Incomes and Productivity
1. Mr. Longden
asked the First Secretary of State and Secretary of State for Economic Affairs if he will particularise the measures to be taken by the Government, with a view to ensuring that incomes do not exceed productivity.
The First Secretary of State and Secretary of State for Economic Affairs (Mr. Michael Stewart)
I would refer the hon. Gentleman to the White Paper, Cmnd. 3235, and to my statement on 17th April—[Vol. 745, c. 92]—which, together, give an account of the steps the Government are taking to maintain an effective productivity, prices and incomes policy.
Does the right hon. Gentleman agree with his Cabinet colleague, the Minister of Transport, who said last night on television that if we are to have proper planning we must [column 1670]plan incomes? Is he aware that if one plans incomes one dictates incomes, and is it not clear that if one plans and dictates prices this will lead directly to the direction of labour?
If the hon. Gentleman does not know the difference between “plan” and “dictate” he had better think again, because his own leaders are committed to believing in planning. As has been made clear, we believe that prices and incomes should be planned to the greatest extent possible by voluntary agreement.
National Board for Prices and Incomes (Staff)
2. Mr. Biffen
asked the First Secretary of State and Secretary of State for Economic Affairs by what amount he expects the permanent staff of the National Board for Prices and Incomes to be increased on account of prospective legislation amending Part II of the Prices and Incomes Act.
The Chancellor of the Duchy of Lancaster (Mr. Frederick Lee)
Until the Bill has been considered by Parliament it would be premature to attempt such an estimate.
In view of the existing evidence, which points to the indifferent and contentious nature of many of these reports, and the fact that they have had to be done with the help of vast numbers of outside consultants—whose names are never disclosed to the public or this House—does not the right hon. Gentleman think that he should be able to give some assurance on this subject, certainly by the time the Bill is published?
No, and I believe that the hon. Gentleman is being too pessimistic. I see a future in which the Board will be dealing with issues of principle rather than dealing with so many individual issues. When the Bill is published, and we see how it is working, we will be able to make a better assessment.
Mr. Iain Macleod
Can the right hon. Gentleman say when the Bill will be published and whether he expects it to become law before the Summer Recess?
The Bill will be published shortly and I hope that it will become law before the Summer Recess.[column 1671]
3. Mr. Biffen
asked the First Secretary of State and Secretary of State for Economic Affairs by what means he proposes to encourage non-statutory supervision of price changes in the light of the Government's objective of promoting a voluntary prices and incomes policy.
Mr. Frederick Lee
Primarily through continued operation of the voluntary arrangements for early warning of price increases, concentrated on prices of economic significance, including those of importance in the cost of living.
Is not the right hon. Gentleman aware that although the T.U.C. has accepted responsibility to do some supervision of wage claims, the C.B.I. has openly declared that it is not prepared to undertake a similar rôle for the supervision of prices? Since the hon. Member for Edmonton (Mr. Albu) said, when he left the Department of Economic Affairs, that he did not believe that one could have a system of price control, is it not clear that the policy will operate by differing standards for prices than for incomes?
In that event, I cannot understand why the hon. Gentleman has been opposing a compulsory system. For our part, we believe that, after the initial period, during which both the T.U.C. and the C.B.I. will be building up the machinery which they intend to use, we can then have a fully voluntary system, and I believe that it will work effectively.
4. Mr. Molloy
asked the First Secretary of State and Secretary of State for Economic Affairs what additional measures will now be taken no control prices to the same degree as wages.
21. Mr. Moonman
asked the First Secretary of State and Secretary of State for Economic Affairs whether, in view of the difficulties experienced in recent months in containing price increases, a new mechanism is now contemplated to deal with the problem.
Mr. Frederick Lee
The Government will continue to see that the criteria for prices behaviour are properly applied. I [column 1672]would not accept any implication that the policy has been applied more rigorously to pay than to prices during the present period of severe restraint.
Is my right hon. Friend aware that in the retail sector, as any housewife will tell him, this criteria is not applying? Since there is in the Department of his right hon. Friend the Minister of Labour a section known as the wages inspectorate, will my right hon. Friend consider establishing within his domain a prices inspectorate?
