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INDUSTRIAL SITUATION

Mrs. Margaret Thatcher (Finchley)

Whatever view James Callaghanthe Prime Minister may take about the situation in Britain, the Opposition took the view that we were in a position of grave trouble of crisis proportions—I should have thought that that was no longer in doubt—that it was of such a nature and of such proportions as to be of great concern to the House, and that we should debate it at the earliest opportunity. The Prime Minister took a different view, and after a month's recess was not prepared to provide a day from Government time, so we have provided a Supply Day of our own.

Inquiries around the several organisations about the precise position have revealed a very grim picture indeed. Own account transport operators such as supermarkets are officially not in dispute, according to the agreement with the Transport and General Workers' Union, and should be exempt from picketing. However, the Freight Transport Association, which represents such operators, reports that own account vehicles have been widely picketed. It also reports that basic food supplies are being stopped.

The Road Haulage Association confirms that picketing is affecting the supplies of essential goods. The Freight Transport Association also reports a new problem—shortage of diesel fuel, particularly in the South-West, because of picketing at the oil terminal at Avonmouth.

British Rail reports quite simply:

“There are no trains today” .

The British Transport Docks Board, the nationalised ports sector, says that, on average, traffic at its ports is down 40 per cent. Practically no containers are getting in and out of Southampton. The rail strike has added to the burden. [column 1525]

The report from the Confederation of British Industry is that many firms are being strangled. There is a shortage of materials. They cannot move their own products. Exports are being lost. It says that secondary picketing, picketing of firms not in dispute, is very heavy all over the country. It is particularly affecting such items as packaging materials and sugar and all vital materials necessary if industry is to keep going. Lay-offs known to the CBI are at least 125,000 already, and there are expected to be 1 million by the end of the week. There are telegrams and telexes from many companies saying that their exports are not being allowed through and that they might lose the orders for ever.

There are messages from firms such as Marks and Spencer which last week lost 20 per cent. of its food production, approximately £2 million. Unless secondary pickets are removed this week the estimate is of a 30 per cent. loss. Over last week and this week and this week, unless there is a change, the company says that it will not shift 50 per cent. of its exports.

The food industry in particular is shambolic. There is pressure on edible oils, yeast, salt, sugar and packaging materials. No maize came through Tilbury yesterday. Associated Biscuits has already laid off 1,500 people in Huyton and 400 in Southampton and will lay off more by the weekend. Cold stores are laying off people, and all large oil mills in Hull were picketed yesterday, except the one visited by BBC television. If that is not mounting chaos, it is difficult to see what is.

The strikes today are not the only ones we have experienced recently. The tanker drivers' strike, thank goodness, is over. We have had the bread strike, hospital strikes, strikes at old people's homes, and strikes in newspapers, broadcasting, airports and car plants. Many people who thought previously that strikes were a characteristic only of large firms and that most firms were strike-free received a rather rude shock from a new piece of work by the Social Science Research Council, a Government-financed body, which found that nearly half our factories had some form of industrial conflict, stoppages, overtime bans and go-slows in the past two years; and [column 1526]nearly one-third suffered from all-out strikes.

This is the picture in Britain today, and the troubles will not be over when the immediate strikes are settled. Not only are there more problems in the pipeline but many of the problems arising from the present strikes will carry on for very much longer than the strikes themselves. Many export orders might never be regained. Companies and firms which have struggled hard to get them may have to lay off their workers. Some of the small firms upon which Britain depends so much may be forced into bankruptcy and they, too, will have to lay off their workers. It was interesting to hear on the BBC this morning a typical road haulage man who said that he knew what he could afford. He could survive only about another four days because he was already losing £1,000 a day.

What is our approach to this grievous strike situation? Unlike the Prime Minister, we do not go around supporting strikes when we are in Opposition. We never have and we never shall. These things are a weapon of the present Government party and the nation is reaping a bitter harvest from the attitude and approach that they have taken.

The Prime Minister will not like it, but it is pertinent that he should be reminded exactly of the attitude he took in the miners' strike during our phase 3. The offer was approximately the same as that being offered by the road haulage employers now. When the miners were being offered 16 per cent., the Prime Minister said this of Edward Heathmy predecessor:

“Unless he has more money to put on the table, he has a bigger struggle on his hands than he has ever imagined. Mr. Heath is arguing that he is fighting inflation. That is utter drivel.”

The Prime Minister obviously expects the Opposition not to follow his example. Indeed, we shall not follow that example. We shall act responsibly, and he is very fortunate that we shall do so. No one on this side of the House will be urging the road hauliers to pay more. No one will be quoting the minimum amounts that they are paid. They are much more likely to believe the comments of many lorry drivers, heard on radio and television, that their regular pay varies from £75 to £100 a week. [column 1527]

The Prime Minister's answer to all our troubles is a statistic—X per cent. This year it is to be 5 per cent. But we cannot have rigid pay policies for ever. That is not a possible way of conducting affairs in a free country which has a great deal of varied industry and where industry must always be changing to keep abreast of the times and one step ahead of competitors if we are to survive. It is not a possible way. It is not even possible in the way that the Government propose to carry out their present policies. There is no way in which it will work. I thought that that was admitted by Michael Footthe Lord President of the Council on television last Sunday during a very long interview. He pointed out that the low-paid workers would get far more than 5 per cent. That had already been arranged.

We know that under schedule 11 to the Employment Protection Act workers just above the low-paid level can use that provision to break through any incomes policy and to get higher pay because other people in the area are getting higher pay. The Prime Minister introduced that schedule and that legislation. It was part of the price he paid to the unions for the earlier stages of incomes policy. He knows and we know that unless he has proper provisions for differentials for people who take the trouble to acquire extra skills, knowing the years this takes, industry cannot be kept going because we shall not have the skilled labour that we need. His policy cannot and will not work.

The Prime Minister said this afternoon, when tackling the problem of inflation, that he believed in money supply. That is common ground between us. Five years of Labour Government have debased the coinage to a greater extent than have any other Government for three centuries. That is not in dispute; opinion as to how or why it came about may be.

The right hon. Gentleman knows and I know that unless he holds the money supply inflation will mount again. He knows and I know that if he goes on spending money at the rate at which the Government are spending at the moment and goes on borrowing the amount the Government are borrowing at the moment interest rates will be very high indeed and industry will be in considerable trouble. It already is. That is not the way to get productivity going. [column 1528]

The right hon. Gentleman knows equally that the real problem is that we have lived through a long period of increasing trade union power. That period has been characterised by a series of what I would call package deals between the Government and the unions in which the Government have offered certain advantages in return for certain co-operation. The trouble has been that the advantages have tended to become permanent and enshrined in legislation, and the co-operation only temporary. In fact, the package deals got unpacked. That happened even with some of ours, as there were a number of advantages for the unions in the Industrial Relations Act. A good deal of the restraints were abolished by the present Government. It has been a very unequal situation.

That time of mounting power for the trade unions has also been a period when we have seen increasing Left-wing militancy in control of the unions. [Hon. Members: “No” .] Yes, we have, and the country knows it. The right hon. Member for Huyton (Sir H. Wilson knows it, the Prime Minister knows it, and the people in the rank and file of the unions know it. Just at a time——

Mr. Sydney Bidwell (Ealing, Southall)

Does not the right hon. Lady understand that in a debate of this importance she must be much more specific than she apparently wishes about the dispute at issue? The characteristic of this dispute is that the rank and file have been balloted all the way through. It is only now that the leadership of the Transport and General Workers' Union has made the dispute official and is taking a hand in it. That is the reality of the situation. The right hon. Lady's arguments are pure fantasy.

