Tag: Edward Heath

Below is the text of the speech made by Edward Heath, the then Prime Minister, in the House of Commons, on 9 January 1974.

I want at the outset of this debate to restate the hard facts which made the Government take the steps they announced in the House on 13th December. The underlying position has not materially altered since those measures were debated in the House on 18th December. The facts were not challenged then, nor were they refuted at the meeting of the National Economic Development Council which followed, at which I took the chair.

Now the facts are accepted by the vast majority of responsible opinion in this country. The only difference is between those who believe that the action we took was wise and those who consider that we should have allowed our stocks to be used up, with the risk of industry grinding to a halt and essential services being damaged.

The measures we took, including the three-day week, were forced on us by the need to make sure that our electricity supplies did not break down within a few weeks. This was a direct result of a fall in coal production, now down by almost 30 per cent., resulting from the miners’ industrial action begun on 12th November. I remind the House that it was only after five weeks of such action, when we could clearly see the consequences for the nation as a whole, that I made my statement to the House.

In the five weeks following the miners’ action, power stations’ coal stocks fell by 3.6 million tons. This compared with a fall of 500,000 tons in the corresponding period last year. At 8th December the stocks stood at 16.2 million tons. A continued rundown of stocks of nearly 1 million tons a week would have reduced this total to the critical level of about 7 million tons by early February. That was on the optimistic assumption that the weather remained mild. It also presupposed that the industrial action in the mines or on the railways was not intensified. We had arranged for increased oil supplies to be sent to the power stations, and at 1st January the Central Electricity Generating Board had enough oil for three weeks’ use at all its oil-burning stations.

The Government were not prepared to see a rundown in coal stocks such as I have described. The alternative was just to let the situation continue as we did in 1972, at the time of the miners’ strike. The Government were bitterly criticised at that time for so doing ; criticised by industry, criticised by the unions and criticised by the public, and, looking back, I should have to admit rightly so. But we have learned from that experience. In those circumstances, it was our duty to ensure as a matter of common prudence that the situation in 1972 was not repeated. In my belief, and, I hope, that of the House, no responsible Government could have done otherwise.

As a result of the measures that we have taken, the saving in electricity consumption has reached about 21 per cent. I should like to pay tribute to the public and thank them for their co-operation. The contribution which they have made by their economies is of major importance. Both employers and the trade unions have also striven to adapt themselves to the limited electricity supplies available. They have striven with skill and ingenuity, and the nation owes them—both employers and trade unions—a great debt for so doing, and I hope the House will join me in asking for their continued co-operation.

To ensure that we can together see the winter through without further major dislocation we need to consolidate that achievement and, indeed, to do rather better. The Government will continue to try to find ways of securing economies in the use of electricity and thus of giving more help to industry. In this we are assisted by the settlement within stage 3 made by the power workers on 5th January.

Since the electricity restrictions took effect we have saved about 1½ million tons of coal. In the week before Christmas, power station coal stocks fell by less than 500,000 tons compared with 1 million tons in the first week of December. Over the Christmas period, the stock rundown was 750,000 tons when the loss was expected to be 1¼ million tons. As I have already told the House, and as I explained to the NEDC and have said repeatedly in public, the three-day week can be ended as soon as the miners decide to return to normal working and adequate supplies of coal are reaching the power stations.

There is one other matter with which I should like to deal. [Interruption.] With respect, part of the agreement between the National Coal Board and the National Union of Mineworkers is that safety maintenance should be done by extra shifts. That is not occurring, and that is one of the main reasons for the fall in coal production.

Mr. Dennis Skinner (Bolsover)

The right hon. Gentleman does not know the agreement.

The Prime Minister

I have it here, and I am prepared to read it to the House. Clause 3 of the 1947 five-day week agreement states: The union will enter into arrangements with the board to provide for the regular working of additional shifts by certain categories of workers where this is necessary to ensure the safety of the pit.

Mr. Skinner rose——

The Prime Minister

There is nothing controversial about this. This is a matter of fact and it is what justifies my statement that when the miners return to normal working it will be possible to get proper production and the coal will get through to the power stations.

Mr. Michael McGuire (Ince)

Will the right hon. Gentleman give way?

The Prime Minister

I am sorry, no.

I listened to Mr. Gormley at the weekend, and there is one matter with which I should like to deal because there seems to be a genuine misunderstanding.

Mr. McGuire rose——

The Prime Minister

I am sorry, but I shall not give way.

Mr. Gormley said: If the members of the National Union of mineworkers went back to normal working tomorrow, you would still have this crisis. If it had not happened this month, it would have been in the next two or three months inevitably. If there is genuine misunderstanding here, I wish to remove it. The three-day week is in the use of electricity, and that is the consequence of the fall in supplies of coal to the power stations.

There is now another factor of the utmost importance for British industry: the reduction in steel production. It is not the three-day week that has caused the British Steel Corporation to cut back production to 50 per cent. It is the lack of essential coking coal for the mills. The facts are that normal deliveries of coking coal to the blast furnaces have been cut to two-thirds of what is required. The corporation’s margins of coal are now down to 3.7 weeks’ supply at full production. That in itself, irrespective of Government action, will involve major shortages of material in manufacturing industry, with consequent short-time working and unemployment.

The three-day week is not the consequence of the oil supply situation. The measures that we took in November would have been adequate to ensure the minimum of damage to industrial production from reductions in our oil supplies. We were assured at the time that industry could absorb those cuts by economies, and this has proved to be the case.

The three-day week is not the result of higher oil prices. Indeed, it is essential that we meet this further external challenge by increasing production and exports to pay for the fuel that we require until our own resources are sufficiently developed to meet those needs.

We also have to make adequate arrangements to safeguard our supplies of imported oil. That is the object of the negotiations now under way with Iran and of our contacts with other oil-producing States which the Government have rightly taken on in the interests of Britain. We wish to co-operate with both the oil-producing and oil-consuming nations in making these arrangements, about both the supply and the price of oil. It is obviously in the interests of all that there should not be an unrestrained international scramble for the supplies that are available.

A number of proposals for international co-operation have already been made. It is right that there should be early talks between the major consuming countries, and that these talks should be broadened to include the producing countries. We have ourselves put some ideas to the American administration on how to follow up the initiative that Dr. Kissinger took in London at the Pilgrims Dinner, which I welcomed in the House and at Copenhagen and which I have welcomed on several other occasions. Meanwhile, I understand that an announcement will be made very shortly by the American Government about new proposals for a meeting in this connection. As soon as these proposals are received—which, I repeat, I understand will be in the very near future—we shall at once consult our Community partners about the response to them.

The recent developments in the supply and, above all, the price of oil have completely transformed not only the degree but the very nature of the energy problem that faces us and, indeed, most Western industrial countries in the coming years. They have clearly added to the amount of time and effort that needs to be devoted to the subject of energy both at ministerial and at official level. My right hon. Friend the Secretary of State for Trade and Industry and my right hon. Friend the former Chief Secretary to the Treasury have been handling these matters with coolness and skill, but inevitably they and their officials have had less time for the other major tasks facing the Department of Trade and Industry.

I recall that when I created the Department of Trade and Industry a few months after the present administration took office it was welcomed by the Leader of the Opposition, who had indeed said that similar thoughts had been in his own mind about this and the other major Departments. I believe that at the time it was right, in the circumstances of the energy supply situation, that the Department of Trade and Industry should have been created.

But the creation now of the new Department of Energy will enable the Secretary of State for Energy and his colleagues to concentrate on the development of the coal industry, on nuclear power and on our offshore oil and gas resources at home, as well as on those tasks of working together with other oil-consuming countries and with the oil-producing countries on the international aspects of the energy problem. It will also make it possible for the Secretary of State for Trade and Industry and his colleagues to concentrate more of their attention upon the implications of energy developments for British industry and on the other major tasks facing the Department, in our overseas trade negotiations, export promotion, industrial development and regional policy, prices, and the considerable burden of legislation on consumer credit and company law reform now before Parliament.

I return to the question of the three-day week and the crisis mentioned by Mr. Gormley, because the three-day week cannot be attributed to the balance of payments position. That demands, as I think everyone would agree, a full working week, maximum production and a continuation of the steady rise in productivity and of the rapid increase in exports over the last year. The three-day week cannot be laid at the door of an economic strategy for growth, which has brought substantial benefits to the people of this country in terms of a real improvement in personal standards of living.

Mr. Russell Kerr (Feltham)

There has been no improvement.

The Prime Minister

Then the hon. Gentleman is in complete disagreement with all the leaders of the TUC who have been taking part in the discussions we have had and who have constantly pressed for and supported a policy of expansion.

The measures we have taken were forced on us by the facts of coal production that I have described. No one—and this was made abundantly plain in the NEDC meeting—the Government, the TUC or the CBI, can possibly welcome the circumstances which bring about a three-day week. We have not got it by choice ; we have got it out of necessity. The Government have not deliberately precipitated the crisis. We have always been willing, indeed anxious, to consult and to take account wherever possible of the views of both sides of industry.

Mr. Kerr

Why did not the Government consult the TUC?

