Heath’s war on your wage packet

the latest Tory attack on living standards and trade union rights

Author: Bert Ramelson;
Publisher: Communist Party of Great Britain;
Published: 1973;
HTML Markup: Pierre Marshall.


Cover of the book

The Phase II clamp-down on wages is the latest in a whole series of efforts by the ruling class to do away with collective bargaining and replace it by state-regulated wages.

Since the end of World War II, eight different attempts have been made by a succession of Governments, Labour as well as Tory, to impose an “incomes policy” in a bid to solve the chronic crisis of capitalism at the expense of the working people.

There was the Labour Government’s freeze in 1948, imposed by the Chancellor of the Exchequer, Sir Stafford Cripps. Then the Tory Chancellor, Selwyn Lloyd, had a go with his “pay pause” in 1961. George Brown, Economic Supremo in the 1964 Labour Government, tried it on with his Declaration of Intent, followed by the Prices and Incomes Act in 1965.

In 1966 Wilson took a hand and imposed a total freeze followed, in 1967 and 1968, by his version of Heath’s Phases II and III.

To underpin its attack on wages the Labour Government tried to deprive the trade unions of the right to strike and make strikes illegal. This was the real objective of Part II of the Prices and Incomes Act and of In Place of Strife.

The Heath Government has been out to impose wage restraint right from the start. It is a myth that the Tories were against state regulation of wages, i.e. “incomes policy”, and were reluctantly compelled to change their policy.

It’s true that the Tories, realizing the people’s anger at the Labour Government’s interference with collective bargaining, set out to con the electorate into believing they would not interfere with wage negotiations. But they never intended to honour this pledge, any more than they intended to honour their promise to consult the people on the Common Market.

No sooner was Heath elected than he launched into an incomes policy to be accomplished “by confrontation”. The aim was to use all the state’s resources to force each section of workers in turn to accept the Government’s undeclared norm of 1% less than the settlement immediately preceding theirs. This was the so-called (n-1) incomes policy, where n is the percentage increase won by the preceding section of workers. The idea was to bring wage increases down by stages to about 4%, or about one-third of the pattern of wage increases at that time.

But the magnificent struggle of the miners, followed by that of the railwaymen, shattered this incomes policy. Heath was therefore compelled to prepare to come out into the open with a policy of state-regulated wages to replace collective bargaining between unions and employers.

With the Industrial Relations Act on the Statute Book, the object of which was to cripple the trade unions’ ability to fight back, the Government decided to go ahead with its total freeze in November, followed by Phase II in January and the promise of Phase III and other phases ad infinitum, all backed by penal sanctions outlawing strike action. It was the battering the Government got from the militant actions of the workers when it attempted to enforce the Industrial Relations Act against the dockers — including the threat of a General Strike — that led it to try to deprive the unions of the right to strike in a different way in its new law.

This brief history of a quarter of a century’s effort by the ruling class, through a succession of Governments, to do away with free collective bargaining, impose state-regulated wages and emasculate the trade unions gives the lie to the argument that wage restraint as far as the bosses are concerned is intended as a temporary measure to deal with temporary difficulties in the economy. ‘

In fact, what is new and most menacing about the latest Tory law is that there is no longer any pretence that the intention to deprive the unions of their basic right to negotiate wages and conditions is to be temporary, and that this right is to be restored to them when the economy has improved.

On the contrary, like the Industrial Relations Act this law sets up permanent institutions to regulate wages, and the provisions to make strikes or any other form of industrial action a criminal offence are to become a permanent feature alongside the Industrial Relations Act. As the Financial Times, (19.1.73) put it: “It is clear that the Government regards them as a more or less permanent feature of the landscape. Mr. Heath hinted at this during his Press Conference. In private, Ministers are even more determined.”

The Tories are planning to use their new law to realize their original strategy of slashing wage increases by stages, to a level in real terms well below the annual rate of productivity increase; in other words, to refurbish the (n — 1) incomes policy which was smashed to smithereens by the historic struggle of the miners and railwaymen in 1972.

Banking on getting away with the proposed norm of a maximum £1 plus 4% and no cut in hours or in holidays, they plan to make the norm for the following year even lower. Every Sunday newspaper on January 21st and most daily papers on Monday, January 22nd carried this message in banner headlines. The Business News section of the Sunday Times was typical: “Pay Freeze: tougher terms next year”.

Such unanimity is only possible when the appropriate Government agency briefs the Industrial Correspondents along these lines, which is a technique often used by the Government to declare its intentions.

Indeed David Watt, Political Editor of the Financial Times with a special “in”, anticipated the Sundays by making the same point in an article on Friday, January 19th: “But their hope is that by the autumn they will be able to tighten the screw to a lower level.”

To justify this attack on the unions and living standards, a sustained propaganda campaign has been launched to persuade people that the alternative to state-regulated wages is runaway inflation and mass unemployment.

Another propaganda theme aimed at consolidating anti-working class legislation is that the law is sacred, and that even if we don’t like it, the law must be obeyed until such time as it is changed “democratically”.

In conducting this campaign the Tory Government is backed by the entire capitalist press, which includes every daily except the Morning Star, and every Sunday paper, as well as all the TV channels and radio programmes.

But it hasn’t been confined to the establishment mass media. Unfortunately, the right wing leaders of the Labour Party and some trade unions, together with most academics who claim to be Labour supporters, have added grist to the Tory mill. Their actions, speeches, interviews and articles give credence to the false argument that the main cause of inflation is unreasonable wage increases, and that the only alternative to inflation is either wage restraint or mass unemployment. In fact, they have tried to out-shout the Tories in condemning working class defiance of anti-democratic, anti-working class legislation like the Industrial Relations Act and Heath’s new pay-pegging law.

It is an outright lie that the major cause of inflation is wage increases or that the alternative to wage restraint is mass unemployment. The real reason for the ceaseless efforts by the ruling class for over a quarter of a century to put a straitjacket on the unions, to do away with collective bargaining and impose state-regulated wages, is that the employers and their state are faced with a well-organized and militant working class, stronger and more powerful than at any time in its history, which refuses to sacrifice its just expectations of a better life to satisfy the unrealisable dreams of the ruling class of recapturing Britain’s position and status as a First Division Imperialist power.

