(c) crown copyright
Catalogue Reference:CAB/128/53/11
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COPY NO
C M ( 7 3 ) 50th
Conclusions
8'
CABINET
C O N C L U S I O N S of a M e e t i n g o f the Cabinet
h e l d a t 10 Downing S t r e e t on
T H U R S D A Y 25 O C T O B E R 1973
at 10. 30 a m
PRESENT
The Rt Hon Edward Heath M P
P r i m e Minister
T h e R t Hon S i r A l e c D o u g l a s - H o m e
S e c r e t a r y o f State f o r F o r e i g n and
Commonwealth Affairs
MP
T h e R t Hon L o r d H a i l s h a m o f St M a r y l e b o n e
Lord Chancellor
T h e R t Han Anthony B a r b e r M P
C h a n c e l l o r of the E x c h e q u e r
T h e R t Hon W i l l i a m W h i t e l a w M P
S e c r e t a r y of State f o r N o r t h e r n I c e l a n d
T h e R t Hon L o r d C a r r i n g t o n
S e c r e t a r y of State f o r D e f e n c e
T h e R t Hon J a m e s P r i o r M P
L o r d P r e s i d e n t of the Council
T h e R t Hon S i r Keith Joseph M P
S e c r e t a r y of State f o r S o c i a l S e r v i c e s
T h e R t Hon G e o f f r e y Rippon Q C M P
S e c r e t a r y of State f o r the E n v i r o n m e n t
T h e R t Hon M a r g a r e t T h a t c h e r M P
S e c r e t a r y of State f o r Education and S c i e n c e
T h e R t Hon G o r d o n C a m p b e l l M P
S e c r e t a r y of State f o r Scotland
T h e R t Hon P e t e r W a l k e r M P
S e c r e t a r y of State f o r T r a d e and I n d u s t r y
T h e R t Hon John D a v i e s M P
C h a n c e l l o r of the Duchy of L a n c a s t e r
The Rt Hon P e t e r T h o m a s Q C M P
S e c r e t a r y of State f o r W a l e s
T h e R t Hon M a u r i c e M a c m i l l a n M P
S e c r e t a r y of State f o r E m p l o y m e n t
The R t Hon Sir Geoffrey Howe Q C M P
M i n i s t e r f o r T r a d e and C o n s u m e r A f f a i r s
T h e R t Hon L o r d W i n d l e s h a m
L o r d P r i v y Seal
SECRET THE FOLLOWING WERE ALSO PRESENT
T h e Rt Hon S i r John E d e n M P
M i n i s t e r of P o s t s and T e l e c o m m u n i c a t i o n s
( I t e m s 7 and 8)
T h e R t Hon P a t r i c k Jenkin M P
Chief S e c r e t a r y , T r e a s u r y
( I t e m s 7 and 8)
The Rt Hon F r a n c i s P y m M P
Parliamentary Secretary, Treasury
SECRETARIAT
Sir
Mr
Mr
Mr
Mr
Mr
Mr
Mr
John Hunt
P D N a i r n e ( I t e m 5)
H F T Smith ( I t e m s 1-4)
P B e n n e r ( I t e m s 1 and 2)
J A H a m i l t o n ( I t e m s 7 and 8)
J A n s o n ( I t e m 7)
I T L a w m a n ( I t e m 6)
H F E l l i s - R e e s ( I t e m s 3 and 8)
M r D E v a n s ( I t e m 5)
CONTE
Item
NTS
Subject
1.
T H E USE OF G O V E R N M E N T C A R S B Y M I N I S T E R S
2
PARLIAMENTARY
0
1
AFFAIRS
Channel Tunnel
3.
Page
1
FOREIGN AFFAIRS
Middle East
3
O i l Supplies
4
Spain
5
Iceland
5
4.
NORTHERN IRELAND
5
5
EUROPEAN COMMUNITY AFFAIRS
7
4
6,
INDUSTRIAL AFFAIRS
F i r e m e n in G l a s g o w
8
Item
7
C
Subject
THE PROGRAMME FOR CONTROLLING
Stage 3
8,
Page
INFLATION 9
P U B L I C E X P E N D I T U R E T O 1977-78
14
Defence
16
Environment
16
Social S e r v i c e s
16
iii
THE
USE O F
GOVERNMENT
CARS BY
MINISTERS
1.
T H E P R I M E M I N I S T E R said that, in the light of the r e c e n t
appeal f o r e c o n o m y in the use of o i l , it w a s i m p o r t a n t that u r g e n t
m e a s u r e s should b e taken and be s e e n t o be taken to s e c u r e the
m a x i m u m e c o n o m y in the use of G o v e r n m e n t c a r s b y M i n i s t e r s .
T h e S e c r e t a r y of State f o r the E n v i r o n m e n t in consultation with
the S e c r e t a r y of State f o r D e f e n c e and the S e c r e t a r y of State f o r
T r a d e and Industry, should c o n s i d e r what steps could be taken and
how they could m o s t a p p r o p r i a t e l y b e p u b l i c i s e d .
In the m e a n t i m e
m e m b e r s of the G o v e r n m e n t should k e e p the need f o r e c o n o m y c l e a r l y
in m i n d .
T h e Cabinet
T o o k note, with approval,, of the P r i m e M i n i s t e r s
statement.
1
PARLIAMENTARY
AFFAIRS
Channel
Tunnel
Previous
Reference:
C M ( 7 3 ) 39th
Conclusions,
Minute 7
2.
T h e Cabinet w e r e i n f o r m e d that s e r i o u s d i f f i c u l t i e s w e r e
e x p e c t e d in the debate which was to take p l a c e in the H o u s e of
C o m m o n s that day on the W h i t e P a p e r about the Channel T u n n e l
project.
It was e x p e c t e d that the a m e n d m e n t put down b y t h e
Opposition would be d e f e a t e d ; but p r e s e n t indications w e r e that
the G o v e r n m e n t s M o t i o n seekiag P a r l i a m e n t s a p p r o v a l t o the White
P a p e r would a l s o be d e f e a t e d .
A substantial number of G o v e r n m e n t
s u p p o r t e r s was l i k e l y to abstain o r v o t e a g a i n s t the M o t i o n ,
Of
t h e s e s o m e w e r e o p p o s e d to the G o v e r n m e n t s E u r o p e a n p o H c i e s ;
o t h e r s w e r e uneasy about the i m p l i c a t i o n s f o r public e x p e n d i t u r e ;
and yet o t h e r s o p p o s e d the p r o j e c t on e n v i r o n m e n t a l g r o u n d s .
Much
would depend on the n u m b e r of p r o - E u r o p e a n Opposition M e m b e r s
who abstained f r o m v o t i n g .
If the G o v e r n m e n t w e r e d e f e a t e d , a
s e r i o u s situation would a r i s e ; and a M i n i s t e r i a l statement a s t o
the G o v e r n m e n t s future intentions would b e n e c e s s a r y .
Matters
w e r e c o m p l i c a t e d by the fact that o n p r e s e n t plans the P r o r o g a t i o n
of P a r l i a m e n t w a s to t a k e p l a c e i m m e d i a t e l y a f t e r the d i v i s i o n .
In d i s c u s s i o n it w a s a r g u e d that a d e f e a t in the House of C o m m o n s
on this i s s u e would b e a m a j o r b l o w to the G o v e r n m e n t s authority;
and, g i v e n the n e e d t o m a k e v e r y e a r l y p r o g r e s s with the M o n e y B i l l
a s s o c i a t e d with the Channel Tunnel p r o j e c t , it w a s e s s e n t i a l that the
p o s i t i o n should b e r e - e s t a b l i s h e d u r g e n t l y .