The Prime Minister

I am quite prepared to deal with that question. As I explained to the NEDC, on the question of the introduction of the three-day week—which is the responsibility of the Government and which they fully accept—there was deliberately no discussion with the TUC members who saw my right hon. Friend the Secretary of State for Employment the night before it was announced, because the Government did not wish to lay themselves open to accusations from any quarter that they had discussed the matter with the TUC before the meeting of the NUM at which there was to be a further attempt by Mr. Gormley—he having made it first after my meeting—to persuade the members of his executive to go to the ballot. We were not prepared to have the accusation made that we were discussing the three-day week with the TUC before the immediate meeting of the NUM.

I wish to deal with the record of the Government in consultation and in what have been the results of that consultation. [Interruption.] I understand, from the Press at any rate, that the nation is expecting the House to discuss this grave situation in a serious way. I certainly, as Prime Minister, propose to do so.

Mr. Skinner

When?

The Prime Minister

I turn now to the question of the record of consultation by the Government because of the accusation which is frequently made—I do not wish to enter into personalities, but it is frequently made—that the Government are seeking confrontation. Far from adopting a policy of confrontation, we have now conducted for more than 18 months the longest, the most detailed and the most far-reaching set of talks in the history of relations between the TUC, the CBI and any Government. Indeed, there has been some criticism in the House of the fact that the Government have taken part in these talks and have engaged in consultation of the fullest kind about the management of the national economy.

Over the last 18 months we have had several objectives in these talks. We wanted to establish once and for all a reasonable basis for discussing common problems. I pledged myself to the nation to do this after the miners’ strike of 1972. It was then welcomed by the TUC and by the employers. We wanted to create a reasonable framework within which wage settlements could be negotiated. We wanted to develop the means whereby the Government, the TUC and the CBI together might review the working of our economy and our progress and discuss what further was necessary to achieve our objectives. Above all, we wanted to get away from the bludgeons of economic power and the blunt weapon of confrontation.

Mr. Kerr

After the Industrial Relations Act?

The Prime Minister

The overriding objective, recognised by all three parties to the talks, was to move away from the blind and indiscriminate use of economic power and to establish a system of wage settlements based on reason. That was the spirit in which we as a Government embarked on the discussions. During the summer and autumn of 1972, we held 11 meetings on a tripartite basis with the TUC and the CBI.

That was the spirit in which we continued the discussions in January and February last year about stage 2 and throughout the summer and autumn before the introduction of stage 3. I presided over more than 33 hours of talks with those concerned. During these talks there was never any suggestion of confrontation from any party to the talks. No one desired that. We were all concerned to maintain the expansion of the economy. The TUC and the CBI recognised that a price for this would have to be paid in the balance of payments, but both fully accepted it and for this reason welcomed the floating of the pound. We were all determined to do everything possible to ensure that our exports had every opportunity of increasing so that our standard of living could rise and so that we could improve the position of the lower paid, the pensioners and others who most needed help.

Those were our agreed objectives then and they remain our agreed objectives today. They are the objectives of the Government. We all recognised that we could not achieve all the improvements we wanted at once but that we could make progress by agreement in an orderly way and reach our objectives more quickly by so doing.

We did not achieve all that we had hoped in 1972. In the absence of voluntary agreement we were forced to take statutory powers. Nor, in the discussions in 1973, were we able to move forward from a statutory policy to an agreed voluntary basis for dealing with prices and incomes. But in these last 18 months a great deal has been achieved and we have deliberately carried through measures to meet as many as possible of the policies on which agreement was reached between the TUC, the CBI and the Government.

In fairness to all three parties to the talks, these achievements, I believe, need restating. By October last year we were making substantial progress towards the achievement of our joint objectives. The economy was expanding. Unemployment was down to under 500,000 and was still falling. Manufacturing output was up by 8 per cent. on a year before, and industrial production was up by almost 7 per cent.

In the export markets, we could sell our products more competitively than any of our neighbours. In the first half of 1973, the growth in volume of our exports was 24 per cent. at an annual rate, compared with a world growth of 17 per cent. to 19 per cent. In the same period the growth in volume of our imports was 18 per cent. at an annual rate, as compared with 24 per cent. of the growth of volume of our exports.

We were beginning to achieve the necessary rate of investment—

Mr. Michael Meacher (Oldham, West) rose—

The Prime Minister

I should say to the hon. Gentleman that, in fairness to all those who have done the work in industry, these figures should be stated. Surveys showed that 1974 would be the highest growth year for investment for more than a decade. Personal standards of living had grown by nearly 6 per cent. in 1972—faster than in any of the previous 20 years. The improvement in the first half of 1973 over the second half of 1972 was 3¼ per cent.
We were also agreed that an essential part of the strategy should be to provide for the lower paid, particularly the pensioners, and again we have acted positively in this.

Mr. Kerr

Dishonest government.

The Prime Minister

We have paid particular attention, as the TUC urged, to the problems of the lower paid. Under stage 2 the wages limit of £1 plus 4 per cent. and the provisions for equal pay, longer holidays and shorter hours were all particularly designed to assist the lower paid.

We continued all this in stage 3. In addition we provided for negotiators the alternative pay limit of £2.25 to help the lower paid. For the pensioners we have provided a secure future by ensuring that pensions should be uprated annually. Our record in this is second to none. Pensions have risen by 55 per cent. since 1970, which is far more than the increase in prices over the same period, and this does not include the £10 bonus which the pensioners have received for the last two Christmases.

Mr. Meacher rose——

The Prime Minister

I am giving the House these details again because it is essential that the House and the country should recognise the background to the negotiations now taking place under stage 3 of the code approved by Parliament. It is absolutely basic to the present industrial situation.

At the same time, all of us—the Government, the TUC and the CBI—recognised throughout our discussions that the reduction of inflation was a prime objective. I repeat that all of us would have preferred to find a way of achieving this voluntarily, but we should in no way underestimate the success of stages 1 and 2 of the incomes policy, for which I have paid tribute to both employers and unions.

Most of us—[Interruption.] I understand that the hon. Member for Nottingham, West (Mr. English) does not like hearing the facts of life. This is a grave situation—

Mr. Michael English (Nottingham, West) rose—

The Prime Minister

This is a grave situation—

Mr. English

Will the right hon. Gentleman give way? [Interruption.]

Mr. Speaker

Order. The right hon. Gentleman obviously is not giving way.

The Prime Minister

—a grave situation, in which the nation—[Interruption.]

Mr. English rose—

The Prime Minister

I think that the nation will note the behaviour of the hon. Gentleman and his colleagues.

A prime objective of these talks has throughout been to combat inflation. I repeat that no one should underestimate the success, with the co-operation of employers and unions, of stages 1 and 2. Most of us would have settled for a price inflation of 3 per cent. or 4 per cent. a year, and that is what we would have had, thanks to the vast growth of the economy and the restraint of employers and unions, but for the rapid and massive rise in world prices of foodstuffs and raw materials. [HON. MEMBERS: “Ah.”] Again, hon. Members are sceptical. Let me give them the figures, from the Economist. The world prices of commodities have risen by no less than 119 per cent. and the world price of food by 113 per cent. Against that background, I should have thought that both employers and unions can count it a substantial achievement to hold the increase in domestic prices to under 10 per cent

The effect of our counter-inflationary policy has been to ensure that we have been able to hold down domestic costs better than most other industrial countries. We have averted the danger of piling a substantial domestic inflation on top of inflation produced by world prices.

Perhaps I may quote the new General Secretary of the TUC. He has emphasised that In the long term, it is still true that the solution to our problems lies in economic growth, it lies in continuing expansion and it lies in continuing investment. That is still the Government’s view, and it makes it absolutely imperative that this country should continue the battle against wage-cost inflation.

Indeed, the large increase in prices that we shall have to pay for oil makes it more important to continue with expansion and not less important—

Mr. Skinner

Your own party does not believe you.

The Prime Minister

But, of course, the fruits of this expansion will have to go in a greater degree to pay for the cost of that oil instead of going to improve our standard of living. Those are the hard facts of the present situation.

In the present circumstances, therefore, I believe that, far from being accused of confrontation, the Government are entitled to ask for a positive response from the trade union movement as a whole for what we have achieved in reply to the points which they, with employers, have put to us. They have benefited from a policy of growth which they demanded and which they fully supported. They have benefited from a policy which brought unemployment below 500,000, which filled order books, which provided a high level of production, improved standards of living and brought over the last year a substantial measure of industrial peace.

In stage 3 itself, the Government have gone as far as possible to meet the points put to us in our discussions with the TUC and the CBI. They asked for a greater flexibility for negotiators. How often we hear at this moment that there must be flexibility. Well, let those who ask for that consider the immense amount of flexibility in the stage 3 negotiations which has been used, rightly used, taken advantage of fully and accepted, by so many negotiators who have already completed their negotiations.

Flexibility has been built into the code—[Interruption.] I am sorry, but in this serious situation, Labour Members will not shout me down, however much they may wish to do so. The flexibility has been introduced into the code in the 1 per cent. flexibility margin, in the provision for hours and holidays and, in particular, in the provision for unsocial hours and in the choice of pay limits. The TUC and the employers asked for the opportunity to negotiate efficiency agreements. These opportunities are included in the code and are being used.

I do not intend to speak in detail of the miners’ pay claim. My right hon. Friend the Secretary of State for Employment is discussing it with the NUM executive this afternoon and he will be taking part in the debate tomorrow. There are certain things in general about it which I wish to say. All the provisions of stage 3 are available to the miners for negotiation. The offer to the miners includes payment for unsocial hours. I am told that there are different arrangements about shifts in mining from manufacturing industry. [Interruption.]

