27 AUGUST 1977, Page 3

A very dirty business

When we look at the Government's incomes policy (if it can be dignified by this term) we see that Mr Callaghan, Mr Healey, Mr Foot, Mr Booth and the rest do not know what they are doing or talking about. The IMF has forced them to adopt a monetarist approach to their handling of the economy, and as a result we can detect the beginnings of a fall in the rate of inflation. But this is an interventionist government which must have its fingers in as many pies as possible. Various consequences inevitably follow.

The Government still sees the 'social contract' as central to its endeavours and hopes, and desperately strives to maintain an active incomes policy despite its failure to agree with the TUC on anything except a twelve months' gap between pay awards. In pursuit of a policy apparently designed to prevent any wage increases not linked to productivity from exceeding ten per cent, and now lacking the support of the TUC, it seems determined to employ any weapon that Comes to hand.

Thus the Government has got itself into some very dirty business indeed. Firms settling outside its quite. arbitrarily declared limits have found themselves Punished by withdrawal of export credit guarantee facilities; a famous food company has been threatened with losing Ministry of Defence orders for baked beans; small engineering concerns have been named in circulais to local authorities as 'in breach of the pay limits', a condemnation accompanied by an instruction to stop dealing with them.

This is petty and disgraceful, not to say illegal. The Government's pay limits have no force of law and are

not even endorsed by the TUC as part of a 'social contract'. The Government now rules— or tries to rule — by edict. By way of sanctions it resorts to blackmail. Its actions are those of men who can think of nothing but piecemeal intervention, regulation, direction and threat.

If the Government wants to impose control over wages settlements it should do so statutorily; if it cannot secure the necessary legislation, it should either abandon its policy or go to the country. It is unlikely to do either, given continued Liberal support. Instead it will continue to seek to reduce inflation through controlling the money supply — while at the same time seeking to control wages by ad hoc arm-twisting methods. This is bound to fail. It will push down production and push up unemployment. We see this happening every day. There is a right mixture and a wrong mixture for the British economy.

The actions of the airport workers in rqcent days provide yet another (and disgraceful) illustration of the Government's incapacity to govern. The very uncertainty — the ambiguity — of incomes policy is a positive invitation to the sort of disorder that has overtaken the travelling public. What Mr Callaghan seems to be hankering after is a statutory policy in all but name. He wants wage control without the legislation which alone could guarantee it. Experience shows that no such accommodation is likely to be achieved. A clear and definite policy is called for. There is not a shred of evidence that the Callaghan Government will be able to provide it.