Mrs. Thatcher

The hon. Gentleman suffers from the fact that I understand him perfectly. He knows as well as I do that perhaps one of the reasons that this strike was made official was that it was already out of control. It went out of control because of the mounting Left-Wing nature of that union.

We have been through a period of increasing trade union power. The unions have had unique power and unique power requires unique responsibility. That responsibility has not been forthcoming. That is the reason for the position in [column 1529]which the country finds itself today—about which they can be no dispute.

There has already been a good deal of comment and argument between the two sides on the vexed matter of picketing, which is playing an enormous part in these strikes. Merlyn ReesThe Home Secretary had a go yesterday. He said two things with which I want to quarrel immediately. I do not like quarelling with the Home Secretary, but he gives one many opportunities to do so in some of the things he says.

He said, first, that, apart from one difference in the law which the Government side brought in, the law on picketing had remained the same. The difference which he said that the Government side brought in is that one cannot now picket at a person's home. That was not brought in by the Labour Party. It was brought in by the Industrial Relations Act——

The Secretary of State for the Home Department (Mr. Merlyn Rees)

It was in the 1974 Act.

Mrs. Thatcher

It was in the 1974 Act, but it was not an improvement, or a greater protection to people in their homes, brought in by the Labour Party. It was introduced by the Conservative Party in the 1971 Act and it was one of the things that the Labour Government retained. So the right hon. Gentleman was wrong on that.

He also said:

“I have no power to instruct chief constables in their duties.” —[Official Report, 15th January 1979; Vol. 960, c. 1323.] He has power to send a circular to chief constables. Does he not remember, when we had debates and emergencies before, his right hon. Friend Shirley Williamsthe Secretary of State for Education and Science debating with my right hon. Friend the Member for Chipping Barnett (Mr. Maudling) at the time when he was Home Secretary? The right hon. Lady said:

“That is why I welcome, but regard as very late indeed, his——

my right hon. Friend's— “circular to chief constables, which was sent out last Friday giving advice on what steps they should take.—[Official Report, 14th February, 1972; Vol. 831, c. 48.] The Home Secretary should be giving advice on the present grievous difficulties.

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Mr. Merlyn Rees

I have no power to instruct chief constables. That is what I said yesterday, and I repeat it. The right hon. Lady is wrong.

Mrs. Thatcher

Will the right hon. Gentleman give the chief constables advice by means of a circular? Why has he not done so already? He has power to give advice in a circular and, in view of the seriousness of the situation, he should already be doing it.

We on this side take the view that it is far better to take emergency powers early rather than leave it until the situation has escalated. That is the practice that we followed. Emergency powers were usually taken comparatively early. The negotiations with industry should now have been completed on what regulations it would be necessary to add to the corps which is already there, ready and waiting, under the Emergency Powers Act 1920. I doubt whether those steps have been taken and I think that that is why the right hon. Gentleman is not bringing in emergency powers as the position is now. When one has those powers there is no need suddenly to use the Army. The Army is there if the contingency plans have all been properly made.

May I continue on the question of the law on picketing? Apart from the one change to which the Home Secretary referred, which we made, he is right to say that the law on the nature of picketing has not changed for a very long time. The best exposition that I know on this—it is not for me to lay down what it is or what it is not—is an exposition given by the Conservative Attorney-General, then Sir Peter Rawlinson, now Lord Rowlinson, in a speech in September 1972. He went into it in language which is so simple that one would not have thought that a lawyer could have written it.

He set out very well the position on the nature of picketing. The only right is that of peaceful persuasion. There is no right to stop a vehicle. There is no right to threaten loss of a union card. There is no right to intimidate. There is no right to obstruct, and numbers themselves can be intimidating. He also pointed out what few other people have said—that every person in this country has a right to go about his daily work [column 1531]or pleasure free from interference by anyone else. That right is not being exerted or exercised at the moment.

My right hon. and noble Friend also pointed out:

“The right to proceed about one's lawful business is not in any way subordinate to the right of peacefully persuading. This has always been the case.”

So the right of a person to do as he wishes should be upheld by the police and by this Government.

But now we find that the place is being practically run by strikers' committees and that they are using such language as “allowing” access to food, “allowing” certain lorries to go through. They have no right to prevent them from going through. They have no right to stop them. Lorry drivers should look to the Government and all the agencies of government to protect their right, first, not to stop if they do not wish it and, secondly, to go through to the docks or anywhere else with their loads. That is not happening and it is most reprehensible that firmer steps are not being taken by the Government to protect the ordinary citizen's right to go about his lawful business.

Some disturbing reports are coming in from parts of the country about what is happening. I am getting a large number. I am pledged not to use any names, so——

Mr. Robert Hughes (Aberdeen, North)

Why not?

Mrs. Thatcher

We on this side respect confidence. Of course the hon. Member would like names, would he not?

Mr. Robert Hughes

Could not the right hon. Lady at least tell us how she can reconcile her support for Ford to settle at any price and for the Government to have no influence over Ford with her sudden desire now to prevent trade unions from carrying out legitimate strike action? If she has information which she says is confidential, what value is it if she is not prepared to name exactly where and when it is taking place?

Mrs. Thatcher

At no stage, even though frequently invited to do so, did I support the Ford strike. It was a strike in breach of an agreement. We on this side believe that unions should uphold their agreements as a matter of honour.

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Mr. Robert Hughes

rose——

Mrs. Thatcher

I have not finished with what the hon. Gentleman said. The argument that I am developing now is that there is no right to intimidate any citizen in this country. But that intimidation is taking place. I propose to use actual reports in the press in which names are given. They are substantiated by many telegrams. I am not prepared to mention names, because that is what a number of people would like me to do—and then those concerned would be exposed to intimidation as well.

It is reported in The Daily Telegraph today—[Hon. Members: “Ah!” ] This relates to the animal feed compounders, a very important group. I thought that everyone recognised that it was important for food to get through to animals—but it is not, apparently, recognised by Labour Members below the Gangway. The spokesman states:

“‘We are finding that essential ingredients—fat, salt and vitamins—are not being allowed through in a number of cases.’”

They are not being “allowed” through. The report continues:

“‘It is a very alarming situation.’

One Reading feed firm was told its nonunion driver would have to pay £16.64, a year's membership subscription to the Transport and General Workers' Union, before he would be allowed in to collect animal feed at Southampton docks.

Mr. Charles Cooper, a director of the firm, Walter Parsons and Sons, said: ‘I think it's blackmail. I thought this was a free country. If our chaps want to join a union, they can. We don't see why we should force a chap to join’.”

No union has any right whatsoever to do that. I believe that it is an offence against the law to do it. Action should be taken to ensure that lorry drivers are not threatened and to ensure that they are not told that they cannot get through unless they have a union card or take one out.

One of the problems about the present law on the nature of picketing is that it is extremely difficult to enforce. Intimidation and violence are unlawful. I believe that intimidation and violence are happening and are a daily occurrence. If the present law is unenforceable, we must change it so that it becomes enforceable. If the Prime Minister wishes to embark upon that, we shall certainly support him.

Merlyn ReesThe Home Secretary said that the law has not changed. He was being less than [column 1533]complete in his assessment of the law. The law on the nature of picketing has not changed, but the law on the occasions when and places where it can take place has changed. It was changed by this Government.

There were considerable debates in the House during the passage of the Trade Union and Labour Relations Acts of 1974 and 1976. Hitherto the position was that trade unions had immunities from the process of the law only provided, first, that there was a trade dispute and, secondly, that the immunity applied only in the case of a contract of employment. That was all. But that was not good enough for this Government. They extended the immunity of trade unions in a vital way. They made trade unions immune in a trade dispute not only in relation to a breach of contract of employment but in relation to breach of any commercial contract whatsoever.