Hon. Gentlemen are sceptical. It was Mr. Jack Jones who raised the matter in the National Economic Development Council. Of course, the miners have been offered an arrangement specifically to deal with the night shifts. If they so wish they can negotiate on these matters. What cannot be done is to deal with all the problems at once on a scale far greater than that already dealt with within the code.

In addition to the basic rate there is the flexibility allowance which the miners have chosen to use to extend their holiday arrangements. That is entirely up to them and is a perfectly fair arrangement for them to ask for. There are special arrangements for unsocial hours which they have opted to use for the night shift. There are bigger lump sums on retirement. All of these are part of the flexibility arrangements, in addition to the basic rate, which have been offered to the miners in the negotiations.

It can be summed up in this way. The offer made to the NUM represents the best offer made to its members in the whole history of negotiations. Even without a 3½ per cent. efficiency increase the offer would give 25 per cent. of miners £6.30p extra a week, 50 per cent. of miners more than £4.75p a week and 75 per cent. of miners more than £3.30p a week. This offer means that average earnings for some underground craftsmen would rise to £55 a week, for some power loaders to £51 a week and for surface men, grade 2, to about £39 a week. All this is before account is taken of the efficiency deal which is available for negotiation between the union and the National Coal Board.

When I saw the NUM on 28th November I discussed all of these details with it. I said to it, and I emphasise this, that if it accepted a stage 3 settlement and resumed normal production the Government would be ready immediately thereafter to consider with both sides of the industry the miners’ pay arrangements in the context of the longer-term future for the industry.

Mr. Skinner rose—

The Prime Minister

Perhaps if the hon. Gentleman were to listen to the offer which has been made.

Mr. Skinner

Why will not the right hon. Gentleman give way?

The Prime Minister

If the hon. Gentleman listened to what I have to say, I might be more willing to give way.

As this point has recently been raised in the Press by responsible commentators it is right that they should have the answer to it. The Secretary of State for Employment repeated this to the leaders of the NUM on 20th December and will repeat it to the full executive of the NUM today.

There are some, including the Leader of the Opposition, who say that we should breach stage 3 and give the miners a better offer. For the Government to do that would be to break faith with millions of workers who have already settled under stage 3. I should like to give the House some figures. By the end of 1973 well over 550 settlements covering 4 million workers had been notified to the Pay Board. This includes over 1 million local authority manual workers, 250,000 National Health Service ancillary workers, over 300,000 agricultural workers and another 500,000 workers covered by various wages councils.

It also includes more than 1½ million workers who have taken advantage of the provisions in stage 3 to help the lower paid. Up to the end of December no major group of workers had failed to reach a settlement within stage 3 by the due date. That is an acceptance of stage 3 by nearly 4 million workers in nearly 550 settlements. I suggest that there is no evidence there of 4 million workers considering this as a confrontation with the Government.

The offer made to the miners within stage 3 gives an average increase of between 13 per cent. and 16 per cent., with the additional efficiency payments. The average size of the settlements agreed in stage 3, of which I have given details, is considerably lower than the 13 per cent. offered to the miners, which excludes the offer of the efficiency agreement of 3½ per cent.

While these agreements in stage 3 were being made we have been able, as a result of the Pay Board report on anomalies, to sort out a large number of anomalies and reach agreement. These were anomalies which arose as a result of stages 1 and 2. I would have thought that the House would accept that to sort out those anomalies by agreement with the unions and to have 550 settlements covering 4 million workers under stage 3 is no mean achievement and is due to the work of employers and unions within the framework of the code approved by Parliament.

Mrs. Barbara Castle (Blackburn)

If the Pay Board report on relativities, which I understand is due out shortly, makes out a case for special cases to receive special payment, are the Government prepared to amend the pay code immediately?

The Prime Minister

That is a perfectly fair question for the right hon. Lady to raise and I hope that she will give the Government credit for having asked the Pay Board not only to deal with anomalies within stages 1 and 2 but also to deal with the much deeper question of relativities in industry. We have given an undertaking that immediately the report is published we will consult with the TUC and the CBI to take action upon it. We cannot give a clearer or firmer undertaking than that. We immediately entered into discussions with the CBI and TUC about the anomalies report and will do the same about the report on relativities when it reaches us from the Pay Board. We asked for it to come to us by 31st December. It is no fault of the Government’s that it has not reached us. On the other hand, we recognise the complexities of this matter and the details which the Pay Board has to consider in all the representations which have been made to it.

I suggest, therefore, that far from this being a confrontation between the Government and the unions, exactly the reverse is the case—that we have sought their assistance in consultation and that, under stage 3, 4 million workers have reached a settlement and many of the anomalies have now been dealt with and peacefully settled.

I believe, therefore, that we should keep faith with those who have accepted the code approved by Parliament and who, therefore, expected that the Government would ensure that the remaining settlements under stage 3 were fully in accordance with it. That, I believe, is an honourable position for the Government to take up.

Mr. Stanley Orme (Salford, West)

Does the Prime Minister say, therefore, that the TUC is in favour of stage 3? Is he not aware—he has been told by the TUC—that the TUC is completely opposed to it and that many of the trade unions that have made agreements have been forced to do so by the Government’s policies? While the Prime Minister is talking about stage 3, will he say whether the Glasgow firemen’s settlement comes within its terms?

The Prime Minister

On the last part of the hon. Gentleman’s question, as he knows that is being considered by the Pay Board, in the way in which the other 550 settlements have been considered. I cannot agree with the hon. Gentleman that the Government have been able to force anyone to reach a decision in this matter ; far from it. These are voluntarily negotiated agreements. [Interruption.] Let me deal with the hon. Gentleman’s first point. I have never disguised for one moment that both employers and trade unionists would prefer to have voluntary collective bargaining, provided that they could be assured that there would not be inflationary leapfrogging, and in none of these discussions has any way been shown how that can be avoided. It was, therefore, the responsibility of the Government to carry through stage 3.

Therefore, the objectives have not changed. We all want to reduce the rate of increase in prices which comes from wage costs, and that is the objective of stage 3. We all want, once the immediate emergency is behind us, to resume the expansion of the economy which we were able to achieve in 1973. We shall do our utmost as a Government to ensure that supplies of oil do not hinder us in this objective.

These objectives are agreed between employers, unions and the Government. The life of every man, woman, and child in this country will be better if we can realise those objectives. I say again to the House and to the country ; does not the best hope of doing so lie in our sitting down together, as we have done over the past 18 months, to talk to each other about these objectives—the Government, the CBI and the TUC?

Mr. Kerr

Repeal the Industrial Relations Act.

The Prime Minister

I have repeatedly made plain to those who have taken part in talks with us that we shall fully consider any proposals for amendments to the Industrial Relations Act. I repeat that no proposals have been made to us at these talks, by either the employers or the unions.

I strongly believe—I repeat it—that it is only through reason, through reasoned argument and reasoned agreement, that, as a nation, we can progress. This does not mean that trade unions and other groups in our society are asked to neglect their own interests ; far from it. Again, in these talks all have always realised that. It does mean that they are asked to take the longer-term view of their own interests—

Mr. Skinner

Jam tomorrow.

The Prime Minister

—to consider their interests in the context of the needs and the interests of the rest of the community.

If we try to achieve sectional interests by fighting each other we fail in our sectional objectives and we end by destroying this country. Surely we should follow the alternative course—a course of reason and, indeed, of moderation.

We should be trying to marry our sectional objectives in policies and programmes which serve the interests of the community as a whole. That was the spirit in which the Government embarked upon the tripartite talks in 1972. My colleagues and I are ready at any time to resume discussions with the CBI and the TUC, together or separately, in that same spirit ; not to try to score debating points, not to exchange recriminations about the past—for we have, none of us, done any of this in the tripartite and bipartite talks that we have had so far—but to try together to work out a programme which may not immediately meet all the desires of any of us but which will provide a framework within which we can meet our agreed objectives for the country and make orderly progress with our separate aspirations, progress which is not at the expense of other people but which takes account of the needs and aspirations of the ordinary people of this country—consumers, housewives and pensioners—to go about their lives in order and stability.

There is to be a special congress of trade union leaders next week. I invite them at their meeting to take up this offer which I am making today here in Parliament, to come together with the Government and the representatives of management, not in a spirit of confrontation and suspicion—[Interruption.] I am sorry that Opposition Members should reveal their complete ignorance of the attitude of the trade union leaders who attended the No. 10 talks and the Chequers talks.

I invite the trade union leaders now to come together with the Government and the representatives of management, not in a spirit of confrontation and suspicion, but in a spirit of constructiveness, of moderation and of reason. It is not too late for reason to prevail. It is not too late to discuss and settle all these matters within the framework which Parliament has approved. It is not too late to look to the future and to plot our course together. Indeed, it is in the interests of the whole nation that we should do so, and do so as rapidly as possible.

Below is the text of the speech made by Edward Heath in the House of Commons on 28 January 1980.

There may be occasions on which Back Benchers can say things that Front Benchers would like to say but do not, and others on which Back Benchers say things that Front Benchers would prefer not to hear. I may indulge in both activities during the course of the few remarks that I wish to make.

The debate is really about world strategy. If it is not, it ought to be. It is a question not of East-West relations on Afghanistan but of one world, indivisible, and the strategy to be pursued by the West, by the non-aligned countries and by the Eastern bloc.