My hon. Friend is really asking us to establish something on the French model whereby, I believe, more than 20,000 people are supervising the prices issue alone. For our part, we reaffirm that the position on prices has been held very well indeed. If my hon. Friend is challenging the validity of the Index of Retail Prices, I suggest that the Ministry of Labour, with the assistance of the T.U.C. and other informed people who are on the Committee which runs that Index, will tell him that they believe that although it is not, of course, an exact replica of every price movement, it is a good return of the movement of retail prices generally.
Captain W. Elliot
Does the right hon. Gentleman still hold to the Government estimate that, after July, wages will rise by approximately 6 per cent.?
We were not referring to the period after July: we were talking about this year. If we are accurate about this estimate of a 6 per cent. increase in wages, when we know perfectly well that we will not get that kind of increase in productivity, it follows we shall have quite a job to restrain prices. If the House looks at what happened since the beginning of 1966, it is obvious that incomes had risen by at least twice the level of prices and—it is no good arguing against economic facts—if that increase goes on prices will rise.
Mr. Raphael Tuck
Does not my right hon. Friend realise that if the Government had shown that they were controlling prices and dividends as strictly as they were controlling wages the workers would have been behind them to a man?[column 1673]
Again, my hon. Friend repeats something that is utterly wrong. Wages have increased during this period. I said publicly a few days ago that wages have been increased for 4½ million people this year. Over the period of the stand-still and severe restraint, dividends are down by £60 million and prices have increased by only 1¾ per cent.
Mr. Iain Macleod
Does not the Question on the Order Paper ask what additional measures will now be taken to control prices, and do not all the Minister's answers boil down simply to “No, Sir” ?
No, Sir. They boil down to the proposition that we have looked at prices, and have been as strict on prices as we have been on incomes.
5. Mr. Marten
asked the First Secretary of State and Secretary of State for Economic Affairs what effect the reduction in the projected growth rate has had upon the National Plan.
Mr. M. Stewart
As I have told the House on more than one occasion, the assumptions and projections in the National Plan are being revised.
Does not a cut in the projected growth rate mean that targets will have to be lowered by about one quarter? Does not the right hon. Gentleman recall his right hon. Friend the Chancellor of the Exchequer saying at election time that Labour's plans could not be achieved unless we had a 5 per cent. or 6 per cent. growth rate? Does not the present position mean that Labour's plans must be cut by about one half?
It is quite clear that if one has a lower growth rate there are many things one has to revise. I have explained to the House, and I have put in the Library a document describing how we are dealing with this task.
7. Mr. Peyton
asked the First Secretary of State and Secretary of State for Economic Affairs on what grounds the National Economic Development Council, according to his paper on planning, came to the conclusion that though the 25 per cent. growth over five years could not be [column 1674]realised, exercises based on such estimates had become no less relevant and were indeed more important than ever.
Mr. M. Stewart
The paper does not attribute such a view to the Council.
I hope that the right hon. Gentleman will accept my apologies that I should have read such a meaning into the paper, but is he aware that it is so obscure and so full of aerated piffle that it is exceedingly difficult to understand what it does mean? What is the point of carrying out one of these exercises based on an invalid premise?
The paper is not difficult, although the hon. Gentleman may find it so. The point at issue now is quite a simple one. The paper points out that there are certain courses of action—those, for example, mentioned in the check list to the National Plan—which are at least as relevant and important now, despite the fact that the numerical projections have to be revised.
10. Mr. Marquand
asked the First Secretary of State and Secretary of State for Economic Affairs whether he will publish a White Paper explaining the assumptions on which his prices policy is based and the aims it is designed to achieve.
Mr. Frederick Lee
The aims of the policy for prices are to improve the competitive position of the economy, to restrain increases in prices and to encourage necessary investment. These aims have been endorsed by the Confederation of British Industry and the Trades Union Congress. We have set out in the White Paper—Cmnd. 3235—the criteria which are to govern prices behaviour, including price reductions, during the twelve months after 30th June, 1967.
But is my right hon. Friend aware that the White Paper is rather vague in what it says about prices? With reference to one of his earlier answers, could not my right hon. Friend look at the much more effective form of price control they have in France, and particularly at the way in which the French are trying to use price control as a way of stimulating productivity; and see whether we can apply something of that [column 1675]type here, particularly in view of our decision to apply to enter the Common Market?