The workers’ power

In fact the British workers not only refuse to become the sacrificial lambs for British imperialism, they have now got the power to thwart the attempts to place the burden of the crisis on their backs.

Indeed, they have the power to take the offensive and go even further. The distribution of wealth between capitalists and workers — wealth which the workers alone produce — has hardly changed in the last 100 years. The growing strength, militancy and political maturity of the working class is putting it in a position to bring about a fundamental redistribution of that wealth in its favour.

This is the nature of the problem facing the ruling class. That is why it wants to cripple the unions and do away with collective bargaining. And the urgency with which it is acting arises undoubtedly from the knowledge that Common Market entry is bound to push up all prices, particularly of food, a fact which will certainly stimulate the demand for big wage increases.

The Maudling Memorandum was a remarkably candid confirmation of this thesis:

“The capitalist system... has led inevitably to wide disparities in living standards and to the concentration of a large amount of wealth in a fairly limited number of hands... We must recognize that this has only persisted because the majority have not been prepared to use their potential economic and political power against the prosperous minority?

“We have seen in the last two decades an arising consciousness of the power of organized labour. Some groups of employees, organized into unions, now possess the power to bring any capitalist economy to a halt.

I do not think we can now redress the balance by individual measures.

A capitalist economy must be prepared to accept a far greater degree of systematic control over the level of incomes and prices than we have ever contemplated before. I am absolutely convinced that the old classical economies are no longer relevant to a wholly new political situation.

The lesson of experience seems to be that we must be vigilant to detect the practical limits of voluntary action and ready if necessary to extend them by the use of legislation.”

(The Times, 12.9.72.)

Maudling, having been a Tory Chancellor of the Exchequer, and then until recently, Heath’s Deputy Prime Minister, as well as having wide interests and contacts with Big Business, was well placed to know the real thinking of the employing class. The Times, the paper for Big Business, treated it as of top importance, and the widespread favourable comment it received in the establishment press is an indication of the accuracy with which it reflected the thinking of Government and Big Business circles.

Similar views have been expressed in recent articles by Professors Balogh and Kaldor, former advisers to the Wilson Government, and in a recently published book, “How to run an Incomes Policy”, by Professor Hugh Clegg, a former member of the Prices and Incomes Board, and considered to be a Labour supporter.

So now we know. The real reason for legislation to shackle the unions and impose state-regulated wages has nothing to do with curbing inflation or maintaining a high level of employment, but with the strength of the working class, with undermining the ability of workers to stand up to the employers during collective bargaining and to force concessions by the full use of their economic and political power.


The very rapid rise in prices which has been a feature of the economies of post-war capitalism is certainly a serious problem and for no one more serious than the working people and their families. It hits particularly hard the working class pensioner, widow and others whose main source of income is fixed benefits paid out by the Department of Social Security. The capitalist is protected and may even benefit from inflation since the price of his assets, whether they be in the form of properties or shares, rises in pace with the prevailing rate of inflation, and often considerably more.

“Over the last 18 months the capital values of British-managed companies quoted on the Stock Exchange have gone up by £28,000 million”, according to Lord Diamond (House of Lords, Hansard, 8.11.72). This amounts to nearly one-half of the total wealth produced in an average year in this country. But the worker’s wages and the pensioner’s pension are eroded by the weekly, if not daily, rise in the prices of the necessities of life. So it’s a lie that the trade unionist demanding a wage increase is unconcerned about inflation.

There is no argument about whether something ought to be done about inflation and prices kept stable. The argument is about the cause of inflation, and hence what measures are needed to curb it.

In order to “sell” to the public their anti-trade union legislation, the Government and the employers are exploiting people’s legitimate concern about rising prices by peddling the line that the major if not the sole cause of inflation is unreasonably high wage and salary increases.

This is a lie. Wage increases play a very minor, if any, part in the inflationary process or the competitiveness of those of our exports which run into difficulties on the world market.

The first thing to note is that rising prices have been an annual phenomenon in Britain and every other industrially developed capitalist country since the end of the war, that is, for about 25 years. While the rate of inflation has fluctuated from time to time and country to country, inflation itself took place every year. This was so during years of wage freeze, incomes policy and large-scale unemployment, as well as during years of wage advances and relatively full employment.

That being the case, then surely it is only common sense at least to suspect that inflation may be a basic feature of post-war capitalism, especially as price stability and even a fall in the price of many commodities and services has characterised the economy of the Soviet Union, the People’s Republic of China and a number of other socialist countries.

There is not any one single cause for the persistent inflation throughout the capitalist world. It is due to a combination of factors. At different times, in different countries, one or another factor may be more or less influential. The totality of all these factors, which are characteristic of post-war capitalism and reflect in their combined effect the crisis of capitalism, expresses itself in inflation. What are these factors?

First, it is an economic fact that inflation will be rampant during a war, unless there is rigid control of prices. For that reason war-time Britain imposed strict price controls. After the war price controls were dismantled but thousands of millions continued to be spent on armaments. This is still the case.

US military expenditure has been enormous since World War II. The USA has been involved in the Korean War, then Vietnam. It has installed military bases throughout the world, and supported every reactionary regime with supplies of arms.

This was bound to have a tremendous inflationary effect not only in the USA, but throughout the capitalist world. Every capitalist economy and currency is closely affected by what happens in the most powerful capitalist country, whose own currency, the dollar, is an international unit of account.

The basic reason why arms spending is inflationary is that the Government pays out money in wages and profits to produce a commodity, armaments, which are not for sale but are either stored or blown up. As a result there is money circulating which is not balanced by the production of goods on which it can be spent. In other words, too much money chases too few goods — and prices rise.

