Pay comparability
(Commission)
The Prime Minister (Mr. James Callaghan)
With permission, Mr. Speaker, I will make a statement about the establishment of a Standing Commission on pay comparability.
In my speech to the House on 16 January I commented on the present method of fixing pay and conditions in some areas of the public services and expressed the Government's readiness to [column 1252]see a greater role for measuring their pay and conditions by making comparisons with pay for comparable work and effort in other occupations where both sides so requested.
This suggestion was carried further in the recent joint Government-TUC statement as a means of averting strike action in areas which affect public health and safety, and we undertook to identify groups which might be covered by such agreements.
The Government have a responsibility both to be fair to public service employees and to avoid arrangements which could in themselves prove inflationary. Comparability studies must therefore be made in a systematic and thorough manner, taking all relevant factors into account.
A Standing Commission on pay comparability is accordingly being set up by the Government to examine the terms and conditions of employment of particular groups of workers referred to it by the Government, in agreement with the employers and unions concerned, and to report in each case on the possibility of establishing acceptable bases of comparison, including comparisons with terms and conditions for other comparable work, and of maintaining appropriate internal relativities. Any further role for the Commission in each case will be a matter for agreement between the Government and the parties.
The chairman of the Commission will be Professor Hugh Clegg, and members will include Sir Leslie Williams, Sir William Ryland, Mr. Peter Gibson, Mr. Harry Urwin and Dr. Joan Mitchell. Other members will be announced in due course.
During the recent negotiations on the pay of local authority manual workers, National Health Service ancillary workers, ambulance men and university manual workers, it was agreed as part of the proposed settlements that a study should be made of acceptable bases of comparisons for these groups. It has also been agreed that these groups should now be investigated by this new Standing Commission.
In the case of these groups, it has been agreed that the Commission will make recommendations which the Government and the trade unions concerned have undertaken to accept. The Commission [column 1253]is being asked to report on these groups by 1 August 1979.
The staging of implementation of these recommendations was also agreed as part of the pay negotiations. The Commission will start work on these assignments as soon as each settlement is reached. Other groups will be referred to the Commission from time to time by agreement.
The TUC informs me that it fully associates itself with the establishment of the Commission. My right hon. Friend the Secretary of State for Employment will be responsible for these new arrangements, which should help us in future years to avoid the dislocation and hardship that the public have suffered in recent weeks.
This is a difficult area in which to determine proper rates of pay, but I believe that these new arrangements will commend themselves to the public as a sensible way forward.
Mrs. Thatcher
I do not find the statement wholly clear. Is James Callaghanthe Prime Minister aware that there appears to be a fundamental contradiction on two matters? He said at the beginning of his statement that the main task of the Commission in relation to any group of workers that was referred to it would be to report in each case on the possibility of establishing acceptable bases of comparison. I understand that that is to be the Commission's main role.
Towards the end of the statement, before a shred of evidence has been examined, the Prime Minister then assumes that there is a basis of comparability in relation to four particular groups. Apparently the Commission must assume that, and then go on to make recommendations presumably about pay levels. Is this Commission not to undertake the task of seeing whether there are possible bases for comparability in these cases but to go straight in and make recommendations? There is a fundamental contradiction. Is the “possibility” role to be carried out first? This has significance, because not only has the Prime Minister assumed that there are bases of comparison: he has even paid £1 on account. How does he reconcile those two factors?
Secondly, the Prime Minister makes the point that the Government's job is [column 1254]to avoid arrangements that could prove inflationary in themselves. How does he intend to ensure that the recommendations of this body are within the cash limits that the Treasury has provided to meet these wage claims? In the private sector Labour Members are always urging industrialists not to pass on increasing pay claims in increasing prices. Does that obtain in the public sector as well? Is the Prime Minister urging public sector concerns not to pass on increasing pay bills in increased taxes, rates and borrowing?
Thirdly, and finally, as there are a large number of other review bodies whose work must include comparability studies, will their work be subsumed in the Standing Commission, or will it continue?
