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Incomes And Living Standards

Volume 385: debated on Monday 11 July 1977

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My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government why, in view of the present United Kingdom borrowing requirement and negligible growth of GNP, they do not make it clear that a reduction of wages in real terms ought to be accepted by the unions.

My Lords, my right honourable friend the Chancellor of the Exchequer gave a warning on 11th October last year in these terms:

"…we shall have to accept in the coming year at least some further fall in the real incomes of the British people as a whole".
The fall in real incomes which he predicted has now happened. The TUC, for their part, understand the reasons for this fall very well. Indeed, I take this opportunity of paying tribute to the sense of responsibility and statesmanship shown by the trade union movement in ensuring the strict observance of the pay policy over the last two years, despite the very severe pressures on living standards. As my tight honourable friend the Chancellor of the Exchequer said in his Budget Statement, his fiscal proposals would enable living standards to be stabilised at something close to their present levels, provided that there is continuing moderation in the level of pay settlements after 1st August.

My Lords, I thank the noble and learned Lord for that reply. Is he aware that perhaps this aspect of our difficulties and the future has not been made quite as clear as have some other aspects of the problem?

My Lords, I am not quite sure what is meant by the question. But certainly, so far as Ministers are concerned, they have, both last year and very recently in the other place, made it absolutely plain that some fall in living standards has happened, that it must be accepted, and that it is hoped that, with moderation in pay claims in the near future, the standard of living may be able to level out for the next 12 months.

My Lords, can the Minister explain how living standards are to be maintained, and our borrowing requirements as set down by the IMF met, if there are continual large demonstrations, as at the moment, of many thousands of trade unionists whose productivity this morning cannot be said to have been great?

My Lords, that is not a matter which I should regard as falling within the Answer to this Question.

My Lords, would the situation not be a great deal easier if Her Majesty's Government allowed the pound to float up to its true level, instead of keeping it depressed and making our imports so expensive?

My Lords, I am sure that the correct answer to that is that in December the Chancellor of the Exchequer wrote a letter of intent to the International Monetary Fund. That outlines our policy in relation to the sterling rate, and that is the policy which the Government will continue to pursue. One hopes that it will continue to bring the benefits that it has brought to sterling over the last seven months.

My Lords, am I to understand that this letter of intent ruled out the question of sterling being allowed to appreciate and to find its proper level?

My Lords, the letter of intent, which is extremely long, and which I could quote if noble Lords wanted me to read it, is available in the Library and I am sure that the noble Lord can see it there.

My Lords, is it not just as unrealistic to say that trade unions ought to accept lower wages, as to say that employers should accept lower profits, and would that be welcome to the Conservative Party?

My Lords, may I say that one must judge people by what they do, and for the last two years the trade union leadership have delivered voluntary pay restraints. Let us look at that, rather than at words that may be used in different contexts.

My Lords, can the noble and learned Lord tell us whether we can have something in the way of a campaign of education of the public out of self-frustrating forms of activity, such as endeavouring to raise wages at home to compensate for a deterioration in the terms of trade abroad, in the hope that people will be led not to indulge in them?

My Lords, I cannot promise the noble Earl that any such campaign will be conducted by the Government. I think that the Government's responsibility is to explain their policy both in the other place and here, and in negotiations with trade union leaders. I am sure that that is the best way of ensuring that the truth gets down to, and across to, people who have to understand it for the purposes of their negotiations.

My Lords, do not the noble and learned Lord's answers today, and the facts of the situation, underline once again the importance of the question of productivity, about which we questioned the Government last week? Is not a deliberate policy to increase productivity the only way of dealing with standards of living in this country?

My Lords, I can give an unequivocal answer to that. Yes, when productivity increases, then we cart begin to increase our real incomes.

My Lords, may I ask the Minister whether he agrees wholeheartedly with what the noble Lord, Lord Carr, has said about productivity, and will the House remember that when the present Opposition were in power it was they who destroyed the productivity council? Are we to believe from this Question that the only cause of the problem we are now facing is high wages? And if that is the feeling, can it be remembered that there are thousands of people visiting London today who have far higher wages than their British counterparts and are buying our goods for less working time than that of our people? Finally, are investors at fault as regards this country's productivity, and can we concentrate on them as well as on wages? The trade union conferences, which most of your Lordships must have seen on television, have made it clear to everybody in this country that the trade unions have accepted responsibility. Furthermore, the leaders of the trade unions in this country are now being doubted by the shop stewards, because of the stand being taken to put right the problems of this country.

Several noble Lords: Question!

My Lords, can we see from the other side, and from the Cross-Benches, a little more concentration on aspects of our problem other than wages?

My Lords, I am sure the House will take note of what the noble Lord has suggested. I think that it would be inappropriate for me to make any further comment on the eve of important negotiations.