Had the British working class and the workers in other countries with large armament expenditures been docile enough to allow the state to cut their real wages and living standards to pay for this waste of resources on. armaments, then perhaps the inflationary effect would not have been so great. But the organised workers refused, and rightly so, to sacrifice their living standards to enable the ruling class, for their own imperialist objectives, to wage the cold war, and launch wars of aggression as in Korea, Vietnam, and Suez.

This analysis is confirmed by Professor David Laidler in the following quotation from an article in the highly respected National Westminster Bank Quarterly Review for November 1972:

“The abnormally high inflation rate of recent years may be interpreted as resulting from a combination of two circumstances. First, there was the attempt of the American authorities to finance a war in Vietnam... this led to a greatly increased rate of monetary expansion after 1966 and to a substantial increase in the world inflation rate, an increase which was bound to affect the British rate of inflation.”

Role of multinationals

Secondly one of the features of post-war capitalism has been a tremendous increase in mergers and take-overs, and the emergence of the multi-national firm. This high degree of monopolization has eliminated competition over growing sections of commodities and supplies of raw materials, components and semi-finished goods. In the absence of Government price controls this is bound to lead to price increases.

Then there have been rapid developments in science and technology which tend to shorten the life span of costly equipment through early obsolescence, leading to a high rate of amortization, that is, a considerable increase in annual write-offs by the unilateral decisions of management. This shows itself as an increase in the costs of production and higher prices.

Lastly, the post war tendency to rely on self-financing for investment purposes rather than borrowing from the banks and financial institutions has meant increasing profit margins by raising prices to provide the necessary investment funds.

An example of this was the decision of the publicly-owned Electricity Generating Board to raise electricity prices by 10.5% in the autumn of 1967 to produce an unprecedented profit of £101 million, in order to provide for an investment programme which the Government had decreed should be financed from the Board’s own funds.

These are some of the factors causing inflation throughout the capitalist world. But there are a number of special factors aggravating the position in Britain, which are responsible for the higher than average inflationary rate for most of the post-war period.

Government policies in Britain have deliberately aimed to raise prices.

The Government has set out to cut the value of wage increases gained by the workers. It has been responsible for rent and fare increases, purchase tax increases, increases in the cost of insurance stamps, increased charges on prescriptions, spectacles, false teeth and dental visits, higher prices for school meals, and the abolition of free school milk. It has changed the farm subsidy system and introduced import levies as part of the preparation for entry to the Common Market. This has affected food prices on which workers spend a quarter of their wages. It is going to introduce VAT, also as part of Common Market entry. By raising the cost of living in this way, the Government has contributed to inflation.

By raising and maintaining high interest rates the Government has also increased the cost of capital, which is then passed on in higher prices.

High interest rates plus the failure to control land values and development plus the cuts in spending on the housing programme have all created an artificial shortage of housing and a paradise for speculators. The cost of housing, whether for the tenant or owner-occupier, has rocketed. And as housing constitutes a quarter to a third of a working man’s budget, it is bound to have a big influence on his cost of living, and is therefore grossly inflationary.

The continued export of capital overseas by the big capitalists to wherever investment is most profitable, instead of using it to modernize British industry and make it more competitive, has constantly undermined the balance of payments.

Instead of controlling such exports the post-war British Governments encouraged them, and attempted to deal with the resulting problems by deliberately contracting the economy through policies of credit squeeze, high interest rates and cuts in investment programmes of the nationalised industries and Government departments. The consequence has been under-capacity working, which increases costs per unit of output and therefore is a factor in increasing prices.

These measures have failed to ensure a steady balance of payments surplus and have made British exports less competitive. Faced with this fact the Labour Government in 1967 and the Tory Government in 1972 tried to escape from the trap by devaluing the pound. Devaluation with the consequent rise in the price of all imports is a powerful inflationary force, particularly for a country like ours which is so dependent on imports.

There can be no doubt that the devaluation by the Tories in 1972, carried out through the technique of “floating” the pound, was the first twist to the new inflationary spiral sparked off by Britain’s entry into the Common Market. And for good measure, the manufacturers and distributors seized upon the opportunity of decimalisation to round up all prices.

However, despite all the ballyhoo, the inflationary rate in Britain is at the present time only marginally above that of the EEC countries. This point was made by the Economic Correspondent of the Financial Times (12.12.72):

“The present situation of the European economy was succinctly put last week by the Organisation for Economic Co-operation and Development’s Mr. John Fay, when he told a gathering of British business economists: ‘Although there is a wide disparity in the stages of the cycle reached by individual economies, there is a remarkable similarity in the rates of inflation prevailing’.”

The present marginal difference in the British rate of inflation is explicable by Government-induced price increases, and is not due to recent wage settlements. This fact removes all justification for the Government’s wage freeze last November and its latest pay-pegging law.

The following tables showing the comparative wage increases and wage levels in Britain and her competitor countries is proof that wages and wage increases are not an important factor in Britain’s inflation, and therefore that it will not be cured by holding back wages.

Comparative Wage Increases and Actual Wage Increases
Profession Wage increases between 1964-1971
United Kingdom 26%
Italy 53%
Belgium 42%
Germany 41%
Holland 39%
France 37%
Luxembourg 28%

Weekly Earnings
Profession Britain Germany France Holland Belgium Italy
Skilled car worker £40/45 £49 £40 £43 £36 £24
Miner £32 £43 £40 £46 £27
Printer £41 £49 £64 £43 £34 £27
Bus driver £32/33 (London) £47 £38+ (Paris) £41 £36 £27
Docker £45 (London) £56 £44 £36 £35
Electrician £32 £44 £40 £40 £43 £25
Teacher £42 (men)
£31.50 (women)
£67 £45 £20
Bank clerk £25 (average lowered by
large numbers of
young girls employed)
£38 £34 £40 £45 £32
Postman £33 (London) £30 £28 £39 £41 £25
Secretary £30 £56 £40 £53 £16

(Source: A study made by the Daily Telegraph Industrial Correspondent and published in that paper, 15.1.73.)

The truth of the matter is that wages chase prices. Workers are compelled to demand increases to maintain the real value of their wages.