There were constant arguments in Standing Committee on this matter. The Government were warned what would happen if they took that action. A long letter from Campbell Adamson was published in The Times and was quoted during those proceedings. Campbell Adamson was not exactly the staunchest ally of the Conservative Party. He said:

“If the Bill is passed as at present drafted, unions … will be free in law … to ‘black’, blockade or boycott, or threaten to do so, whenever they like … in respect of a trade dispute anywhere in Great Britain or in the rest of the world. Secondly, it will be lawful to use the picket line for the purpose of establishing boycotts or blockades whether against an employer in dispute or against employers, companies … or bodies which have nothing to do with the dispute in question.”

The Government were warned that if they passed that section of the legislation it would lead to blacking, blockades and boycotts. That is what they wanted and that is what we have got.

Mr. Joseph Ashton (Bassetlaw)

The right hon. Lady referred to the law as it was in 1972. Is she not aware that the picketing that took place at the Saltley coke depot which was led by Arthur Scargill—[Hon. Members: “It was illegal.” ] It might have been illegal, but it worked from the union point of view.

Hon. Members

Oh.

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Mr. Speaker

Order. The right hon. Member for Finchley (Mrs. Thatcher) gave way to the hon. Member for Bassetlaw (Mr. Ashton). He is making a brief intervention.

Mr. Ashton

Whatever laws are on the statute book or whatever is written on a piece of paper do not guarantee the prevention of picketing.

Mrs. Thatcher

The hon. Member for Bassetlaw (Mr. Ashton) has made one of the most revealing and significant interventions that I have heard. He is not concerned with legality. He is not concerned with protecting the rights of the ordinary citizen to go about his business. He is concerned with the convenience of the trade unions. It is because of that attitude that today many of our citizens have to apply for permits to a strike committee of the Transport and General Workers' Union. That is exactly what this Government have landed our people in. It is totally and utterly wrong.

The Government have changed the law on picketing—not on the nature of picketing but on the extent. They were warned what would happen. It has happened and they are responsible for it in large measure.

Mr. Thomas Swain (Derbyshire, North-East)

Will the right hon. Lady give way?

Mrs. Thatcher

Of course I shall. I am only too delighted to do so. Hon. Members are being most helpful.

Hon. Members

Oh.

Mr. Swain

Stop baying, hounds. We have not killed the fox yet.

Does the Leader of the Opposition agree that she has missed out two important sections of society—members of the British Medical Association and members of the associations for the legal professions? They operate a closed shop and, above all, unlike trade unions, operate their own kangaroo courts.

Mrs. Thatcher

Neither the Law Society nor the Bar Council operates a closed shop. The hon. Member for Derbyshire, North-East (Mr. Swain) should read the last presidential address of the current president of the Law Society. Of course people must acquire qualifications. That is different. A solicitor does not have to belong to the Law [column 1535]Society to practise as a solicitor. A barrister does not have to belong to the Bar Council to practise as a barrister. A doctor does not have to belong to the British Medical Association to practise as a doctor.

I understand from a number of the Prime Minister's comments about picketing that he does not like the present situation either. We do not always judge the Prime Minister by what he says because he does different things. Most of us did not like what happened at Grunwick, but he did not stop his Ministers joining that picket line. That picketing involved numbers, and numbers themselves can be intimidating—that is apart from the violence. The Secretaries of State Shirley Williamsfor Education and Science and Fred Mulleyfor Defence joined the picket line when they were not involved in the dispute in any way.

The Secretary of State for Education and Science and Paymaster General (Mrs. Shirley Williams)

Will the Leader of the Opposition also tell the House what a number of her colleagues have not said in letters to the press, that the moment that there was violence on the Grunwick picket line—which was many weeks after I was there—I immediately denounced it publicly?

Mrs. Thatcher

The right hon. Lady was not involved in that dispute. She was not in dispute with anyone, so far as I know. Nevertheless, she added her presence to the picket line and added to the numbers, when numbers themselves can be intimidating.

Mrs. Shirley Williams

The right hon. Lady knows that what I have said is true. Will she now concede that my remarks are true?

Mrs. Thatcher

The right hon. Lady concedes that she went on the picket line. I should never accuse her of wanting or condoning violence. However, she was not in dispute. She ought never to have gone on that picket line. Her action encouraged others to turn up in larger numbers. When one of my hon. Friends tackled the Prime Minister about that during Prime Minister's Questions he said that he hoped that others, including Opposition Members, would join that picket line. [column 1536]

The Prime Minister does not have exactly the world's best record on picketing. In a more recent quotation he said:

“Not crossing the picket line has become an expression of solidarity to a degree which I certainly did not know in my younger days when I was an active trade unionist. But that kind of solidarity if carried to extremes means that life could seize up in a closely knit industrial society such as our own.” —[Official Report, 1st November 1978; Vol. 957, c. 53.]

It seems that the right hon. Gentleman, too, is having second thoughts. If he is, if he will carry out an inquiry and investigation into picketing and will undertake, first, to repeal the extension of the law that his Government introduced and, secondly, will ascertain how both the law and practice may be changed to ensure that we do not have the problems that we are now encountering, the Opposition will support him.

Closely allied to picketing and the giving of tremendous power is the powerful weapon of the closed shop. I do not say that it allows pickets to intimidate because they are not allowed to do so, but in practice it enables them to intimidate. At present we cannot catch that and take it to the courts. It is illegal. It is the most powerful weapon for any group to have. When a lorry driver meets a line of pickets he may be alone in the cab. Therefore, he has to face a line of pickets alone. He can be identified because of the number of his lorry and the name on it. He is so fearful that he is almost bound to stop. As one driver said, “What choice have I? Who will stand up for me when I am sacked?”

In the vexed and vital area of the closed shop the Government have enhanced the powers of the trade unions. They have made it legal to have a statutory closed shop. They have made it legal for the unions to ensure that a person may be sacked from his job without compensation and without right of appeal to the courts of law. That is what the Government have done to enhance and increase the powers of trade unions. The Government have introduced legislation that allows picketing to take place at a greater number of places. The picketing that we now see taking place and the closed shop provisions have put into the hands of trade unions a considerable weapon leading to violence, and to intimidation that we cannot detect.

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Mr. John Gorst (Hendon, North)

Will my right hon. Friend associate an additional feature with her remarks? Does she agree that many picket lines are being used—this applied to Grunwick and other disputes—in current disputes by extremist parties, such as the Socialist Workers Party and the Communist Party, solely as a background for making political trouble?

Mrs. Thatcher

I want to remove all possibility of violence on picket lines. I want to re-establish the circumstances under which people may go about their business without interference and without fear of losing their jobs. At present they are in grave fear.

The Prime Minister has been saying various things about the closed shop. He voted to change the earlier legislation but he has been making new statements about the closed shop. On 12th July 1977 he said:

“I always took the view that there was a right not to belong to a trade union, when I was a trade unionist myself, and I take that view now.” —[Official Report, 12th July 1977; Vol. 935, c. 219.]

If he wishes to repeal the legislation that his Government enacted, we shall support him in doing so. If he will bring forward proposals to mitigate the effects of the closed shop, again we shall support him in doing so. If he asks the unions to minimise its effects, we shall support him in that approach.

It is not impossible to do that. It has just been done at County Hall. At the instance of Horace Cutler about 17 unions have entered into a new agreement at County Hall which means that the closed shop in its present form will not continue. What has been achieved is one of the greatest breakthroughs under present Conservative government in the GLC. If the Prime Minister will secure similar agreements for all unions under all circumstances, it will be a great advance.