T h i s could b e s t be done
by m e a n s of an e a r l y debate on a M o t i o n of c o n f i d e n c e ; and, having
r e g a r d additionally t o the i m m e d i a t e d a m a g e which would o t h e r w i s e
be done t o our standing in the e y e s of o u r E u r o p e a n p a r t n e r s and of
the F r e n c h a u t h o r i t i e s in p a r t i c u l a r , i t w a s f o r c o n s i d e r a t i o n
whether P r o r o g a t i o n should be d e f e r r e d f o r 24 hours so as t o
enable such a d e b a t e to take place on the f o l l o w i n g d a y .
On the
o t h e r hand, it w a s a r g u e d that the Channel Tunnel w a s not an i s s u e
which w a s r e g a r d e d in the c o u n t r y at l a r g e as so i m p o r t a n t as t o
j u s t i f y such d r a s t i c action, which indeed m i g h t e a s i l y be m i s i n t e r ­
A p r e f e r a b l e c o u r s e would b e to a r r a n g e f o r the confidence
preted
i s s u e to be r a i s e d in the c o u r s e of the debate on T h e Q u e e n s Opening
Speech,
T h e G o v e r n m e n t s intentions would h a v e t o b e stated
i m m e d i a t e l y a f t e r the d i v i s i o n ; and the a r r i v a l of B l a c k R o d t o
summon M e m b e r s of the House of C o m m o n s t o the P r o r o g a t i o n
c e r e m o n y would have to be c a r e f u l l y t i m e d so as to e n s u r e that
any e x c h a n g e s a r i s i n g f r o m that statement had been c o n c l u d e d ,
0
s
T H E P R I M E M I N I S T E R ^ s u m m i n g up the discussion,, said that the
Cabinet a g r e e d that if the G o v e r n m e n t w e r e d e f e a t e d on the Channel
Tunnel i s s u e m e a n s would h a v e to be u r g e n t l y c o n s i d e r e d f o r
re-establishing their authority; otherwise their ability to g i v e
e f f e c t to m a j o r a s p e c t s of t h e i r p o l i c i e s , and in p a r t i c u l a r t h e i r
E u r o p e a n p o l i c i e s ^ would be c a l l e d into question, and our standing
in the e y e s of our E u r o p e a n p a r t n e r s would b e s e r i o u s l y d a m a g e d .
T h e r i g h t c o u r s e in the e v e n t of a defeat might be to a r r a n g e f o r a
confidence M o t i o n to be t a b l e d and d i s c u s s e d in the H o u s e of C o m m o n s
during the d e b a t e on The Q u e e n s Opening Speech, which would contain
s p e c i f i c c o m m i t m e n t s in r e l a t i o n t o E u r o p e a n p o l i c i e s and to
l e g i s l a t i o n on the Channel T u n n e l ,
In any e v e n t , a statement
of the G o v e i * n m e n t ' s intentions would have to be m a d e i m m e d i a t e l y
a f t e r the division^ and the L o r d P r e s i d e n t of the C o u n c i l , in
consultation with the Chief W h i p and the other M i n i s t e r s c o n c e r n e d ,
should c o n s i d e r the t e r m s of such a statement and b y w h o m it could
m o s t c o n v e n i e n t l y be m a d e , and should i n f o r m h i m u r g e n t l y of the
conclusions r e a c h e d .
In consultation with the L o r d C h a n c e l l o r , he
should a l s o m a k e a r r a n g e m e n t s to e n s u r e the suitable t i m i n g of the
a r r i v a l of B l a c k R o d ,
a
1
The Cabinet T o o k n o t e , with a p p r o v a l , of the P r i m e M i n i s t e r s
s u m m i n g up of t h e i r d i s c u s s i o n .
!
3.
T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y said that
the c e a s e f i r e a p p e a r e d t o be o p e r a t i n g e f f e c t i v e l y that m o r n i n g .
But
it r e m a i n e d p r e c a r i o u s .
T h e I s r a e l i s had m a d e the m i s t a k e of not
l e a v i n g open l i n e s of r e t r e a t f o r the E g y p t i a n f o r c e s and t h e r e w e r e
p o c k e t s of E g y p t i a n s w h i c h , being cut off f r o m s u p p l i e s , w e r e in a
p&slous situation.
T h e p r e v i o u s day P r e s i d e n t Sadat of E g y p t had
c a l l e d f o r the introduction of p e a c e - k e e p i n g f o r c e s f r o m the S o v i e t
Union and the United S t a t e s ,
The A m e r i c a n s had r e a c t e d n e g a t i v e l y ,
but the R u s s i a n s had indicated that they m i g h t f e e l o b l i g e d to
i n t e r v e n e with f o r c e s , e v e n if they had t o do so unilaterally^
c l a i m i n g that the b e h a v i o u r of the I s r a e l i s w a s in v i o l a t i o n of
the c e a s e f i r e .
U n i l a t e r a l S o v i e t i n t e r v e n t i o n would c r e a t e a
g r a v e situation and he w a s c o n s i d e r i n g c a l l i n g in the Soviet
Ambassador,
I n d e e d , the p r e s e n t d i s p o s i t i o n of the I s r a e l i
and Egyptian f o r c e s m a d e it i m p r a c t i c a b l e to i n t e r p o s e an a r m e d
p e a c e - k e e p i n g f o r c e of any kind b e t w e e n t h e m ,
B e f o r e a peaces­
k e e p i n g f o r c e could be usefully introduced it w a s n e c e s s a r y to m a k e
r o o m f o r it b y s e p a r a t i n g the opposing f o r c e s .
T h i s must b e part of
a task to be c a r r i e d out b y the United Nations T r u c e S u p e r v i s o r y
m a c h i n e r y , which would need to be a u g m e n t e d .
T h e r e had b e e n
a m o v e in this d i r e c t i o n in the S e c u r i t y C o u n c i l the p r e v i o u s e v e n i n g ,
but the Council had adjourned without r e a c h i n g a decision,.
H e had
asked our A m b a s s a d o r in Washington to t e l l the A m e r i c a n S e c r e t a r y
of State Dr K i s s i n g e r , that in our v i e w it w a s u r g e n t l y n e c e s s a r y
that t h e r e should b e f a r m o r e United Nations o b s e r v e r s on the ground,
acting under the a u s p i c e s of the S e c r e t a r y G e n e r a l , D r W a l d h e i m ,
T h e i r i m m e d i a t e t a s k would be to s u p e r v i s e the c e a s e f i r e .
They
would need t o m a k e a r r a n g e m e n t s to a l l e v i a t e the supply p r o b l e m
facing the e n c i r c l e d E g y p t i a n f o r c e s and they should seek to s i m p l i f y
the l i n e s separating the b e l l i g e r e n t s ,
P r o g r e s s might be m a d e under
a p a c k a g e a r r a n g e m e n t consisting of t h r e e e l e m e n t s .
The Egyptians
might be p e r s u a d e d to l i f t the blockade of B a b e l Mandab which w a s
denying I s r a e l i shipping a c c e s s to the R e d Sea,
Secondly the
exchange of p r i s o n e r s , t o which I s r a e l attached p a r t i c u l a r i m p o r t a n c e ,
might begin.
T h i r d l y , the d i s e n t a n g l e m e n t of the I s r a e l i and
E g y p t i a n f o r c e s would m e e t the Egyptian i n t e r e s t .
If p r o g r e s s
could b e m a d e in this way it might b e p o s s i b l e t o a r r a n g e f o r the
I s r a e l i f o r c e s t o m o v e to p o s i t i o n s a f e w m i l e s to the e a s t of the
Suez Canal.
