Prime Minister
Gentlemen, I think you probably had the members of the TUC here before us and they have told you from their viewpoint what happened. There was very little distance between us as far as the objectives were concerned. They want the same things that we want in the sense that they want a higher standard of living, better social services. The difference really came in the ways in which we meet these objectives. We all share the same concern and objectives in that we want lower unemployment—indeed no-one is more concerned about it than those people sitting this side of the table at this moment. The differences were on how to get it and broadly speaking, the methods of the TUC were to ask for reflation. It is of course a polite word of saying to put inflation on top of inflation which would make prices worse, which would very soon price our goods and services out of the market and would very soon rapidly make unemployment even worse. So we came to the conclusion that their remedies would make an existing situation worse and I think we would adduce evidence for that by saying year after year we have spent more in this country than we have in fact earned. That gave us more and more unemployment over the years and we therefore went into this recession with a very high level of unemployment that we had inherited from our predecessors of something like 1.4 million unemployed. And that was partly because of the policies we have pursued over the years of trying to spend and spend and spend our way out of all our problems. That didn't work, it landed us with our present problems. It won't work and that is why we really now have to go for getting inflation down and keeping it down. Not only from the viewpoint of inflation but from the viewpoint of jobs. They were very much concerned as we all are about interest rates. We want interest rates down too. It is not enough to say you are concerned about them—you have to be prepared to do the things that will get them down. And it is no earthly good saying please we want interest rates down but we want you to borrow more and more because that in fact is the very thing that will send interest rates up. It is no earthly use saying please use North Sea oil money in a certain way when we are already using it all to pour into existing expenditures. [end p1] There isn't any left over. So, objectives the same, concern about unemployment the same. Their remedies would put up prices and ultimately increase unemployment, their remedies are the same that have landed us in trouble for a long period of years. We discussed pay—we took a rather different view about it because we don't know of another industrialised nation which is a competitor of ours that has in fact done what we have, which is a mistake, which is to pay ourselves 22 per cent more for producing 4 per cent less. So pay is an enormous factor in competitiveness and we have tried to put over this very strongly. And yes of course increases in pay can produce increases in unemployment. Sometimes in your own industry; sometimes in someone elses. They said that we were not supporting nationalised industries enough we produced all of the figures- this year, very nearly £3,000 million going into nationalised industries on top of what we are paying in new increased prices. As you know there are about thirty-seven or thirty-eight of them and there are just we four. Mr. Fisher and Mr. Basnett and Mr. Murray put their viewpoints and we took the dialogue between us. I think on the whole we enjoyed it—we always enjoy an argument—and it was all fairly calm. Now shall I then go over to you with your questions.
Press
Prime Minister, what was your reaction to the warning which I understand came from the other side that there could be social unrest?
Prime Minister
Well you know if you added inflation on top of inflation and that led to increasing unemployment you would be in far greater danger of social unrest than the way in which we are going. After all it was Germany between the Wars who went that way and that is perhaps one of the reasons why in the post-War period she was determined to have what I would call a sound monetary policy, that means that your money should be properly backed by the goods and services the nation produces and not be devalued because extra is printed.
Press
Prime Minister, Mr. Gill suggested that because you have actually met the unions you were starting to have secret doubts about your strategy. Is there any significance in … . [end p2]
Prime Minister
Not in any way, none of us. I simply cannot think where he got that from. We told them that their remedies would make both inflation and unemployment and competitiveness worse and pointed out one of the problems we face today is that people who have high wages don't use those high wages to buy goods produced in this country. They want high wages as producers but low prices as consumers and therefore choose to buy goods produced elsewhere. No, that is totally untrue.
James Prior
Mr. Gill in a mischievous mood!
Press
Have you narrowed the gap at all between your Government and the TUC?
Prime Minister
Well we have tried to get our viewpoint across. Some of them may have taken it.
Sir K Joseph
Some of them may have understood better what we believe are the linkages—the cause and effect. Some of them may.
Prime Minister
I must say Sir Geoffrey Howethe Chancellor said to them when they were going on about more and more spending: where would you get the money from? He put that point directly.