It has long been clear that the Soviet bloc has a well-defined strategy. It was a three-pronged form of advance, with Vietnam into South-East Asia, with Afghanistan into the Indian Ocean and down into the Gulf. In addition, it was able to maintain its forces on its western frontier with Europe and on its north-eastern frontier with China and, if necessary, to build against Japan. That was the clear strategy.

As the Leader of the Opposition said, added to that strategy is the ability to interfere wherever an opportunity arises and to justify it by saying that it is in the interests of its friends in that part of the world. That has been the case in Africa, the Caribbean and elsewhere.

Against that, the West has had no clear strategy of any sort whatever for the past six years, and from that springs the greatest danger to the world. That is what we are discussing today—the danger of a third world war because we stumble into it by mistake or by misjudgment. That is the real danger that we face today. The only way to cope with that is for the West to have a clear strategy and for there to be a complete understanding between the East, the West and the non-aligned countries about that strategy.

For that reason, I am sorry that any contact should be broken. If it is true that Mr. Gromyko intended to visit Britain but has been asked not to do so, I regret it. I believe that the best thing would be for Mr. Gromyko to hear the views of my right hon. Friends on the Front Bench about Afghanistan—indeed, the views of those on the Opposition Front Bench as well. If we are to recreate the understanding of our strategy, it can be done only by maintaining contacts and by making clear to the Soviet Union and its bloc where we stand and what we are prepared to do.

I agree with the Leader of the Opposition about the need to define that strategy. However, that takes time, and the West has been taken unawares. On Saturday night a White House spokesman said on television “We are extemporising” What is more dangerous than to extemporise in today’s world? We should not declare that we shall do things which, palpably, it can be seen that we cannot perform. That only increases the incredibility. Incredibility is the problem.

On the other hand, we must protect our vital interests. We are dealing with the Soviet Union not because it is a Marxist country—although some would argue that it is no longer that; we are dealing with it not even because of its treatment of dissent, which we find most horrifying; we are dealing with it on the basis of the interests of our country and the West as a whole. On that, above all, we have to decide.

I suggest that it is not enough to look at the present. We have to look back at the immediate past because of the problems that it presents to us. After the debacle of Vietnam and the withdrawal from that country, the United States opted out of a large part of the world obligations that it had previously undertaken. The West allowed it to do so, and Europe put nothing into the vacuum. Therefore, when the events of Angola happened the United States did nothing. The American people were not prepared to let Congress do anything and Congress was not prepared to let the President do anything. It was not President Carter or Mr. Vance who did nothing it was their predecessors, President Ford and Dr. Kissinger, who were not allowed to intervene in Angola.

The Russians were the first to assess what that meant. As a result, through their Cuban friends and allies they were able to exploit it. Similarly, they exploited Ethiopia, Somalia, South Yemen and Aden. The pattern built up because both America and Europe had opted out.

Mr. Hooley Does not the right hon. Gentleman appreciate that it was not a question of opting out of Angola? There was the impossible dilemma of supporting Fascism on the one hand—which could not possibly be done in Africa—or supporting a Marxist Government, which the Americans did not want to do?

Mr. Heath That was not how the Americans saw it. The Administration were prepared to intervene but they were not allowed to do so by Congress or by the mood of the American people.

Since that time, we have seen Russia support Vietnam and the two countries become allies. We have seen Vietnam absorb Laos, reach into Kampuchea and launch attacks across the Thai border. There has been a push to the South-East. How far will that push extend into Malaysia? As far as Thailand? Will it continue to Singapore and Indonesia? The West must make up its mind about its strategy. The position in South-East Asia affects us intensely.

What did the West do about the push into South-East Asia? Absolutely nothing. We were only too glad to wash our hands of Vietnam, Laos and Kampuchea and to ignore what was going on until the humanitarian question of the boat people arose. Even then, such people as the Prime Ministers of Malaysia and Singapore knew that behind the question of the boat people lay the political purpose of the entrenchment in their countries of groups that would work against their Administrations.

The second push was into Afghanistan. Afghanistan has been a Soviet protegé for the past two years. It has existed by permission of the Soviet Union for that time. What has the West done about that? It has never discussed it; it has left it there as a Soviet protegé Therefore, the Soviet Union will claim the Brezhnev doctrine that it was a Socialist State under the Soviet Union’s protection and that it intervened in those circumstances. We may reject that idea, but it leads to the more important question of Yugoslavia. After President Tito, will there be a claim that Yugoslavia is subject to the Brezhnev doctrine? Will it be claimed that it is a Socialist State and that until 1948 it was under Soviet domination? That is the biggest individual threat to Europe today.

If the Soviets move into Yugoslavia, NATO and Europe will become divided into two parts. The Soviet Union will be on the Mediterranean. That is why I raise the question of what we accepted about Afghanistan, and the fact that nothing was done about it. The Soviet Union has been allowed to establish itself on the Horn of Africa and to ensure that when it wants to do so it can operate from a warm-water port at Aden. For the past six years, neither the United States nor Europe has done anything about that.

There have been declarations. The last one was about Soviet combat forces in Cuba. President Carter said that that situation could not be allowed to continue. Nevertheless, it has been allowed to continue. Who learnt the lessons from that operation? The people in the Caribbean and in South America said that it did not matter and that it could not produce results.

The last and most tragic fact of all is the revelation that the greatest military Power in the world can do nothing about securing the release of 50 hostages in its embassy in Tehran. In the modern world, that is the most tragic and ghastly warning. A result can be achieved only by some sort of negotiation.

In the minds of a large part of the world, all these facts have left a great credibility gap. The Soviet Union is trading on that gap at the moment and we have to bridge that credibility gap. We can do that only by working out our strategy and by showing that we can carry it out. We have to make absolutely clear to the Soviet Union where we stand.

In the past few weeks, the Soviet Union has demonstrated its ability to use forces and maintain its position in the West and the East. In any undertakings that we make, it must not be forgotten that the Soviet Union has short communications. As was the case in Vietnam, other communications have to go by the long routes, whether from the United States or Europe. That is an important factor to be considered in our strategy.

We are seeing the emergence of a much stronger military power inside the Soviet Government. That happened before Mr. Khrushchev took office, after the demise of Stalin and the short reign of Malenkov. Mr. Brezhnev is obviously on the point of giving up office, and the same thing is happening again. We are seeing increased military power in the Soviet organization, which has been able to get its way—inspite of the political objections about Afghanistan.

The time came when, finally, there was no restraint by SALT II. The Soviet Union made up its mind and said that it would not ratify the agreement. It is a presidential year and it thought that nothing could happen until after 1980 and well into 1981. Therefore, it took a chance because it felt that the reaction would be forgotten in time and because there was no restraint by SALT II.

Factors have emerged on the United States and Western side. First, the President cannot take effective action unless there is a general consensus in the United States and the West. That consensus was lacking over Vietnam and it destroyed the American policy on that country. Therefore, President Carter must ensure that such a consensus exists now. That is where we in Europe have a major part to play.

Another factor that inhibits action is the difficult relationships between countries in the affected regions. We should examine that matter in detail because it governs the strategy that we can adopt. First, there is the problem of Turkey. We denied access and military support to Turkey because of its action in Cyprus. As a result, Turkey has fallen into economic chaos and political disarray and it leans more and more towards Moscow.

Then there is the problem of the Aegean, between Turkey and Greece. There is the problem of Cyprus, with no settlement there. What has the West done about these? It has done absolutely nothing for the past five or six years. But now we have suddenly to say that we accept any faults that we proclaimed that Turkey had, because we want her as a strong ally with us in the West. But look at what has happened in the meantime and the difficulties, particularly economic, that Turkey faces. These can be overcome only by very substantial amounts of financial assistance—not limited means, in the usual way of aid, but massive assistance—if Turkey is to be an effective ally.

Let us consider Pakistan. To all intents and purposes, relations with and aid to Pakistan were broken because of the nuclear problem. If we are not to support Pakistan because of the danger from Afghanistan, we can no longer link with it the nuclear problem, for the very simple reason that from Pakistan’s point of view this is a matter of national prestige and national security. She will therefore say “Thank you very much for your offer, but if you are to link it in this way we cannot accept it.” In that event, we shall see a key country looking towards Afghanistan and the Soviet Union instead of the West.

This is the dilemma that confronts us in our strategy. We shall have to forgo some of the things that we have insisted upon in the past five years if we are to be able to carry out a strategy of this kind. We shall have to forgo much of the attitude that has been taken about human rights, because the regimes that we are now to be asked to support, because of their vulnerability, are very often regimes which do not maintain our standards of human rights. We must not put ourselves in the position of being accused of double talk on these questions, because that is the accusation we make against those from whom we are trying to protect other countries.

Mr. Dalyell The right hon. Gentleman is concerned about a Pakistani bomb. Ought we not also to be concerned about a Libyan bomb and an Iraqi bomb, since the two are linked, possibly financially and probably technically?

Mr. Heath I could not agree more. I am just pointing out the dilemma in dealing with this question in relation to Pakistan and the neighbouring countries. It has to be faced if an answer is to be found.

Then there is the problem of the association of Iran’s neighbouring countries with the United States, following the long episode of 30 years of American support for the Shah. We have seen a double reaction in the Middle East. First, there are those who say that because the Americans were associated so closely with the Shah, whose regime has been over-thrown, they cannot have any real arrangements with the Americans and the West. That is one attitude.