T h e r e would then be r o o m f o r p e a c e - k e e p i n g f o r c e s
to take up p o s i t i o n s b e t w e e n the I s r a e l i s and E g y p t i a n s ,
It w a s t o o
soon t o say w h e t h e r the p e a c e - k e e p i n g f o r c e s would b e contributed
b y the United States and the Soviet Union a l o n e , o r whether o t h e r
contingents would be i n c l u d e d .
W e had t o l d D r W a l d h e i m that w e
would be w i l l i n g to p a r t i c i p a t e if that w e r e thought to be helpful.
$
8
T h e Cabinet ­
1.
T o o k note of the statement by the F o r e i g n
and C o m m o n w e a l t h S e c r e t a r y .
O i l Supplies
Previous
Reference;
C M ( 7 3 ) 48th
Conclusions,
Minute 3
T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y said that the
Saudi A r a b i a n A m b a s s a d o r had i n f o r m e d h i m that the United K i n g d o m
w a s among Saudi A r a b i a ' s p r e f e r r e d c u s t o m e r s f o r o i l , and that
King F a i s a l intended to e n s u r e that our supplies should not s u f f e r .
In d i s c u s s i o n i t w a s noted that both Kuwait and A b u Dhabi had
s i m i l a r l y i n t i m a t e d that our supplies would not b e cut.
On the
o t h e r hand the o i l c o m p a n i e s w e r e n o w suggesting that b y D e c e m b e r
t h e i r i m p o r t s would be m o r e s e r i o u s l y affected than t h e y had earliex'
supposed.
T h e true p o s i t i o n w a s o b s c u r e ; and c l a r i f i c a t i o n ^ w h e t h e r
through d i p l o m a t i c channels o r b y o t h e r m e a n s , w a s u r g e n t l y n e e d e d .
M o r e o v e r , i t m i g h t be d i f f i c u l t f o r the producing s t a t e s to e n s u r e that
t h e i r f r i e n d l y p r o f e s s i o n s could b e c a r r i e d into e f f e c t : i t w a s c o m m o n
p r a c t i c e f o r s h i p s ' d e s t i n a t i o n s to be switched on the high s e a s and
t h e r e could be no g u a r a n t e e that cai*goes m a n i f e s t e d f o r the United
K i n g d o m would a c t u a l l y a r r i v e h e r e .
T h e p o s i t i o n m i g h t a l s o be
c o m p l i c a t e d by the n e e d f o r us to c o n f o r m with i n t e r n a t i o n a l sharing
a r r a n g e x n e n t s m a d e by the O r g a n i s a t i o n f o r E c o n o m i c C o - o p e r a t i o n
and D e v e l o p m e n t s
8
T H E P R I M E M I N I S T E R , s u m m i n g up the d i s c u s s i o n , said that t h e r e
w a s an u r g e n t need to e s t a b l i s h the f a c t s of the p r e s e n t position and
e n s u r e that the f r i e n d l y intentions of the p r o d u c i n g s t a t e s w e r e not
frustrated.
T h e T a s k F o r c e on O i l Supplies should r e p o r t , u r g e n t l y ,
t o the M i n i s t e r i a l C o m m i t t e e on E c o n o m i c S t r a t e g y on the steps
needed.
T h e Cabinet ­
2,
Invited the S e c r e t a r y of State f o r D e f e n c e to
a r r a n g e f o r the T a s k F o r c e on Oil Supplies to r e p o r t
u r g e n t l y t o the M i n i s t e r i a l C o m m i t t e e on E c o n o m i c
Strategy ­
i.
T h e b e s t a s s e s s m e n t o f c u r r e n t and
prospective supplies,
ii.
T h e a c t i o n needed to e n s u r e that the
intentions o f producing states to m a i n t a i n
supplies to the United K i n g d o m w e r e f u l f i l l e d .
Spain
Previous
Reference:
C M ( 7 3 ) 43rd
Conclusions,
Minute 1
T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y said that a
r e c e n t c o n v e r s a t i o n he had held with the Spanish A m b a s s a d o r had
b e e n m o d e r a t e l y r e a s s u r i n g s i n c e the A m b a s s a d o r had e m p h a s i s e d
the d e s i r e to d e v e l o p r e l a t i o n s and had s e e m e d t o r e f l e c t a m o r e
r e l a x e d attitude on the p a r t of h i s G o v e r n m e n t in r e g a r d t o
Gibraltar,
T h e Cabinet ­
3,
T o o k note of the statement b y the F o r e i g n
and C o m m o n w e a l t h S e c r e t a r y ,
Iceland
Previous
Reference?
C M ( 7 3 ) 46th
Conclusions,
Minute 2
T H E P R I M E M I N I S T E R said that we might s u c c e e d in r e a c h i n g
an a g r e e m e n t with the I c e l a n d i c G o v e r n m e n t in the f a i r l y n e a r
future on t e r m s which would o f f e r a r e a s o n a b l e p r o s p e c t of an
annual catch in the r e g i o n of 130,000 t o n s .
T h e Cabinet ­
4,
T o o k note of the statement b y the P r i m e Minister, NORTHERN
IRELAND
4,
T H E S E C R E T A R Y OF S T A T E F O R N O R T H E R N I R E L A N D
said that p r o g r e s s continued to be m a d e in his t a l k s with the Unionist
P a r t y the S o c i a l D e m o c r a t i c and L a b o u r P a r t y ( S D L P ) and the
A l l i a n c e P a r t y on the f o r m a t i o n of an E x e c u t i v e ,
Personal relations
b e t w e e n the l e a d e r of the Unionist Party^ M r F a u l k n e r , and the S D L P
l e a d e r s h i p had shown a m a r k e d i m p r o v e m e n t ! M r F a u l k n e r had been
p l a y i n g a useful r o l e in the t a l k s and i t n o w s e e m e d to b e accepted
that he should f i l l the o f f i c e of C h i e f E x e c u t i v e ,
When the t a l k s
continued the f o l l o w i n g w e e k they would have to d e a l with the difficult
p r o b l e m of the l a r g e number of p e r s o n s held in detention,,
Despite
the d i f f i c u l t i e s , it was p o s s i b l e that the talks would l e a d to the
f o r m a t i o n o f an E x e c u t i v e within the next month o r s o .
The security
situation in B e l f a s t w a s r e l a t i v e l y g o o d ; it w a s a l i t t l e m o r e difficult
in L o n d o n d e r r y ; and t h e r e w e r e continuing p r o b l e m s in the B o r d e r
areas.
s
Previous
Reference:
CM(73) 43rd
Conclusions,
Minute 2
9
T h e H a r l a n d and W o l f f s h i p y a r d had again run into financial difficulty
and G o v e r n m e n t a s s i s t a n c e , of the o r d e r of £10 m i l l i o n , w a s n e c e s s a r y
if the company w a s to be able t o continue trading within the l a w .
He
and his c o l l e a g u e s m o s t c l o s e l y c o n c e r n e d had d e c i d e d in p r i n c i p l e
that a s s i s t a n c e should be provided,, subject to s t r i n g e n t s a f e g u a r d s .
T h e Cabinet T o o k note of the statement b y the S e c r e t a r y of State
£or N o r t h e r n I r e l a n d .
1
EUROPEAN
COMMUNITY
AFFAIRS
5,
T H E C H A N C E L L O R OF T H E D U C H Y OF L A N C A S T E R said
that the m e e t i n g of the Council o f M i n i s t e r s ( A g r i c u l t u r e ) on 22-23
O c t o b e r had taken no i m p o r t a n t d e c i s i o n s .
The m a i n subject at
i s s u e had been the dx-aft d i r e c t i v e on Mountainous and Other L e s s
F a v o u r e d A r e a s and a d e c i s i o n on this had been d e f e r r e d to the next
meeting.
