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T H I S D O C U M E N T IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y S G O V E R N M E N T
J
C M ( 7 3 ) 43rd
Conclusions
C O P Y NO
Q 9
CABINET
C O N C L U S I O N S of a M e e t i n g of the Cabinet held at 10 Downing S t r e e t on T U E S D A Y 2 O C T O B E R 1973 at 10. 30 a m PRESENT
T h e R t Hon E d w a r d Heath M P P r i m e Minister T h e Rt Hon Sir A l e c D o u g l a s - H o m e
S e c r e t a r y of State f o r F o r e i g n and
Commonwealth Affairs MP
T h e R t Hon 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 R o b e r t C a r r M P
S e c r e t a r y of State f o r the H o m e D e p a r t m e n t
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 C o u n c i l
T h e R t Hon S i r K e i t h 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 Rt 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
The Rt Hon Gordon Campbell M P
S e c r e t a r y of State f o r Scotland
T h e Rt 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
T h e R t 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 Rt 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
T h e R t Hon Joseph G o d b e r M P
M i n i s t e r of A g r i c u l t u r e ^ F i s h e r i e s and
Food
T h e R t Hon S i r G e o f f r e y H o w e 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
( I t e m 5) 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 THE F O L L O W I N G WERE ALSO PRESENT
M r P a u l Channon M P
T h e R t Hon Ian G i l m o u r M P
M i n i s t e r f o r Housing and C o n s t r u c t i o n ( I t e m 5) M i n i s t e r of State f o r D e f e n c e
( I t e m s 1-3)
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 5)
T h e Rt Hon F r a n c i s P y m M P
Parliamentary Secretary, Treasury
( I t e m s 1-4)
SECRETARIAT
Sir
Mr
Mr
Mr
John Hunt
H F T Smith
P Benner
I T Lawman
C ONTENTS
Item
1.
2.
Subject
OVERSEA
AFFAIRS
United States and E u r o p e
1
Iceland
1
Gibraltar
3
V i s i t of the Japanese P r i m e M i n i s t e r
3
Austria
3
NORTHERN IRELAND
T h e I r i s h C a s e at Strasbourg
4
F o r m a t i o n of an E x e c u t i v e
5
3.
MONETARY MATTERS
4.
INDUSTRIAL AFFAIRS
5.
Page
6
T h e M o t o r Industry
7
T h e E l e c t r i c i t y Industry
7
The Railways
7
T h e Coal Industry
8
M O R T G A G E A N D MORTGAGE LENDING
9
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 on h i s r e c e n t v i s i t to the United States to attend the G e n e r a l
A s s e m b l y of the United N a t i o n s , he had found the m o r a l e and state
of mind of the United States A d m i n i s t r a t i o n v e r y d i s t u r b i n g .
P r e o c c u p a t i o n with the consequences of the W a t e r g a t e affair
and the c h a r g e s being l e v e l l e d against the V i c e - P r e s i d e n t ,
M r A g n e w , w e r e p r e v e n t i n g the A d m i n i s t r a t i o n , with the exception
of the S e c r e t a r y of State, D r K i s s i n g e r ^ f r o m taking a g r i p on a f f a i r s .
N e v e r t h e l e s s , , s o m e p r o g r e s s was being m a d e on the definition of the
r e l a t i o n s h i p b e t w e e n E u r o p e and the United S t a t e s , a f t e r a s l o w start
and s o m e m i s u n d e r s t a n d i n g s .
T h e m e e t i n g of the F o r e i g n M i n i s t e r s
of the N i n e , held in Copenhagen on 10 and 11 September^ had m a d e
good p r o g r e s s in the p r e p a r a t i o n of a document on the E u r o p e a n
identity and of a draft d e c l a r a t i o n on the j o i n t p u r p o s e s of the Nine
and the United S t a t e s .
D r K i s s i n g e r had shown s o m e i r r i t a t i o n at
the d e c i s i o n of the Nine to p r e p a r e , j o i n t l y , a d r a f t d e c l a r a t i o n to put
to the A m e r i c a n s f o r d i s c u s s i o n , but he now u n d e r s t o o d the r e a s o n
why t h e y had to p r o c e e d in this way,,
T h e F r e n c h G o v e r n m e n t had
shown t h e m s e l v e s m o r e c o - o p e r a t i v e than had at one t i m e s e e m e d
l i k e l y and with t h e i r a g r e e m e n t d i s c u s s i o n with the A m e r i c a n s w a s
being c a r r i e d f o r w a r d by the P o l i t i c a l D i r e c t o r s of the N i n e ,
There
was a r e a s o n a b l e p r o s p e c t that a s a t i s f a c t o r y statement on d e f e n c e
would be p r o d u c e d in the N o r t h A t l a n t i c T r e a t y O r g a n i s a t i o n ( N A T O )
f o r u s e i f and when the P r e s i d e n t of the United S t a t e s , M r Nixon^ v i s i t e d
Europe.
