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From International Socialism, No. 63, Mid-October 1973, pp. 4–7.
Transcribed by Christian Høgsbjerg.
Marked up by Einde O’Callaghan for ETOL.
THE GOVERNMENT hopes with its Phase Three proposals to do two things: to maintain the redistribution of the national income in favour of profits secured in Phases One and Two, and to do so without provoking any large scale confrontation with powerful unions.
It has now more or less successfully held back wages for nearly a year. The annual rate of increase of earnings has been cut to 12.4 per cent, compared with a 15 per cent figure last November; after nine months of the freeze, average take home pay (after deduction of tax and national insurance payments) was just keeping abreast of the official price index – which means that the pay of large numbers of workers must have been lagging well behind real price increases; and most importantly, the government has ensured a rise in the share of profits in the national product and a corresponding fall in the share of wages and salaries. By holding back wages, Heath has been able to ensure, quite simply, that most of the much vaunted five per cent or more economic growth has accrued to profits.
The aim in the months ahead is, the Financial Times explains, to make consumption rise ‘somewhat more slowly’ than in the last year. To this end the Tories have plumped for a basic norm for wage increases of seven per cent – which at a time when prices are rising, as they are at present, at nine per cent a year, means wage cuts for those workers who do not manage to get more.
But no-one in the cabinet has forgotten the experiences of last year, when the government three times suffered defeat at the hands of powerful sections of workers. Ministers know that nothing it has done in the last 11 months of freeze has done anything to destroy the ability of the organised labour movement to walk through any governmental enactment, once the self-confidence and leadership exist. As the Economist has noted (6 October): ‘The government believes that the worst disaster this winter would be a near general strike that was successful because the strikers commanded a wide measure of public sympathy.’
The Times (9 October) has backed up the government’s fears on this score. It has stressed the need to avoid a clash which would be potentially very damaging to the ruling class, ‘a season of bitter industrial strife during which the basic institutions of democracy and law could easily have been drawn into the fray and, perhaps, fatally damaged.’
To try and placate workers a little – or rather to make it easier for union leaders to placate their members – the government has built two devices into Phase Three that were not present in One and Two: the threshold clause and the productivity let out. And it hopes that the latter will also aid key sectors of business in their long term plans to increase the rate of exploitation and to reinforce their control over their labour force.
IN SOME WAYS the situation today is similar to that at the end of the first year of the Labour government’s wage freeze in 1967. Six months of complete wages standstill followed by six months of ‘severe restraint’ were then very successful in holding wages – for a time. Between the second quarter of 1966 and the second quarter of 1967, the total wage bill rose by only 2 per cent, compared with rises of 4.1 per cent and 5 per cent respectively in comparable periods of wage restraint in 1957–8 and 1961–2.
Successful wage restraint depended not merely on the use of the law. It also required that the trade union bureaucracy should be able to persuade the rank and file to desist from struggle. This was possible with severe restraint for a period of a year, but not much longer. After that point the government had greater and greater difficulty in holding back wages, and they rose 7 per cent in 1967–8.
Overall, the effect on wages of the Labour government’s legally enforced incomes policy was not very great. According to the then head of the Prices and Incomes Board, Aubrey Jones, the ‘average annual increase in earnings in recent years may have been just under 1 per cent less than otherwise it would have been’. Much more important was the effect of incomes policy on work speed and conditions. For, in order to make it easier for trade union leaders to sell wage restraint to their members, as well as to aid big business in its drive to greater profitability, the Labour government allowed wage increases in excess of its norm in return for productivity concessions from the workers. In three years the number of workers covered by such deals shot up from half a million to six million.
The Tory government is now turning to the productivity deal for the same reason that Labour did in 1967. Trade union leaders will be able to get some of their members wage increases above the rise in the cost of living – providing the membership accept all sorts of new and unpleasant work practices. Under Phase Three up to 3.5 per cent extra wage increases will be allowed to workers who make concessions on productivity and payments of up to 20 per cent extra are allowed for hours worked at night or at weekends as part of a regular shift system ‘spread over six or seven days’.
However, the productivity option cannot be such an easy let out now as it was under the Labour government’s freeze. There are a number of reasons why.
Firstly, big business considers that it made mistakes last time round. Although for industry as a whole there was a large increase in productivity and a massive ‘shakeout’ of labour into lengthening dole queues, in many individual firms workers took the money for the prod deal, but did not deliver the goods in terms of increased output and flexibility. As the Financial Times has complained ‘a large number of the companies that introduced deals achieved little real saving in labour costs’.