T h e C o m m i s s i o n had announced that t h e i r p r o p o s a l s on the
r e v i e w of the C o m m o n A g r i c u l t u r a l P o l i c y would not b e c o m e a v a i l a b l e
b e f o r e m i d - N o v e m b e r and t h i s d e l a y would add to the p r e s s u r e of
b u s i n e s s t o w a r d s the end of the y e a r ,
T h e Cabinet T o o k n o t e , with approval^ of the r&aiement by
the C h a n c e l l o r of the Duchy of L a n c a s t e r ,
7
INDUSTRIAL
AFFAIRS
Firemen
in
Glasgow
Previous
Reference:
C M ( 7 3 ) 49th
Conclusions,
Minute 4
6.
T H E S E C R E T A R Y OF S T A T E F O R S C O T L A N D said that the
m a s s m e e t i n g s of f i r e m e n in G l a s g o w on the p r e v i o u s day had d e c i d e d
a l m o s t unanimously to take s t r i k e a c t i o n f r o m 8, 00 a m on 26 O c t o b e r ,
It w a s , h o w e v e r , p o s s i b l e that s o m e of the m e n might n e v e r t h e l e s s
report for work.
T h e P a r l i a m e n t a r y U n d e r - S e c r e t a r y of State f o r
H o m e A f f a i r s and A g r i c u l t u r e had m e t national o f f i c e r s o f the F i r e
B r i g a d e s Union in G l a s g o w , who had u r g e d that the G o v e r n m e n t
should h a v e no d i r e c t d e a l i n g s with the s t r i k e r s .
The Parliamentary
S e c r e t a r y w a s a l s o d i s c u s s i n g the situation with the G l a s g o w
C o r p o r a t i o n in o r d e r to e s t a b l i s h the f a c t s of the dispute; t h e r e
w a s no question of the G o v e r n m e n t s attempting to conciliate^
p a r t i c u l a r l y s i n c e it now a p p e a r e d that the a l l o w a n c e a l r e a d y
o f f e r e d to the m e n b y the C o r p o r a t i o n m i g h t not c o m p l y with the
Pay Code,
T h e f i r e m e n ' s l e a d e r s had s a i d that a c c e s s b y t h e i r
o f f i c e r s to the f i r e a p p l i a n c e s would not be i m p e d e d , d e s p i t e p i c k e t i n g ,
n o r would other l o c a l f i r e b r i g a d e s .
T h e C o r p o r a t i o n w e r e hoping
that it m i g h t b e p o s s i b l e to obtain s o m e a s s i s t a n c e f r o m b r i g a d e s at
G l a s g o w A i r p o r t and at the H i l l i n g t o n I n d u s t r i a l E s t a t e ,
The
S e r v i c e m e n who would p r o v i d e an e m e r g e n c y s e r v i c e , if n e c e s s a r y ,
w e r e now at Edinburgh and undertaking f a m i l i a r i s a t i o n t r a i n i n g ; t h e y
would be r e a d y i f and when needed.
H e p r o p o s e d to m a k e a
statement in the House of C o m m o n s that afternoon r e g r e t t i n g
the p r o p o s e d s t r i k e action, appealing t o the m e n to r e c o n s i d e r
t h e i r d e c i s i o n and indicating that the G o v e r n m e n t w e r e taking
i m m e d i a t e m e a s u r e s to be r e a d y to help s a f e g u a r d l i f e and p r o p e r t y
in G l a s g o w , if n e c e s s a r y .
T H E P R I M E M I N I S T E R , summing up a b r i e f d i s c u s s i o n , said that
the Cabinet a g r e e d that the S e c r e t a r y o f State f o r Scotland ohould
m a k e a s t a t e m e n t that afternoon as p r o p o s e d , e m p h a s i s i n g that t h i s
w a s an u n o f f i c i a l s t r i k e which had b e e n denounced b y the F i r e
B r i g a d e s Union,
T h e Cabinet T o o k n o t e , with approvals of the summing up of t h e i r
d i s c u s s i o n b y the P r i m e M i n i s t e r and i n v i t e d the
S e c r e t a r y of State f o r Scotland t o b e guided
accordingly.
THE
PROGRAMME
FOR
CONTROLLING
INFLATION
Stage 3
Previous
Reference?
C M ( 7 3 ) 45th
Conclusions
7,
T h e Cabinet c o n s i d e r e d a m e m o r a n d u m b y the C h a n c e l l o r of
the E x c h e q u e r ( C P ( 7 3 ) 112), t o w h i c h w a s attached a n o t e s u m m a r i s i n g
the a m e n d m e n t s which it w a s p r o p o s e d to m a k e to the d r a f t P x i c e
and P a y C o d e f o r Stage 3 in the light of consultations with i n t e r e s t e d
parties.
T h e y a l s o had b e f o r e t h e m a f u r t h e r m e m o r a n d u m b y the
C h a n c e l l o r of the E x c h e q u e r ( C P ( 7 3 ) 114), t o which w a s attached a
r e v i s e d t e x t of the Stage 3 C o d e i n c o r p o r a t i n g t h e s e a m e n d m e n t s .
T H E C H A N C E L L O R OF T H E E X C H E Q U E R said that s i n c e the
p u b l i c a t i o n , on 8 O c t o b e r , of the C o n s u l t a t i v e D o c u m e n t on the
d r a f t P r i c e and P a y C o d e f o r Stage 3 ( C m n d 5444) consultations
had b e e n h e l d with a w i d e r a n g e of i n t e r e s t e d o r g a n i s a t i o n s ^ a s
w e l l as with the P a y B o a r d and the P r i c e C o m m i s s i o n .
In
c o n s i d e r i n g what a m e n d m e n t s should be a c c e p t e d , the M i n i s t e r s
c o n c e r n e d had had in m i n d the r e p r e s e n t a t i o n s m a d e b y industry
that, on pay, the Code w a s b i a s e d i n f a v o u r of the public s e c t o r
a s e m p l o y e r ; and that, on p r i c e s , it should be d e s i g n e d to p r o m o t e
e f f i c i e n c y and i n v e s t m e n t , and t h e r e should b e i m p r o v e m e n t s i n the
a d m i n i s t r a t i o n of the c o n t r o l .
D e v e l o p m e n t s s i n c e the publication
of the d r a f t C o d e had u n d e r l i n e d the need t o a v o i d f u r t h e r substantial
r e l a x a t i o n s on e i t h e r pay o r p r i c e s .
On p a y , the a m e n d m e n t s
p r o p o s e d w e r e m a i n l y technical,, including a n e w l i m i t on p a y m e n t s
under p r e - s t a n d s t i l l p r o f i t - s h a r i n g s c h e m e s .
It had b e e n concluded
that a m e n d m e n t s to w i d e n the a c t i o n on pay a n o m a l i e s , f o r e x a m p l e
b y e x t e n s i o n to the A r m e d F o r c e s could not s a f e l y be m a d e .
The
p o s i t i o n of the A r m e d F o r c e s could b e c o n s i d e r e d at the t i m e o f t h e i r
r e v i e w in A p r i l 1974.
On p r i c e s , a n u m b e r of changes had b e e n m a d e
in the i n t e r e s t s of e f f i c i e n c y o r i n v e s t m e n t .
A m e n d m e n t s had a l s o
b e e n m a d e to the p a r a g r a p h l i m i t i n g the r e d u c t i o n of p r o f i t s under
the C o d e ; and the p e r i o d f o r c o n s i d e r a t i o n of a p p l i c a t i o n s b y the
P r i c e C o m m i s s i o n had b e e n r e d u c e d .
