch with the company since it made its final settlement. The Secretaries of State for Industry, Employment and Prices and Consumer Protection have seen Sir Terence Beckett on two occasions to discuss this matter in the last few days.

Does my right hon. Friend agree that if Ford had been prepared to help bring down inflation it would have reduced its prices instead of amassing great profits? If that company had not amassed great profits the workers would not have been goaded into the strike.

The size of the Ford Motor Company's profits last year, which resulted from a substantial increase in prices, was one of the factors which influenced the course of negotiations.

How many jobs are likely to be lost to the British car industry and gained by Japan as a result of the Government's actions?

None as a result of this action, but many have been saved as a result of the assistance which the Government have given and are giving, not only to the Ford Motor Company but to other motor companies.

Does my right hon. Friend agree that one of the strangest aspects of this episode is that this company first offered 5 per cent. as being all that it was allowed within the Government guidelines, concluded a negotiation after a nine weeks' strike at 16 or 17 per cent., yet still proclaims that it is within the Government guidelines? Does my right hon. Friend further agree that had it sat down well beforehand and worked out a sensible productivity-based deal with the unions, the company would have had neither strike nor sanctions?

I do not think that it is for me to comment on the way in which the Ford Motor Company handled the negotiations. I limit myself to pointing out that at the beginning of the negotiations it was prepared to offer a 5 per cent. increase in basic wages and a 10 per cent. productivity deal, but, in fact, within a week it had decided that it would increase the amount offered on a basic wage increase ultimately to 11½ per cent. and the attendance bonus scheme which was responsible for the other 6 per cent. The consequences of that are still very unclear.

On a point of order, Mr. Speaker. The Chancellor and the Prime Minister have both had pointed out to them today the inconsistency in condemning with sanctions a settlement by the Ford Motor Company which involves a 17 per cent. increase in pay while ignoring a settlement for the staff of the Trades Union Congress which involves a 60 per cent. increase in pay over three years. It must be in everybody's mind that the unions affiliated to the TUC are major subscribers both to hon. Members on the Government Benches and to the party of which the Government form the head. Surely it is one of the rules of this House that where an interest is involved —a financial interest and a substantial one—whether it be,personal or party, its is normal for the spokesman to declare that interest

Since there is a cleat and obvious genuflection to the paymasters in this case Mr. Speaker, would you ask the. Prime Minister and the apologise to the House for not having declared their interest in the partial nature of the exercise,.of their discretion in this non-statutory matter?

On a point of order, Speaker. I think that you will agree that this extension of Question Time is of vital importance to the House, and especially to hon. Members who have Ford industries in their constituencies. May I therefore ask you to extend Question Time a little further so that those with a constituency interest may ask questions?

Further to the point of order, Mr. Speaker. May I add my voice to that of the hon. Member for Liverpool, Garston (Mr. Loyden)? A number of hon. Members on the Opposition Benches have Ford factories in their constituencies and would also like to see an extension of Question Time.

A large number of hon. Members have Ford works in their constituencies, but I am afraid that we must now move on.