A recent Report by the Engineering Employers’ Federation — no friend of the workers or champion of wage increases — was compelled to make the same point. The Guardian Editorial (2.9.72) commenting on that Report said:

“Inflation cannot simply be equated to wage demands. The EEF acknowledges that the background to the recent spate of enormous wage claims was an already inflationary situation caused largely by devaluation, rising import prices, taxation, and measures taken by both Governments to reduce demand which in fact raised unit costs.”

The same point was made in a letter by Lt. Col. F. W. Tooby published in the Financial Times on September 1st, 1972, and quoted by Eddie Marsden, General Secretary of the Construction Section of the AUEW, when moving the successful resolution against any form of incomes policy at the 1972 TUC:

“The TUC and the unions are not to blame for the current inflation of consumer prices... Some results of my research were cited in a paper published by the Economic Research Council under the title ‘Excessive Taxes Lead to Stagflation,’ to show that the average take-home pay of all employees in the country rose from 1960 to 1970 at a rate insufficient to compensate for their rising productivity and the rise in consumer prices... It will be agreed, I think, that the unions cannot be responsible for inflation if consumer prices rise faster than the national average take-home pay per unit of real production and per person in civilian employment... Anyone can prove that this was in fact the case from 1960 to 1970 by calculating and comparing two indices, both on the base 1960:100, from official data in the 1971 Blue Book of National Income and Expenditure! (A) is an index of consumer prices, from table 16 in the 1971 Blue Book. (B) is an index of take-home pay per unit.”

The letter then cited the following table:

Year Consumer Prices
Take-home Pay
1960 100 100
1961 102.9 102.5
1962 106.9 104.4
1963 108.9 105.2
1964 112.6 106.4
1965 117.7 108.3
1966 122.1 110.8
1967 125.3 115.1
1968 130.8 118
1969 137.9 123.4
1970 145.4 135

As a result of the wage advances won in 1972, wages for many workers have increased by around 16%, a net increase in real terms of about 4%. This is the first time in years that there has been a substantial gain in real terms and therefore a marginal redistribution of wealth. It is undoubtedly the reason for the drop in unemployment.

But such an increase in wages is lower than the increase in productivity, and therefore could not have been inflationary.

Professor Paish has published a detailed study of productivity in Britain in the authoritative Lloyd’s Bank Review. He concluded that on average productivity rose by 4.2% in 1970 and 5.4% in 1971, and he estimated that it would rise at an annual rate of approximately 5% between now and 1980.

This is, of course, an average. In particular industries, mainly where wage increases have been above average, productivity has risen much faster:

Sector Productivity Increase 1970/71
Coal and Petroleum Products 8.7%
Gas, Electricity and Water 34%
Chemicals 9.6%
Food, Drugs and Tobacco 14.8%
Bricks, Cement and Glass 25%
Timber, Furniture 18%
Electrical Engineering 11.27%
Shipbuilding% 13%
Vehicles 5.7%
Clothing and Footwear 12%
All Manufacturing Industries 10%

(Sunday Times, 28.1.73)

To quote again finally from Professor Laidler’s article in the National Westminster Bank Quarterly Review published in November 1972: “Now if it is the case that the current inflation may be explained in the terms set out in this article, it follows at once that explanations that look to purely domestic causes of inflation — I am thinking here in particular of those explanations that centre on trade union militancy — are quite simply too parochial in outlook and confuse descriptions of inflation with the analysis of its causes.”


To argue that the alternative to an incomes policy or wages restraint is mass unemployment is even more ludicrous than to argue that wage increases are the cause of inflation. The facts show the exact opposite.

The first jump towards serious and persistently record high unemployment since the war was in 1966 with Wilson’s imposition of the wage freeze. The freeze was followed by wages restraint guided by various norms and unemployment stayed stubbornly high.

The first significant drop in unemployment since 1966 — estimated at roughly 150,000 — coincided with the breakthrough in wages following the miners’, railwaymen’s and building workers’ victory. It was the increases in wages and earnings in 1972-73 of about 16% as against an inflationary rate of over 10%, that is, a real increase in take-home pay, plus the extra spending money made available by the last budget, that was the real basis for the drop in unemployment and the relative expansion of the economy.

Had there been no wages breakthrough there can be no doubt that unemployment would have been near 1½ million by now and not the 1 million it is. The latest figures show a drop in investment in manufacturing of 10% over last year. The export figures are also disappointing. So if this boomlet that Heath and Barber are all excited about is not export-led and not investment-led, what did cause it if not increased consumer demand. Translated into plain English, this means more consumer spending due to more money in the pockets of the working men and women due primarily to the successful wages breakthrough in 1972, which was supplemented to some extent by tax relief. The well-off, who weren’t short and therefore didn’t spend all they were given, benefited most from the tax concessions of course. So the main factor was the increase in wages and earnings.

Far from wage increases leading to increased unemployment, the exact opposite is the truth. If Heath succeeds with his wage restraint policies, then it is not only living standards that will be endangered but jobs as well.

The signs are already ominous. The balance of payments surplus of £1,000 million achieved by the Wilson Government at the intolerably high price of mass unemployment, wage freeze and incomes policy — and which cost Labour the election — has already been dissipated. The staggering surplus is being turned to a deficit even before paying the price of joining the Common Market. The latest forecast by the London & Cambridge Economic Bulletin is that we may be facing a £1,000 million deficit on the balance of payments next year.

Already interest rates are the highest for over half a century and credit is being tightened up. The investment boom has not materialized and now we are faced with an attack on wages. There certainly is a real danger of mass unemployment on a scale not seen since the thirties.

But this danger will not be avoided by accepting wage restraint and therefore a reduction in consumer spending. On the contrary, only a further boost in consumer spending through winning substantial wage increases will stimulate production encourage investment and sustain employment.

The propaganda campaign of the employers and the Tory Government aimed at concealing the real purpose of the latest law was made considerably easier by the decision of the right wing majority on the General Council of the TUC to engage in discussions on the kind of “incomes policy” that would be acceptable.