Let me tell the Prime Minister what has been agreed. Horace Cutler said:

“What we have now agreed is that any worker who genuinely objects to trade union membership on the grounds of religious belief or personal conviction can opt out without question; that there will be no ‘Star Chamber’ type of inquisition into the genuineness of such belief; and that any worker opting out will make a charitable donation equivalent to the trade union subscription.”

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The Government made the closed shop possible and legal in circumstances in which it would never have been possible and legal before. They enabled trade unions to compel a person to lose his job without compensation if he refused to join a union.

If the Prime Minister will secure by agreement that each and every person who does not want to join a trade union because of personal conviction is able to opt out, we shall support him. If he will undo some of the measures that he supported to give greater power through the closed shop provisions of the 1974 and 1976 Acts, we shall support him. He has a chance. We shall now see whether his statements that he is against the closed shop and that there is a right not to belong to a trade union were meant in the sense that he is prepared to take action, or whether they were mere talk. If he takes steps to minimise the closed shop provisions, we shall support him.

Mr. Eric S. Heffer (Liverpool, Walton)

Was not the agreement recently reached with the GLC made under the existing law? The trade unions are supposed to have enormous power, yet they are willing to enter into agreements of that sort. Is not the right hon. Lady undermining the whole of her argument? The trade unions have proved that they are willing to enter into agreements provided that they can be freely arrived at.

Mrs. Thatcher

Of course I am not undermining my argument. The hon. Gentleman knows that. I believe passionately that no one should be compelled to join a trade union as a condition of keeping his job. The Government do not share that belief. The Government believe—they introduced legislation to this effect—that a person should be compelled to join a trade union and that if he does not he should lose his job. That is in the 1974 and 1976 legislation. The hon. Gentleman knows that people who have worked for British Rail for years in a perfectly satisfactory manner have lost their jobs without compensation because the Government passed legislation that enabled that to happen. We must seek to change the law and the extent to which the trade unions seek to operate it.

I appreciate, Mr. Speaker, that I am taking rather a lot of time but I am not [column 1539]occupying all of it by a long chalk. If the Prime Minister will do something to reverse the effect of the 1974 and 1976 Acts which his Government and his predecessor's Government enacted, we shall support him.

Another complaint that is frequently made is that we cannot have free collective bargaining—I stress that we have always used the term “realistic and responsible collective bargaining” —between two sides when there is no true balance of power between the sides. There is a great deal in that argument. If we are to be able to bargain freely, there must be a pretty good balance of power between the two parties to the bargaining. That is why the powers of trade unions were strengthened many years ago when the employee was very much on the adverse side of the balance. Today it is the employer who is on the adverse side.

In many instances—this is not known by Labour Members sitting below the Gangway—a strike of three to four weeks can put an employer totally and utterly out of business, although it may scarcely affect the income of those who previously worked for him. Until that balance is a true balance once again, I believe it will be difficult, if not impossible, to get free collective bargaining.

Every freedom—trade union freedom as well—requires very grave responsibility in its exercise. I can see what will happen. Unless the Prime Minister is prepared to redress the balance of trade union power so that there is an even balance between the two sides, what he is going for will be a State in which one can never get free collective bargaining and in which he will try to have incomes policies year after year. This will mean that industry in this country seizes up and we never reach that state of prosperity to which our talents and abilities entitle us.

A good deal has been said about the way that the PAYE system works, but I might point out that the most obvious way to deal with this problem is one which Denis Healeythe Chancellor will never take. If one did not pay so much in tax out of one's pay packet, there would not be as much to come back during a strike. But the Labour Party is the party of high personal income tax. It increases it every time it is in power, and it has [column 1540]many effects. It means that people have no incentive to work harder and it means—this is another side effect—that people look at their net take-home pay and demand bigger pay increases than they would otherwise get if they paid less tax.

Some unions are so powerful that they are able to deprive the community of the essentials of life, and there are people in some occupations who would not go on strike at all. The Army would not, nor would the police, and we should be very grateful to them for their loyalty in all kinds of situations.

Are there not other unions whose members' work is so essential that one would expect them to be prepared to enter into no-strike agreements? Would it not be reasonable to take them out of the usual processes of bargaining in return for different methods which could be negotiated with them? I heard someone say “water” . I know that we went against the Donovan report and took away the limitation on striking in the water, electricity and gas industries. Some of us now think, with hindsight, that we were ill-advised to do that, but the nature of the prohibition was a criminal sanction which we did not like. Moreover, it had not been used for many years. There was a third reason, that people could get round the strike provision and have goslows or overtime bans. Donovan recommended keeping that limitation to remind people that there were particular occupations which were not entitled to inflict immense harm and damage on the community out of all proportion to their numbers.

What I am suggesting to the Prime Minister is that he enters into negotiations with some of the unions to see whether he could get a no-strike arrangement in return for a different method of bargaining which they would find satisfactory. Again, if he does that we will support him.

Doubtless the Prime Minister now regrets his attitude to “In Place of Strife” . We certainly regretted his attitude in 1974 when he pledged to do away with the Industrial Relations Act and to enact new legislation which, in his own words, Labour had already agreed with the TUC.

We are concerned with the well-being of all our people. The question of the [column 1541]powers of unions in relation to the community, Parliament and the law has been raised again by events and by crises which even the Prime Minister cannot ignore. While we are very critical of his complacency, and while we are critical of the way in which matters have hardened and he has not been prepared to take the requisite action, and while we are critical of much of his political philosophy, if he will take steps to deal with the situation of trade union power and consider new laws and new practices against picketing, of alleviating the effect of the closed shop and of trying to achieve more secret ballots so that people do not go on strike before they have been consulted about a matter which affects their whole livelihood—if he will agree to take action on these issues, we will support him through and through.

We believe that this is a matter of great significance for democracy and a free society, and we will support him if he will take steps to deal with these problems. I hope he will set them in hand soon. May I point out that this is a more generous offer than he ever made to us when we were in government. I hope that he will take those steps. If he does not, I hope that he will step aside for a party that will.

The Prime Minister (Mr. James Callaghan)

I congratulate the right hon. Lady on a most effective parliamentary performance. It was in the best manner of our debates and the style in which it was delivered was one of which the right hon. Lady can be proud.

I wish I could offer quite the same compliment about some of the content. I think that anger and indignation are emotions that it is right to display, and when they come from a deeply felt passion it is right that the House should listen to them. But I would seriously and earnestly beg the right hon. Lady not to give way to overmuch indignation when she is negotiating on these issues. We have found by a long experience of history that it is not sufficient to refer to a large number of one's fellow citizens, as one of the Sunday newspapers did, as enemies within the gate. That is not the way that one can handle these matters. [Interruption.] Well, I suggest that hon. Gentleman go [column 1542]to the House of Commons Library and look up the headings in the Sunday newspapers and they will see.

I propose to deal with what I have to say under three headings. The first heading I take is the present situation, and in view of the fact that the right hon. Lady spent the greater part of her speech on the power of the trade unions and strikes and picketing—as I intended to do myself—it would be proper to spend time on that. But I shall also embark upon a subject that she did not mention. Not one word passed her lips, as far as I can remember, about the overall question which faces this country and that is the prospect of runaway inflation. I will come to all of these matters in turn.

