The Labour government’s incomes policy has gone through a number of stages. In December 1964 representatives of the government, the Trades Union Congress and the employers’ organisations signed a Joint Statement of Intent on Productivity, Prices and Incomes. Following in its wake, the National Board for Prices and Incomes (PIB) was set up, under the chairmanship of former Tory MP Aubrey Jones. Since the board’s recommendations were not mandatory, this first stage of the policy was “voluntary”.
In the second stage, lasting from July 1966 to June 1967, the government imposed a standstill on all wage increases for six months, and then severe restraint accompanied by a harsh deflationary policy for another six months. During this stage wages were allowed to rise only under exceptional circumstances. The freeze was on.
In the third stage, between July 1967 and March 1968, the nil norm for wage increases was replaced by a 3 to 3½ percent norm, and the government took the power to delay a proposed pay increase for up to six months.
The fourth stage began in April 1968, with the cancellation of the government’s power to postpone wage rises. A ceiling was imposed on all rises of 3½ percent, although subject to specific exceptions, namely where there was a marked contribution to productivity. This stage continued (according to the Prices and Incomes Act 1968) until the end of 1969, during which time the government had the power to hold wage rises beyond the 3½ percent ceiling for up to 11 months.
On the face of it such a massive legislation should have curbed wage rises. However, its impact was very limited indeed. Up to July 1966, as the incomes policy was merely “voluntary”, it hardly affected wage rises at all. In the period July 1966 to June 1967 the dampening of wage rises was very successful. Between the second quarter of 1966 and the second quarter of 1967 the total wage bill rose by no more than 2 percent, as compared with rises of 4.1 percent and 5 percent respectively in the comparable periods of wage restraint of 1957-58 and 1961-62. However, after June 1967 a thaw set in. In 1967-68 total wages increased by 7 percent, as against 4.9 percent in 1958-59 and 4.5 percent in 1959-60. For the two years together, the 1966-68 rise of 9.2 percent was exactly the same as in 1957-59, and slightly lower than the rise of 9.7 percent in 1961-63. 
All in all, in the four years from October 1964 to October 1968 the average hourly earnings (excluding effects of overtime) rose by 27 percent, as against 23 percent in the four preceding years. 
Even Aubrey Jones is very cautious regarding the effectiveness of the incomes policy. He believes that the net effect of the policy has been that the “average annual increase in earnings in recent years may have been just under 1 percent less than otherwise it would have been”. 
This was a very tentative conclusion. Of course there is no sure way to tell what the increase in earnings would have been had there been no incomes policy.
Nevertheless a declaration of intent, and even a paper law, could not stop well organised workers in their trade unions from pushing their wages upwards to try and keep pace with rising prices. But the indirect effect of the incomes policy was much greater than its direct effect. For the incomes policy prepared the ground for spreading productivity deals, a far more sophisticated weapon for the employing class.
The 1965 white paper on prices and incomes , as well as the 1967 white paper, stressed that there was one “legitimate” loophole to the earning norms fixed by the PIB. Pay is allowed above the norm “where the employees concerned, for example by accepting more exacting work or a major change in working
practices, make a direct contribution towards increasing productivity in the particular firm or industry”. 
Aubrey Jones crossed the t’s and dotted the i’s:
[There] is a strong case for encouraging the spread of productivity agreements which conform with the requirements of a prices and incomes policy. We attach great importance to this relationship between the two for, just as we think productivity agreements can further the aims of the policy, so we believe a prices and incomes policy can provide the most favourable environment for successful productivity agreements.
The rate of growth of productivity agreements will depend in our view upon the maintenance of a prices and incomes policy. All that we have heard suggests that the effect of government policy, especially since July 1966, has been to direct the attention of both the employers and trade unionists away from conventional bargaining and towards productivity bargaining. But since productivity agreements require time and effort whereas conventional bargaining is easy, many of them might turn back if the pressure were removed.
The Labour government blocked the path to a direct advance of wages, but left the trapdoor of productivity bargaining wide open.
One should not, however, draw the conclusion that incomes policy has served only as a prelude to the introduction of productivity deals. The failure of incomes policy in itself contributed to the pressure for productivity bargaining. The failure of incomes policy to hold down wages dictated the move towards productivity deals – i.e. making workers pay, by working harder, under worse conditions, for their wage increases. This is where the employers’ offensive springs from. The years of effort to impose the incomes policy located the main obstacle – shopfloor organisation. Hence the determination to eliminate this power, not by direct confrontation, but by structural alterations to the entire fabric of industrial relations, which would seek to isolate and undermine this power.