By participating in such discussions, contrary to the categoric decision of the TUC that Congress is opposed to discussing any incomes policy, whether it be voluntary or statutory, these General Council leaders played into the hands of the bosses and the Tories.

Such discussions added credence to the Tory lie that wage and salary increases were a major cause of inflation, that they needed to be restrained, and that the only argument between the trade unions and the Government concerned the form such restraint should take and the conditions which should be satisfied.

The Tories showed their real contempt for the unions. Having achieved what they were after — to engage the union leaders in discussions and create the impression that everyone was agreed about the necessity for wage restraint — they arrogantly rejected every proposal made by the unions and proceeded to implement in their entirety the proposals made by the CBI, the employers” spokesmen.

The Government, having succeeded once, are now beginning the campaign to entice the unions into discussing the next phase (Phase III) of their attack on free collective bargaining and trade union rights. In this “seduction” job) they are, of course, relying on the ready help of the capitalist press and TV pundits.

This is only to be expected. What is tragic is that some trade union leaders. provide them with ammunition. Some of them seem absolutely incapable of learning from experience. For Tom Jackson, the postmen’s General Secretary, to become the champion of “talking with the Government” is really ironic.

All the eloquence of Jackson in support of the unanswerable case of the postmen when they were the first guinea pigs of the Tory Government’s incomes policy got him nowhere. Had he been prepared to continue the magnificent struggle of his members, instead of relying on “influencing” the Government and their “packed” Tribunals by appeals to reason, his members might not have been relegated in the wages stakes.

What makes Jackson, Anderson of NALGO, and the others who are clamouring to return to Downing Street or Chequers think that they will succeed where they failed during the numerous “discussions” preceding the freeze and Phase II?

These trade union leaders must be reminded that there are some things that are not negotiable and one of them is free collective bargaining. Once they give that up they have divested themselves of their major function. Once the unions cease to have the right to bargain meaningfully on wages and conditions and the power to back up their bargaining with strike action or any other form of industrial action short of that, then they become to a large extent redundant.

It is precisely because the British trade unions have fought to retain these rights, and insisted that such rights are not negotiable, that the British trade union movement is the most effective, and relatively the largest, in the capitalist world.

Having been kicked in the teeth by the Tories, the trade union leadership ought to get down to mobilizing the full strength of the movement for the counter-offensive needed to defeat the Tory attack on their rights, instead of engaging in talks. The TUC should reject the advice of those who have no sense of shame or dignity in counselling that they lend themselves yet again to be used by the bosses and the Government in discussions which have one aim: to get the unions to collaborate in their own destruction.

The whole opposition to the Industrial Relations Act was based on the simple basic proposition that free collective bargaining and the unions’ right to strike are not subject to discussion or barter. They are inalienable, fundamental rights which are not negotiable at any price. That is why this latest law, which does away with collective bargaining and makes industrial action and strikes illegal, must be smashed.

The latest Anti-Union Law

As we have already said, the latest Tory pay-pegging law, at the time of writing still in the form of a Bill, and the White Paper which accompanied it are but the latest in a long process of attempting to replace collective bargaining with state-regulated wages and to emasculate the unions. They are in many ways more vicious and dangerous than all past efforts.

To explain why, it is necessary to examine the Bill and the White Paper separately.

The Bill sets itself the task of institutionalizing state-regulation of wages.

It sets up statutory institutions with the power to issue orders on the permitted levels of wage and price increases, making it a criminal offence to disobey them. The maximum penalties provided are unlimited fines on individuals and the unions, whether registered or not.

The institutions set up, the Pay Board and Prices Commission, are to be permanent. This is made clear in the provisions for the appointment of members for 5 years, such appointments to be renewable for a further 5 years at the expiry of their first term of office, and the provision to renew their powers after the initial 3 years for which they are exerciseable.

The fines are to be a charge on all the unions’ funds, whether they be strike funds or not. Thus all the ingenuity of the legal profession in advising unions to set up “protected funds” has been thwarted.

In the final analysis, shop stewards organising, supporting, or financing a strike or any other industrial action short of a strike can be jailed, even though it will take a little longer and the procedure is more complicated than was the case when the Pentonville Five were jailed.

Whereas in previous incomes policies the Prices and Incomes Board could only advise on and delay the payment of wage increases, its findings not being enforceable after the expiry of 3 months, in this Bill the Pay Board can issue an order not to pay a wage increase and that order is legally binding; and it is a crime to put pressure on an employer to disregard the order.

Whereas in the past the Prices and Incomes Board could only consider wages cases referred to it by the Government, this Bill provides for the Pay Board to have power to intervene on its own initiative with regard to any wage settlement, even if not referred to it by the Minister, and issue an order forbidding the payment of increases voluntarily entered into between the unions and the employers.

Whereas previously the Prices and Incomes Board, while expected to do so, was nevertheless not bound to be guided by the Government’s norm or guide lines in making its awards, this is not the case with the Pay Board set up by this Bill. The Pay Board is specifically bound by the Government’s guide line, which will be promulgated from time to time in a Code which will have the force of law under this Bill.

The Bill also specifically prohibits any attempts to get round paying the forbidden increase.

Section 6 and its sub-sections quoted below is the key section giving the Pay Board these unprecedented powers:

“Section 6 — (1) The Pay Board shall exercise the powers conferred by this section in such ways as appear to them appropriate for the purpose of ensuring that the provisions of the code which concern remuneration are implemented.”

“(2) For the said purpose the Pay Board may restrict any kind of remuneration for a period when this Part of this Act is in force.”

“(3) The powers conferred by subsection (2) above shall be exercisable by order, or by notice given to the person, or each of the persons, paying the remuneration subject to the restriction.”

“(6) Where an order or notice under this section makes it illegal to pay remuneration of any amount, it shall also be illegal to enter into any agreement or arrangement whereby the employer makes to, or for the benefit of, the employee some payment, whether called remuneration or not, to compensate for the remuneration which it is illegal to pay; and an employer who enters into any such agreement or arrangement, or makes any payment pursuant to any such agreement or arrangement, contravenes the provisions of the order or notice.”