The government believes that the pressure on particular companies to enter into such ‘phoney productivity deals’ will be much greater now than in the late 1960s. That was a period of deflation and rising unemployment; today there is a boom, with labour shortages in the more prosperous parts of the country. Many employers are already ignoring the pay board when it comes to attracting skilled labour – they would be all too ready to use phoney prod deals as a cover for their activities. And the phoney deal would provide the same help to employers wanting to buy themselves out of labour disputes.
The productivity deals under Labour also had a disadvantageous side-effect for the capitalist class as a whole. By raising the take home pay of certain groups of workers, they fed the expectations of other groups, who could not easily make productivity concessions. To this extent they provided part of the impetus to the ‘revolt of the lower paid’ in 1969 and 1970. Those who had been left behind in the productivity rush – like dustmen, teachers, car workers already on measured day work, took to militant action in order to catch up.
For these reasons the proposals for Phase Three are deliberately designed to make the conditions under which productivity deals operate much more onerous for the workers than previously. The maximum amount of money that can be offered for productivity concessions – about 3.5 per cent – is considerably less than many workers received in the last round of prod deals.
But that is not the end of the matter. The Pay Board is to police each and every deal to ensure that the employers’ labour costs are cut by the scheme and that the wage increase pays for itself. And to make certain there are no errors here, no wage increase under the prod deal will take effect until the productivity increases have been in effect for three months and have satisfied the Pay Board.
Workers who want their take home pay to keep up with the cost of living will be driven in the direction of productivity concessions. But when they get there, they will find a powerful battery of measures designed to make them give as many concessions as possible for as little as possible. For those who fall for this trap life will be even more difficult than it was for those who embarked on the productivity road five years ago.
THE POPULAR PRESS contained the usual ‘Generous Ted’ headlines the day after the publication of the Phase Three proposals. For the ‘safeguards against a higher rate of price increase’ – as threshold clauses are called in the government ‘green paper’ – are an effort to persuade trade unionists that their wage increases are being guaranteed against rising prices. But this is in fact little more than a confidence trick. A brief examination of the threshold agreement clause shows why.
The idea of linking wages to the retail price index (RPI) is not new. Until 1967, two million workers in the print, building, steel, glass processing and other smaller industries had agreements which guaranteed them wage increases every time the RPI rose. But the effect in terms of protecting living standards was very limited. The TUC noted in its survey of sliding scales in 1967 that they ‘rarely if ever fully compensate fully for rises in the RPI’.
The threshold agreement is much less generous than the old sliding scales. It starts off with the aim of only compensating partially for rising prices. Thus the Phase Three proposal does not give its 40p increase until the RPI has moved up a full seven points. In other words, you only get compensation for price increases when your wage has already been cut by seven per cent.
Just how little impact the agreements have on wages was shown by a study by the National Institute for Economic and Social Research in November 1971. This showed that, even with a threshold of three per cent – much more generous than the government’s seven per cent one – a rise in prices of six per cent in a year would only produce an increase in wages over the year of 0.88 per cent, and a 12 per cent price rise would only lead to a wage increase of 3.75 per cent.
The situation for workers is much worse than the figures indicate. The government’s threshold payment of 40p would be cut by tax and increased graduated pension contributions and would reduce eligibility for rent rebates. So for a family earning about £30 a week and receiving a rent rebate, the 40p would mean an increase in purchasing power of only about 23p – rather less than a 1 per cent increase for each 1 per cent rise in the RPI. And, to cap it all, the 40p threshold payment does not count for overtime or shift payment calculations. There is 40p and no more, regardless of how many hours you work.
Finally, the threshold payments depend on the movement of the RPI. But this is not at all the same thing as the movement of those prices that most affect workers, particularly low paid workers. The Department of Employment Gazette shows the RPI as moving 7.7 per cent between January 1972 and January 1973. But in the same period housing costs rose 14 per cent, food 10.1 percent, meals bought out (including in work canteens) 10 per cent, seasonal foods by 18 per cent. All these are things on which working class families spend a greater proportion of their income than the ‘average’ used as the basis for calculating the RPI.
THE REACTION of most economic commentators has been to regard Phase Three as a gamble on the government’s part. The feeling is that the Tories have taken the risk of being too lax on the wages front – even though, as we have seen, what is offered on the productivity and threshold front is so minimal.