Because an authentic productivity deal represents a radical change in work (and life) conditions, its introduction and implementation takes not only months, but often years. In its written evidence to the Royal Commission on Trade Unions and Employers’ Associations (the Donovan commission), Esso Petroleum Co sketched the following time schedule:
The time scale at Fawley went as follows:
Mid-1957: Work started at the refinery on identifying areas of inefficiency.
November 1958: Memorandum from the consultant.
November 1958-December 1959: Development period. Discussion at plant and shopfloor level, involving stewards, supervisors, management and men.
February-May 1960: Formal negotiations.
July 1960: Signing.
July 1960-July 1962: Implementation period.
In marketing the time scale is as follows:
1962: Operations department set up. Planning started.
February 1964: Notice to leave employers’ panel given.
June 1964: Notice expired.
June-September 1964: Discussions in the field with managers, supervisors and men to draw together proposals for negotiation.
September 1964: First proposals put before the trade union – “Green Book”.
January 1965: Informal negotiations with trade union.
February-October 1965: Continuous discussion with trade union at national and local level to find solutions to problems that had been identified nationally and locally.
November 1965: Formal negotiations with trade union.
January 1966: Further session of formal negotiation. Deal signed.
February-August 1966: Implementation period. 
Similarly the implementation of the ICI deal is taking a considerable time. Discussions in the company started in 1962. The unions were brought in in 1965, and the first trial agreement was signed in 1967. This agreement, the Manpower Utilisation Payment Structure, provided for a one-year trial period and was operated on only nine sites involving about 5,000 workers. At the end of the trial period a revised agreement, the Weekly Staff Agreement, was drawn up and signed. By January 1970, eight years after the idea was first mooted, only seven sites are actually operating the WSA. About 40,000 workers out of a total of 67,000 manual workers employed by ICI have not yet even been approached.
In the docks the preparations for a productivity deal took many years. In September 1962 the Rochdale committee recommended the decasualisation of dock labour, a key item in any productivity deal. Three years later, in August 1965, the Devlin report went further in the same direction. Between the publication of this report and the implementation of the first phase of the agreement, a further three years elapsed. The first phase has now been going for more than two years, and we still have not arrived at the more decisive second stage of Devlin.
In Rootes factories the implementation of productivity deals “has been a seven or eight year process”. 
In the long time negotiations take, management is very cautious in softening up workers’ resistance, with management-steward meetings occurring several times a week, interspersed with weekend conferences in pleasant surroundings. As the task of changing work conditions to a productivity deal’s requirements is a slow process, in opening negotiations the management can write into the agreement proposals whose full implications cannot, so early on, be seen on the shopfloor. It is at this stage of the negotiations that quite lavish wage increases are granted to the workers. Thus, while in these first stages the management appear to make quite modest demands, they are banking on the later fruition of these demands and, contrarily, when workers agree to a productivity deal they judge its merits on the present and immediate wage concessions.
The lengthy period of preparation, negotiation and implementation can be extremely advantageous to management. It means that at the end of the process they will have a far better understanding of how their own factory really operates – of unofficial working practices and of workers’ ad hoc methods of undermining the management authority. Even more important, the length of time makes effective opposition to the productivity agreement very difficult. At first workers’ attitudes are likely to be, “Well, we might as well have a look at it – we don’t have to commit ourselves.” However, as the talks drag on attitudes shift very gradually until the deal comes to be accepted as a “fait accompli” without any decision ever being taken. Shop stewards involved in negotiations associated with a productivity deal similarly find that they are being gradually drawn into a discussion of the details instead of the principle of the deal.
D.A.C. Dewdney, former vice-chairman of Esso and member of the PIB, has this to say:
What distinguishes what has come to be called productivity bargaining from the daily efforts which any competent management makes to secure the optimum use of its resources is the comprehensive nature of the approach.
A true productivity bargain, to me, is one that looks at the labour force as a whole and the factory operation as a whole, and is as ready to develop new systems of production control, the deskilling of manufacturing methods, new shop layouts, new storekeeping procedures, new accounting methods, as it is to debate with the shop stewards the lines of demarcation between craftsmen, and between maintenance workers and operatives. The whole package ought to be looked at as a whole. 
Every productivity deal has a basic set of components to it, even though individual productivity deals will combine the parts in varying proportions and according to different schedules. According to one expert industrial consultant, they were:
(1) Reduction in non-working time at each end of shifts, at breaks and between jobs.
(2) Reduction in the amount of overtime worked and the control of this within policy limits, with agreement that it will be worked when necessary.
(3) Greater flexibility in the deployment of labour.
(4) Completion of work to schedule even when follow-on work is not available.
(5) The elimination of mates for craftsmen or their more effective use.
(6) Reduction in lateness and absenteeism.
(7) Elimination or reduction in claims for special allowances.
(8) The maintenance of a specified tempo of working.