Thus the Pay Board, unlike previous institutions, has power to make binding orders for the non-payment of wage settlements and the power to stop any wage settlement without any reference being made to it. It is bound by the Government’s established norms embodied in a Code which can be changed from time to time, and it is conceived as a permanent institution.

Such powers are unprecedented even in the long history of wage restraint legislation and it is an open declaration. in plain language, of the Government’s decision to do away with voluntary collective bargaining and replace it by permanent state-regulation of wages.

The White Paper accompanying the Bill deals with “The Second Stage” or Phase II of the Government’s “incomes policy”. As with the Bill, the proposals contained in this White Paper are in many respects more brutal in their attack on wages, and more phoney in their pretence of controlling prices and profits, than any previous attempt to do so. For sheer hypocrisy and cynicism, they would be hard to beat.

Pretending great concern for the low-paid the White Paper extended the total freeze to March 31st even though among those whose wage settlements or negotiations caught in the freeze were the farm workers and the hospital workers, who are amongst the lowest paid of all.

Despite the fact that women in general receive on the average not much above 50% of the male rate, and despite the fact that by and large women are the lowest paid in. the work force, the White Paper announces the Government’s callous refusal to use its powers under the Equal Pay Act. as already promised, to raise women’s wages to 90% of the male rate in 1973.

This is the meaning of Paragraph 24: “The Government stand by the requirement of the Equal Pay Act 1970 to achieve equal pay by the end of 1975. They wish orderly progress towards this to continue and any remaining differential between men’s and women’s rates may therefore be reduced by up to one-third by the end of 1973 outside the pay limit, if necessary. Increases outside the limit for this purpose may only be made where pay settlements within the limit do not widen the existing relativity between men’s and women’s rates.”

The norm of £1 plus 4% of earnings exclusive of overtime is presented as a boon to the low-paid. There are millions of workers, men as well as women, whose earnings are under £18 a week, which is well below the minimum considered necessary for existence by the Department of Social Security. These workers qualify for the Family Income Supplement. An increase of £1 plus 4% of earnings will still keep them below the Department of Social Security minimum requirement and will barely maintain the purchasing power of their wages as compared with a year ago. It would certainly leave them considerably worse off by the time of their next increase which cannot take place, according to this White Paper, for at least another 12 months. So much for the Tories concern for the low-paid.

No above-norm increases

All previous incomes policies allowed above-norm increases for increases in productivity. Not so this time. Nor are there any provisions for increases due to sharp increases in the cost of living.

Nor are cuts in working hours to below 40 hours a week, or improvements in holiday provisions for those already having 3 weeks, permitted: unless, of course, they are set against the £1 plus 4% norm. In other words, it is either a wage increase or shorter hours but not both, even though, as in steel and in many other industries and plants, only a cut in hours can prevent or even reduce large-scale redundancies.

Nor can there be any increases above the norm on the grounds of extraordinary increases in profits in a plant or industry where wages are well below those paid in comparable plants, occupations or industries. Thus the exceptions in previous incomes policies which allowed above-norm increases on the grounds of comparability, or to attract labour in short supply, are prohibited.

The most diabolical “innovation” is the provision that the £1 plus 4% ceiling on wages is to be calculated not on the wages of an individual but on the wages of the negotiating “group”. This is a device to create the maximum division between workers and to place the burden of more-than-average increases for the low-paid on to the better-paid.

In other words, the boss figures out the equivalent of the £1 plus 4% increase on the total bill for a “group”, which could be a whole plant or department, offers it to the union and then it is for the union to share it out. The workers will be encouraged by this means to fight for their share like dogs over a bone.

The Coal Board has done just that. It calculated that the norm means a £25 million increase in its wages bill and offered that sum to the union to divide up. If the union fell into the trap, this would create divisions between surface and underground workers and craftsmen, and between each of them and the union.

Thus the Government’s intention is to impose the most rigid wage restraint in our entire history, creating disruption and division amongst workers in the bargain. It is intent on plugging up every loop hole, taking no cognisance of special circumstances whether they be rocketing prices, phenomenal increases in productivity, abnormal profits or unjustifiable differentials between the earnings of workers in similar occupations or industries, and refusing to give any consideration to the position which workers like the civil servants find themselves in because of the Government’s own arrangements with the Pay Research Units, as a result of which their pay has fallen behind.

But what a different attitude to prices and profits! Only the “large” firms need prior permission to increase prices. Medium sized and small firms need no prior consent.

As far as food is concerned, there is no pretence of control. In fact, prices have rocketed ever since the freeze on wages and prices was announced on November 6th 1972. The official figures show that food prices rose during the first month of the freeze at an annual rate of 18%.

The Grocer magazine gave the following figures for the increases in food prices during the first eleven weeks of the freeze: fresh meat — 8.5%; fresh vegetables and eggs — 6.8%; fresh fish — 20.9%; fresh fruit — 32.3%.

Even when prior permission has to be obtained for price increases, experience during the freeze shows that this will be readily forthcoming. The Times Business News (27.1.73) revealed for example that Findus, Birds Eye, and Ross Foods had been given permission to charge up to 5p a pound more for frozen fish and meat products. It also reported that an increase of 50p on a 280 lb. sack of biscuit flour milled from English wheat had been allowed, and added: “This brings the total of rises allowed on biscuit flour since the freeze started to £1 a sack, and leading biscuit producers have given warning they intend to seek increases.” And on January 31st, it was announced that wool companies would be allowed to increase prices by 10% to compensate themselves for higher raw material costs.

The Government’s Housing Finance Act has also pushed up all rents, council as well as private. Rates are expected to rocket following the revaluation of rateable values. Contrary to the provisions on wages, all the Government promises in the White Paper is to monitor prices, not freeze them or limit their increase.

In addition, special provisions are made for increasing prices due to increased costs of imports. As most commodities have an imported element in them, and as the floating pound has led and will continue to lead to increased costs of imports, the White Pap-er gives the green light for price increases.