P a r a g r a p h 53, which w a s
intended t o r e s t r i c t s u b d i v i s i o n of an enterprise f o r ' t h e purpose'of the
C o d e , had not struck a w h o l l y s a t i s f a c t o r y b a l a n c e b e t w e e n
p r e v e n t i n g a r t i f i c i a l s u b d i v i s i o n and p e r m i t t i n g it when i t w a s
g e n u i n e ; and the drafting of t h i s p a r a g r a p h had been further
i m p r o v e d s i n c e the c i r c u l a t i o n of C P ( 7 3 ) 114
Subject t o the
a p p r o v a l of the Cabinet, the O r d e r embodying the Code would
b e m a d e at the end of the w e e k and published on 30 O c t o b e r , t o
t a k e e f f e c t f o r p r i c e s on 1 N o v e m b e r and f o r pay on 7 N o v e m b e r ,
T h e a m e n d m e n t s would b e e x p l a i n e d in a P r e s s n o t i c e , and f u l l
i n f o r m a t i o n would be i s s u e d b y the P a y B o a r d and the P r i c e
Commission.
8
0
In d i s c u s s i o n the f o l l o w i n g p o i n t s w e r e m a d e ­
a.
T h e r e w a s a c a s e f o r e x e m p t i n g c a r parking c h a r g e s
f r o m the C o d e , at l e a s t as r e g a r d s c h a r g e s l e v i e d b y l o c a l
authorities.
I n c r e a s e s in parking c h a r g e s w e r e a c e n t r a l
f e a t u r e of t r a n s p o r t p o l i c y , and had been r e l i e d on t o a c h i e v e
public expenditure s a v i n g s .
W h i l e the e x t r a c o s t would f a l l
on c o n s u m e r s , t h e y a l s o had an i n t e r e s t in a v o i d i n g t r a f f i c
congestion.
On the o t h e r hand, e x e m p t i o n f r o m the Code
would l e a v e d e c i s i o n s about c h a r g e s w h o l l y in the hands of
the l o c a l a u t h o r i t i e s , and the p r o s p e c t of c o m p l e t e l y
u n c o n t r o l l e d parking c h a r g e s , at a t i m e when p e t r o l
c h a r g e s w e r e a l s o r i s i n g s h a r p l y , would cause
c o n s i d e r a b l e public d i s m a y .
I t would be p r e f e r a b l e
t h e r e f o r e to l e a v e the m a t t e r f o r r e c o n s i d e r a t i o n in the
l i g h t o f the o u t c o m e of the c u r r e n t r e v i e w of t r a n s p o r t
policy^
b,
T h e S e c r e t a r y of State f o r N o r t h e r n I r e l a n d had
set out in h i s minute dated 24 O c t o b e r to the P r i m e M i n i s t e r ,
t h e c a s e f o r amending the C o d e to a l l o w a d d i t i o n a l p a y m e n t s
to be m a d e to the R o y a l U l s t e r Constabulary ( R U C ) ,
The
s i z e and e f f e c t i v e n e s s of the R U C w a s c r u c i a l t o the
a c h i e v e m e n t of the G o v e r n m e n t s p o l i t i c a l o b j e c t i v e s
in N o r t h e r n I r e l a n d , including the r e s t o r a t i o n of l a w
and o r d e r and the w i t h d r a w a l of the A r m e d F o r c e s ,
A s m a l l payment^ on the l i n e s of that c o n c e d e d t o the
London p o l i c e , would not satisfy t h e i r full c l a i m , but
would be s o m e r e c o g n i t i o n of the quite e x c e p t i o n a l nature
of the duties which the R U C w e r e r e q u i r e d to u n d e r t a k e .
It would a l s o b e helpful if the R U C could be e x e m p t e d f r o m
e s t a t e duty if k i l l e d as a r e s u l t of t e r r o r i s t a c t i v i t y , as was
a l r e a d y the c a s e f o r the A r m y ,
On the o t h e r hand, while
the R U C could c l a i m t o be e x c e p t i o n a l in that t h e y w e r e under
o r d e r s to go in and d e a l with v e r y difficult and d a n g e r o u s
situations, m e m b e r s of o t h e r public s e r v i c e s in N o r t h e r n
I r e l a n d , such as P o s t O f f i c e w o r k e r s , w e r e a l s o in p r a c t i c e
subject to the same d a n g e r s , and had so f a r f u l l y c o - o p e r a t e d
in p r o v i d i n g supporting s e r v i c e s f o r the R U C .
The RUC
should a l s o gain m o r e than o t h e r p o l i c e f o r c e s f r o m the
" u n s o c i a l h o u r s " c o n c e s s i o n in the P a y C o d e , although
t h e r e w a s s o m e u n c e r t a i n t y whether the n e g o t i a t i o n s in
t h e P o l i c e C o u n c i l would a c t u a l l y p r o d u c e this r e s u l t ,
s
c,
T h e P a y B o a r d had r e f u s e d to a p p r o v e national
a g r e e m e n t s a l l o w i n g p a y m e n t s to be m a d e to a d m i n i s t r a t o r s
in the N a t i o n a l Health S e r v i c e ( N H S ) who had b e e n i n v o l v e d
in additional w o r k and r e s p o n s i b i l i t y connected with the NHS
reorganisation.
S i m i l a r p a y m e n t s had been m a d e t o l o c a l
authority o f f i c e r s in connection with the r e o r g a n i s a t i o n of
l o c a l g o v e r n m e n t , but t h e r e w a s no other outstanding c a s e
s i m i l a r to that of the NHS o f f i c e r s , who w e r e o n l y c l a i m i n g
an a g r e e d r e c o m p e n s e f o r e x t r a w o r k which had a l r e a d y been
done.
If the Code w e r e not amended to a l l o w the payments t o
b e m a d e r e t r o s p e c t i v e l y , t h i s would be f i e r c e l y r e s e n t e d by
P
the NHS staff c o n c e r n e d , and t h e y would w i t h d r a w t h e i r
c o - o p e r a t i o n in b r i n g i n g about the NHS r e o r g a n i s a t i o n ,
with consequent d a m a g e to G o v e r n m e n t p o l i c y o b j e c t i v e s
in this f i e l d .
On the o t h e r hand, r e t r o s p e c t i v e p a y m e n t s
had been d e n i e d to o t h e r g r o u p s , and it would a p p e a r i n d e f e n ­
s i b l e to a l l o w backdating f o r one s m a l l g r o u p of r e l a t i v e l y
h i g h - p a i d staff when i t was not being g r a n t e d t o , f o r
example^ l o w - p a i d c i v i l s e r v a n t s .
M o r e o v e r , a concession
on the l i n e s suggested would p r o v i d e further o c c a s i o n f o r the
g e n e r a l c r i t i c i s m a l r e a d y v o i c e d by industry that the Code
w a s b i a s e d in f a v o u r of the public s e c t o r , and did not take
account of e q u a l l y difficult situations which a r o s e in the
private sector,
s
d.
T h e r e w a s an outstanding i s s u e r e l a t i n g to the
r e m u n e r a t i o n of NHS o p t i c i a n s , which w a s s t i l l under
discussion,
e,
T h e p r o v i s i o n in the C o d e p e r m i t t i n g n e w s c h e m e s
f o r e f f i c i e n c y p a y m e n t s had b e e n s e v e r e l y c r i t i c i s e d by the
C o n f e d e r a t i o n of B r i t i s h Industry, the T r a d e s Union C o n g r e s s ,
and the N a t i o n a l Union of M i n e w o r k e r s , on the grounds that
t h e y would not p r o v i d e sufficient i n c e n t i v e to introduce n e w
s c h e m e s , and that the d e t a i l e d a r r a n g e m e n t s p r o p o s e d w e r e
not p r a c t i c a l ,
Thfj m i n e w o r k e r s had s u g g e s t e d that the l i m i t
on additional p a y m e n t s under t h e s c h e m e would i n t r o d u c e an
e l e m e n t of u n c e r t a i n t y , since t h e i n d i v i d u a l w o r k e r would not
know when the l i m i t had been r e a c h e d .