My hon. Friend has mentioned prices in France. I hope that we shall be a little more successful in that respect than the French seem to me to have been during my visits to France in the last few years. There have been 974 proposals for price increases. Of these, 137 have been rejected or withdrawn, 614 have been accepted—in a number of cases, after modification—and 223 are still under consideration. Although we are not creating the kind of detailed analysis that my hon. Friend mentions exists in France, we are doing everything possible to ensure that where prices increase they increase only against the criteria of the White Paper.
Is the Chancellor of the Duchy of Lancaster aware that British Rail is under the impression that a price increase may be justified when the demand for advertising space has gone up? Does he not think that to be a good principle and would he not extend it to the private sector?
I would not say that the private sector has done so badly itself on the criteria.
Whatever doubts may be expressed about the accuracy of the prices index, does not my right hon. Friend agree that no one seems to mind quoting it when it suits him?
There are many millions of workers whose increases are based on the retail index, and have been for many years—including the period when the right hon. Member for Enfield, West (Mr. Iain Macleod) was Minister of Labour—and I do not think that any of them would care to say now that they were deprived of increases to which they were entitled.
Mr. Stratton Mills
If the Prices and Incomes Board and the right hon. Gentleman's Department have to examine what is a reasonable profit, would they consider laying down some guide lines so that the appropriate return on capital as a fair investment can be seen for a wide variety of industries?
I have answered this question before. I am sure that the hon. [column 1676]Gentleman would agree that one cannot lay down specific terms unless one looks at such things as the risk involved, the capital necessary, and that kind of thing, differentiating between different industries.
13. Mr. Dickens
asked the First Secretary of State and Secretary of State for Economic Affairs if he will give the average annual rate of economic growth now expected over the period 1964 to 1970.
Mr. M. Stewart
Not until the planning studies now in hand have been completed.
Would my right hon. Friend accept that, based on the Chancellor of the Exchequer's Budget speech, and projecting the figures forward for the three years to 1970, we shall achieve an average of 2.7 per cent. per annum compound over the six years; and that this rate of economic growth is lower than in any other period over the preceding decade?
I expect that my hon. Friend's arithmetic is correct, but it overlooks what my right hon. Friend the Chancellor of the Exchequer made clear; first, that this was a provisional estimate and, secondly, that he trusted that we should do better than this.
On what basis was the estimate made?
On the normal forecasting techniques—[Interruption.]—but I would emphasise that this was given by the Chancellor of the Exchequer to the House as a provisional estimate based on certain assumptions. In my own speech on the Budget Statement, I developed the things that it would be necessary to do to help to improve on this estimate.
14. Mr. Dickens
asked the First Secretary of State and Secretary of State for Economic Affairs if he will state the estimated percentage increase in economic growth in the calendar year 1967, compared with the calendar year 1966.
Mr. M. Stewart
I would refer my hon. Friend to the speeches of my right hon. Friend the Chancellor of the Exchequer on 11th and 17th April.[column 1677]
But is my right hon. Friend aware that the Chancellor of the Exchequer was characteristically vague on this point. He said that for the period to December, 1967, compared with December, 1966, there would be an increase of 3 per cent. That is rather a different thing from comparing a calendar year with the preceding calendar year. Would my right hon. Friend accept that the real figure for 1967 over 1966 would be 1.5 per cent.? Is this not utterly unsatisfactory, and should we not therefore end the period of deflation at once?
I do not accept a figure like that. I entirely agree that the rate of growth is not at present satisfactory, but in his first Question my hon. Friend asked for certain figures which can be deduced from the Chancellor of the Exchequer's speeches. The real point is what growth we can expect in the future, and what measures we must take to that end. That is part of the planning exercise now being conducted.
Industrial Reorganisation Corporation
15. Mr. Hooley
asked the First Secretary of State and Secretary of State for Economic Affairs if he will give a general direction to the Industrial Reorganisation Corporation to consult representatives of trade unions whose members will be directly affected, before carrying through or taking part in any merger or reorganisation of two or more industrial firms.
Mr. M. Stewart
Would my right hon. Friend accept that on this side of the House we very much welcome the activities of this Corporation? Will he give an assurance that it will not operate simply as a kind of orthodox marriage broker but will take account of the social significance of mergers which it is designed to produce?