First, the right hon. Lady began by giving us her assessment derived from the reports reaching her of the situation in the country. I have of course, through the Department of Transport and the Ministry of Agriculture, Fisheries and Food, been getting similar reports. It is very difficult to give an overall picture, because the situation seems to change from hour to hour, and as the right hon. Lady said, from place to place. Regional officials, I am told, of the Transport and General Workers' Union are being very active in seeking to ensure that the limits of industrial action, particularly in relation to secondary picketing, are respected, and they are taking positive steps with strike committees on the basis of the priority list that the Government handed to them.

Priority supplies, I am told, are moving out of a number of ports, although usually on a restricted basis and not at all at Hull or Felixstowe. Picketing of some food manufacturers and suppliers of animal feedingstuffs continues, but has eased. In general, while vehicles belonging to the Road Haulage Association, even when carrying priority supplies, continue to face problems, what are called own account operators are not being restricted. [Hon. Members: “Nonsense.” ] I prefaced my sentence by saying “In general” . I ask the House to accept that these reports are compiled on the basis of what is sent in by the regional officials assessing the situation for the Departments.

On the other hand, there are clearly occasions when the recommendations of the union are being ignored. There are regional differences. It is said that exports [column 1543]are being held up and raw materials are not reaching factories. The situation is easier in the South-West and is improving in the North-East, but the North-West and South Yorkshire continue to cause serious concern.

Mr. Michael Brotherton (Louth)

Will the Prime Minister give way?

The Prime Minister

No. As regards supplies in the shops——

Mr. Christopher Brocklebank -Fowler (Norfolk, North-West)

Will the Prime Minister give way before he leaves this point?

The Prime Minister

I am not leaving any point. I am trying to give the House the best up-to-date account I have from the regional officials of the Departments concerned of the overall picture.

Mr. Brotherton

It is out of date.

The Prime Minister

I can only reply to the hon. Gentleman that the report was assembled at 2.30 this afternoon. As I said, the situation changes from hour to hour and it is not possible to get an overall picture.

Mr. Brotherton

Will the Prime Minister give way?

The Prime Minister

No, not at the moment. Basic foods such as milk, meat and bread are widely available, and we expect that position to continue. We expect supplies of most foods to get through to the shops in reasonable amounts for the time being, although there are a number of difficulties to be resolved with important raw materials such as salt, edible oils, fats and sugar in order to get the food factories moving again and the pipelines replenished.

The effect of the instructions issued by the TGWU to its members has yet to be seen, but, if secondary picketing of own transport vehicles is removed, there will be a resumption in the flow of some of the important raw materials to which I have just referred. If the union ensures that secondary picketing of vehicles moving food is brought to an end, all these vehicles should be able to go about their business and that would greatly reduce the interruption of food manufacture and distribution and of essential supplies of animal feed. [column 1544]

The broad conclusion that we have reached is that the situation for trade, industry and employment in this country is serious. We shall continue to keep under review, day by day, whether a state of emergency would increase the flow of supplies, food and materials. That is the ultimate test. As of today, we do not believe that the declaration of a state of emergency would increase that flow of supplies, food or materials. Indeed, it might lessen the flow.

If the situation changes, the right hon. Lady and the Opposition need have no doubt that, as in the case of the oil tanker drivers if their dispute had continued, we would not hesitate to come to the House with a declaration of a state of emergency and ask the House to support us on it.

A number of hon. Members want to raise matters with me. I shall give way gladly, but I am sure that they will understand that I have a lot to say about other matters.

Mr. Brocklebank -Fowler

Many of us will interpret the Prime Minister's remarks as being an extremely complacent assessment of the current situation. What hope can he give to companies such as the Dow Chemical Company in my constituency which is totally blockaded by secondary strikers even though no member of its staff is in dispute with anyone? As a result of that action, an important export order to Egypt which cannot be replaced is likely to be lost and will never be won again.

In addition, because of the shortage of fuel oil and the damage that will be caused to experimental greenhouses containing plants, insects and animals essential to research, three years' important research work will be lost. What steps will the Prime Minister take to ensure that fuel and other essential supplies can get through to that firm?

The Prime Minister

If there is obstruction under the existing law, action can be taken. If the criminal or civil law does not allow action to be taken, I should like to ask the hon. Gentleman what action he thinks I should take—apart from conceding the claim.

Mr. Brocklebank -Fowler

The right hon. Gentleman is the Prime Minister and claims to have influence with the [column 1545]trade unions. I shall be grateful if he will use his influence to ensure that the Transport and General Workers' Union removes its pickets and enables the firm to get on with its work.

The Prime Minister

If I had the influence with the Transport and General Workers' Union that the hon. Gentleman ascribes to me, the strike would never have started.

Mr. Reginald Eyre (Birmingham, Hall Green)

Will the Prime Minister give way?

The Prime Minister

No. I shall not give way again. I am sure that in every constituency there is a complaint that every hon. Member could raise.

Mr. Brotherton

Will the Prime Minister give way?

The Prime Minister

No.

Mr. Speaker

Order. It is clear that the Prime Minister is not giving way. The House must acknowledge that fact.

Mr. Brotherton

Will the Prime Minister give way?

The Prime Minister

No. I promise the hon. Gentleman that Ministers will make reports as soon as is necessary and every day. I have a long speech to make and I have given way. I must get on.

I have given the up-to-date position in so far as any general assessment can be made.

Mrs. Winifred Ewing (Moray and Nairn)

Will the Prime Minister give way?

The Prime Minister

No.

Mrs. Ewing

Give way.

The Prime Minister

No.

Mr. Speaker

Order. May I say to the hon. Lady the Member for Moray and Nairn (Mrs. Ewing) that we shall not have a reasonable debate if the right hon. or hon. Member addressing the House is not allowed to continue.

The Prime Minister

The interruptions of the hon. Member for Moray and Nairn (Mrs. Ewing) sound to me like secondary picketing. [column 1546]

I want to come to the question of picketing, but let me utter a word about strikes in general. The Leader of the Opposition said that the balance of forces has changed. I agree with her. There was a time when the employers were in the ascendance and when strikes were very much a matter of last resort—unlike now. Indeed, in those days men often stayed at work and accepted intolerable conditions with great bitterness rather than strike because of the privations they and their families would endure if they went on strike.

Lord Donovan, in his outstanding report—and I was a general supporter of his conclusions—said of men on strike:

“It would hardly be human if they viewed with composure the spectacle of other workmen endeavouring to take over their jobs” .

The origin of picketing was to stop the blackleg from doing one's job and the method used was to interrupt the flow of supplies to and from one's employer. The struggle was between the employer and the workmen who had combined to assert their right to decent living conditions.

The Leader of the Opposition quoted Lord Rawlinson 's remarks about the legal issue. I am not a lawyer, but I understand that there is no legal distinction between primary picketing and secondary picketing in either the criminal or the civil law. However, the plain man can draw such a distinction, and I do.

Picketing, even today when the balance of strength has changed, is intended to stop the blackleg from doing the work of the man on strike.

Secondary picketing has always been with us, but not to the extent that it is today. It grew up, I may say—without, I hope, raising too much heat—especially during the period of the ill-fated Industrial Relations Act. But it is not designed to stop the blackleg from doing the job of the man on strike. It is intended to stop another worker from doing the job that he usually does. That is the distinction that I make as an ordinary citizen and not as a lawyer. It is my view that in these circumstances indefensible hardship can be imposed on innocent people and on people who are not connected with the dispute. That is why the spectacle of secondary picketing has aroused widespread criticism, and the Transport and General Workers' Union has attempted to limit [column 1547]picketing to its original purposes, although so far with only some partial success.