It had also b e e n
suggested that it w a s u n r e a s o n a b l e to e x p e c t w o r k e r s t o
w a i t f o r t h r e e months b e f o r e t h e y could b e s u r e w h e t h e r
they would obtain any benefit under the s c h e m e .
The
a r r a n g e m e n t s w o u l d in any c a s e need to be a p p r o v e d by
the P a y B o a r d in a d v a n c e , and i n t h o s e c a s e s w h e r e
i n f o r m a t i o n about the r e s u l t s o f the s c h e m e could b e
p r o v i d e d m o r e quickly j t h e r e m i g h t be advantage in
g i v i n g the P a y B o a r d d i s c r e t i o n to a l l o w p a y m e n t s a f t e r
a shorter delay.
T h e r e might a l s o be advantage in consulting
an i n d u s t r i a l i s t with e x p e r i e n c e of t h e s e m a t t e r s , t o v e r i f y
that the a r r a n g e m e n t s now i n c o r p o r a t e d in the Code would
b e w o r k a b l e in p r a c t i c e .
On t h e o t h e r hand, i t s e e m e d
u n l i k e l y that the point r a i s e d b y the m i n e w o r k e r s would
b e a s e r i o u s p r o b l e m , since the e f f i c i e n c y s c h e m e i n the
c o a l i n d u s t r y w a s a national a g r e e m e n t whose benefits w e r e
d i s t r i b u t e d throughout the e n t i r e w o r k f o r c e .
The provisions
n o w i n c o r p o r a t e d in the Code had b e e n the o u t c o m e of
c o n s i d e r a b l e d i s c u s s i o n with the P a y B o a r d .
They were
intended to e n c o u r a g e the introduction of n e w s c h e m e s that
would p r o d u c e genuine r e s u l t s , w h i l e d i s c o u r a g i n g the s c h e m e s
which would not.
T h e r e was a l r e a d y a c o n s i d e r a b l e body of
opinion that the P a y C o d e e r r e d on the s i d e o f g e n e r o s i t y , and
any f u r t h e r r e l a x a t i o n on e f f i c i e n c y p a y m e n t s m i g h t be seen a s
c r e a t i n g a loophole which would f u r t h e r i n c r e a s e the o v e r a l l
r i s e in e a r n i n g s during Stage 3 .
£0
T h e n e w l i m i t on p a y m e n t s under p r e - s t a n d s t i l l
p r o f i t - s h a r i n g s c h e m e s would not p r e v e n t payments
continuing to be made under such s c h e m e s .
It would
h o w e v e r r e s t r i c t to a m a x i m u m of £350 the i n c r e a s e i n
such p a y m e n t s during Stage 3
0
In further d i s c u o s i c n , the Cabinet w e r e i n f o r m e d that the P r i c e
C o m m i s s i o n had a g r e e d to a f u r t h e r i n c r e a s e of Jrp in the p r i c e
of a standard l o a f of b r e a d ,
Although it had b e e n a g r e e d that the
C o m m i s s i o n should c e a s e to announce individual p r i c e i n c r e a s e s
during Stage 3, they had felt that it would be i m p r u d e n f t o b e g i n
b y refusing to announce an i n c r e a s e of this i m p o r t a n c e ^ and t h e y
w e r e t h e r e f o r e p r o p o s i n g to announce it on 29 O c t o b e r ,
It w a s
suggested i n d i s c u s s i o n that the fact that this n e w i n c r e a s e had
been a p p r o v e d , and yet another i n c r e a s e had a l r e a d y been applied
f o r , added u r g e n c y to the need t o d e v i s e a s y s t e m under which
i n c r e a s e s i n the p r i c e of bread would be m a d e at l e s s f r e q u e n t
i n t e r v a l s , e v e n if they w e r e then l a r g e r i n amount,
T h i s should
be p o s s i b l e under the C o d e , if both the industry and the P r i c e
C o m m i s s i o n w e r e p r e p a r e d to c o - o g e r a t e t o g e t h e r .
Moreover,
given that the p r i c e of b r e a d w a s bound to i n c r e a s e substantially
o v e r the next f e w m o n t h s , it had a l r e a d y been a g r e e d that t h e r e
would b e a d v a n t a g e in making this cslear i n advance r a t h e r than
having t o e x p l a i n each s u c c e s s i v e p r i c e i n c r e a s e .
T h i s point
had indeed a l r e a d y been made i n M i n i s t e r i a l s p e e c h e s , although
without quantifying the total i n c r e a s e now e x p e c t e d ,
T H E P R I M E M I N I S T E R , summing up the d i s c u s s i o n , said that the
Cabinet a g r e e d that the Code should not b e a m e n d e d to e x e m p t c a r
parking c h a r g e s , although this point m i g h t be r e c o n s i d e r e d in the
light of the o u t c o m e of^transport p o l i c y r e v i e w .
T h e Cabinet
s y m p a t h i s e d with the c a s e f o r a s p e c i a l payment to the R U C , but
r e c o g n i s e d the d i f f i c u l t i e s that t h i s m i g h t p r e s e n t i n dealing with
o t h e r public s e r v i c e s in N o r t h e r n I r e l a n d ,
It was p o s s i b l e that
the p r o b l e m m i g h t be solved by use of the p r o v i s i o n in the Code
concerning " u n s o c i a l h o u r s " .
T h e S e c r e t a r y of State f o r N o r t h e r n
I r e l a n d should d i s c u s s further with the S e c r e t a r y of State f o r
Employaaojat w h e t h e r it would b e p o s s i b l e to find a f o r m of w o r d s
t o m e e t the c a s e of the RUC in a w a y which would not b e open to
r e p e r c u s s i o n s in other public s e r v i c e s ; but if this could not b e
done it would b e n e c e s s a r y to l e a v e the m a t t e r a s i t s t o o d .
The
S e c r e t a r y o f State f o r N o r t h e r n I r e l a n d should a l s o d i s c u s s with
the C h a n c e l l o r of the E x c h e q u e r his p r o p o s a l c o n c e r n i n g e s t a t e
duty e x e m p t i o n .
T h e Cabinet c o n s i d e r e d that, on b a l a n c e ,
no p r o v i s i o n should b e m a d e for r e t r o s p e c t i v e p a y m e n t s t o
a d m i n i s t r a t o r s in the NHS,
T h e y noted that d i s c u s s i o n s w e r e
s t i l l continuing on the r e m u n e r a t i o n of o p t i c i a n s .
On the p r o v i s i o n s
p e r m i t t i n g n e w s c h e m e s f o r e f f i c i e n c y p a y m e n t s , the S e c r e t a r y of
State f o r E m p l o y m e n t should d i s c u s s f u r t h e r with the P a y B o a r d
w h e t h e r it would be p o s s i b l e to r e l a x the condition p r e c l u d i n g
p a y m e n t during the f i r s t t h r e e months o f the s c h e m e without
e f f e c t i v e l y w e a k e n i n g the s a f e g u a r d s a g a i n s t abuse.
The
S e c r e t a r y of State should a l s o , in consultation with the C h a n c e l l o r
of the E x c h e q u e r , 3eek to enlist the a d v i c e of an independent and
e x p e r i e n c e d i n d u s t r i a l i s t to v e r i f y whether t h e s e p r o v i s i o n s would
b e p r a c t i c a l t o o p e r a t e in t h e i r p r e s e n t f o r m .