The Prime Minister
The Leader of the Opposition says correctly that the work of the Commission, certainly in the first four cases, is divided into two parts. First, it must make an examination of the feasibility of these studies, and both parties must accept that such comparisons are feasible. When it has done that, it is agreed that it should then carry through the results of such an agreed feasibility study into recommendations which the Government and local authority employers have agreed to accept on this occasion for these four cases. I understand that this is a little difficult, but the role is quite clear and is understood by the trade unions which will take their cases to the Standing Commission. It is important to get the agreement of all those concerned.
The Leader of the Opposition said that it was assumed that there was a basis for an increase because I had paid them an extra £1 a week already. She is wrong. That extra £1 was not part of the Government's agreement. That was the arrangement entered into by the local authority employers with the unions concerned when they were meeting together without the presence or assistance of the Secretary of State for the Environment. They reported this matter to him, and they must bear this increase on the rates. The right hon. Lady is quite wrong to say that I have undertaken to pay £1 on account. Presumably the local authorities have felt themselves covered by this matter, because it is for them and not [column 1255]something that the Government have proposed.
The Leader of the Opposition also asked whether the payments would be within the cash limits. The Chief Secretary to the Treasury made a very carefully drafted statement on this matter in order to try to meet the points that the right hon. Lady has raised, and I have nothing further to add to it.
On the question whether the arrangements for other groups will be subsumed in the work of the Commission—at present the answer is “No” . However, if they express a desire to enter into the new arrangements—indeed, I hope that the Standing Commission will grow in authority—I should wish to see that possibility examined with care.
Finally, perhaps I am naïve to be a little surprised that the right hon. Lady did not express some appreciation of the fact that we are entering into a system that could avoid the dislocation of recent weeks.
Mr. David Steel
It is obviously sensible to secure new machinery rather than a series of individual ad hoc inquiries of the sort that we have had, but may I ask the Prime Minister for clarification of the terms of reference of the Commission? Will it be able to avoid inflationary settlements by also examining the scope for productivity deals in assessing comparability, or will that be outside its terms of reference? What is the difference between the terms of reference of this body and those of the Prices and Incomes Board, which was abolished in 1970, and the Relativities Board, which was abolished in 1974? Is it not time to make an effort to establish a permanent pay body to adjudicate in these matters?
The Prime Minister
I cannot answer the last part of the right hon. Gentleman's question because I do not have the terms of reference of those bodies in front of me. It will be for the parties to argue in front of the Standing Commission and for the Commission to consider whether particular factors are relevant to the comparability exercise and what weighting to give to them. The Commission will consider the submissions and will weigh the individual points and considerations—whether on productivity, the value to attach to job security, indexlinked pensions, or holiday or sickness [column 1256]arrangements. The parties will argue those matters in front of the Commission and the Commission will rule on them.
Mr. Alexander W. Lyon
Since the introduction of the Commission has arisen from increasing evidence that public sector pay has been falling behind that of the private sector, does not the establishment of the Commission presume that there must be a continuing incomes policy in the future, in order that the pay in the private sector should be brought roughly into line with the increase in real wealth in the economy?
The Prime Minister
That depends on what period one takes. One cannot draw a general conclusion and say that pay in the public sector has fallen behind. It depends what years are taken for that purpose. We should try to avoid the leapfrogging that takes place when public servants—I take them as a hypothetical illustration—receive substantial increases that are supposed to bring them up to private sector increases and that the private sector then uses in order to build new claims. That is the merry-go-round—the circularity—that produces inflation.
It is inherent in this arrangement that the circularity will not be allowed to persist. In the joint statement, the TUC said that it recognised that this could happen, and it does not intend to base its claims in that way. As for the question of a continuing incomes policy, I believe that more and more people are coming to the conclusion, certainly within the public sector, where free collective bargaining clearly does not apply, that an incomes policy is becoming more and more self-evident.
Mr. Hugh Fraser
Will the Prime Minister examine what happened with the Services pay review body, which attempted to establish these comparability studies? It was a total failure. Are we to regurgitate all the failures of previous Governments? Surely that would delude the workers and guarantee inflation. I hope that the Prime Minister will withdraw this preposterous suggestion.
The Prime Minister
It is easy to criticise the arrangements. If the right hon. Gentleman is saying that he thinks that the arrangements are not worth a trial and that he would rather the public put up with what they have over the recent [column 1257]weeks in the absence of such arrangements, he is entitled to his opinion. Very few people will share it. We must learn from the efforts of previous Governments, including the Administration of the right hon. Gentleman, and try to build upon them.