Striking used to be a measure of last resort, because of the privations that resulted. Nowadays it is not so. Indeed, the privations are hardly to be seen in certain circumstances, although in the Grunwick case there was an indefensible attitude on the part of the employer concerned. Workers today are part of society, and I thought that one of the elements missing from the right hon. Lady's speech was a recognition that they are part of society. Workers today accept fewer constraints than they did in the past about the effects of their actions on the general public. They intend—and by using secondary picketing they succeed—to bring pressure to bear on the employers and on Governments, to make us concede the claims which are put forward.

The present actions have highlighted the problems of secondary picketing, which did not attract continuous attention, at any rate in the past, and the Government certainly have a responsibility to consider what should be done to alter the present situation. I am bound to say, however, in view of our long history in these matters, that it is much easier to analyse than it is to find a proper solution, but we must try.

I begin by asserting two fundamental principles of our society. First, we cannot deny the right of men and women to withdraw their labour and still call ourselves a free society. That to me is fundamental. The second principle that I assert is that the community has an overriding right against all sectional interests. These principles must be reconciled. This is the difficulty of a modern society.

I point out to Opposition Members that it was a trade unionist, John Boyd, the general secretary of the Amalgamated Union of Engineering Workers, who summed up the position the other day. He said that it was wrong to cause other people to be thrown out of work, food wasted, animals slaughtered and health put at risk. He said that that is not the function of the trade union movement. I am with him 100 per cent. I address the road haulage drivers particularly when I say that they have to measure their sense of grievance against the effects that their actions are having on the community at large. [column 1548]

I deduce, from the speeches of some Opposition Members who have studied these matters, that they are far from clear that a change in the law would solve the problem. The right hon. Lady this afternoon made a number of suggestions, but, as far as I could understand her approach, she was saying not that these were suggestions that she would like to put into force but that if we came forward with them she would support them. I am only trying to interpret what I understand the right hon. Lady's position to be.

Mrs. Thatcher

It would help if the right hon. Gentleman were to repeal the 1976 Act which his Government passed.

The Prime Minister

I will come to that particular point a little later. I do not think it would help.

I have read the recent comments of the hon. and learned Member for Cleveland and Whitby (Mr. Brittan) and of the right hon. Member for Lowestoft (Mr. Prior). They have spoken in the last week about this matter of picketing. They have referred to the need for a voluntary code of conduct. Certainly I believe that that would have a better chance of survival than ill-considered legal provisions, which could be ignored in the future as they have been in the past.

There is the example—it was referred to earlier—of the position in 1972 with Arthur Scargill and the Saltley coke works, which led the National Union of Mineworkers in 1974 to lay down voluntarily strict rules governing the conduct of picketing. These controls were effective. Why? Because they had the force of law? No. These controls were effective because they were voluntarily agreed measures, drawn up by the union itself and accepted by its members. They could not have been enforced if they had not been accepted by those concerned, or if there had been competing factions, for example, within the union who did not accept the overall decision. But the National Union of Mineworkers has usually—indeed, I would say almost invariably—accepted decisions of this nature when they are taken, and it did so on that occasion. What I am saying to the House, and what I beg the House to believe, is that the law is only a second—no, a third—best in these circumstances unless we have the agreement and consent of those who are bound together. [column 1549]

As the House knows, the Secretary of State for Employment has given a lot of consideration to the question of picketing. Last October he sent to a number of bodies, such as the TUC, the CBI, and to the right hon. Member for Lowestoft, the Scottish National Party, the Liberal Party, and others, including ACAS, a series of proposals for trying to clarify the issue of picketing, to try to turn it into something that would be generally acceptable and would not result in the kind of position that we have seen today. It is a prickly subject and, as the present position shows, a little progress has been made in the comments that we have had so far from some of those whom we have asked to give us the benefit of their advice. My right hon. Friend has asked them to expedite their replies, and the Government intend that we should proceed as quickly as we can to draw up a code of conduct that will adhere to some of the principles I outlined at the beginning of my remarks. My right hon. Friend will report progress to the House on this matter from time to time.

I come now to the question of the law, which the right hon. Lady raised. It has been suggested by other Tory spokesmen that industrial relations legislation which this Administration introduced has made secondary picketing more likely because of the repeal of the Conservative Administration's Industrial Relations Act 1971.

The Conservative Administration put that Act on the statute book in good faith, with the intention that it should introduce a system which they hoped would be fair between the unions, the employers and the public, but let us recall what was the basic underlying purpose of the Act. It was to make most strikes and picketing actionable. That was the purpose of the Act. People came under the law directly in that sense. What happened? Some action was taken. I hardly like to remind the House that five picketers were arrested, five picketers were charged, five picketers were imprisoned, and the Official Solicitor was called in to get them out.

It was during the lifetime of the Industrial Relations Act that secondary and flying picketing became the nuisance that it is today. The legislative change which we have made, which it is alleged has made secondary picketing easier, is that [column 1550]in the Trade Union and Labour Relations (Amendment) Act 1976 the immunity, as the right hon. Lady correctly said, for acts done in contemplation or furtherance of a trade dispute was extended to inducement to break a contract instead of, as previously, only a contract of employment. That was the extension that was made.

The right hon. Lady says that this was intended to give great new powers to the unions and was part of the whole ethos. The truth is that this change was made because of a number of court decisions in the late 1960s. These decisions had made the application of the law extremely unclear. This was commented upon by Lord Donovan who said in his report that whether legal liability was or was not incurred depended on—and here I quote the words of the report—

“whether a legal maze is successfully threaded or not.”

That was the result. As it was drafted, the Act was acting capriciously and inequitably between differ, ent groups of workers and in different industries.

I have examined this carefully, and in the light of the experience that we have had it is highly doubtful, if the change-back was made, whether this would effectively curtail secondary picketing. I still recall the Trade Disputes and Trade Unions Act 1927. That Act provided for the , measure that the right hon. Lady has asked us to reinstate. I was deeply opposed to it because it prevented Civil Service unions from being affiliated to the TUC. That was eventually repealed. What I would like the right hon. Lady to check is this. The law was totally ignored and unused despite, that provision from 1927 until the time that it was repealed.

We must be careful about the law in these matters. I am not in principle opposed to the law in trade union matters. As a Conservative spokesman said the other day, we have introduced more law than almost anybody else. We have done, so, but we must be careful where we go with these laws unless we are to bring them into contempt and ridicule. That surely is not the purpose of the Opposition in putting forward suggestions of this sort.

The 1927 Act is one that I well recall, and it is for this reason among others that the , Government believe in and would [column 1551]favour a code of conduct drawn up in any approved way. The right hon. Member for Lowestoft suggested this, but not the right hon. Lady, as I understand it. I am not trying to make a distinction between the two, but I will if the House wants me to, an, d it will not be very difficult. Everybody is trying to think his way through this. I agree with the right hon. Gentleman that a voluntary code of conduct, reaffirming the existing law, would be the best way to proceed as a solution to this problem.

Mr. Eyr, e

May I press the matter of urgency upon the Prime Minister. He mentioned raw materials, great quantities of which are being held up at the ports by secondary strikes and other activities. The consequence of that limitation of supply will be devastating in the industrial towns and cities within a week.

The Prime Minister

I cannot undertake on a long-term issue of this sort, which has been growing up for several years, that a new voluntary code of conduct would be drawn up and agreed within a week. That is not possible. We must try within the limits of the present civil and criminal law to ensure that secondary picketing does not go beyond the proper limits. With the help of the regional officers and the aid of the police, I trust we shall be able to do that.