Chancellor
The question is you see, when one is pressed to spend another billion pounds, ask the question, do you want to get it by more borrowing, or by more taxing? And when I asked it more than once I eventually got not an answer to that question, but the answer by producing more.
Minister
That's what we have all got to do.
Chancellor
It's the fact that we can't get more money by taxing more or borrowing more. To spend our way out of the problem is … (tape unclear)
Press
Can I go back to the Social unrest point? … .
Prime Minister
… . This did not, I must tell you, play a major part in what they said. It was introduced at the beginning and [end p3] at the end, but after all we were there for an hour and fifty minutes.
Press
Do you disregard that, or do you think its a … .
Prime Minister
It was not one of their major points. They might have put it across to you. I think that if we went their way and added inflation on top of inflation we should get far worse problems than we shall have going this way. Because their way is the very way which has steadily produced increased unemployment, and has made inflation more difficult permanently to get rid of.
Press
… . closing down in … . can one not do something about protecting … .
Prime Minister
All the arrangements are done through the EEC—Germany, France and ourselves by the same arrangement. On textiles we do have arrangements, we do have quota arrangements, about 400 quota agreements with a large number of countries, and that agreement comes up for renegotiation within the next two years. We shall of course renegotiate it. On cars, we have a voluntary agreement between our car producers and the Japanese. When it comes to things like polyester yarn, nylon yarn from the United States, John Nott went to the Commission and they acted to reduce the import of it. I am afraid we then did get some complaints from people who had used the cheap yarn to produce cheaper products and they didn't like it. But all of that stuff is dealt with through the Commission and we have indeed acted when we have been able to present to the Commission evidence which has been damaging to our industries and we shall continue to be very active in that way. You also have to remember that we export 30 per cent of our national income and there are jobs, a lot of jobs, in export. We mustn't put those at risk.
Minister
They scarcely mentioned it themselves, they referred fleetingly to it twice, I think. [end p4]
Press
Was there anything in what the TUC had to say that would influence your strategy at all?
Prime Minister
I think we were pretty well convinced that the strategy is absolutely right. What they were suggesting was more and more and more public spending that they couldn't say where it would come from. They want lower interest rates, so do we. But you don't get that by more public spending but by less, so what they wanted was in direct contradiction to what they were proposing.
Press
Did you give them any clue about when interest rates must come down?
Prime Minister
We were not in a position to do that. At the moment as you know if we look at the figures already published, the amount that we borrowed, the expected amount this year, is about £8½ billion for public sector and we have already in the first six months borrowed something like just over £7 billion. It's not quite as bad as it looks because you tend to borrow heavily in the earlier part of the year and get positive later. The point is that borrowing is already running very high and that is on top of North Sea revenues. And I did point out to them that we want interest rates down as well. The fact is that the Government, the public and the private sector and housing all of which of course are borrowing more than there are savings to borrow. And you can't under that say right well we want to spend even more. One of you has to get your borrowing down if you're to bring interest rates down. Well we're trying to do it to get Government borrowing down and to erase the debt in different ways.
J Prior
Mr. Murray did mention first of all that he recognised that monetary policy had I think a bigger part to play than he had perhaps thought formerly, and secondly he did mention the whole question of concerted action in Germany. We were discussing the German success story and the way they had run their economy and I thought that we could follow that up by greater dialogue in NEDC and so on. So there are two points there which could perhaps have further discussion. [end p5]
Prime Minister
We did make it very very clear that we needed cooperation to get unemployment down because the fact is that high pay can lead to higher unemployment. Sometimes in your own industry by pricing yourselves out of markets, Time and again we came to them on the extra burdens being put on the private sector, sometimes by high increases in prices in the nationalised industries. We pointed out that prices in nationalised industries had gone up far more than the Retail Price Index. What is happening, we took coal and electricity as examples with newsprint. Newsprint has been partly pushed out of business by high energy and electricity costs in this country. The biggest single factor in electricity costs is the cost of coal because [word missing] keep 70%; of our electricity generated from coal and so we get enormous increases in nationalised industry prices, whether it is coal, electricity, telecommunications, that can be just what pushes other people into having to have redundancies and going out of business. Time and again we've tried to make this link—no man an island—your pay increase might be someone else's loss of job.