T h e t i m i n g of the P r e s i d e n t s v i s i t w a s , h o w e v e r , s t i l l
uncertain,,
T h e r e w a s l i t t l e doubt that he would l i k e to make an e a r l y
v i s i t but i t s e e m e d doubtful whether the p o l i t i c a l situation in the
United States would a l l o w h i m to c o m e to E u r o p e b e f o r e the end
of the y e a r .
T h e Cabinet ­
1.
T o o k note of the statement by the F o r e i g n and
Commonwealth Secretary.
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
United States S e c r e t a r y of State, D r K i s s i n g e r , had e x p r e s s e d to h i m
his a n x i e t y about the future of the A m e r i c a n b a s e at K e f l a v i k
although no s u g g e s t i o n had been m a d e t o us that w e should change
our stance in the fishing dispute.
N e v e r t h e l e s s the dispute was b^ing
e x p l o i t e d by s o m e e l e m e n t s to put p r e s s u r e on the I c e l a n d i c
G o v e r n m e n t to t e r m i n a t e the a g r e e m e n t on the b a s e .
Concern
on this i s s u e w a s a l s o f e l t in N A T O w h e r e a r e c e n t r e v i e w had
e m p h a s i s e d the i m p o r t a n c e of the base to the d e f e n c e of the A t l a n t i c
area.
On 25 S e p t e m b e r the P r i m e M i n i s t e r had s u g g e s t e d in a
m e s s a g e t o the P r i m e M i n i s t e r of I c e l a n d , M r Johannes son, that
6
w e should t r y to r e a c h a m o d u s v i v e n d i under which we would w i t h d r a w
n a v a l p r o t e c t i o n and r e s t r i c t v o l u n t a r i l y the s i z e of our fishing effort,,
and I c e l a n d would stop i n t e r f e r i n g with our t r a w l e r s .
M r Johannes son
had i n d i c a t e d that he would l i k e t o h a v e a modus v i v e n d i ; but he had
said that it w a s p o l i t i c a l l y i m p o s s i b l e f o r h i m to g i v e a public u n d e r ­
t a k m g t o stop i n t e r f e r i n g with the t r a w l e r s , although he would do his
b e s t t o e n s u r e that if n a v a l p r o t e c t i o n w a s w i t h d r a w n , such i n t e r f e r e n c e
would c e a s e .
It had t h e r e f o r e been d e c i d e d to send a further m e s s a g e
t o the e f f e c t that i n an e f f o r t t o find a w a y of b r e a k i n g out of the p r e s e n t
i m p a s s e w e had d e c i d e d that the R o y a l N a v y would be withdrawn f r o m
the disputed a r e a a t 1500 h o u r s on 3 O c t o b e r ; that the w i t h d r a w a l
would b e m a d e on the a s s u m p t i o n that the I c e l a n d i c a u t h o r i t i e s would
not take any m e a s u r e s a g a i n s t B r i t i s h t r a w l e r s fishing, o r which had
f i s h e d , in the disputed a r e a ; and that the N a v y and the tugs would
r e t u r n if that assumption p r o v e d to b e w r o n g .
The message also
stated that an i m p o r t a n t o b j e c t i v e w a s t o e s t a b l i s h conditions which
would enable M r Johannes son t o v i s i t London f o r t a l k s with the P r i m e
M i n i s t e r d i r e c t e d t o w a r d s a c h i e v i n g a modus v i v e n d i .
B e f o r e the
m e s s a g e was sent 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 had held
a m e e t i n g with r e p r e s e n t a t i v e s of the industry who had a c c e p t e d the
r e a s o n s f o r sending it and who had been g i v e n an a s s u r a n c e that naval
p r o t e c t i o n would b e r e s t o r e d if the t r a w l e r s w e r e subjected to
harassment.