Yes, it will certainly do that. I would be very ready to listen to any views which may be relevant to its work, whether from the trade unions or from other quarters, but the specific question was that I should give a direction that the Corporation was itself to consult trade union representatives. I am not sure that the trade unions themselves would wish that. They might [column 1678]prefer discussions to be conducted with the employers with whom they are accustomed to deal.
Mr. Stratton Mills
Will the right hon. Gentleman say for what reasons Mr. Grierson has retired before he was due to do so? Was it because he was not used to this kind of meddling from Government sources?
The hon. Member should not make a suggestion like that. The reasons for Mr. Grierson 's retirement have been given in the Press and there is no truth at all in what the hon. Member has said.
Is my right hon. Friend aware that industry very much welcomes the setting up of the I.R.C.? Can he say on which industries its intervention will be made public?
I was glad to hear the first part of that supplementary question. The second part goes wide of this Question and should be put on the Order Paper.
Regional Employment Premium
16. Mr. Marquand
asked the First Secretary of State and Secretary of State for Economic Affairs what effect he estimates that the proposed regional employment premium will have on the annual average seasonally-adjusted rate of unemployment in the regions concerned, and in the United Kingdom as a whole, between the end of 1967 and 1970.
Mr. M. Stewart
If the premium were to be introduced at the median rate of 30s. per week for men it might reduce the average disparity between unemployment in development areas and the country as a whole by around a half over a period of the order of three to five years from its introduction. It is not possible to be more precise than this. Unemployment in the United Kingdom as a whole might fall by about half as much as the fall in the development areas.
Is my right hon. Friend aware that most of us on this side of the House regard this proposal as one of the most imaginative in regional policy that we have yet had? [column 1679]But is he further aware that it becomes clear from his Answer that it is not going to have a very significant effect on unemployment in the regions between now and 1970? Will he say what other steps the Government will take to increase regional development in the short term?
I do not think I could agree with my hon. Friend that this is not going to have a significant effect, but I quite agree that this is only one measure and we must proceed with the rest of regional policy, with the proper use of industrial development certificates, with the policy of dispersal, with advance factories and improving the infrastructure of the regions. It is one measure among many, but I think it a useful one.
19. Mr. Blenkinsop
asked the First Secretary of State and Secretary of State for Economic Affairs if he will introduce legislation to implement the proposal for a regional employment premium.
Mr. M. Stewart
The Government are still considering the advice they are receiving on the proposal.
Will my right hon. Friend make an early statement, because many of us in development areas—for example, in the North-East—believe that an early statement of the Government's intention to go ahead with this proposal could deter firms from moving out of these areas as some firms are doing?
I shall take note of what my hon. Friend has said, but I said when introducing this proposal that although we wanted full discussion it must not be dilatory and I have this still very much in mind.
Sir J. Eden
What is the assessment which the right hon. Gentleman puts on the representations or reactions which have so far come to him?
I do not think it would be sensible for me to give a sort of provisional and perhaps ex-parte judgment. There will be further occasions to come.
Can my right hon. Friend tell the House whether, when the legislation is introduced, there will be, as a part of it, machinery to enable a variation in premium as between one [column 1680]area and another and a variation in the premium itself from time to time so that the premium may be an effective means of ending the problem of hard-core unemployment in development areas?
I note that question with interest, but I think it is exactly the kind of question I should not answer now. I do not want the process to be prolonged. Our job in the fairly short term is to weigh up the representations we have received before bringing legislation before the House. The view expressed by my hon. Friend has, of course, come to us from more than one quarter.
Price Increases (Complaints)
17. Mr. Hamling
asked the First Secretary of State and Secretary of State for Economic Affairs how many complaints he has received alleging unjustifiable price increases in the last six months; and whether he will make a statement.
Mr. Frederick Lee
Most complaints about prices are made direct to the Ministers immediately concerned with the goods and services in question. In the six months to 30th April, 1967, some 9,000 complaints in all were received. Examination of the complaints showed that the great majority of them related to increases which had either been justified under the relevant criteria for prices behaviour or had occurred before the July standstill. Nevertheless, the flow of complaints has played its part in encouraging suppliers to do all they can to restrain price increases. We will continue to keep price increases and proposals for increases under proper surveillance.