Press
Did you then mention the miners specifically?
Prime Minister
Not specifically, no. I don't think we mentioned specific pay claims at all.
Press
Do you think these meetings serve any useful purpose at all? … . they weren't too pleased last time they came out and I got the impression they weren't very pleased this time.
Prime Minister
When they ask to see me I see them. I must say I enjoy the meetings, I enjoy listening to their viewpoint. I hope they gain something from our viewpoint.
Press
You made the point Prime Minister that you are looking for some sort of cooperation in terms of … . pay … . But the impression that we got was that the situation you presented was an “Alice in Wonderland” situation and that you're living in a different world.
Prime Minister
I think perhaps they had one or two phrases which they were determined to use. [end p6]
Press
How do you expect the cooperation … .
Prime Minister
I have pointed out time and time again that many of their members in the private sector are already cooperating with management and with companies. They are. They're cooperating, trying to become more competitive. In some cases productivity is actually going up. You have seen the export record—we could not have achieved that without cooperation between management and workforce. I pointed out time and time again that we were securing their cooperation. I also pointed out as far as the public sector was concerned, we had said we would honour the Clegg awards and we did and there was an enormous bill to pick right at the beginning of our period of office—some £3 billion. We said we'd honour it and we have and therefore we have done well by the public sector. They pointed out that those bills … . would not come again because it was a Clegg catch-up.
Press
Did you comment or could you comment now on the engineering settlement?
Prime Minister
No, I didn't comment on it, it wasn't raised and it's not for me to comment on it.
Sir Keith Joseph
I think what we were trying to put over, Prime Minister, was the need for understanding the link between unit labour costs that rocket up, as they have in the last few years and make us less competitive and the loss of jobs. Unit labour costs have been going up. We've tried to get their understanding because wage claims have gone up enormously more than productivity has gone up. It was the understanding we were seeking and I hope we got some.
Press
You don't seem to have got very far with that. Doesn't this appearance at least that you're continuing to have a dialogue … . as it were with the TUC depress you at all?
Prime Minister
We are getting cooperation, management is getting cooperation with the workforce. They know that unless their goods stay competitive we don't get the business. Time and time again we came back—whatever Government is in power—in the end you have to produce goods that are competitive. Time and time again we said [end p7] to them why is it that people who earn quite high wages here use those wages to buy imported goods? No-one makes them. They go out and they judge value for money. Why is it that time and time again they reject the goods which some of their fellows have produced? And we came to them and said why is it that Halewood was mentioned? It's productivity we've got to go for. We want high wages and low prices, the link between the two is productivity. This is becoming increasingly understood on the shop floor, increasingly understood.
Press
Prime Minister, are you saying by that you think that the people who came here this afternoon from the TUC are not representative at all?
Prime Minister
I am saying that it is becoming increasingly understood on the shop floor, I think a number of the people there understood it very well. We shouldn't have the record on exports at the moment that we've got unless it were becoming increasingly understood. The success in exports has been absolutely first class.
Press
Prime Minister, how important is the NEDC?
Prime Minister
Well, we said that we hoped that the discussions would continue in NEDC for they are extremely valuable. They're regular and that's exactly where we get to grips with it. What we are trying to get across is that there are certain things that no Government can ignore One is that you've got to be competitive and therefore your costs must be comparable with those of other industrialised countries. If you want interest rates down, you can't get it by putting up expenditure and borrowing at a time when it is already too high. So we did share their objective of getting interest rates down. We say that we have got to go about it the way which will bring them down.
Press
But aren't you saying Prime Minister that you don't really need the cooperation of the men you've seen this afternoon because you're getting cooperation on the shop floor? [end p8]
Prime Minister
On the contrary you need to produce goods at the right time, the right design, delivery on time, you need supreme cooperation between management and workforce and management is a part of the workforce in a way. That I think is where we shall increasingly get it. I certainly had the impression that a number of people there understood that we did have to get up productivity. Indeed I think when the question of restrictive practice came up, no-one attempted to defend them in any way.