There is a new disposition, as the Government and TUC agreement makes clear, because an important part of that agreement is concerned with this matter. Everybody understands the problems that we face. We must make a fresh effort to solve them. I hope that there will be some understanding that the unions are willing to join in this fresh attempt.
Mr. Henderson
Does the Prime Minister see the body as a short-term “fire brigade” action or does he see it as a long-term form of arbitration which the Government have committed themselves to accepting? Does he accept that it is surprising that the nurses and the teachers have not been referred to in the series of inquiries? Does the statement indicate that the Government are announcing that they accept the findings of the Pay Research Unit in relation to the Civil Service?
The Prime Minister
The body is certainly not short-term; that is why it is called a Standing Commission. For the workers and unions who accept the arrangement, its value is that it is not an ad hoc body which is set up, establishes a level of remuneration, and is then dispersed so that the groups of workers concerned feel, after the lapse of a few years, that they have to go through the process again. This body is a Standing Commission, and those who accept the arrangements will be entitled to regular reviews by the Commission.
The nurses were not included for a specific reason. As I have said, there must be agreement by the parties concerned—in this case, the unions that represent the nurses as well as the Government. The Government have made clear to the representatives of the nurses that they are ready to submit the case to the Commission, subject to the nurses' agreement. The nurses have not accepted the proposals so far. It is a matter for them, and they are still negotiating. I should like to make clear that the body seems to me to be a valuable one for the [column 1258]nurses to refer their outstanding grievances to. It would be able to determine objectively the strength of their case. I do not prejudge their case.
The teachers have their own separate negotiating machinery. I told the right hon. Lady the Leader of the Opposition that we do not intend to compel anybody to go to the Commission. I believe that the body can grow in authority, and perhaps other bodies, in due course, will want to come under its umbrella.
Mr. Heffer
Will my right hon. Friend indicate how the body will affect the construction workers among public workers? Is he aware that UCATT has made a claim based on comparability? By what method would such claims be dealt with? Will they go through the normal machinery, or can the union or the employers, either jointly or separately, appeal to go to the Commission to discuss the case? This is a serious question, and there is no propaganda in my remarks. I should like to know the answer.
The Prime Minister
I should be grateful if my hon. Friend would ask that question of the Secretary of State for Employment. I should not like to give a false answer on a group of workers about whose conditions I am not clear. If those workers claimed under this heading, both the union and the employers would have to agree to go to the Commission.
Mr. David Price
Will the Prime Minister accept from one practised in this area and who is by no means unsympathetic to his announcement that there is no such thing as a purely scientific objective comparison between various wage rates? Will he further accept that if anything is done it is important that it should be acceptable to the people concerned? It is most likely to be acceptable at local level, where, when differentials are wrong, they cause most trouble. The lower down the line this can be done, the better. The higher it is done, the more likely it is to go wrong.
The Prime Minister
I have also had experience in this area. I agree with the hon. Gentleman that there is no scientific or objective basis for calculating pay rates. However, there must be some basis for settlement, and we must do the best that we can. It is a muddled subject, and we are trying to find our way through [column 1259]it. I note what the hon. Gentleman says about determinations at local level being more acceptable. I shall bear that in mind in future discussions that my right hon. Friend will have with the unions, in order to see whether and to what extent the Standing Commission could be used for this purpose.
Mr. John Ellis
When the Commission has carried out its immediate work of comparison, will it be able to make comments on the efficacy of such matters as allowing workers in the public sector, particularly those who do not strike, to follow the normal wage drift, whatever it may be in any year? Is my right hon. Friend aware that that was the practice in the Civil Service and that it stood the country in good stead for many years? The Civil Service followed on behind other settlements and usually had its own settlements backdated. The system was abolished by Selwyn Lloyd, and has led to a great deal of trouble in the public sector. Would the Commission be able to consider such matters?
The Prime Minister
I should like to study what my hon. Friend said. Broadly speaking, I take the view that the Commission will be free—it is an independent body—to comment on any aspect that it thinks is appropriate in these areas. I have indicated some of the areas in which I am sure that it will want to adjudicate, but it would be for the parties concerned to bring before the Commission matters that they regard as relevant and for the Commission to judge whether those factors are relevant in the determination of a case.