In particular, the CBI has complained of the threshold clause. It is felt that it could lead to wage increases ‘more expensive than the economy can stand’. The argument is basically, that by trying to sweeten the union with the threshold clause, the Tories have prevented the full impact of any further increases in the prices of imported goods (due to either higher prices internationally or another fall in the value of the pound) being born by workers. Industrial profits and the balance of payments might have to suffer as well.
But if this happened it would weaken considerably the chances of British capitalism dealing with any of its long term problems. At present profits are running at record levels. However, the National Economic Development Office has pointed out that ‘the share of investment in the recent upturn in the economy has been significantly smaller than in previous cycles’. Clearly, investors are still not happy with the rate of profit and believe that the cuts in the living standards of many workers planned for Phase Three are not stringent enough.
All this puts the government itself in an extremely difficult situation. It wants to avoid a confrontation with the unions, because it fears it would lose it. But it cannot offer the unions more, for fear of the effects on the long term prospects of big business. Despite successes in the last 12 months, it enters Phase Three not knowing whether or not it will be able to muddle through. It hopes that prices will not rise by more than about seven per cent in the next year. It hopes that industries’ profits can continue their present upward surge. And it hopes that it does not run into the sort of trouble -with the unions that could destroy it as a government. But the odds in its favour are less than 50–50 in each case.
THE OFFICIAL trade union reaction to the Phase Three proposals has been one of outright rejection. But there are signs that the hostility of many national leaders is only skin deep. Although only Tom Jackson of the postal workers has gone so far as to seem to praise the proposals (it ‘could promise to be a fairly attractive package for our members’ he told the Financial Times of 9 October), the final talks between the government and the TUC preceding the introduction of the Green Paper were said to be very ‘friendly’. And the day after the announcement of the measures, Hugh Scanlon, of the engineers, was pressing to get back to Downing Street-even though his union is committed to breaking off the talks.
The government itself is assuming that its productivity let out will effectively mollify the union leaders. It knows that they have to go through the ritual of voicing opposition, but its hope lies in what the Financial Times refers to as ‘a distinct possibility that there will be a wider gap during Stage Three between the collective disapproval which the TUC feels obliged to express and the advantage which individual union leaders take of the greater scope for bargaining which they are to be allowed.’
Certainly, it would not be surprising if the majority of union leaders are tempted to accept the package in practice, even if they do continue to denounce it from conference platforms. After all, that was their attitude to Phase One and Two. The response of Jones and Scanlon to the Chrysler electricians strike (see IS 62 for details) has been equally submissive to the plans of big business, with them doing their utmost to force the electricians to accept the sort of terms Chrysler were offering, even instructing their members to ignore electricians’ pickets. And if ‘productivity’ is the key note of Phase Three, then it was union leaders like Jones, with their talk of a ‘high wage, high productivity economy’, who were part of the driving force behind the last wave of prod deals.
’Threshold agreements’, the TUC declared on 6 August, ‘are no substitute for strict legal control of food prices and a return to free collective bargaining. But this opposition is a recent phenomenon. Last year the TUC was pressing for threshold agreements and the government and the CBI resisting the pressure. Vic Feather told a TUC ‘explanatory conference’ on the subject that ‘a threshold clause will give a guarantee that wages will not be overtaken by prices’.
A few unions have already tried to negotiate such agreements – the AUEW at the Easton Corporation, Telford; TASS at Fletcher Sutcliffe Wild, Hull; AUEW and TGWU at Dimplex, Southampton; TGWU in British Oxygen; last year’s national agreements in building and printing. Given such a record, the verbal opposition to the threshold clause in Phase Three should not be taken too seriously.
But for the union leaders to want to avoid conflict through productivity bargaining is a quite different thing from them being able to do so. For, just as employers are going to have to drive harder bargains over productivity payments than previously, workers are going to be in a stronger mood of resistance to making concessions than previously.
Many workers have already sold those work practices that are easiest to do without. Any further concessions are going to demand much more from them in terms of effort than before. What is more, under conditions of inflation of nine or 10 per cent a year, 3.5 per cent is not going to seem much to get for selling conditions. It would take a year or two in the late 1960s before a productivity rise would be eaten up by inflation; today most workers are vaguely aware that the sorts of sums being offered will not last six months – indeed, given the three months or more of waiting, many productivity linked rises will hardly raise the real value of the original wage by the time they are paid out. Militants are much more attuned to what prod deals mean than was the case in the late 1960s. And finally, of course, there is the history of the last 18 months. Many workers have recent memories of taking on the government and forcing it to repudiate its own threats.
