Tony Cliff

The great incomes policy con-trick

(December 1974)

First published in Socialist Worker, No. 405, 21 December 1974.
Extract from Tony Cliff, The Crisis, London 1975.
Reprinted in Tony Cliff, Neither Washington nor Moscow, Bookmarks, London 1982, pp. 253–6.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

WHAT DO politicians mean by incomes policy? Is it anything more than a policy to restrain wages?

When Labour introduced its first incomes policy in 1965, it stressed that it would be perfectly fair because it would apply equally to all incomes. Is there any truth in this claim?

Can Profits Be Controlled?

There is a qualitative difference between wages and profits: wages are a necessary part of the costs of production while profits are not; profits are what is left over after production and sale, while wages are not; wages are negotiated between two sides, while profits are not. It is nonsense to talk of putting the same restraints on profits and wages since profits cannot be planned.

Profits, moreover, are the motor of capitalism and its only reliable guide to how well an enterprise is doing.

Profit is the life-blood of capitalism. If you are allergic to profit then you just can’t run a capitalist economy. Therefore, as long as the Labour leaders are committed to such an economy they cannot and dare not harm, or gag, profits.

Profits are what is left from the sale price of a commodity after its costs of production have been deducted. So, to control profits, there must also be control of prices. But price control is also an impossible task.

The number of price changes is fantastically large. The Department of Economic Affairs estimated that something like three million prices are altered each year, that is 12,000 for each of the 250 members of the Price Commission staff

These poor people have to evaluate all the price increases requested, check the quarterly returns, make spot checks on a myriad of small firms, and make sure that all the figures they are given are valid, even though they have nothing better than unaudited accounts to deal with, or alternatively year-old audited ones.

And if they do get anywhere, the maximum fine that can be imposed for illegal price increases is £400 – what a deterrent!

In the first five months of Phase Three, only one company had to defy a Commission order to reduce prices – there were no others, which is not surprising since price increases of up to 80 per cent were being allowed through.

The 1964–1970 Labour incomes policy was launched against a background of economic growth and expansion Now we’re in the middle of a crisis.

So incomes policy Mark II will be different from Mark I. It will be accompanied by a massive propaganda effort around the theme that incomes policy is necessary to avoid catastrophe – to prevent massive unemployment and spiralling inflation.

Labour will try to convince workers that they should not press for an improvement in living standards, but aim at best to defend existing ones. The TUC’s “Social Contract” fits the bill perfectly.

Does the Social Contract help the low-paid?

Many workers believe that incomes policy is a good thing in principle, even if they don’t agree that it should apply to themselves at present. Many believe that it makes sense for better-off workers to practice restraint in order to improve lower-paid workers’ wages.

But in fact the whole thing is based on a misunderstanding: if ICI workers were to hold back on a claim for another £1 a week, would the management of ICI transfer the money they have saved to, say, the nurses, or would they transfer it to ICI’s bank, account? To ask the question is to see the answer.

The way wages are won under capitalism is simple: workers in the strongest sections, in the technologically advanced industries, where they are best organised, win increases, and the rest of the working class keep up by comparing their own wages with those received by the strongest and best-paid, and following.

If a worker in a strong position gets a small wage rise, the one in a weaker position will get even less. This is why wage differences within the working class have declined considerably over the years as the workers’ strength grew. Skilled workers, who were getting twice as much as the unskilled in the years before 1914, were only 15 or 10 per cent ahead by the fifties.

If anything was needed to explode the myth that incomes policy would act as the angel of social justice for the lower-paid workers, it was the Prices and Incomes Board’s refusal of the railwaymen in January 1966.

In their report, wages per standard week (excluding overtime) were given as follows: porters £10. 18s; leading luggage room attendant £12 5s; second-year guard £12 19s; qualified fireman £14 8s; qualified train driver £16 19s (National Board fix Prices and Incomes, Pay and Conditions of Service of British Railways Staff, Cmndt 2873, January 1966, pp. 32–33).

There they are, low-paid grades in plenty – but still no suggestion that more pay should be given to the wretchedly underpaid sections.

The strongest and best-organised workers must not hold back, for if they do the whole working class will be held back with them.

Is the Social Contract fair?

Harold Wilson tried a voluntary incomes policy when he first came to office. It fell to pieces in the rebellion of the lower-paid in 1969. This time, with inflation four or five times higher than last, his incomes policy will be doomed even faster.

Talk of its fairness cannot stick, when workers read about nine-carat gold neckchains for cats – price £85 (Observer Magazine, 20 May 1974), or velvet ‘Marie Antoinette’ kennels for £148, and small doggy winter coats – in mink – for £400 at Harrods (London Evening News, 10 December 1973), or penthouse suites at £35,900 each on the QE2’s 91-day round-the-world cruise (Daily Mail, 25 January 1974), or Michael Noble, Tory MP for Argyllshire’s bottle of Chateau Mouton Rothschild, which went for a record £3,538 (£100 a glass) (Daily Express, 24 May 1972).

Long queues of pensioners form each morning outside Greggs’ bakery shop in Westgate Road, Newcastle, The reason? Stale cakes and bread returned from the firm’s other shops are sold to the pensioners for half price.

A spokesman for the firm said that previously “the bread used to be destroyed and it was normal for it to be sent to pig farms”. (Morning Star, 17 July 1974)

Workers are more suspicious of government propaganda than before. The fact that, on the eve of the October general election, there was a fantastic strike wave shows how little leeway they will allow for government, including a Labour government.

In 1969 it was the workers with no traditional militancy or strength of organisation that broke through the wage restraint. This time the breakthrough will come much more quickly, and through the activity of workers on a much wider front, from relatively well-paid carworkers to ancillary workers in hospitals.


Last updated on 3 February 2017