Mr. Heseltine
Going back to the question of cash limits, which are crucial in the rate-fixing process that is under way, the Secretary of State for the Environment said during Question Time earlier that cash limits would be adjusted to take account of the comparability settlement. Can the Prime Minister confirm that if the comparability findings increase the level of local authority expenditure, that will be fully reflected in the Government's willingness to pay their share of the extra costs as laid down in the rate support grant calculations?
The Prime Minister
Yes.
Mr. Robert Hughes
Is my right hon. Friend aware that there will be consider[column 1260]able satisfaction in the country at the prospect of avoiding the history of ad hoc settlements of large sums, followed by years when the workers concerned have felt let down? My right hon. Friend said that the first Commission report was expected by August. Will that cover both the feasibility study and any recommendations that may arise?
The Prime Minister
I agree with what my hon. Friend said in the first part of his question. One of the aspects of the new arrangement that should appeal to various groups is that it is not an ad hoc arrangement. It will be a Standing Commission which will have the opportunity, if both sides concerned with a pay claim wish, to review conditions at regular intervals—yearly, two-yearly, or whatever is agreed.
We may be able to escape from what my hon. Friend regards as a real grievance of an ad hoc group having been established, reporting and disappearing, leaving the group concerned feeling that it has fallen behind and needs another ad hoc inquiry and another large increase which will feed its way backwards into other settlements.
On the second part of my hon. Friend's question, we are setting the Commission a rather fast pace for the first few months. We have agreed—and we ask the Commission to live up to our agreement—that it should fulfil both its study of the feasibility of such a comparability exercise and produce recommendations by I August.
Mr. Stokes
Is the Prime Minister aware that he is embarking on a most difficult and dangerous exercise? Is he further aware that I spent many years dealing with the subject? Does he realise that it is difficult to fix salaries without regard to market forces and the supply and demand for the jobs concerned? For example, in comparisons between public and private sector jobs, it must be realised that there is an enormous risk to job security in the private sector but absolute security in the public sector. In regard to this new quango and these highsalaried jobs, why does the Prime Minister not ask personnel managers to do the job, since they do it for nothing?
The Prime Minister
I am aware that we are embarking on a difficult task. I [column 1261]have been aware of that all winter, but I do not know that it will be any more difficult than some of the experiences that we have lived through during the past few weeks. It is worth our while to try a new system, especially as we are embarking on it with the good will and assent of those principally concerned. There have been times when they would not have looked at such a proposition, and it is important that we should encourage steps in this direction.
On the hon. Gentleman's second point, of course such matters as job security or performance measurement would have to be brought forward by one of the two sides, if it wished to do so, in the consideration of comparability. If a man is in a job in which he has permanent security and an index-linked pension, that is clearly a factor that the independent Commission would want to take into account when assessing the value of that job against a job in private enterprise that the man might lose. Those are obvious factors which must be taken into account.
I thought that someone would have to get in a reference to a quango at some stage, but both bodies that will be servicing the Standing Commission—the Office of Manpower Economics and the Pay Research Unit—were set up by Conservative Governments, and all that will be involved is an extension of their work, which will largely be done by the people recruited by the Conservatives when they were in office. The hon. Gentleman should not devour his children with such relish.
Mr. Walter Johnson
Is it intended that the Commission should take over the functions of the various arbitration boards available to nationalised industries? When the Commission completes its studies, will the recommendations be binding on the parties concerned?
The Prime Minister
The taking over of the functions of bodies concerned with nationalised industries is not included in the new arrangement. It will be for those concerned to come forward with proposals. We are not shackling anyone to the new arrangement. It will be for the parties concerned to present their case and for the Government to consider whether it would be advantageous to alter existing arrangements. [column 1262]
As to whether the settlements would be binding, the answer in relation to the first four cases that I have outlined is “Yes” . That was part of the package negotiated on the pay settlement. With future cases, it will be a matter for agreement between the parties before they go to the Standing Commission whether an assessment, verdict or ruling by the Commission should be binding. The parties would have to agree that before going to the Commission.