Will my right hon. Friend take steps to publish a White Paper giving details of the various complaints and the so-called criteria that are advanced to justify some of these increases?
The criteria have been published in the White Paper to which I made reference. I sometimes think that the great difference between incomes and prices is that, whereas it may well be that some trade unions do not mind being turned down by the National Board for Prices and Incomes, some employers do because it is not very good for their image.[column 1681]
Could the right hon. Gentleman tell us how many of the complaints were complaints against nationalised industries?
No, I could not offhand, but if the hon. Member puts that Question on the Order Paper I will give him an Answer.
How many of the complaints were found to be justified?
I gave the answer to that in an answer a few minutes ago. If the hon. Lady looks it up, she will find that I gave the answer.
18. Mr. Hamling
asked the First Secretary of State and Secretary of State for Economic Affairs whether he will now take the same power to control rents as he proposes in order to control incomes.
Mr. Frederick Lee
I do not consider that this would be the right course to take. Rents of virtually all private sector housing are already subject to the Rent Acts. As my hon. Friend knows, the rents of local authority houses are not on a profit-making basis and are subsidised to an appreciable extent. Where increases in such rents are necessary because of the financial obligations and circumstances of local authorities, the latter have been urged to make the fullest use of rebates to protect tenants of modest means.
Is my right hon. Friend aware that, notwithstanding the operation of rent rebates, in my local authority area council tenants have had their rents increased, three times in two-and-a-half years? Does he not think that this goes completely counter to the Government's policy on prices?
This is a question for my right hon. Friend the Minister of Housing and Local Government. My hon. Friend mentioned council houses. That question has a direct relevance to the issue of rates. If we were to have rents pegged, rates would go up.
Since the kernel of the prices and incomes policy is an exhortation, unbacked by Statute, for notification of increases of either prices or incomes, why on earth cannot the right hon. Gentleman also ask for notification of increases in rents?[column 1682]
The answer is that we do. During the period of standstill and restraint a very small number of local authorities, very small indeed, have raised the level of their rents. If the question asked by the hon. Member means that he is asking us to take compulsory powers for notification, we shall take note of his request.
Mr. Emrys Hughes
Is my right hon. Friend aware that farmers' rents increased last year in England by 6.5 per cent. and in Scotland by 6.9 per cent.? What is he going to do about this?
We may have to look at the affluence of Scottish farmers and see if we can reduce it in some way.
Is the right hon. Gentleman aware that the whole basis of acceptance of the prices and incomes policy rests on making it appear fair to the ordinary citizen and that when people who live in council houses see their rents going up substantially while rents in the private sector are frozen, they see that as an inequity which they are not prepared to accept?
I accept entirely the first point made by the hon. Member. It is not only a question of being fair; it has to be seen to be fair. I thoroughly agree and we will do everything we can to ensure that. But the hon. Member is quite wrong in saying that, whereas council house rents are going up, others are frozen. I refer him to the Rent Act, 1965. I hope that he will study it.
I was on the Committee and I know it by heart.
Industrial Production (Growth)
20. Mr. Peyton
asked the First Secretary of State and Secretary of State for Economic Affairs what benefits he expects to flow to industry from the estimate of a growth of production potential based on a range of figures with a difference of 1 per cent. a year between the higher and lower figures; and if he is satisfied in the light of experience that such a margin of error is sufficient.
The Joint Under-Secretary of State for Economic Affairs (Mr. Peter Shore)
The two figures would not so much represent a margin of error as the implications of [column 1683]alternative assumptions. Their value would be that they would help industry to form a view of what is possible, on which planning assumptions could be based. One per cent. is quoted in my right hon. Friend's paper for illustrative purposes.
Does not the hon. Gentleman think that making these forecasts can be highly misleading and, therefore, very damaging to investment programmes? Does not he agree that the fiasco of the National Plan ought to have warned the Government against taking the arrogant path of claiming omniscience, which they do now?
No. The whole purpose of asking for alternative assumptions on which plans can be based is to ensure that errors are not repeated, or to ensure that different possibilities are fully taken account of by firms when they make their own plans.