Subject to r e s o l u t i o n
of t h e s e points the C h a n c e l l o r of the E x c h e q u e r should a r r a n g e f o r
the O r d e r e m b o d y i n g the Code to b e m a d e , as p r o p o s e d in C P ( 7 3 ) 112.
T h e L o r d P r e s i d e n t should d i s c u s s u r g e n t l y with the M i n i s t e r of
A g r i c u l t u r e w h e t h e r the i n c r e a s e in the p r i c e of b r e a d to be
announced on 29 O c t o b e r could be d e f e r r e d b y a r r a n g i n g f o r
i n c r e a s e s to b e m a d e l e s s f r e q u e n t l y e v e n i f of g r e a t e r amount;
and whether a c l e a r e r warning could be g i v e n in M i n i s t e r i a l s p e e c h e s
of the l i k e l y i n c r e a s e s which would need to b e m a d e during the next
few months
s
0
T h e Cabinet ­
1.
T o o k note^, with a p p r o v a l , of the sumrmng up
o f t h e i r d i s c u s s i o n by the P r i m e M i n i s t e r .
2,
Subject to any a m e n d m e n t s n e c e s s a r y in the
light o f f u r t h e r d i s c u s s i o n of the outstanding p o i n t s
noted b y the P r i m e M i n i s t e r in h i s summing up,
i n v i t e d the C h a n c e l l o r of the E x c h e q u e r to a r r a n g e
f o r the P r i c e and P a y C o d e f o r Stage 3 to be m a d e
and published as p r o p o s e d in C P ( 7 3 ) 112,
3,"
I n v i t e d the L o r d P r e s i d e n t to d i s c u s s with
the M i n i s t e r of A g r i c u l t u r e the a c t i o n t o be taken
r e g a r d i n g i n c r e a s e s in the p s i c e of breads as
i n d i c a t e d b y the P r i m e M i n i s t e r in h i s summing
up.
8c
T h e Cabinet c o n s i d e r e d a m e m o r a n d u m by the C h a n c e l l o r of
the E x c h e q u e r ( C P ( 7 3 ) 108) about the p r o g r a m m e f o r public
e x p e n d i t u r e to 1977-78.
T h e y a l s o had b e f o r e t h e m m e m o r a n d a
b y the S e c r e t a r y of State f o r D e f e n c e ( C P ( 7 3 ) 113) about d e f e n c e budget
t a r g e t s , b y the S e c r e t a r y of State f o r t h e E n v i r o n m e n t ( C P ( 7 3 ) 111)
about l o c a l authority e x p e n d i t u r e in England and W a l e s in 1974-75,
and a c o l l e c t i v e b r i e f by the C e n t r a l P o l i c y R e v i e w Staff ( C P ( 7 3 ) 109).
T H E C H A N C E L L O R O F T H E E X C H E Q U E R said that the p r o g r a m m e
f o r public expenditure in the y e a r s to 1978 which was due to be
published in D e c e m b e r would be of c r u c i a l i m p o r t a n c e to the
Government.
If t h e i r p o l i t i c a l , s o c i a l and e c o n o m i c p o l i c i e s
w e r e to b e a r f r u i t , they m u s t maintain a r e a s o n a b l e l e v e l of
T o this end substantial
e x p a n s l o n and r e d u c e the r a t e of i n f l a t i o n .
p r o d u c t i v e i n v e s t m e n t must continue, and e v e r y e f f o r t must be made
t o r e d r e s s the c u r r e n t d e f i c i t in the b a l a n c e of p a y m e n t s , which e v e n
b e f o r e the r e c e n t i n c r e a s e in o i l p r i c e s w a s running at about
£1, 000 m i l l i o n .
Since the p r e v i o u s White P a p e r had been published,
the i n c r e a s e s in w o r l d p r i c e s of c o m m o d i t i e s , food and o i l had i m p l i e d
a s e r i o u s l o s s o i r e a l i n c o m e f o r the United K i n g d o m , and a r e d u c e d
c a p a c i t y to m e e t a l l d e m a n d s .
If the b a l a n c e o f payments w e r e not
t o b e r e s t o r e d , i n t e r n a t i o n a l confidence in s t e r l i n g would be put at
r i s k , and at a c r i t i c a l m o m e n t f o r the s u c c e s s of t h e i r p o l i c i e s the
G o v e r n m e n t might be f a c e d with the n e e d t o i m p o s e stringent
m e a s u r e s of d e f l a t i o n .
A t the s a m e t i m e , r o o m must be m a d e
f o r s o m e i m p r o v e m e n t in the r a t e of p e r s o n a l consumption: i f
an annual r a t e of something l i k e 3-f- p e r cent in r e a l t e r m s eould
not be achieved t h e r e would b e s e r i o u s c o n s e q u e n c e s both f o r the
G o v e r n m e n t s p o l i c y on i n c o m e s and m o r e w i d e l y .
These
c o n s i d e r a t i o n s t o g e t h e r m e a n t that the r a t e of g r o w t h in public
e x p e n d i t u r e must be r e s t r a i n e d .
Indeed-, the g e n e r a l tenor o f
c o m m e n t by qualified o b s e r v e r s w a s that public expenditure ought
t o b e cut b a c k .
H e b e l i e v e d this to be t r u e ; but he r e c o g n i s e d that
such a c o u r s e would i n v o l v e v e r y g r e a t d i f f i c u l t i e s f o r Ms c o l l e a g u e s .
I t w a s h o w e v e r e s s e n t i a l that the totals of public expenditure
p r o g r a m m e s in the f o r t h c o m i n g White P a p e r should not e x c e e d
i n r e a l t e r m s t h o s e published the p r e v i o u s D e c e m b e r , and that
the p r o j e c t i o n s f o r 1977-78 should be c o n s i s t e n t with that r a t e of
growth.
A s the C e n t r a l P o l i c y Rwdfew Staff had pointed out this
p o l i c y did not, f o r m o s t p r o g r a m m e s , i m p l y m o r e than a slowing
down in the r a t e o f e x p a n s i o n : t h e r e would s t i l l be r o o m f o r
i n c r e a s e s in r e a l t e r m s f r o m y e a r to y e a r ; but the r a t e of i n c r e a s e
would r o m a i n s t e a d y .
9
a
T h e Cabinet, f o l l o w i n g t h e i r d i s c u s s i o n s in July, had invited h i m and
the Chief S e c r e t a r y , T r e a s u r y , t o hold b i l a t e r a l d i s c u s s i o n s with the
M i n i s t e r s in c h a r g e o f spending p r o g r a m m e s .
T h e s e had n o w been
completed.
Although the Cabinet had e a r l i e r a c c e p t e d the n e c e s s i t y
o f reconstituting a t r u e contingency r e s e r v e , he had found it
n e c e s s a r y , in o r d e r to a c c o m m o d a t e the c u r r e n t p r o g r a m m e s , to
r e d u c e the contingency r e s e r v e to the b a r e s t m i n i m u m , a s w e l l as
t o m a k e the m o s t o p t i m i s t i c a s s u m p t i o n s about future l e v e l s of
a s s i s t a n c e to the nationalised i n d u s t r i e s , the d i s a p p e a r a n c e of
the r e g i o n a l e m p l o y m e n t p r e m i u m , an i n c r e a s e in the p r i c e of
m i l k in O c t o b e r 1974, and the s i z e of s h o r t f a l l s in actual e x p e n d i t u r e .
One of the m o s t disturbing f e a t u r e s of the r e v i e w w a s the l a r g e
i n c r e a s e in the c u r r e n t e x p e n d i t u r e of l o c a l a u t h o r i t i e s , o v e r which
the G o v e r n m e n t had l i t t l e c o n t r o l .