There was another attitude that I found in the Middle East just before Christmas. People were asking “Who now are our friends? We thought the Americans were the friends of the Shah, and after 30 years they pulled the rug from under him. What good were all the forces that were put into Iran? Absolutely nothing. The rebellion went ahead. So where do we look for our friends?” This was particularly emphasised when people pointed out that the Americans have now blocked the Iranian accounts. This has had more impact in the Middle East than any other single item. They said “If it can be done on one political question, it can be done on others. What happens to our oil revenues which are banked with American and international banks?”

If we are to achieve our purpose of allowing these countries to secure their defence with our aid, very often, in material goods, we have to be careful about the attitudes that we take on other things.

§Mr. Heffer I have been trying to follow the hon. Gentleman’s argument very closely. Why, then, are we concerned about the Soviet Union’s entry into Afghanistan, its entry into other countries and the whole question of human rights? Is it only because of our national imperialist interest in relation to oil—precisely the same as that of the Russians—or is it that we are deeply concerned about human rights? Are we perhaps prepared to say that we are not concerned about human rights in those countries that back up against the Russians? Will the right hon. Gentleman explain how it can be argued that oppression is all right in a country if its economic and political system is satisfactory to us but that it is not all right in another country if that country is opposed to us?

Mr. Heath I shall be coming to that point later on. I want to mention the question of how we can have a relationship with States that may be necessary for our strategic defence when at the same time those States do not have the standards that we have. This is a crucial point.
I want now to mention the difficulties involved in making these relationships. First, there is the question of the Muslim world. I do not believe that the West understands the Muslim world today. We do not understand its enoromous breadth, from the Philippines to Nigeria, with 600 million people. We do not understand its immense economic strength as the supplier of 80 per cent. of the West’s oil supplies. This is the Muslim world today.

We have long thought that people in the Muslim world wanted the Western way of life, that if they did not want it they ought to want it, and that in any case they were jolly well going to get it. What has now been shown in Iran, and is being shown elsewhere in the Muslim world, is that none of those things is true. There is a younger generation which does not want the Western way of life and which wants to go back to what it believes to be a simpler, older, authoritative—sometimes we would say authoritarian—way of life, according to the Muslim religion.

I remember going into Tehran during last summer. We thought that it was necessary for Iran to have full employment. A million foreign workers were brought in because the work had to be done. There were 5 million cars, there were luxury hotels, the women were all liberated, and there were discotheques, alcohol and pornography—all the best that we could give them. How could they want to change that? But the fact is that they did, and we have to recognise it. We have to accept these facts in making a relationship with the Muslim world, otherwise we have no means of looking after our security and that of the developing world.

If we say, as President Carter has rightly said, that the Middle East is crucial to us because of the oil supplies—particularly to Europe, because we are more dependent upon these oil supplies than is the United States—we have to recognise that the key to the Middle East is the settlement of the Palestinian problem. Until that is settled, the moderate States in the Middle East are not free to look to us or to the United States for help or for common policies.

It is basically crucial that every effort should be made, therefore, to solve the Palestinian problem. But, again, Europe has done absolutely nothing about it. It has just allowed it to roll along. President Carter, of late, has been so preoccupied with other factors that he has not been able to keep up the pressure. But it is the key, and the solving of the Palestinian problem is a matter of the utmost urgency.

It is all very well for us to say that President Sadat, with all his courage, his imagination and his negotiating prowess, will be prepared to accept us and to work with us. With all that, he is a lone figure, and neither the radical nor the moderate Arab States will support him. If we are associated alone with President Sadat, we cannot expect to have a working relationship with the other States. That is why it is so important to solve the Palestinian question and to solve the Middle Eastern problem. Then we can have the States there working on our side.

I regret that in all this Europe has done nothing. But we have a part to play, certainly over Cyprus, certainly over the Aegean and certainly over Turkey. I believe that we also have a part to play over the Middle East. I believe that we can be of help to President Carter in finding a solution to the Palestinian problem.

What response do we make, therefore, in the present situation, against the background of the last six years? I have already said that we have to restore credibility. The West as a whole has to rethink its foreign policy. We have to ensure that the non-aligned world understands this and sympathises with it. We have also to drop the linkage that we have made in a variety of places, not only in the Indian sub-continent and in Europe but also in South America, in relation to the action that we take. We have the problem of dealing with the question of human rights.

Oil is a crucial interest for us all. But, if at the end of the 1980s the Soviet Union will no longer be self-sufficient in oil supplies, we should make it absolutely plain to the Soviet Union that we shall not deny it access to Middle Eastern oil.

Although I fully supported the settlement between President Sadat and Prime Minister Begin, in many ways I regret that the whole matter was lifted out of the Geneva sphere, because there the Soviet Union was present. Now the Soviet Union has no incentive to co-operate in the Middle East. I have a feeling that when eventually we can reach an arrangement over the Palestinian question it will be necessary to return to Geneva and obtain the commitment of the Soviet Union to it and at the same time make plain that the oil in the Middle East is an interest of both of us, if we are deficient in oil supplies.

I accept the breaking of trade contacts. That is a natural response to public opinion, particularly on grain, but it produces its dilemmas. If it goes on for only a short time, the Soviet Union will say “Short memories”. If it goes on for a long time, one of the restraints on the Soviet Union is removed. The Soviet Union will say “It did not operate last time, over the past five years. “The restraint is removed, and it may then go its own way in other parts of the world where it thinks it can get away with it.

The Olympic Games are a matter for natural differences of opinion. I happen to be one of those who take part in sport. I am proud that I have captained two national teams in international sport. I believe that we should keep politics out of sport. I fully accept that other people do not, but that does not alter my view.

Nor do I think that having the Olympic Games in Moscow is only a question of prestige for Moscow. It is a question of prestige wherever the Games go. On Saturday night the presidential spokesman said that it had now become a question of American prestige. We have that problem in either case.

The question that I ask myself is this: “If the Soviet Union is as determined on aggression as is said, will abandoning the Olympic Games really stop it?” I find it difficult to believe that it will. But if individuals, teams or nations do not want  to take part, it is fully up to them to take their decision.

The governing point in my mind is that, because the matter has been so ventilated in public opinion, it has taken the nation’s mind and the Western mind off what really requires to be done. That is what worries me. To do the things that are required will need a great public effort by the whole of the West.

What should be our main objectives? I believe that one objective should be to buttress the countries that require it in our international interests, from both the military and the economic points of view. I welcome the President’s naval force in the Indian Ocean. It has taken a decade to persuade the United States that the Indian Ocean is important. We started in 1970, and for the first two years the United States Government would not believe it, but gradually they have accepted the idea, and I welcome that. Europe should make its contribution as well and not leave it to the United States.

I welcome, too, the fact that the President is to have a quick-strike force. If it is to have credibility, it must be seen to exist and be operative. That is certainly not so at present, and it may not be so for some time. That is another practical point.

The third point is that in going to help the countries concerned we must learn the lesson of Iran. We must not do it in a way that will make public opinion in those countries revolt against us because the public deduce that we are trying to dominate their society. Therefore, military help requires to be given in a fairly discreet way. It means diplomatic action in a discreet way.

Oman has been asking for a long time for help to have minesweepers to keep the Straits of Hormuz clear. What have we done about it? Absolutely nothing. If anyone, wherever he comes from, likes to try to block the straits by mines at present, he can do so without the least fear of anyone’s being able to clear the straits. That is a practical example of how words are simply not enough in the present situation.

Mr. Dalyell May I be clear about what the right hon. Gentleman is saying in his first and second points? Is he implying that the West should build up a great Anglo-American base at Diego Garcia?

Mr. Heath No. I am saying exactly the reverse. The point about a naval force is that it can be inconspicuous. One does not need the great bases that we had in former times.

I come to the question of supporting the Afghan rebels when they flee into Pakistan, which has been put forward in some quarters. I strongly support financial assistance for Pakistan. If military support is given to counter-attack across the Afghan border, we are running into grave dangers. The policy on that matter should be absolutely clear. If necessary, some international force must be brought in to prevent that.

I deal, fourthly, with the question of financial assistance. This links up very much with what the Leader of the Opposition said about the Brandt commission. I do not want to go into details now, because I hope that the House will find time to debate its report in detail when it appears. The plain fact is that any financial assistance to the non-aligned world today must be on a scale that is nowhere near being approached by any of us—any of us in Europe, let alone the United States, which has consistently reduced its aid programme. I regret to say that even our Government have reduced their aid programme.

For example, the problem of Jamaica, in our Commonwealth, is appalling—from the point of view of its indebtedness, its unemployment and its economic position in general. Look at the appeal of neighbours nearby who say “We can put that right, because we shall produce the money for you from Soviet sources.” We have already seen it happening in the Caribbean islands.

Let us take the case of Brazil, a prosperous country. The total cost of its oil imports plus servicing its indebtedness now exceeds its total exports. That is the problem facing countries in the non aligned world. They say “If you mean what you say, take some action. You will have to face up to the questions of access for industrial goods, of commodity arrangements for one or two more commodities, of dealing with indebtedness—rolling it over, reducing interest rates, dealing with the least developed countries in this respect. You will have to have a code for transnationals.” That sort of approach may need to start off with small groups of leaders from the non-aligned countries, the Western world and the OPEC countries.

