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International Socialism, March 1977


Notes of the Month

Tearing up the Social Contract


From International Socialism (1st series), No.96, March 1977, pp.34.
Transcribed & marked up by Einde O’Callaghan for ETOL.


IN THE last few weeks a new mood has crystallised among large sections of workers. This mood is one of all-out opposition to the Social Contract. After nearly three years during which the Labour government and the TUC General Council have persuaded workers to accept falling real wages, mass unemployment and cuts in the social services, they are now faced with a growing rank and file rebellion against pay restraint.

Most obvious, and potentially most dangerous, is the sudden explosion of anger and frustration in the car industry. When Eric Varley visited Longbridge on February 11 in the company of Jack Jones and Hugh Scanlon to drum up higher productivity, he was met by 6,000 carworkers demonstrating against the Social Contract. At the time of writing (February 27) 30,000 British Leyland workers are laid off as a result of the toolmakers’ strike.

The British Leyland joint shop stewards committee has called for a strike against the Social Contract on April 19. The Ford combine committee has also denounced the Social Contract and drawn up a pay claim for increases of up to 40 per cent to give Ford workers in Britain parity with the company’s Continental plants.

Nor is the rebellion confined to the car industry. It stretches right across the working class. Busmen’s delegates have prepared a motion opposing wage restraint to go to the next TGWU conference in June. The NUPE conference agenda is loaded down with motions attacking wage restraint. Yorkshire and Nottinghamshire miners have come out against the Social Contract.

Behind the rebellion

THERE are a number of reasons for this sudden and dramatic change of mood. One is that the ideological argument for wage restraint seems much weaker than two years ago. When the present incomes policy was introduced in July 1975 we were told that wage increases meant price increases and fewer jobs.

In fact, inflation has accelerated rapidly since the summer. In the first four months of Phase Two, from the end of July to November 1976, earnings (including overtime) grew by 3.5 per cent while the cost of living rose by 5.1 per cent (Financial Times, January 29 1977). Meanwhile, unemployment continues to rise. One forecast predicts 2.5 million jobless by 1982 unless present policies are changed (Financial Times, February 14 1977). Wage restraint has brought with it falling living standards, continued inflation and longer dole queues.

One factor has affected the car industry in particular. The narrowing of skilled workers’ pay’ differentials has driven groups of them into bitter revolts like the Leyland toolroom dispute. Inflation and incomes policies that have relied largely on flat rate increases favouring lower-paid workers have hit the traditionally higher paid sections very hard.

The reasons behind the pay revolt in the car industry are often sectional. There is widespread resentment among semi-skilled lineworkers who have lost a great deal in pay over the last few months because of disputes caused by different skilled sections fighting to restore their lost differentials. The supporters of the Social Contract will try to exploit these sectional divisions.

The position of skilled workers could drive them in two directions. They could fight a purely sectional battle for a restoration of differentials. Or they could lead the struggle of all workers against the Social Contract. After all, the revolutionary shop stewards’ movement during the First World War was detonated by pressure on skilled engineering workers’ differentials.

The response of the trade union leadership

THE PAY revolt has been accompanied by a significant shift within the trade union bureaucracy. The united front behind the Social Contract has fragmented. The attempt by Murray to rush through an agreement on Phase 3 before Healey introduces the budget this month was blocked on the TUC economic committee by, among others, Joe Gormley and Hugh Scanlon.

A number of important right-wing trade union leaders are now criticising the Social Contract. David Basnett of the GMWU opposed ‘an immediate and disorderly return to free collective bargaining’ but opposed a ‘rigid’ Phase Three that involved ‘the kind of cuts in living standards of the last two years’. Frank Chapple and the EETPU have been making similar critical noises and calling for a Phase Three that allows the restoration of differentials.

This shift is far from a rejection of the Social Contract. But a growing number of trade union leaders realise that it simply will not be possible to hold their members back under another round of rigid wage restraint. Behind calls for ‘flexibility’ lies these leaders’ desire for a Phase Three that will enable them to offer their members wage increases in the shape of higher differentials and productivity deals. Hence, for example, Joe Gormley’s call for a local incentive scheme in the mines.

The Communist Party veers left

AFTER TWO years in hiding the Communist Party and its Broad Left allies have come out into the open. CP members have played an important part in mounting the attack on the Social Contract. In particular, Derek Robinson as chairman of Leyland combine committee is trying to present himself as the leader of the pay revolt in the car industry.

The Communist Party’s new line was in evidence at the Liaison Committee for the Defence of Trade Unions conference on February 26. In marked contrast to last year’s assembly on Unemployment, also organised by the Broad Left, there were no speeches by Tribunite MPs and no calls for import controls. Instead the conference endorsed the Leyland combine call from a delegate conference against the Social Contract on April 3 and for a national strike on April 19.