Several Hon. Members

rose——

The Prime Minister

I must pass on. I gave way only 30 seconds ago. I turn now to the question of pay policy. My right hon. Friend the Secretary of State for Employment reports that in this pay round there have so far been 45 major settlements covering 1½ million employees. Thirty of those settlements, covering 800,000 employees, are within the guidelines. At least eight settlements covering over half a million employees are not within the guidelines. I add that most of those in breach had settlements within single figures, although, since the Government's defeat on sanctions in December and our consequent withdrawal, the situation has worsened. Some offers are being made of more than 10 per cent. and productivity conditions are being dropped from the offers.

Up to the time of the sanctions debate there were two highly publicised, confirmed breaches—Ford and British [column 1552]Oxygen. These breaches, together with the oil tanker drivers and now the road haulage drivers, tend to set a pattern. There is a knock-on effect, an attempt to set a going rate. Everybody who has anything to do with negotiations knows that this is true.

I shall enumerate some of the agreements that were outside the limits just to give an indication of where they were. There were the merchant seamen at 8¾ per cent., British Oxygen at 9½ per cent., motor vehicle repair workers at 8 per cent., narrow fibre workers at 8 per cent., and electrical contracting workers at 10½ per cent. It could be claimed that this kind of settlement, although not in accord with the Government's views of the best results for the country as a whole, would not be regarded as totally intolerable. But experience has shown that when there have been some highly publicised breaches the knock-on effect works through subsequent negotiations and indeed accelerates. This is the problem and the issue that the country has to face today.

I draw the attention of the House and of the country to the warnings—the awful warning in some ways—of 1975. At the start of the pay round—history can judge the reason for it and what effect the money supply had—we had some settlements in double figures. There were those who considered this tolerable, just as we now consider that we can perhaps tolerate something that we do not really want. The settlements started in double figures, but they gradually built on each other. By the end of the year, by the end of the round, settlements were not just in double figures. They had rocketed to over 30 per cent. The right hon. Lady said nothing about this this afternoon. She said not a word about it, but here, in a sentence, is the reason why the Government do not intend, wherever they have influence, to depart from the guidelines they have laid down and which are best for the country as a whole.

I noted what the right hon. Lady said about not encouraging the road haulage workers in any way at all. The discussion on their pay has all been in terms of basic rate. I will repeat the figures accurately as I do not wish to mis-state them. Their basic rate is £53 a week. They have been offered a further £7 to bring this rate up to £60. They are on strike for an extra [column 1553]£12 a week to bring it up to £65. On the basis of overtime and bonus payments, their present average earnings are £84 a week. The offer made to them would increase those earnings to £95 a week—that is, by £11 a week. If they were to get the £65 a week basic rate, their average earnings would increase from £84 to £103 a week—an increase of £19 a week or nearly £1,000 a year. I put it another way—the increase they would get is as much as a single old-age pensioner has to live on in the course of a week. Is that reasonable? Is this what free collective bargaining is about?

Mr. Alexander W. Lyon (York)

These figures are fairly well known, but I understand from some lorry drivers in my constituency that they are affected by the reduction in the number of hours that are permitted under EEC regulations. The result of this for one of the drivers whom I questioned yesterday was that he had already lost £5 a week on the first instalment of the hours regulations. He expected to lose more progressively as the regulations continued to be implemented. In those circumstances, is there not a case for saying that the lorry drivers' claim should be viewed in a different light from the rather naked figures that the Prime Minister has just given?

The Prime Minister

It is my experience that every group of workers has some particular problem that affects them and them alone. I have never known a case that is not unique. These are matters that must be dealt with by negotiation.

The road haulage workers' union has already negotiated an increase of about 15 per cent. this year. That is too high, in our view, for the health of the economy. These workers also received 15 per cent. a year ago at a time when inflation was running at 8 per cent. a year. They have had tax cuts like everyone else and increase in child benefit and children's allowances, yet now they say they will not settle for less than 22 per cent. I have no doubt what the answer should be in those circumstances. They have had a better deal than could have been expected and they should now go back to work.

Mr. Norman Tebbit (Chingford)

rose——

[column 1554]

The Prime Minister

No, I shall not give way at the moment. We now face claims in the public services from the local authority manual workers, the water workers, National Health Service ancillary workers, ambulance men, railwaymen, postmen, steel workers, gas supply workers, electricity supply workers and miners. These settlements are crucial to the future health of our country. The Government's policy is that the country should not go through once again what it went through four or five years ago. We shall adhere as closely as possible to the pay limits that have been laid down. We are at present seeing the first bitter fruits of free collective bargaining.

We have been deprived, by the vote of the House, of the instruments we were using to influence the holding down of pay settlements. Therefore, we must make the best use of such instruments as are available to us.

First, I make it clear that we do not intend, as a Government, to finance inflation. We do not intend to have a situation like that of a few years ago when the money supply snowballed out of control. We intend to adhere to monetary targets, with inevitable effects both on the level of activity in the economy and on the level of unemployment.

What has been remarkable so far has been steadiness of sterling. It has not slipped; it has wavered very slightly. As long as the Government are known to be holding to those targets and to this policy, we can be certain that our currency will not slip in the way that it did previously.

The Government do not prefer these alternatives. They are not our choice. However, we reject the alternative of allowing inflation to increase unchecked. If we do, we shall all be far worse off in the long run.

What would be the result of a small increase—and that is what it would be, only a small increase—in the quantity of money financing very large wage settlements of 20 per cent. or 30 per cent.? There could only be one result—the weakest firms would go to the wall and there would be more unemployment. In addition, instead of easing interest rates the country would be faced with further tightening. These rates are already higher [column 1555]than we would like. A further rise would cause industries and distributors to postpone investment where it has been running high—a 13½ per cent. increase in new investment last year. That will have to be postponed if higher wages are to be paid.

Secondly, in the public sector big settlements will push up the public sector wage bill. If settlements in the public sector were at the rate of 15 per cent., public expenditure would increase by more than £2 billion next year. The borrowing requirement would increase, on present estimates, by rather less than £2 billion.

If the local authority pay settlements are as much as 10 per cent., domestic rates will increase on average by as much as 18 per cent. If local authority pay settlements are as high as 15 per cent. domestic rates will increase on average by up to 27 per cent. What are the consequences? Excessive pay settlements to public servants will mean worse and poorer services for the public generally. The tragedy will be that, if pay settlements are excessive, there will be cuts in rail services, longer hospital waiting lists, poorer education and fewer jobs. Let us have some sense in this situation.

None of us wants to go through this kind of situation again. I warn the House that if we were to increase the borrowing requirement by anything like that figure—and even the Leader of the Opposition would find difficulty in cutting that—sterling would slip. We would then have an increase in inflation once more and we should be off on the same old merry go round, except that it would be a tragedy.

We have considered the Government's attitude against this background. I come immediately to the question of low pay. Paragraph 17 of the White Paper correctly labelled “Winning the Battle against Inflation” said that the Government would be ready to see higher percentage increases than 5 per cent. in cases where earnings were less than £44.50 for a normal full-time week. The condition was that those on higher earnings should accept the consequential improvement in the position of the lower paid. This provision was of potential benefit to about 2 million employees—nearly 10 per cent. of the total. [column 1556]

At the Labour Party conference at Blackpool where this policy was rejected, a number of delegates said that the Government had not gone far enough for the lower paid. I indicated that this was a matter on which the Government would be prepared to talk further with others, including the TUC. We had those talks and I regret that the result was not ratified by the General Council.

Nevertheless, the Government have continued to give further thought to this matter. We have concluded that we should go further in an attempt to ease the situation and help the lowest paid. Therefore, we propose that, in addition to the existing exception of those earning up to £44.50 for a normal full-time week, there should be a bigger increase for those in the earnings bracket immediately above this figure.