At some point a clash between a significant group of workers and the government is likely. Despite all their hopes, neither the Tories nor the trade union bureaucracy have the leeway to avoid this indefinitely. But no-one can predict with any degree of certainty when and how the confrontation will occur. There are too many unknown factors at work. The most important of these is the official trade union machine.
LEFT WING MILITANTS frequently make two sorts of mistakes in relationship to the national trade leaderships. The most common is to assume that the frequent excursions of the ‘left’ union leaders into class collaborationist policies – witness the attitude of Jones and Scanlon to the Downing Street talks or the Chrysler dispute – are minor aberrations from an otherwise consistently left wing approach.
This view ignores all the most important characteristics of the trade union bureaucracy. The established union leaders see their job as being to operate the unions within capitalist society, taking its functioning for granted. The right wing regard this in the main as a means of ensuring their own social mobility – to the top of nationalised industries or into the House of Lords. The ‘lefts’ may be less concerned with personal ambition. But they too assume that the aim of the unions is to exert pressure in existing society, with the aim of coming to agreements with big business slightly more favourable to their members than hitherto. They also take it for granted that the only way to exert such pressure is by building up the strength of the trade union apparatus, protecting its funds and buildings at all cost, and securing their positions by live-and-let live agreements with the right wing. Very rare indeed are individuals who rise to the top of unions without such accommodation to the rest of the bureaucracy becoming a second nature to them. And so, although their individual motives may be different, they react like the rest of the bureaucracy to the prospect of any bitter social conflict which will put in danger the union machine, its funds and its high salaries.
The appeal of productivity bargaining is precisely that it seems to offer an easy way to the bureaucrats to avoid such a conflict. It enables them to continue negotiating peacefully with employers, even when the employers are intent on upping profits at the expense of wages. And, of course, the union leaders themselves do not have to work the ‘unsocial hours’ or labour on the speeded up assembly lines.
But some militants make the opposite mistake in relation to the union leaders. They assume that the union leadership will never move in opposition to the government and employers. This view ignores the fact that even the most rabid, right wing union leader depends for his privileged position within present day society on being able to control workers. If no unions existed, then the Tory ministers and the heads of industry would never bother to flatter a Sid Green or a Frank Chapple. They only do so because a Green or a Chapple has some ability to influence organised workers.
That influence does not exist in a vacuum. It depends upon the right wing leader maintaining the loyalty of some at least of the rank and file union activists – and that means, on occasions, giving the go-ahead to struggles against the employers. That is why in recent years even extreme right wing unions like the GMWU, have been forced to make some of the disputes of their members official – so that the amount it spent on strike pay was greater in 1970 than the total amount spent by the whole trade union movement seven years before.
That is also why Frank Chapple of the electricians’ union has also been forced to back his members in Chrysler and has talked about ending the Joint Industrial Board agreement in electrical contracting (although it is doubtful if he is serious about such talk). He has not undergone some sudden conversion to the elementary principles of trade unionism – but he does feel compelled to make some gesture to the increasing resentment at rising prices among even the most right wing of his members.
The pressure from rank and file workers over wages is already high and is likely to grow in the months ahead. The union leaderships, right and left, will respond to this pressure with occasional militant speeches and even partial mobilisations of their members for industrial action. But they will try to avoid a clash with the government if there is any conceivable alternative. And they will try to limit the scope of any industrial action as much as possible.
Revolutionary militants cannot ignore the considerable possibilities that will be opened up if the bureaucracy is forced to give the go-ahead for such struggles. But we have, at the same time, to point out continually, before, during and after the struggles the inbuilt limitations of the existing national leaders.
And there can be no question of sitting back and waiting for the official organisations to act. It may well be the case that the first battles of Phase Three are not national ones, but local ones, with groups of workers trying to outflank the norm rather than confront it directly. There have already been a number of battles of this sort and given the general anger at rising prices, more can be expected. Here the prospects for direct intervention by revolutionaries can be much greater than in national struggles – especially since today victory in even the most localised of struggles demands a level of initiative and militancy that was not necessary in the past. And it is on the basis of the successes of such struggle that we can work to build the sort of rank and file organisations in industry that begin to be seen by much larger numbers of workers as offering a real alternative to the vacillation of the trade union bureaucracies.
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