Britain’s Pay Curb

Press, Volume CVI, Issue 31107, 9 July 1966, Page 14

Britain’s Pay Curb

The British Government’s incomes policy has been suffering some hard knocks. The Pearson inquiry and report on the seamen’s award claims was one, for its recommendations far exceeded the prescription of the incomes policy. Although the Government showed itself ready to handle it firmly, the strike was an encouragement to militant unions to defy the Government’s urgings for restraint on wage increases. Now Mr Frank Cousins, Minister of Technology, has resigned his post because he considers the policy is wrong anyway. He has claimed that it is not a solution to economic problems caused by Britain’s inability to increase productivity. He foresees more industrial disputes and, presumably, more occasions on which the Government will have to show its determination to enforce a policy aimed at restricting wage increases to 3 J per cent a year—a “ norm ” related to the growth of production. The policy, on its own, could not, of course, get Britain out of its economic difficulties. To start with, the growth rate has not yet been achieved. Without restraints on incomes and prices, however, the prices of Britain’s exports will continue to risefaster than production. The incomes policy is not a substitute for long-term economic adjustment; but it should be a means of inducing people to adopt new methods of working. It also has a positive side—to encourage efficiency and reduce restrictive practices. So far the Government has not rigorously stood by the Prices and Incomes Board appointed to carry out the policy. When the Prices and Incomes Bill has been passed the board will have statutory authority and the Government will have due warning of proposed price increases and wage claims. It will be surprising then if the Government by-passes the board. This, no doubt, is what Mr Cousins fears. Millions of trade unionists will share his fear. Employers have not taken up the policy with enthusiasm either. They would often rather pay more—and put their prices up accordingly —than lose workers.

One alternative to the policy of wage restraint is devaluation of the pound. The Government rightly, has been very anxious to avoid this. Another alternative is deflation—and consequent unemployment. This would probably stop the growth of the new industries on which Britain depends. The Government might impose a pay freeze; but that would imply failure of the present policy. So the Government has little choice. It simply has to find a way of restricting the rise in incomes—wages, prices, dividends, and salaries—to something below the rise In national production. Mr Cousins was quite right when he said it interfered with conciliation procedures. It interferes with a lot of other economic processes as well: or rather, it will if the Government decides to exercise it. The real trouble, however, is a political failure—the failure of the Government to convince the public of the meaning, the need, and the urgency of its policy—and the failure is most complete where a Labour Government might have been expected to have the greatest successes—on the factory floor. Without co-oneration at this level the Government will find itself, as Mr Cousins has, in effect, predicted, more and more in direct conflict with the unions.