T H E P R I M E M I N I S T E R said that he had spoken by telephone with
M r Johannes son who w e l c o m e d the m e s s a g e and a g r e e d to c o m e to
London f o r talks on 15 O c t o b e r .
H e had e m p h a s i s e d to
M r Johannes son the e x t r e m e i m p o r t a n c e of a v o i d i n g incidents
in the disputed a r e a .
T h e S e c r e t a r y G e n e r a l of N A T O , D r L u n s ,
who had d i s c u s s e d the m a t t e r with the P r i m e M i n i s t e r on 30 S e p t e m b e r ,
had g i v e n us an a s s u r a n c e that if, a f t e r we had withdrawn naval
p r o t e c t i o n , our t r a w l e r s should be h a r a s s e d and w e w e r e t h e r e f o r e
o b l i g e d t o r e s t o r e p r o t e c t i o n , he would support u s .
It would now be
n e c e s s a r y t o w o r k out in d e t a i l what l i m i t a t i o n of our fishing e f f o r t we
would be p r e p a r e d to a c c e p t as p a r t of a modus v i v e n d i .
T h e Cabinet ­
2.
T o o k n o t e , with a p p r o v a l , of the s t a t e m e n t s
b y the P r i m e M i n i s t e r and the F o r e i g n and
Commonwealth Secretary,
Gibraltar
Previous
-Reference:
C M ( 7 3 ) 26th
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
although the Spanish F o r e i g n M i n i s t e r , Senor L o p e z R o d o , had
taken a p r e d i c t a b l y h a r d line on G i b r a l t a r in his speech to the
United N a t i o n s G e n e r a l A s s e m b l y , they had held a p r i v a t e c o n v e r s a t i o n
in which Senor R o d o had r e f r a i n e d f r o m any t h r e a t s to i n t e r f e r e with
our t r a d e and o t h e r r e l a t i o n s and had, on the c o n t r a r y , e x p r e s s e d a
d e s i r e t o d e v e l o p our r e l a t i o n s so far as p o s s i b l e .
T h e y had a g r e e d
that t h e r e would b e no point, at this stage, in continuing the m e e t i n g s
on G i b r a l t a r which he had had with Senor R o d o * s p r e d e c e s s o r but he
had undertaken to send a p a p e r to Senor R o d o which would o f f e r
suggestions on w a y s in which Spain might i m p r o v e h e r r e l a t i o n s
with G i b r a l t a r .
s
T h e Cabinet ­
3.
T o o k note of the statement by the F o r e i g n and
Commonwealth Secretary.
Visit
of the
Japanese
Prime
Minister
T H E P R I M E M I N I S T E R said that his talks with the Japanese P r i m e
M i n i s t e r , M r T a n a k a , who w a s h e r e on an o f f i c i a l v i s i t , w e r e going
well.
A n i n t e r e s t i n g p r o p o s a l put f o r w a r d b y M r Tanaka w a s that
Japan should be a l l o w e d to i n v e s t in the e x p l o i t a t i o n of N o r t h Sea o i l ;
that Japan would not h a v e a r i g h t to a c q u i r e any of the o i l thus
p r o d u c e d , but that t h e r e would be offset a r r a n g e m e n t s with B r i t i s h
P e t r o l e u m o r S h e l l , under which Japan would obtain o i l p r o d u c e d
e l s e w h e r e ; and that a s p a r t of the package Japan would a l s o i n v e s t
in d e v e l o p m e n t a r e a s in B r i t a i n .
T h i s p r o p o s a l w a s being e x a m i n e d .
W e w e r e a l s o t r y i n g t o p e r s u a d e M r Tanaka to a c q u i r e f i s s i l e
m a t e r i a l f r o m the A n g l o - G e r m a n - D u t c h c e n t r i f u g e , and we w e r e
u r g i n g h i m to r e t a i n an i n t e r e s t in the C o n c o r d e ,
T h e Cabinet
4.
T o o k note of the statement b y the P r i m e Minister. Austria
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
undertaking r e c e n t l y g i v e n b y the A u s t r i a n G o v e r n m e n t to A r a b
t e r r o r i s t s , that in r e t u r n f o r the r e l e a s e of h o s t a g e s t h e y would
c l o s e the c a m p used f o r the r e c e p t i o n o f Soviet J e w s e m i g r a t i n g
f r o m the S o v i e t Union, had c o m e under s e v e r e c r i t i c i s m and c r e a t e d
a dangerous p r e c e d e n t .