(9) The gradual removal of inter-trade barriers – demarcation. 
Actually productivity deals change all conditions of work. As Sir Peter Runge, vice-president of the Confederation of British Industry (CBI) and joint vice-chairman of Tate & Lyle Ltd, put it, “Productivity deals ... genuinely trade a new way of work (and life) for a new wage structure”. 
Because productivity agreements aim at a total change in work practices it is not a once and for all bargain. Signing the agreement ends the discussion on pay, but only begins the introduction of work study, flexibility and all the other implications:
In a conventional agreement the signature marks the end of the process. In productivity bargaining the signature marks the end of the negotiating stage – and the beginning of the implementation stage. 
Phase one prepares the ground for phase two, and so on. Phase one can be represented by a loose application of new methods of work and quite a good wage increment. But this is only the beginning. E.J. Robertson, who is the director of research at the Engineering Employers’ Federation, has emphasised that a productivity deal “is a continuing process demanding constant follow-up”. 
This is particularly true of the ICI WSA. The agreement says, “A continuous programme of examination and change will be required.” There are no limits in development – ICI already has full work study, job assessment and continuous shift working – neither, so far as is known, have the unions asked for any limits or guarantees.
Similarly, George Cattell, director of manpower and productivity at the DEP, wrote in Rootes’ house magazine that he prefers to call the Rootes deal “an enabling agreement”. It prepares the basis for the introduction of work study, etc.  By using the term “enabling agreement” Cattell clearly means that it enables management to introduce such methods and loads of work as it sees fit. Any illusions about being able to “bend” a productivity deal in line with workers’ interests, by selling outdated practices or imaginary conditions for example, are quickly dispelled as the first stages are superseded by subsequent stages. It is these later stages which carry the real weight of a productivity deal’s work innovations.
Another general characteristic of productivity deals is the way in which they formalise labour relations in the factory. This is very detrimental to shopfloor bargaining, which relies very much on the informal, matter of fact approach. As one writer put it:
It may be doubted how many managements who agree to let stewards share in the allocation of overtime, the settlement of workloads, the introduction of work-sharing as an alternative to redundancy, and the settlement of conditions under which new machinery will be introduced, would be prepared to sign formal agreements which revealed the extent to which these matters have now become a matter for joint regulation. Traditionally these are still thought of as areas of “managerial prerogative”, particularly by those who are not actually responsible for the day to day conduct of industrial relations. 
Both the Donovan commission and the PIB have recommended highly formal agreements at plant level. Once labour relations are highly formalised, then hurdles can be put in the path of workers who attempt to improve conditions on the factory floor (for further elucidation see Chapter Nine).
In this study we deal only with comprehensive productivity deals. Besides these, there are the traditional, or “partial”, productivity deals. A comprehensive agreement covers a number of related changes in working conditions and affects all the workers of the establishment, whereas a partial agreement affects only one work practice and often only a single group of workers. A director of Joseph Lucas (Batteries) Limited and CAV Limited, A.J. Nicol, confused the two types of productivity deal when he said to the Donovan commission, “We are making very small productivity bargains all the time – this is a constant part of our operation, and it is the way in which we give increases, the way we get a higher productivity increase per year”. 
The difference between partial and comprehensive productivity bargains is not merely one of size, but also involves qualitative, radical differences. While the former has been a feature of pay settlements in industry for a long time, the latter is a completely new departure for British collective bargaining. Since we are examining what is specific to this new era in the class struggle, then we have to concentrate on comprehensive productivity deals alone.
1. F.W. Paish, Rise and Fall of Incomes Policy (London, 1969), p.49.
2. Statistics on Incomes, Prices, Employment and Production, March 1969.
3. Prices and Incomes Board report no.77, p.12.
4. Cmnd 2639.
5. Prices and Incomes Board report no.36, Productivity Agreements, Cmnd 3311, p.1.
6. Written Memorandum of Evidence Submitted by the Esso Petroleum Company in Advance of the Oral Hearing, Donovan commission reference WE/143.
7. Pathfinder, Arrow (Rootes journal), July 1969.
8. Engineering Employers’ Federation, A Productivity Bargaining Symposium, 1969, p.23.
9. Engineering Employers’ Federation, A Productivity Bargaining Symposium, pp.39-40.
10. P. Runge, The Relations of Productivity to Price and Wage Control (London, 1966), p.14.
11. Donovan commission report no.39, Evidence of Esso Petroleum Co Ltd, p.1672.
12. E.J. Robertson, Productivity Bargaining and the Engineering Industry (London, 1968), p29.
13. Arrow, July 1969.
14. Donovan commission, research paper no.1, p.29.
15. Donovan commission, Minutes of Evidence no.47, p.2038.
Last updated on 31.10.2003