If the OPEC countries with the resources can be satisfied that we in the West are now genuine about dealing with these problems, I believe that they will be prepared to pool their resources with us. That is the only way in which we can obtain the total resources necessary to help the countries that are now in difficulty and that we want to keep on our side. Our purpose must be to hold them on our side in a non-aligned position, healthy enough economically to resist Soviet subversion.

What is required is a world strategy—military, political, economic and social. We have, again with discretion and diplomacy, to try to persuade those countries that do not share our attitude towards human rights to move, with increasing prosperity, into that democratic situation.

I do not believe that that is beyond possibility. It is happening in various places already. It is happening now in Brazil. It should happen in Argentina. With discretion and diplomacy we can help to persuade these people, who are now so important to us—they always have been, but perhaps we now realise it—that they can move in a direction that will help us, as well as us helping them.

So far, the response to the present situation on a world scale has been in adequate. What we in the West need is a policy which is as inconspicuous as possible but as consistent as possible, so that people will know that we are their friends, that we shall not rat on them and that we shall be there in case of need. We have to decide, first and foremost, who those people will be.

I want to see a united European approach. I believe that Europe is not pulling its weight at present. With great respect to my right hon. Friend the Prime Minister, when our summits concentrate on fish, lamb and budgets and ignore the state of the world, who can be surprised if the Soviet Union thinks that this provides it with the opportunity to extend itself still further? We should solve our internal problems speedily, with give and take, so that we can deal with the outside world.

My last point relates to the Atlantic Alliance. We should not allow Soviet activities to divide Europe from the United States. It is clear that many countries in Europe see the threat on their doorsteps perhaps more vividly. They are more reluctant to take firm action and want to see negotiation. If the Soviet Union can play that card to divide us, all is lost. It is absolutely vital, when considering the proposals that I put forward, that we hold Europe and the United States together, because the United States is our final safeguard in case of need.

Below is the text of the personal statement made by Edward Heath in the House of Commons on 9 May 2001.

 

Below is the text of the statement made in the House of Commons by the then Prime Minister, Edward Heath, on 6th November 1972 on the subject of inflation.

The Prime Minister : With permission, Mr. Speaker, I will make a statement on the breakdown of the discussions between the Government, the TUC and the CBI, and on the action which the Government now propose to take.

In my speech in the debate on the Address last Tuesday, I gave an account of the earlier stages of these discussions, and I explained the difficulties which at that time seemed to stand in the way of an agreement, particularly over the issue of a voluntary arrangement or the use of statutory powers.

The Government and the CBI both made clear their strong preference for completely voluntary arrangements over the whole field, pay as well as prices, though they were prepared, for the sake of reaching agreement, to accept that voluntary arrangements should be supported by backing-up legislation over their whole range. The TUC representatives, on the other hand, had made it a prior condition that there should be statutory control of prices but they were not able to accept the introduction of similar statutory controls on incomes.

I had therefore asked the TUC representatives whether the TUC was prepared to accept either completely voluntary arrangements, or voluntary arrangements backed up by statutory powers over the whole range of any agreement. This issue was so fundamental that it would clearly have been pointless to go on discussing other matters until the answer to this question was known. The TUC representatives said that they could answer that question only after reference to their General Council, and we adjourned on Monday evening to enable them to consult it.

The representatives of the TUC consulted the General Council on this question on Wednesday morning. At the beginning of the tripartite meeting on Wednesday afternoon, the TUC tabled a proposal requesting that the Government should give an unqualified guarantee that the retail price index in general, and food prices in particular, would not rise by more than 5 per cent. in the year ahead.

At the end of the meeting on Wednesday, the Government and the CBI made it clear that they would only accept arrangements which were either completely voluntary or were supported by backing-up legislation over their whole range. The representatives of the TUC said that they understood this position and would continue to negotiate on this basis.

At the opening of the meeting on Thursday, I explained why it was impossible for any Government to give a guarantee of the character sought by the TUC. However, I reminded the meeting of a number of features of the Government’s proposals which together would ensure a strict limitation of prices. Let me remind the House what those features were.

First, there was a CBI recommendation to its members to undertake not to increase prices of manufacturers over the next 12 months, except where unavoidable, and then only as little as possible. The intention was that the increase in the price of manufactured goods should not exceed 4 per cent. on average over the 12 months.

Then there was the Government’s request to the nationalised industries generally to limit their price increases to an average of 4 per cent.

Thirdly, there were the undertakings by the large majority of the British retail trade to reflect this restraint and to hold their gross percentage margins at no more than current levels. Further, the food distributors had offered to collaborate with the Government in a system of maximum retail prices for certain foodstuffs. Maximum prices for a number of manufactured foodstuffs were to be increased only if a tripartite monitoring body agreed In relation to goods other than food, the remainder of the retail trade agreed not to increase their cash margins on individual items by more than 5 per cent. without the approval of the monitoring body.

Fourthly, the Government agreed to consider taking action to limit prices where they had the ability to influence them.

The general intention thus was that the rise in retail prices attributable to the rise in domestic costs should not exceed 5 per cent. over the 12 months. We also envisaged the possibility of action to limit or offset price increases arising from other causes.

There were further proposals designed to provide and protect an improvement in the living standards of wage and salary earners, particularly those on low pay. The flat rate increase of £2 proposed by the Government would have allowed average earnings to rise by over 8 per cent. For those on or below £20 a week it would have allowed increases of 13 per cent. or more, and thus an appreciable improvement of living standards.

Threshold agreements were also proposed, to allow additional increases of pay if towards the end of the year, because of certain special factors, the rise in the retail price index exceeded 6 per cent. These would provide a safeguard for all wage earners.

I repeat that the effect of these proposals was, for anyone earning up to about £40 a week, not merely to protect but actually to improve living standards, while at the same time reducing the rise of inflation.

At the meeting on Thursday, I went on to make a number of further proposals designed to improve the position of those in low paid employment and pensioners. These included the following proposals. The needs allowance should be increased by 50 pence in order to limit the effect of rent increases in 1973 for tenants in receipt of rent rebates and housing allowances. The period for which family income supplement, free school meals and free welfare milk are awarded should be extended from six months to one year, so that entitlement to these benefits would continue throughout the year for those receiving them, irrespective of increases of pay or other changes in circumstances. When reaffirming the Government’s intention that, as a result of the review of pensions in the spring, at the next up-rating pensioners should have the benefit of a share in the nation’s increasing prosperity, I stated that, as an earnest of that intention, the Government would pay a special lump sum to those over national insurance retirement age in receipt of retirement pensions and supplementary pensions, as soon as the necessary arrangements for payment could be made.

In addition, I said that the Government were consulting the local authorities in order to moderate the rate of growth of local rates.

All these proposals, together with the very important arrangements made with the retail trade, were additional to those which the Government had made on 26th September. Moreover, in reaffirming its own intentions, the CBI had already stated its willingness for dividends to be controlled.

As the House will be aware, the representatives of the TUC stated that they did not regard the total package of proposals as a basis for negotiation. They said that, although they would take them back to the General Council, they would do so without being able to recommend their acceptance. The General Council met this morning. The statement which it has issued shows that there has been no change in the TUC’s position.

Although it has not been possible to reach agreement in this round of discussions, the Government are fully prepared to continue to take part in tripartite discussions with the CBI and the TUC on subjects of mutual concern to the three parties.

The responsibility for action now rests with the Government. We have come to the conclusion that we have no alternative but to bring in statutory measures to secure the agreed objectives of economic management in the light of the proposals discussed in the tripartite talks.

These measures will take time to work out in detail and to implement. In order that the fulfilment of the objectives should not be prejudiced in the meantime, the Government propose to introduce tomorrow an interim Bill to provide for a standstill on increases in pay, prices, rents and dividends, subject to a limited number of defined exceptions. The standstill will come into operation immediately, and will run for 90 days from the Royal Assent to the Bill, with provision for an extension of up to 60 days, by order subject to affirmative Resolution.

The arrangements for the standstill are set out in a White Paper, which will be available in the Vote Office at 4.30 p.m. The draft of the Bill is contained in a separate White Paper which will be available later this evening.

Although it has not proved possible to reach a tripartite agreement, the Government intend to implement their proposals for increasing the needs allowance; for extending from six to 12 months the period of entitlement to family income supplement, which carries with it exemption from National Health Service charges, and to free welfare milk and free school meals; and for paying a lump sum to pensioners. As regards the latter, the payment will be made as early as practicable in the new year, and will consist of £10 to each retirement and supplementary pensioner – that is, £20 for a married couple both of whom are over retirement age.

The CBI’s and the TUC’s acceptance of the Government’s invitation to join in discussions on the objectives and methods of economic management signalled a major change in the conduct of economic policy in this country—far in advance of anything even tried for by previous Governments. I know that I was not alone in thinking that it was one of the most hopeful things that had happened in Britain for many years. I deeply regret that last Thursday’s disagreement has forced us to take action which I regard as less satisfactory than a voluntary arrangement could have been.

I profoundly believe that the course upon which we had embarked was the right, rational and sensible course for Britain. I therefore hope that this setback will not be allowed to stand in the way of our resuming discussions between the three parties in due course on the objectives and problems of economic management.

In the meantime, the Government have a duty to the nation to carry through the proposals which I have now put before the House.

