The TUC and Phase Three
Despite the eighty-three motions listed in the agenda for the hundred and fifth Trades Union Congress at Blackpool this wiek those attending, and those watching, will know perfectly well that the discussion is about one thing and one thing only — the attitude of union leaders to the Government's attempt to devise a functioning Phase Three of its Prices and Incomes policy and, as a subsidiary to that, the question of whether discussions with ministers ought to continue or not. Most union leaders are anxious to stay in the talks, if only to suggest to public opinion that they are reasonable men, and even though they have no faith in the policy: Mr Scanlon bitterly regrets instructions from his own union which have caused his withdrawal; and even Mr Jenkins, an artful dodger at the business of finding loopholes in Pay legislation, objects to the talks only because he was not invited. However, militant pressure from shop steward level (there is every indication that the majority of ordinary workers are anxious to be co-operative, and anxious, too, to avoid any industrial action which might lead to a confrontation with the Government) will be directed to the sabotage of the talks. Although in the present economic climate the talks are almost completely irrelevant, the TUC would probably be better advised to continue with them.
Few objective commentators would pretend that either the TUC or any of the major unions have any even remotely sensible ideas on what should be done about the national economic situation. They , are not even consistent in their advocacy of their own Proposals. Threshold wage agreements, for example, were originally a TUC idea, or ploy. The Government's ready acceptance of the scheme (indeed, the extraordinary ease with which they Offered to discuss anything, anything, which the unions put forward) staggered Mr Feather and his colleagues, and even embarrassed them: they, after all, were merely putting up notions to give an appearance of constructive argument. When Mr Heath Jumped for the straw Mr Feather had to pull it away from him. On more serious matters the TUC's views on inflation, demand management, nationalisation, and the EEC are pretty confused and pretty jejeune. The most harm they can do, however, is to break off the talks in circumstances which enable Mr Heath to blame them for his own failure to resolve the inflationary problem: any further such concealment of the truth about the country's economic situation could be disastrous.
The TUC feel instinctively that any restraint on incomes such as the Government envisages is unfair on union members; they are further determined not to allow their members to be forced to carry the main burden of the Government's counter-inflationary Policy so long as it is felt to be .unfair. Both of these are eminently reasonable propositions. For, with the publication last Friday of the latest report of the National Institute of Economic and Social Research, the evidence that the Government has both Misread the economic situation and miscalculated its response begins to look overwhelming: until the Government reforms, .there is no reason why the TUC should give it more than nominal' co-operation.
At the present moment in Britain demand is increasingly outrunning supply. At the same time there is a huge Budget deficit and a money supply burgeoning at present at 25 per cent a year: it was 20 per cent when the Chancellor said its growth rate was dangerously fast. In July alone official and overseas borrowing amounted to about • a tenth of the official reserves: when indebtedness increases at this rate, at the same time as .the domestic economy is rapidly over-heating, the infla tionary situation is bound to get worse: it cannot do other. And the only solution to the problem -thus created is for the Government to throttle back on demand and investment. Mr Walker has been very effective, in a debating sense, recently in arguing that investment is a sacred cow that cannot be touched: but the CBI report in August made it very clear that the capacity of the economy was not great enough to absorb the spending programmes being undertaken. A reasonable throttling back now could both secure a steadier, if lower rate of growth in the future, as well as reducing price and wage inflation. The TUC, of course, is as useless as the Government at understanding this aspect of the problem, for investment is just as much an idol to them.
The other unsound aspect of the Government's argument is their propagation of the idea that, as firms continue to restock with the imported raw materials, the rise in world commodity prices creates both a payments deficit and an increase in inflation, but that the future prospects both for exports and for a fall in world commodity prices will redress this unfavourable balance in our favour. All the indications are that import prices will fall by no more than 2 per cent by the end of next year. If at the same time import buying on credit is allowed to continue to rise at a rate that cannot be absorbed and turned into exports because of the limited capacity of the domestic economy, and if much of that buying continues to be deficit financed, then both the payments situation and inflation will be very much worse, rather than better, by the end of 1974. This the National Institute calls inflation at Latin American rates.
Unless we could imagine the unlikely prospect of the trade unions agitating for a measure of deflation and severe reductions in public expenditure there is very little to be hoped for from any contribution they might hope to make to the national economy. The best they can do is to continue reasonably, well-behaved and polite in their relations with the Government. The responsibility for what happens to the country over the next year or so remains with ministers and with them alone. It cannot be said that our prospects are good. For the truth of the matter is that economic debate in Britain in recent years has become excessively institutionalised: we have accepted so readily that our affairs can and ought to be governed by some sort of ramshackle 'coalition between the national institutions — the Cabinet of the--" day, the TUC and the unions, the CBI and the employers — that we diffuse blame when blatne is merited. The responsibility for managing the national economy belongs with governments. They are elected, usually on pretty good specific programmes of action — this Government more than most. Sometimes they reverse their policies, but when they do their mandate carries on, because the business of government is the responsibility they sought and worked for.
It is not reasonable for them to blame interest groups in the nation, like the unions, for trying to do effectively what, as interest groups, they came together to do, like obtaining higher real wages. It is not effective, that is, if the government of the day is unwilling to submit itself and its new policies, its problems and its analyses of them, to the electorate for a fresh verdict. It is quite plain what this government needs to do to reduce inflation while maintaining steady, if fairly low, growth. It chooses not to do it, but to embark on a gamble instead, a gamble which involves a great deal of playing of games with unions and incomes policies. If that gamble does not work, the Government, has no business to bawl about it, unless their revised programme is to be tested in another election.
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