Then, the White Paper specifically exempts coal and steel from price control since, by joining the Common Market, the British Government has lost control over these industries and it is the Coal and Steel Community that determines prices. “Prices for coal and steel are subject to our obligations as members of the European Coal and Steel Community,” it says. And the Financial Times of January 24th, 1973, had the following headline: “Steel price may rise 5-6% from May 1st.” Presumably coal prices will follow. Thus rising costs of steel and coal, which go into the cost of producing a great variety of commodities, will lead to permissible increases in the price of a host of non-food commodities. It is also worth noting in considering the possible size of the price increases that British steel and coal prices, both nationalised products, have been held down below world market prices.

Thus the provisions are there to enable the employers to raise prices without any ceiling being put on them while wages are rigidly controlled. On top of all this, the prices of all goods and services will rise. When Value Added Tax is introduced after the Budget, and food prices will jump further because of Britain’s entry into the Common Market.

What about profits?

The limiting of dividend payments to 5% above the previous year is meaningless. Control of dividends has long been exposed as a fraud. It merely delays payment, does not deprive the shareholder of anything, and adds to the capital value of the shares, which can be sold at any time and the profit cashed.

The provisions regarding control of profits are a real swindle.

First there is the provision that only profits made on goods sold at home are subject to control, not those made on exports. As most of the big firms participate in both home and export trade, the idea that it will be possible to control or limit their profits is a sick joke.

Then, of course, we have the giant multi-national firms and conglomerates, the really big boys in whose interest this Government rules. It is ludicrous to believe that their profits can be controlled considering the ease with which they can transfer funds around the world, and by the use of book-keeping techniques can show at will a loss or a profit in a given country. They can make decisions on the rate of amortization for example which can convert a huge profit into a paper loss.

Then there are the provisions for retaining the present profit margin. This is another gimmick designed to allow profit increases under the disguise of controls and limits.

Profit margins are calculated as a percentage of either costs or sales. And as we have seen earlier, as costs and prices will rise due to rises in the price of imports, steel, coal and other raw materials, so the same profit margin will yield more profits even if the turnover remains the same. If the turnover increases, then of course profits will rise even more.

The ceiling on profits permitted is another real confidence trick. Profits are to be limited to the highest profit average of any 2 years in the preceding 5 years. As 1967, the year following the Wilson freeze, was a bumper profit year, and 1972-3, following the Tory freeze, also shows a jump in profits, and both years are within the 5 year period, the bosses won’t shed any tears.

As can be seen, unlike the case with wages, when it comes to profits there are no strict controls. The bosses aren’t worried. They’ll be able to drive a dozen tractors through the provisions of this new law. They will be able to hang on to the big increases in profits that will stem from increases in productivity which as we saw are to be excluded from consideration on wages settlements. And they will also have the benefit of the freeze on business rents (in contrast to the raising of workers’ rents).

The press is making a lot of the increase in the needs allowance for calculating rent rebates, and the decision to postpone increases in the price of school meals due in April. It is trying to suggest that Heath has met the trade unions’ demands on rents and social services.

This is yet another lie. Whilst rents for business premises are frozen, workers rents are to be increased by the full amount with the only provision that the floor for earnings to qualify for a means-tested rebate will be raised slightly.

As for the postponement of increases in the cost of school meals, this isn’t giving anything to working class families at all. The increased charges were daylight robbery anyway. All the Tories have promised is not to effect the robbery until 1974.

This new Tory law, and the White Paper on which the Code will be based is a vicious class-biased piece of legislation aimed at depriving the unions of their basic function, filch the democratic right of workers to strike, attack their living standards and provide for a huge increase in profits while rigidly controlling wages.

Mr. Vic Feather, General Secretary of the TUC, is paid a salary nearly three times that of the most highly skilled and best paid workers. He is paid to defend the unions against the bosses’ attack, not to show the white flag at the first signs of preparations by the class enemy to attack them.

His public statement in reaction to the Government’s onslaught on the workers that the unions are not seeking a confrontation with the Government or employers shows his readiness to capitulate. Someone ought to tell him that it is the Government and the employers who have chosen confrontation. His job, and that of every trade union leader, ought to be to throw himself heart and soul into the most rapid mobilisation of the whole movement to face this Tory challenge. It is his job to rouse the movement and use its immeasurable power to resolve the confrontation by smashing this Tory policy, and in so doing, to get rid of the Tory Government as well; for the Tory Government could not survive the defeat of this policy, a central part of its strategy of confrontation with the organized working class.

It can be done. The experience of 1972 proves that this is so. The miners and railwaymen forced the Government to retreat. The defiance of the dockers and the engineers in the face of the iniquitous Industrial Relations Act forced the Pentonville jail gates to be opened, Goad to be bought off by the bosses, the closed shop to be restored in the North East and in Coventry with the bosses, faced by the determination of the workers, openly collaborating with the unions to defy the law against the closed shop.

All this was achieved, not by Feather’s pleading, but by workers taking action, defying the class-ridden Industrial Relations Act.

Natural justice

Similar action on a much more massive scale and solidarity by all workers with those sections in the front line will be needed to defeat this latest Tory law.

It will not be defeated by Wilson, Healey, Prentice, Feather and others echoing the Tory call to obey the law. They are playing the Tory game by failing to distinguish between law which is based on a genuine consensus and is aimed to guarantee the rights of the overwhelming majority to the orderly and peaceful pursuit of their way of life, and vicious class law which is imposed by a minority class to intensify the exploitation of the many and which in particular is aimed at depriving the working class of its inalienable democratic right to combine, to use its combined strength, to strike, in order to advance its interests.

It is the Government that is defying plain, straightforward natural justice, attempting to deny workers their natural, democratic right to form trade unions for their own protection. Natural justice in a democratic society supersedes class law.

The working class understands this and in the past has refused to accept ruling class laws docilely as with the Combination Acts, the Munitions Acts in the First World War, Order 1305 in World War II, Wilson’s In Place of Strife and the Industrial Relations Act of 1971.