Let me remind the House again of the objectives: the maintenance of a high rate of growth and an improvement in real incomes; an improvement in the position of the low paid and the pensioners; and moderation in the rate of cost and price inflation.

All those round the table at Chequers and Downing Street were in full agreement on these objectives. But I would go much further than this. I believe that they command the support of the great majority of the people of this country. The opportunities now open to the country and to us all are immense, if we can, together, succeed in these objectives.

The Government’s proposals are designed to secure these objectives. I therefore commend them with confidence for the approval of the House, and for the support and co-operation of all those concerned, on both sides of industry, and of the whole nation.

Mr. Harold Wilson : The right hon. Gentleman will know that, as we said publicly on Friday, we share his disappointment at the breakdown of the discussions. I take it that his words mean that he wishes the talks to be resumed at an early date. In our view, if they were resumed, there would have to be a radically different approach on the Government’s part to certain fundamental issues affecting prices and the wider living costs of the average household. If there is to be any agreement emerging from future talks that will have to be the fundamentally changed approach of the Government.

This is not the time to remind the right hon. Gentleman of all the many strongly worded statements, since he became Leader of the Conservative Party, in every debate in this House, on every proposal of the Labour Government, and during the General Election—and of the fact that this represents the biggest reversal of positions he has taken on any subject since he broke his “at a stroke” promise on coming to office.

We have repeatedly warned the right hon. Gentleman that no agreement would be fair and just, or workable, which did not provide for guarantees on food prices, not only domestically created prices—the right hon. Gentleman again referred to domestic prices—and a limited range of other essentials—rents, both private and public, rising mortgage interest rates, VAT and school meal prices, which he is to increase next April, as well as the dividends referred to in his statement. The right hon. Gentleman has moved a little in his three months’ proposals, but he has not met the main requirements for a fair agreement as we put them to him.

Has the right hon. Gentleman recognised, in all these long-drawn-out talks, that those he has to meet are not so much employers or trade union leaders as trade union members and, above all, the wives of trade union members responsible for balancing their family budgets? Does he agree that a three-months freeze – for it is only three months; even if the further 60 days are added, it will take it only to early April – would mean on 1st April, or soon afterwards, increases in rents of up to 50p for many families, many private rent increases – he has not told us, or perhaps I did not hear him correctly, whether private rents are to be included in his controls, but I hope they are  increases in school meals, taxation of school and other children’s clothing and V.A.T., as well as three months of rising European food prices and rate increases, all next April? Does he recognise that, even at the end of this period, that will be the position, whether the freeze is renewed for 60 days or not?

Will the right hon. Gentleman tell the House his proposals for dealing with the wide range of prices that have been pushed up since the breakdown of the talks, on Friday, Saturday and again this morning? They are on record already in the Press – for example, pharmaceutical and other manufactured goods. How does the right hon. Gentleman propose to catch those in his Bill? Of course, as a public employer he has caught many wage discussions and held them back since 26th September while allowing rents to rise on 1st October and other prices to rise since last Thursday. What machinery has he in mind? Recalling that he scrapped the National Board for Prices and Incomes, in a mood of euphoria after the last election, will he now restore that Board and the Consumer Council?

The right hon. Gentleman referred to exceptions. What exceptions has he in mind? For example, do they cover increments in public and private employment? Do they cover pay increases for the police, atomic energy, local authority and electrical workers which have been agreed but not yet paid? Will he explain the answer to that question?

Finally, is the right hon. Gentleman aware that, in our view, no proposals will be workable, or fair and just, which fail to deal with food prices, rents, both private and public, school meals, mortgage rates and taxation of children’s clothing, and that, because such proposals will be neither workable nor fair, we shall oppose them?

The Prime Minister : On the right hon. Gentleman’s first point, of course he is right. As I said in my statement, we are prepared at any time to carry on further talks with both the TUC and the CBI. They realise this and I hope that it will be possible.

I reiterate my belief, of which the right hon. Gentleman is well aware, that in a free society it ought to be possible to make these arrangements on an entirely free and voluntary basis. No Government have tried harder than we have tried during the past three months to achieve that result. Indeed, this has been widely recognised by both the CBI and the TUC. I regret that it has not been possible to do this. Therefore, we must look forward to the time when we can have an arrangement of a similar kind, which I hope can be negotiated voluntarily.

The right hon. Gentleman will find the answers to the detailed points he raised set out in the White Paper. However, I will deal with some of the major ones. He asked what machinery would be used. Government machinery – Government Departments – will be used. One of the first things I learned in the discussions was that the National Board for Prices and Incomes had been anathema as much to the TUC as to many other people. Therefore, there was no desire to recreate that body. [Interruption]. Let us discuss these matters frankly. This is what I was told.

Incremental payments will be excluded. I hope the right hon. Gentleman will agree that that is right. In the nature of their payment, they are not in fact wage increases.

Concerning the other matters mentioned by the right hon. Gentleman, concentration is not only on domestic costs. As I pointed out in my statement—and it was said on Thursday to the TUC and the CBI – the Government have undertaken to use the means available to them for influencing and holding down costs outside domestic costs. We gave our full undertaking to do that.

Many of the other matters mentioned by the right hon. Gentleman—I must frankly say this to him—are political. They are not matters which directly affect the discussions which we have been having. Every Government has the right to carry through its policy. I told the CBI and the TUC that I was not prepared to repeal the Act taking us into the European Community, nor to repeal the Industrial Relations Act, nor to repeal the fair rents Act, but that the Government were prepared to take into account the results of that legislation. That is what we have told them all the way through. When we said this, we said that the Chancellor of the Exchequer in framing his next Budget will, of course, take into account the consequences of membership of the European Community and of the other factors in the economy. This is the right position for Government and Parliament to take up, and then to discuss with those concerned how best we can deal with these items. That is what we have done.

Mr. Wilson : One of the first points the right hon. Gentleman made when he said that the Government had a policy for food price increases that arose from causes other than domestic causes, was – I think his statement was to this effect – that he envisaged the possibility of action to offset price increases. Was he able to tell the TUC, or can he tell the House today, whether there is a firm Government proposal for shielding the British consumer from the increase in food price rises that will result from entering the Market in January and from other increases arising from outside causes? Is the right hon. Gentleman prepared to answer that question? Will the right hon. Gentleman, following what he has just told the House about the discussions on other prices, now give an undertaking that he has powers to deal with them? When he refers to political matters, is he not confirming that it is the right hon. Gentleman’s own political prejudices which stopped an agreement on rents and on other matters?

The Prime Minister : In no circumstances do I accept that. As to the food prices of the Community, they do not have an effect until the spring in any case. The Government have in mind certain items of food the prices of which they can influence. As my right hon. Friend the present Leader of the House pointed out on Friday, it is quite incorrect to say that the rise in food prices has been due to levies by the British Government – quite untrue. It is due to the impact of the rise in world food prices. We told the TUC and the CBI that in dealing with other factors we would take account of what was going on in this sphere.

Mr. Powell : Does my right hon. Friend not know that it is fatal for any Government or party or person to seek to govern in direct opposition to the principles on which they were entrusted with the right to govern? In introducing a compulsory control of wages and prices, in contravention of the deepest commitments of this party, has my right hon. Friend taken leave of his senses?

The Prime Minister : The present Government were returned to power to take action in the national interest when they were required to do so.

Mr. David Steel : Is the right hon. Gentleman aware that we on these benches also share his regret at the breakdown of the talks? He said that no Government had tried harder in the past three months to seek agreement. Is he aware that his party has been in office for two years and three months and that we regret that this approach was not adopted when the Government came to power in June, 1970? Can the right hon. Gentleman say whether the exceptions during the 90-day period will include exceptions for the lowest paid and whether the Government are moving towards a national minimum earnings rate?

The Prime Minister I am grateful to the hon. Gentleman for what he said. I must emphasise that the present Government, when they came into power, asked the CBI and the TUC to consult and co-operate with them. It was through no fault of the Government that consultation was refused. I have no desire in any way to make it more difficult to achieve a resumption of these talks and I therefore do not wish to discuss that matter further. Whether the reluctance to consult was based on political motives is not for me to say. The Government have always been fully prepared to consult and co-operate with both the TUC and the CBI.

On the second point which the hon. Gentleman raised, he will see the exceptions set out in the White Paper. The one to which I would particularly draw his attention is that of wages councils’ awards. These are concerned with those who are the lowest paid in the country, and where the proposal has taken place before the standstill and it is more than a year after the last award it will be possible for it to be an exception.

Sir Harmar Nicholls : Is my right hon. Friend aware that although the method that he has announced is a change of direction for the Conservative Government, the nation as a whole will recognise and respect the great efforts that he has made to arrive at a voluntary agreement? Is he also aware that the one thing he could not do, under the circumstances that exist in this country at the moment, was, as the Leader of the Government, to do nothing, and that what he has done by underwriting the offer he made to the bodies when they were discussing the matter will help to restore the credit of this country when it is badly needed in a time of crisis?

The Prime Minister : This country now has expansion going at a rate of 5 per cent., faster than we ever had under the last Administration, with capacity for further expansion for at least another year, with capacity for investment to carry on that expansion over further years ahead. In addition, we are now providing more jobs and greater productivity. [HON. MEMBERS: “Where?”] We are not going to see this expansion and the future of the British people thrown away by excessive wage increases.