Mr. Sainsbury
Can the Prime Minister confirm that the Commission will be able to make recommendations that are conditional upon the achievement of improvements in productivity, whether or not they involve a reduction in establishment? If it makes such recommendations, will the Commission or some other body be responsible for safeguarding the interests of the taxpayer and the ratepayer by monitoring the achievement of improvements in productivity?
The Prime Minister
The answer to the first part of the hon. Gentleman's question is that it would be for the Commission to decide what it wants to take into account. I cannot confirm or deny the hon. Gentleman's question. It is an independent Commission, and it understands the general terms under which it will be working. It must decide what general factors it will take into account.
I have not yet given consideration to the question how the interests of any group are to be safeguarded, whether it be those to whom an award is made or the taxpayers who may have to foot the bill. Those are arrangements that will have to follow on, but I am glad to be able to say that, with the ink scarcely dry on the TUC agreement, we have managed to carry it much further in the space of two or three weeks than has been possible in a matter of years.
Mr. Skinner
Is the Prime Minister aware that there is another view about the whole question of incomes policies—and it is known as the Labour Party policy view? Does he understand that this crowd of unaccountable moonlighters will not discover any financial device of instrument for transferring wages from one set of working people to another? Is he aware that in the real world, what really happens is that the workers make the [column 1263]sacrifices and get hammered and the wealthy groups in our society, such as the peculators in gilts who made a killing recently, pick up all the money that is second arising out of all the efforts at incomes policies that have been arranged in the past 20 years?
The Prime Minister
My hon. Friend exercises his usual arrogance in assuming that he is the only one who knows what the Labour Party view is.
Mr. Skinner
I know what mine is.
The Prime Minister
If my hon. Friend is saying that it is his view, I would expect it to be as idiosyncratic as usual. [Hon. Members: “Oh.” ] I am tired of asking it from my hon. Friend every time to gets up. I really am sick and tired of it, and I am not going to bother with it.
As for happens in the real world, I do not know how far my hon. Friend is aware of where these arrangements apply, but where they do apply, as they do in a number of cases now, the last thing that the people who have them want is that they should be removed. That surely, is a piece of evidence that he should take into account.
Several Hon. Members
rose——
Mr. Speaker
There is another statement to follow. We have been half an hour on this one. I shall call three more hon. Members from each side of the House, as long as they ask brief questions.
Mr. Arthur Lewis
On a point of order, Mr. Speaker. You rightly said that we had been half an hour on the statement made by my right hon. Friend the Prime Minister. To my knowledge, and I think to your knowledge, Mr. Speaker, it has always been the custom that a statement is not usually allowed to be made by any Minister when the issue is not important or has already been answered, and/or when there are questions on the Order Paper about it. It has also been the custom that Ministers do not agree or disagree with press reports. All that we have had is half an hour for my right hon. Friend to confirm the leaks that were reported in the press on Sunday. This has taken half an hour, but my right hon. Friend has failed to give the salary of the [column 1264]people concerned and their tax-free expenses.
Mr. Speaker
When the Prime Minister seeks to make a statement it is customary for the Speaker to agree.
Mr. Higgins
The Prime Minister said that the Chief Secretary to the Treasury had made a statement to the House on cash limits. Would it not be more accurate to say that he gave a written answer to a convenient question asked by a Labour Back Bencher the day before we rose for the recess, and that he still has not faced the House on this matter? How are we to know that the Commission will take a sufficiently broad view of the economy? Does the Prime Minister still not understand that if productivity increases in one sector of the economy result in higher wages, which are then reflected by comparability increases elsewhere, the effect is bound to be inflationary?
The Prime Minister
Yes, Sir. That is the purpose of these arrangements—to avoid that.
Mr. Cryer
Will my right hon. Friend comment on the other bodies that review salaries? In particular, I am thinking of the Top Salaries Review Body. Will he accept that there is a great deal of resentment among ordinary working people when they see such people as judges, top civil servants and generals receiving significant increases, apparently without any effort? Would it not be worth while if, in addition to looking at the wages of, say, manual workers, the Commission had the task of comparing the worth in society of manual workers as against top civil servants?