The heroes of the Labour Movement are not the class collaborators who joined with the bosses in advocating that defiance of authoritarian, anti-working-class laws endangered democracy.

On the contrary, it is the Tolpuddle Martyrs, it is the Clydeside shop stewards of the first World War, it is the seven dockers led by Dickens and Grady in the post war years, it is the Pentonville Five last year, and the tens of thousands of engineers and dockers who defied the Industrial Relations Act, who are, as will be recognized by history, the real champions of democracy. These are the people who have defended democracy from the authoritarian attacks upon it by the ruling class who are frightened that the democratic process will put paid to their ability to intensify the exploitation of the working class.

There’s no point in Wilson moaning about the threat of authoritarianism, about the emergence of fascism if at the same time he facilitates its development by acquiescing in the destruction of democratic institutions and processes such as free trade unions and collective bargaining.

Nor will the fight be advanced by Labour leaders arguing for an incomes policy of their own. Such an approach reduces the opposition to the Tories to one of detail and not principle. It becomes a sham debate. It leads to cynicism. It accounts for the inability of wide sections of people to see any real difference between the Labour and Tory Parties, which Wilson has publicly recognised to be a fact.

Wilson himself and his other right-wing colleagues bear a great share of the responsibility for the fact that many, many electors can see no real difference. Only by recognizing that they must make a complete break with the past, give up the impossible task of finding a “fair incomes policy” within the framework of capitalism, and join the workers in defying anti-working class laws, will Labour leaders be able to conduct a real, meaningful and effective fight against the Tories and inspire confidence in their leadership.

There can be no incomes policy so long as capitalism exists which does not lead to higher profits and therefore increased exploitation of the workers and a strengthening of the economic and political power of the bosses as a class.

The planning of wages cannot be isolated from the planning of all resources and the return, in one form or another, of the products of labour to those who produce them — the workers. In other words, an incomes policy acceptable to the working class because it is fair in the sense that the benefits are reaped by the workers and their families and the community as a whole is only possible in a socialist society.

All experience proves that the only way this diabolical attack on the unions and living standards can be defeated is by determined struggle. The miners. railwaymen, dockers and building workers proved that in 1972.

There are already signs that the workers not only understand this but are determined to battle. The action of the civil servants, gas and hospital workers, engineers on the Mersey and in Southampton, and many others is evidence of this.

But the main responsibility for mobilizing the whole movement to fight the Tory law is that of the TUC and the leaderships of the various unions. The working men and women would respond to a lead for action.

But while the main responsibility rests with these leaders, the rank and file led by their shop stewards and local officials and the rank and file organizations such as the Liaison Committee for Defence of Trade Unions cannot, must not, and will not sit back and wait.

Already mass pressure has succeeded in securing the convening of a special TUC Congress. The General Council, acting on the decisions of that Congress, must be pressed still further to mobilize the entire movement to smash the Tories’ wage restraint.

The bosses must be engaged in struggle at every level and solidarity mobilized with those directly engaged. All support should be given to the mobilizing efforts and calls for action of the oflicial as well as the rank and file movement.

Unity, struggle and solidarity are the key slogans to rally the workers to preserve their hard won democratic rights.


The analysis in this pamphlet shows the depth of the crisis of capitalism, and the way this obliges the capitalists to attack the workers’ democratic institutions and their wages and conditions in an attempt to achieve a temporary stability.

When defeated in one sort of effort to achieve this aim, as with the Pentonville Five, the ruling class tries again and again. They have no choice. And this goes for all whose basic objective is to make capitalism work, whether it be Heath, Carr and Barber or Wilson, Jenkins and Healey.

That’s why there can be no ultimate solution to the yearning of the working people for the broadening of democracy, whether in the general political field or in the sphere of workers’ control at work so long as capitalism exists. Nor can there be any realization of their rightful expectation of constantly rising living standards and improving working conditions, or the reaping of the benefits of modern technology and science and the planning of resources, so long as capitalism exists. So long as it does, the same fight will have to be fought over and over again as we have seen with In Place of Strife, the Industrial Relations Act and now this new Heath Act. To safeguard the freedom of the unions we had to fight the Cripps freeze, Selwyn Lloyd’s wages pause, Brown’s Declaration of Intent, Wilson’s freeze and Prices and Incomes Board, and now Heath’s Pay Board.

Only the ending of capitalism and the building of a socialist society will solve these problems once and for all.

That is why it is not enough to fight to defeat the Act, and to restrict oneself to the struggle for wage increases. The fight must be extended to the fight for a Socialist Britain.

Britain is ripe for socialism and has been so for quite some time. If we are still saddled with a Tory Government, it is because millions of workers, genuinely desirous of socialism, still don’t see that to win socialism, what is needed is a political party dedicated to that goal, a political party without any illusions about making capitalism “fairer” to the working man, or without any illusions that it is somehow possible to have socialism while leaving economic and therefore political power in the hands of the tiny minority of rich capitalists.

Such a party is the Communist Party, and such ideas and agitation are argued for daily in the Morning Star.

The best way to advance the cause of socialism in this country is to join the Communist Party, and to read and win more readers of the Morning Star, thus helping to make the socialist ideals for which the Communist Party and the Morning Star stand more widely understood throughout the Labour Movement.


The TUC Economic Report presented to the special TUC Congress makes the same point as this pamphlet that wage increases are not the cause of inflation. It gives the following table for the percentage changes in wages and wage costs in manufacturing between the second quarters of 1970 and 1972.

UK Major EEC Countries & Japan
Wages 25 24
Productivity 12 10
Unite wage costs 11 15
Consumer prices 15 10
Export prices (dollar terms) 25 14

Since UK productivity increases have been equal or greater then other countries during this period, whilst wages have been broadly in line, there has been a significantly slower growth of unit wage costs in the UK. However UK consumer prices and export prices have risen much more rapidly than for other countries over this period. As a result there must have been a substantial widening of gross profit margins particularly in exports and this is reflected in the increased profits being announced. This, not wages, is responsible for the acceleration in the UK’s inflation since 1970 relative to the other countries.