In reply to what the right hon. Gentleman said, the great mass of trade unionists and of their wives believe that the proposals which were put to them by the present Government were fair and gave them a better chance of a steady improvement in their standard of living than ever before.

Mr. Eadie : The right hon. Gentleman is very fond of using the expression “economic management”? Is he aware that if he applies the test of economic management to the Government which he is leading he will fail in that test and, therefore, that he should resign as a consequence of what he has said this afternoon or reconsider his position? Is he aware that a former Conservative Minister has said that the policy that he is presenting to this House this afternoon cannot succeed unless he has a long-term economic strategy? However hard the right hon. Gentleman may try to convince or influence this House, he cannot say that he has a long-term economic strategy.

The Prime Minister : I have constantly told the House that the economic objectives were agreed around the table. Those objectives are very clear, and I believe that they have the full support of the country.

Sir D. Walker-Smith : Does my right hon. Friend appreciate that thinking people, who tend to respect the constitutional principles of this country, will support efforts to resist any attempt by organisations or people, however respected and however powerful, to deny the function of government to the elected representatives of the nation?

The Prime Minister : Yes, Sir; I am sure that that is the view of the majority of the people of this country. It is time that all three parties in this House made it absolutely clear that when Parliament has passed its legislation the law should be observed by everyone, regardless of his position, wealth or power.

Mr. Sheldon : Is the right hon. Gentleman not aware that the whole argument about a prices and incomes policy is an argument about who gets what? What the Prime Minister and the Chancellor have ensured over the past two years is a redistribution in favour of the well-to-do. When the Prime Minister went to those tripartite talks, he did not go with clean hands. If he ever wants to get a voluntary agreement, he will have to reverse those policies which he has carried out already.

The Prime Minister : The hon. Gentleman’s first sentence touched on what obviously proved to be one of the major matters in the discussions—namely, whether the higher paid wage earners are prepared to see, in this stage, the lower paid getting proportionately larger increases. This is what was agreed around the table, but when the proposals were put forward at the end of the day they did not secure acceptance.

Mr. Edward Taylor : As steel is one of the basic costs of manufacturing industry, and a crucial one for Scotland, will the right hon. Gentleman confirm that any restraint on the prices of nationalised industries during or after the 90 days will apply to steel also? Will he obtain the agreement of the ECSC for this to be done?

The Prime Minister : As I said in my statement, the Government have requested all nationalised industries to comply with the voluntary policy. Now that we are moving into the standstill, obviously the nationalised industries themselves—all of them—are involved.

Mr. Palmer : Would the right hon. Gentleman not agree that many of the wage and salary claims at present before negotiating machinery are for the rectification of unjust and unsatisfactory differentials? Will not this proposal simply freeze an artificial payments structure and mean that it will take a very long time for the country to recover from it?

The Prime Minister : I do not think that the hon. Gentleman’s last sentence is justifiable, in view of the fact that the intention of this proposal is for a 90-day standstill, in order then to get through the legislation which will enable the further stage to take place. But of course the hon. Gentleman is right that many of the problems of wage bargaining arise from differentials which some groups believe to be unjust. The real problem is how that can be dealt with without causing inflationary wage increases. What we were trying to do in the talks was to get agreement about a basic approach for this first year only and to establish priorities. The priority which was agreed was to help the lower-paid workers. Of course, this affects differentials right the way up, but it is a priority which was agreed. What one has to do in any attempt at a policy which will prevent inflation is to see how these can be adjusted fairly.

Dame Joan Vickers : In view of the fact that many proceedings are going on under arbitration, including those for Her Majesty’s Dockyards, when the arbitration court decides on the award, will the Government agree to accept that without any further delay?

The Prime Minister : I would ask my hon. Friend to await the White Paper. These matters are set out quite specifically, stating what will be done in the particular cases. It is much better that it should be seen in the whole context.

Several hon. Members rose—

Mr. Speaker : Order. I want the help of the House, if I may have it. There is to be a business statement next, the contents of which I know. There is an important debate on poverty today and there is a debate on the industrial situation tomorrow. I hope that it is the wish of the House that I should not continue these exchanges indefinitely.

Mr. Strang : Is the right hon. Gentleman aware that his proposal to increase the rent rebate needs allowance by 50p will mean in practice that council tenants in Scotland who were facing increases of £1 a week will have it reduced by a derisory 8½p? Will the local authorities which have refused to implement the Housing Finance Act have present rent levels frozen, and will council tenants who have had increases imposed on them as a result of the Act have them withdrawn?

The Prime Minister : No, Sir, and those councils which have refused to carry out the law will not be exonerated by the Bill.

Mrs. Knight : Would my right hon. Friend be reluctant to prescribe either excessive medication or the surgeon’s knife except in a case in which the patient is quite incapable of recovering otherwise? In view of what he has recently said, will be assure us that the fears that some of us have entertained since hearing what the Post Office Corporation intends to do about putting up prices, will be allayed by his statement?

The Prime Minister : As I have said, this applies to all the nationalised industries. Therefore my hon. Friend’s fears can be allayed during this standstill period.

Mr. Roy Jenkins : May I ask the right hon. Gentleman one question on a matter on which I think the House is entitled to know the state of his current thinking? Has he now abandoned his constantly reiterated view that a statutory policy could only make inflation worse in the long run, or does he now regard the short-term situation that he has produced as so disastrous that he cannot afford any longer to think about the long run?

The Prime Minister : I have already told the House that I believe that, in a free society, it ought to be possible to manage the economy in co-operation with the TUC and CBI in a voluntary way. I have read with great interest a reprint of the speech which the right hon. Gentleman made, in which he himself said that these matters should be voluntary and that there should be as little legislation as possible. I am glad to see the right hon. Gentleman nodding his head. Therefore, we are both in agreement on that matter.

What I am saying is that, in the situation when these talks have not led to agreement, it is essential to have this standstill for 90 days and then to move on to the next phase. But I believe that there is a difference between the situation in which we are doing this and that in which the right hon. Gentleman had to do it. He was doing it at a time of a stagnant economy, at a time when he was deflating continuously through heavy taxation and at a time when he was trying to reduce the real standard of living of the British people. We are doing it at a time of expansion. Our sole objective—I am sorry that the right hon. Gentleman turns away—is to protect the expansion and the improvement in the real standard of living of the whole nation.

Hon. Members: Resign!

 

Below is the text of the speech of the then Prime Minister, Edward Heath, in Brussels on 22nd January 1972.

We mark today, with this ceremony, the conclusion of arduous negotiations over more than ten years which have resulted in another great step forward towards the removal of divisions in Western Europe.

This uniting of friendly States within the framework of a single community has been brought about by the sustained and dedicated work of many people. Their efforts were essential to the success which we are celebrating.

My tribute here is to all who have laboured in this great enterprise — not only to those who have negotiated, Ministers and officials, together with the members of the Commission who have contributed so much, but to all who, in their many different ways, have supported and advanced the idea of a united Europe.

Just as the achievement we celebrate today was not preordained, so there will be nothing inevitable about the next stages in the construction of Europe. They will require clear thinking and a strong effort of the imagination.

Clear thinking will be needed to recognise that each of us within the Community will remain proudly attached to our national identity and to the achievements of our national history and tradition. But, at the same time, as the enlargement of the Community makes clear beyond doubt, we have all come to recognize our common European heritage, our mutual interests and our European destiny.

Imagination will be required to develop institutions which respect the traditions and the individuality of the Member States, but at the same time have the strength to guide the future course of the enlarged Community.

The founders of the Community displayed great originality in devising the institutions of the Six. They have been proved in the remarkable achievements of the Community over the years. It is too early to say how far they will meet the needs of the enlarged Community.

For we are faced with an essentially new situation, though one which was always inherent in the foundation of the Community of the Six, which was visualized in the preamble to the Treaty of Rome and which has been created by its success.

Let us not be afraid to contemplate new measures to deal with the new situation.

There is another cause for satisfaction.

“Europe” is more than Western Europe alone. There lies also to the east another part of our continent: countries whose history has been closely linked with our own. Beyond those countries is the Soviet Union, a European as well as an Asian power.

We in Britain have every reason to wish for better relations with the states of Eastern Europe. And we do sincerely want them.

Our new partners on the continent have shown that their feelings are the same. Henceforth our efforts can be united. The European Communities, far from creating barriers, have served to extend east-west trade and other exchanges.

Britain has much to contribute to this process, and as Members of the Community we shall be better able to do so.

Britain, with her Commonwealth links, has also much to contribute to the universal nature of Europe’s responsibilities.

The collective history of the countries represented here encompasses a large part of the history of the world itself over the centuries.

I am not thinking today of the Age of Imperialism, now past: but of the lasting and creative effects of the spread of language and of culture, of commerce and of administration by people from Europe across land and sea to the other continents of the world.

These are the essential ties which today bind Europe in friendship with the rest of mankind.

What design should we seek for the New Europe?

It must be a Europe which is strong and confident within itself.

A Europe in which we shall be working for the progressive relaxation and elimination of east/west tensions.

A Europe conscious of the interests of its friends and partners.

A Europe alive to its great responsibilities in the common struggle of humanity for a better life.

Thus this ceremony marks an end and a beginning.

An end to divisions which have stricken Europe for centuries. A beginning of another stage in the construction of a new and greater Europe.

This is the task for our generation in Europe.