The Prime Minister
I hope that the Standing Commission will develop, and I believe that it can in a number of these fields, but I do not want to proceed without agreement in this area. As my hon. Friend knows, there are areas in which people are very sensitive about these matters. We must proceed by discussion on them. I hope that in the course of time the Standing Commission will achieve such authority that other groups, which are at present dealt with by ad hoc bodies, will feel that this kind of machinery is more appropriate to their [column 1265]purpose. If that happens, I shall welcome it.
Mr. Kenneth Lewis
Is the Prime Minister aware that so far this year it would appear that, on average, the public sector is receiving higher rises than are being given, or can be given, in the private sector? Will he make sure that the Commission takes this into account? Unless it does, it will not be up to date.
The Prime Minister
I am sure that those factors will be argued completely in front of the Standing Commission. It is the Commission's responsibility to take all of them into account, as I said in answer to a question much earlier. It depends what year one starts as to whether the public sector is moving ahead faster than the private sector. When we are arguing across the Chamber, we always conveniently take the years that suit our argument best. I hope that the Standing Commission will be able to sort out these matters and that it will try to ensure that those in the public sector who refer their cases to it are given fair, comparable conditions for comparable effort under arrangements comparable with those in the private sector. That is its task.
Mr. English
My right hon. Friend will recall that he restored the Civil Service Pay Research Unit and created the Pay Research Board in response to a recommendation of the Expenditure Committee. What will be the relationship between that Board and the Commission? Clearly, it would be, to say the least, unfortunate if there were any difference between the principles adopted by the Pay Research Board for office workers in the Civil Service and those adopted by the Standing Commission for industrial workers in the Civil Service.
The Prime Minister
The Commission is not necessarily related only to industrial workers. I hope that I have not given that impression. It happens that the first four groups referred to it will be what are called industrial workers, but it is not confined to them.
As for the relationship with the Pay Research Board, at present there would be none. Perhaps there could be some overlapping membership in due time, but I repeat what I have said three or four [column 1266]times already—I am sure that I would raise a mountain of wrath if I said today “And, of course, we shall put everything under this Standing Commission” . I can conceive of nothing that would get it off to a worse start.
Let us see how the Commission goes and proceed by persuasion. I believe that we shall be able to make some progress in this area.
Mr. Peter Bottomley
The Prime Minister said earlier that, inherent in the new arrangements, circularity—by which he explained he meant leapfrogging—would not be allowed to continue. What did he mean by that?
The Prime Minister
I shall try to explain it again. It means that if the public sector were found to be X per cent. behind the private sector, and therefore received X per cent., the private sector should not automatically use that fact, saying “Now we need X per cent, in order to get ahead again.” [Hon. Members: “How will the right hon. Gentleman stop it?” ] I shall not stop it. That is the purpose of the independent Commission. It is for the Commission to consider these matters and see how far it needs to make adjustments for this purpose.
Mr. Arthur Lewis
I thank my right hon. Friend for confirming the press leak that we all read over the weekend. As the professor in question was named, so was his salary, of between £10,000 and £15,000 a year. Will my right hon. Friend confirm or deny that? [Hon. Members: “It is £18,000.” ] What is the difference to such people? It means nothing. Is it not the case that they all have two or three fingers in the pie and already have such fabulous incomes that they receive tax-free expenses worth, to each one of them, as much as £100 a day? Are they the sort of people who should consider the pay of the low paid? Is it not another case of “jobs for the boys” ?
The Prime Minister
My hon. Friend's approach to this matter is not one that I think would be generally shared.
As for the question of how the name of the chairman came to be in the press, it is obvious that if the Government are to ask for a chairman they need to consult various people, and those people can indicate to the press, if they wish to do so, [column 1267]what they think and who they think to be appropriate. [Hon. Members: “Why?” ] Because that is the modern way of doing things. It is not my way. But this is the way in which we all now proceed. Everybody feels that he is entirely free to say anything he wants at any time about any suggestion put to him. [Interruption.] I know that my hon. Friend the Member for Bolsover (Mr. Skinner) takes this view. He always says that he reports the meetings of the national executive committee. That is another illustration.
The salary will depend upon the amount of time that the chairman has to put in. There will be a pretty full amount of time put in during the hearing of the first four cases and the assembly of the information. The chairman will not receive this sum, but his salary will be based upon £18,510 for a full year, which is the usual level for a body of this type. How much he is paid will depend upon the number of days in the year that he works.