What we have in mind is that increases might be allowed, up to a specified cash figure of £3.50 a week for a normal full time week, where this amount will be more than 5 per cent. of weekly earnings. In order to allow the maximum flexibility for negotiators, this increase, like the 5 per cent., can be applied as a kitty among those benefited, but obviously on condition that the benefit is shared between those for whom it is intended and not transferred to the more highly paid grades within the same negotiating group. Of course, it is our view that this should apply throughout the whole sector, public and private. In the case of the private sector, negotiations would have to go on as they are going on now.

As to local authorities, this development in the pay policy would have implications for next year's cash limits. It was stated in the White Paper that the 1979–80 cash limits would reflect the Government's policy on pay, but so far the only cash limit which has been announced has been that for the rate support grant. I should like to make clear to the local authorities that the Government will be ready to meet their share of the extra cost to the local authorities of these proposed increases to the lower paid. The cost would similarly be taken into account where appropriate in setting the rate of the other 1979–80 cash limits. For central and local government the cost will be about £60 million.

I come now to the aspect of fixing fair rates of pay for those employed in the [column 1557]public sector. One of the real difficulties which always emerge when one is in a period of free collective bargaining, as we are now, is that fairness is rooted deeply in the conceptions of what should be the proper rewards. Some public service groups already make use of comparisons with rewards paid to employees in the private sector in their negotiations. The Government will be ready to see in some additional areas of the public sector, other than those engaged in trading, where there is a different set of negotiations, a greater role for comparability in determining pay.

The guiding principle should be the achievement of comparable pay for comparable work and comparable effort. Where the employers and the unions concerned make a request, therefore, the Government will be prepared to agree to an investigation into the possibility of establishing, for particular groups of workers, acceptable forms of comparison with terms and conditions for other comparable work. We will be prepared that the results of negotiations based on such comparisons should be implemented by stages in subsequent years. This is by no means an ideal solution, but it seems to us that, if we have to try to find our way through the present difficult situation, it is something on which we should be ready to take a chance.

Obviously, if we are to achieve the desired effect of setting fair and equitable relationships, such an arrangement depends upon the recognition by those groups with whom the comparisons are being made that it will be self-defeating if they seek to use the consequential increases in the public sector as a basis for their own next round of claims.

Mr. Terence Higgins (Worthing)

Has not the Prime Minister yet learned the lesson, which was pointed out by the original three wise men about 15 years ago, that if one has productivity agreements in some parts of the public sector and comparability in the other—indeed, if one has productivity agreements generally and comparability in the public sector—this must be inflationary and there is no way in which that can be avoided?

The Prime Minister

That is an argument of the economists. It is one on which I have heard both sides argued. I [column 1558]am not attempting to insult the hon. Gentleman by calling him an economist, but in practical terms I think that this is the best way forward. But in case the hon. Gentleman has misunderstood, I am not proposing that there should be indexing, that the public sector should be able to index its earnings against others. I believe that this argument will go on, but decisions have to be taken and I believe that this is a way of trying to get through the present situation without resulting in runaway inflation.

Ministers have begun discussions with employers and unions concerned—with local authority manual workers, with National Health Service ancillary workers and with ambulance men—to see whether a comparability investigation on the lines that I have described has a contribution to make in the context of their current negotiations. The Government will naturally be prepared to give sympathetic consideration to joint approaches for comparability to be applied to other public service groups. Here I have in mind nurses, for example, because it seems to me that there is an opportunity to try to get some sense into the present situation.

I turn now to price controls. The Government will strengthen price controls. My right hon. Friend the Secretary of State for Prices and Consumer Protection will introduce a Bill to strengthen the powers of the Price Commission by repealing the provision in the Act under which firms in both the private and public sectors are able to put up prices automatically. When the prices policy was introduced in 1977, it was the intention that the Price Commission should make judgments about price increase applications on their merits. But, because fears were expressed about the way in which the Price Commission would act, the Government introduced a requirement for my right hon. Friend to make regulations which would ensure that there would be a certain level of profitability, whatever the circumstances of individual firms and irrespective of the views of the Price Commission. These fears have been wholly exaggerated, as, indeed, we expected at the time. But these regulations apply quite arbitrarily. They allow firms to maintain profit levels by putting up prices, whether or not the same level of profit can be achieved in other ways—by cutting costs or by improving efficiency. [column 1559]

The effect of the new Bill will be to abolish the requirement for such regulations during and after Price Commission investigation of individual enterprises. There will then be no restriction on the Commission's ability to consider the extent to which firms can reasonably absorb costs. In this context it will be obliged to look at all relevant costs. The Bill will also provide that firms which prenotify price increases after today—16th January—will not qualify for safeguards if the Price Commission decides to investigate those price increases. But the Bill will maintain safeguards where the Government direct the Price Commission to examine the profit margins of whole sectors of industry as opposed to individual firms, since it will not always be possible for either the Price Commission or the Government to assess clearly how hard the recommendations of the Commission, which might be proposed for a whole sector, would bear on the financial position and viability of individual firms.

The Bill will maintain the present discretion of the Price Commission to grant interim price increases to companies under investigation where justified by the circumstances of the case. This power has already been used by the Price Commission in several cases despite the existence of safeguards, and it will continue to use it.

I want to come to a conclusion. We put these proposals forward at a time—and I do not wish to re-open old sores—when the Government have not been left with many instruments in their hands to try to control the prospects for inflation in a free collective bargaining situation.

Mr. John Pardoe (Cornwall, North)

The Prime Minister has repeatedly throughout his speech made the point that all these troubles seem to stem from the time when the House voted against sanctions. Will he accept and admit that throughout the whole of the 18 months of the Lib-Lab pact I and my hon. Friends did everything we could to persuade him to put effective sanctions to Parliament? We were told that the Government could not do so because a section of the right hon. Gentleman's party would not support them.

The Prime Minister

I do not accept in any way the last part of what the hon. Gentleman has said. Although we expect [column 1560]the hon. Gentleman to quote private conversations in public, at least he might quote them correctly.

We have put forward these proposals in the belief that they will help the position of the lower paid and ease their lot, in an attempt to create a greater sense of fairness among employees in the public sector in the light of the changed situation we are now in, in which free collective bargaining holds the stage, and with the belief that the proposal on prices will not discourage good and efficient firms but may make less efficient firms more ready to overhaul their practices.

These proposals will not meet, and are not intended to meet, the demands of those who seek increases of 20 per cent. or even more. The best way we can help the lower-paid, the pensioner, the sick and those unable to help themselves is by having a strong and effective counter-inflation policy. In such a policy excessive wage settlements have no place. Public opinion should reject those who put them forward.

It is the Government's view that the country has been moving in the right direction up to this year. Is the present setback a reason for going into reverse on all our policies? The answer is “No” . Our approach is right on incomes, on industrial strategy and on the need for a meaningful understanding with the trade union movement on how powers are limited and worked out and used by consent. Although we have not yet succeeded in carrying it out, our approach is right in relation to the uses of North Sea oil. None of these objectives needs to be changed.

No Government could today spare Britain from a bumpy ride for as long as the attack is being made on the anti-inflation programme. We shall not seek to make scapegoats of any group. We shall do everything we can to make possible the return to a realistic and rational level of settlements. We shall continue to hammer the message home. I say to the right hon. Lady the Leader of the Opposition that we shall seek to build bridges, not to blow them up. No doubt we shall lose some battles in the course of this fight.

However, our strategy must survive because it is the right one. We have heard no alternative. It is the only one for [column 1561]Britain. In whatever time remains in this Parliament we shall do our best to carry it out. In so far as we do not succeed in this Parliament we shall carry it out in the next.