T h e l e v e l of e x p e n d i t u r e for
1974-75 which had been r e d u c e d by s o m e £81 m i l l i o n to m e e t the
e c o n o m i e s which the G o v e r n m e n t had announced in M a y n o w s e e m e d
l i k e l y t o b e e x c e e d e d by £140 m i l l i o n .
The C a b i n e t would wish to
pay c l o s e attention to th:,s p r o b l e m when they c a m e to discviss the
l e v e l of r a t e support g r a n t f o r that y e a r .
A p a r t f r o m t h i s , he had
beer- able t o r e a c h broad a g r e e m e n t with his c o l l e a g u e s o v e r t h e i r
spending p r o g r a m m e s , subject t o the adjustment of d e t a i l s , e x c e p t
in the f i e l d s cf the s o c i a l s e r v i c e s , e n v i r o n m e n t and d e f e n c e .
He
did not h o w e v e r p r o p o s e that the Cabinet should on this o c c a s i o n
s e e k to d e t e r m i n e the i n d i v i d u a l expenditure p r o g r a m m e s ; but he
asked t h e m t o a g r e e that the y e a r l y t o t a l s in the f o r t h c o m i n g White
P a p e r should not exceed^ in r e a l t e r m s , the c o r r e s p o n d i n g totals
in the W h i t e P a p e r for 1972 ( C m n d 5178); and that this d e c i s i o n could
if n e c e s s a r y be r e f l e c t e d in public statements about the e c o n o m y .
In d i s c u s s i o n it w a s s u g g e s t e d that e v e n the m e a s u r e of r e s t r a i n t
p r o p o s e d b y the C h a n c e l l o r of the E x c h e q u e r m i g h t not a l l o w the
G o v e r n m e n t sufficient r o o m to a c c o m m o d a t e d e s i r a b l e expenditure
in the c o m i n g y e a r .
It w a s n o t e w o r t h y that the e c o n o m i e s a c h i e v e d
in M a y had a l r e a d y been s w a l l o w e d up b y i n c r e a s e d e x p e n d i t u r e , often
on p r o g r a m m e s u n r e l a t e d to those w h e r e cuts had b e e n m a d e .
It
might i n d e e d be f o r c o n s i d e r a t i o n w h e t h e r p r i o r i t y should continue
t o b e g i v e n in subsequent y e a r s to the o b j e c t i v e of k e e p i n g down
p r i c e s b y s u b s i d i e s to the n a t i o n a l i s e d i n d u s t r i e s ; and the convention
of publishing expenditure p r o g r a m m e s f i v e y e a r s ahead u n d e s i r a b l y
r e s t r i c t e d the G o v e r n m e n t s f r e e d o m of action and m a d e no
a l l o w a n c e f o r the changed c i r c u m s t a n c e s in l a t e r y e a r s that
m i g h t b e e x p e c t e d f r o m the s u c c e s s of the G o v e r n m e n t s e c o n o m i c
strategy.
N o n e t h e l e s s , although t h e r e w e r e strong a r g u m e n t s on
e c o n o m i c g r o u n d s for a c h i e v i n g the o v e r a l l d e g r e e of r e s t r a i n t which
the C h a n c e l l o r p r o p o s e d , it m i g h t b e i n a d v i s a b l e f o r the G o v e r n m e n t
t o c o m m i t i t s e l f t o a g i v e n t o t a l of public e x p e n d i t u r e b e f o r e
a g r e e m e n t had bean r e a c h e d on individual p r o g r a m m e s , and t h e i r
mutual r e l a t i o n s h i p had b e e n a s s e s s e d .
In d i s c u s s i o n of i n d i v i d u a l p r o g r a m m e s the f o l l o w i n g points w e r e
made.
^""^efence
^-^
*
T h e r e was s t i l l a l a r g e d i f f e r e n c e i n the l a t e r y e a r s of the
p r o g r a m m e b e t w e e n the p r o p o s a l s put f o r w a r d b y the C h a n c e l l o r
of the
chequer and t h o s e a c c e p t a b l e t o the S e c r e t a r y of State f o r
Defence,,
But our d e f e n c e c a p a b i l i t y w a s a m a j o r f a c t o r in our
i n t e r n a t i o n a l standing; and if the cuts p r o p o s e d in the defence budget
w e r e l i k e l y t o p o s e a c h o i c e b e t w e e n the maintenance of
conventional f o r c e s and the n u c l e a r d e t e r r e n t , it m i g h t
be n e c e s s a r y to c o n s i d e r savings e v e n beyond p r e s e n t l e v e l s
on o t h e r p r o g r a m m e s , such as o v e r s e a s a i d .
Environment
T h e e s t i m a t e s o f l o c a l authority e x p e n d i t u r e f o r 1974-75 indicated
l i k e l y r a t e i n c r e a s e s of the o r d e r of 8 o r 9 p e r cent; and the Cabinet
had a l r e a d y d i s c u s s e d the p o s s i b i l i t y of shifting m o r e of the r a t e
burden f r o m the d o m e s t i c r a t e p a y e r s on to Industry and c o m m e r c e .
A r e d u c t i o n in public expenditure on housing would be m o r e
a c c e p t a b l e if funds r a i s e d p r i v a t e l y f o r housing a s s o c i a t i o n s
w e r e not included as public e x p e n d i t u r e .
Other savings v/ould
depend l a r g e l y on d e c i s i o n s to be taken in the f i e l d of t r a n s p o r t
policy.
S o c i a l
S e r v i c e s
T h e S e c r e t a r y of State f o r Social S e r v i c e s w a s p r e p a r e d t o m e e t
the t o t a l of savings proposed^ but the c h o i c e would depend upon a
difficult a s s e s s m e n t of the p o l i t i c a l c o n s e q u e n c e s ,
T H E P R I M E M I N I S T E R , summing up the d i s c u s s i o n , said that the
Cabinet w e r e d i s p o s e d to a c c e p t the C h a n c e l l o r of the E x c h e q u e r ^
o b j e c t i v e s in p r i n c i p l e .
T h e y would w i s h t o r e f l e c t on the points
which had b e e n m a d e in d i s c u s s i o n and to r e s u m e t h e i r d i s c u s s i o n
at an e a r l y opportunity with a v i e w to settling the p r o g r a m m e as a
whole.
M e a n w h i l e the C h a n c e l l o r of the E x c h e q u e r and the Chief
S e c r e t a r y , T r e a s u r y , should p u r s u e t h e i r d i s c u s s i o n of outstanding
i s s u e s with individual M i n i s t e r s c o n c e r n e d .
A t t h e i r next d i s c u s s i o n
the Cabinet would wish t o be a p p r i s e d of the b r o a d p o l i t i c a l
c o n s i d e r a t i o n s i n v o l v e d in any a r e a s which r e m a i n e d t o b e settled;
and it would a s s i s t t h e m if the C h a n c e l l o r of the E x c h e q u e r , in
consultation with the M i n i s t e r s c o n c e r n e d , could c i r c u l a t e a further
p a p e r identifying those i s s u e s ,
T h e Cabinet ­
1,
T o o k n o t e , with a p p r o v a l , of the summing up
of t h e i r d i s c u s s i o n b y the Py&me M i n i s t e r .
2.
Invited the C h a n c e l l o r of the E x c h e q u e r to
c i r c u l a t e a further paper on the i s s u e s which r e m a i n e d
f o r d e c i s i o n , and t h e i r p o l i t i c a l i m p l i c a t i o n s .
Cabinet O f f i c e
26 O c t o b e r 1973