The Communist Party’s turn, like the shift in the trade union bureaucracy, to whose left wing it is closely wedded, reflects the change in the mood on the shopfloor. No doubt, it also reflects the increasing pressure it feels from its left in the shape of the Right to Work Campaign and the Socialist Workers Party, whose supporters made up about a quarter of the 1,200 delegates at the conference.

The Communist Party’s campaign is focussed on the election of Hugh Scanlon’s successor as AUEW President, the first round of which will take place in September. The Broad Left will try to recover the ground lost to the right wing over the last two years by going all out for the victory of their slightly shopworn candidate, Bob Wright. The debate on the Social Contract at the AUEW National Committee in May will be more to do with this election than with organising a real fightback.

Moreover, the detail of the Communist Party’s opposition to the Social Contract in the car industry is not dramatically different from that of the right-wing. After all, Moss Evans, Jack Jones’s handpicked successor as TGWU general secretary, is calling for a return to free collective bargaining. And the Communist Party’s Derek Robinson advocates a plant incentives scheme – in effect, a return to piecework – as the solution to the crisis in British Leyland.

Prospects for Phase Three

UNDOUBTEDLY a Phase Three agreement will be signed. It will almost certainly include clauses offering room for ‘flexibility’ – productivity deals and differentials. Part of the burden will be taken by cuts in income tax, which Healey is likely to hint at in his budget.

This sort of deal will have the support, not only of the trade union leaders, but also of the employers.

But the weak condition of British capital, and in particular its low profitability (see this month’s Briefing) offers little room for manoeuvre in using wage increases to buy higher productivity and reorganise the chaotic bargaining structure of a company like British Leyland.

Moreover, the more flexible the pay deal the more difficult it will be to enforce. During the productivity deals offensive of the late 1960s the Labour government had its own machinery to police the pay policy in the shape of the Prices and Incomes Board. The present policy is enforced by the TUC. This does not matter so much providing it is simply a matter of a rigid cash limit as under Phases Two or Three. But the more complicated and flexible the deal, the easier it will be to use special case arguments and phoney productivity clauses as a face-saving cover for breaches of the pay policy. In other words, the shopfloor opposition to wage restraint may well mean a Phase Three that looks like the much looser pay policy in operation before July 1975.

This is the pattern of previous wage policies – about two years of restraint (1966-8, 1970-2, 1972-4), followed by an explosion of pent-up frustrations. If this pattern is repeated, then we can expect the following wages free-for-all to be cut short by a new tight incomes policy (1970, 1972 and 1974). The present ‘left’ opponents of the Social Contract will no doubt collaborate in these new wage controls, just as their predecessors, Scanlon and Jones, did in the old ones.

The collapse of wage restraint could mean the collapse of the pound. The government’s strategy, therefore, is likely to be one of divide and rule. It will try and canalise the demands of the stronger sections like carworkers and miners into sectional incentive schemes. At the same time the big stick will be reserved for workers in the public sector. Given the anger in unions like NUPE and NALGO over pay restraint and the cuts there could be big confrontations over wages in the public sector this autumn. What happens if the pay policy does collapse? A recent editorial in the Economist (February 19) hinted at big business thinking. It argued that the government should then abolish price and dividend controls and use ‘the tightest control on money supply’ to damp down wage increases by pushing up unemployment. The collapse of the Social Contract would probably also decide big business to discard the battered and demoralised Labour government. The Tories under Thatcher in any case see control of the money supply as the main weapon in disciplining the working class.

Generalising the Struggle

THE rank-and-file rebellion against the Social Contract in the car industry is, as we have seen, primarily sectional and therefore ideologically highly vulnerable. It could be dissipated by concessions on productivity and differentials of the sort advocated even by its leaders.

A similar problem exists in the public sector. There the level of militancy is rising, as is shown by the series of one-day strikes against the cuts in various areas. But the programme of local protest actions advocated by the public sector unions will not halt the cuts. In each area they will encourage local authorities to shift the burden of the cuts from the more militant to the less militant sections.

Even the lefts’ among the public sector union leaders like Alan Fisher are careful to avoid any national confrontations.

Thus Fisher is adopting a ‘wait and see’ policy on Phase Three rather than coming out against the Social Contract. But unless national and co-ordinated action is organised the movement against the cuts will be exhausted and demoralised by constant and ineffectual local protests.

We have to frame demands that will bring together the fragmented opposition to the government’s policies into a national movement. This means , supporting the April 3 conference called by the Leyland combine committee and pressing for strike action against the Social Contract and the cuts on April 19. It means arguing for an open-ended national strike in the public sector to halt the cuts. It means pushing for wage rises that begin to reverse the fall in living standards, i.e., at least £15. It means supporting all strikes against the Social Contract.

These demands require a national rank-and-file movement independent on the officials. But the Broad Left leadership of the opposition to wage restraint is too preoccupied with rhetoric and with changes in the bureaucracy (e.g. the AUEW election) to build such a movement. It will emerge if existing rank-and-file organisations like the Right to Work Campaign are able to give a real lead in the mass struggles against the cuts and the Social Contract that are developing.

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