H e w a s h i m s e l f v i s i t i n g A u s t r i a on
16 O c t o b e r , and w a s i n s t r u c t i n g our A m b a s s a d o r to i n f o r m the
A u s t r i a n G o v e r n m e n t now of our c o n c e r n at the p r o b l e m s c r e a t e d
b y the undertaking.
T h e L e a d e r of the Opposition had suggested
that f a c i l i t i e s should be p r o v i d e d in c a m p s in this country to r e c e i v e
Jewish i m m i g r a n t s on t h e i r w a y f r o m the S o v i e t Union t o I s r a e l .
T h i s p r o p o s a l would r a i s e p r a c t i c a l d i f f i c u l t i e s ; the n u m b e r s i n v o l v e d
w e r e l a r g e ; and w e would b e c r e a t i n g a t a r g e t f o r A r a b t e r r o r i s m in
this country.
C o n s i d e r a t i o n would h a v e to be g i v e n t o the line to take
if M r W i l s o n ' s p r o p o s a l a t t r a c t e d support; but in the m e a n t i m e t h e r e
w a s a p o s s i b i l i t y that the A u s t r i a n s m i g h t find w a y s of continuing t o
help the i m m i g r a n t s on t h e i r way to I s r a e l ,
T h e Cabinet ­
5.
T o o k note of the statement b y the F o r e i g n and
Commonwealth Secretary,
2.
T H E P R I M E M I N I S T E R said that the E u r o p e a n C o m m i s s i o n
on Human R i g h t s w a s starting i t s h e a r i n g s on the I r i s h complaint that
t h e r e had been g r a v e i n f r i n g e m e n t s of human r i g h t s in N o r t h e r n
Ireland.
When he had v i s i t e d the P r i m e M i n i s t e r of I r e l a n d ,
M r C o s g r a v e , on 17 S e p t e m b e r , they had r e a c h e d a g r e e m e n t
that the c a s e should be set a s i d e on the b a s i s of a f r i e n d l y s e t t l e m e n t .
M r C o s g r a v e had said that f o r his own p o l i t i c a l r e a s o n s he must not
appear t o be acting i n c o l l u s i o n with us and we had t h e r e f o r e a g r e e d
that we would t a k e the i n i t i a t i v e in asking the C o m m i s s i o n to pursue
the p o s s i b i l i t y of a r r a n g i n g a f r i e n d l y s e t t l e m e n t , on the understanding
that the I r i s h G o v e r n m e n t would respond f a v o u r a b l y .
Subsequently,
h o w e v e r , M r C o s g r a v e had i n f o r m e d h i m that t h i s p r o c e d u r e would
not be a c c e p t a b l e : the p r e s e n t stage of the h e a r i n g s , which c o n s i s t e d
of the I r i s h p r e s e n t a t i o n of t h e i r c a s e and our r e s p o n s e ^ must go
ahead, but t h e I r i s h G o v e r n m e n t would a c c e p t a m o v e t o w a r d s a
f r i e n d l y s e t t l e m e n t a f t e r the conclusion of the p r e s e n t stage and
b e f o r e the next s t a g e , at which individual w i t n e s s e s would o f f e r
e v i d e n c e in support of the I r i s h c o m p l a i n t .
Although this change
in the I r i s h p o s i t i o n w a s r e g r e t t a b l e , i t w a s the next stage of the
h e a r i n g s which it w a s p a r t i c u l a r l y i m p o r t a n t to a v o i d , s i n c e the
w i t n e s s e s would include e x t r e m i s t s w h o s e e v i d e n c e would c r e a t e
publicity p r e j u d i c i a l to the fulfilment o f our constitutional p o l i c i e s
in N o r t h e r n I r e l a n d .
T h e r e r e m a i n e d the p o s s i b i l i t y that in
p r e s e n t i n g h i s c a s e at the p r e s e n t stage the I r i s h A t t o r n e y G e n e r a l ,
M r C o s t e l l o , would f a i l to o b s e r v e p r o p e r r e s t r a i n t .
The Attorney
G e n e r a l had w a r n e d M r C o s t e l l o that the tone of our r e p l y would depend
upon the tone of h i s s t a t e m e n t .
T h e Cabinet ­
1.
T o o k note of the statement by the P r i m e Minister. Formation
of an
Executive
Previous
"Preference:
C M ( 7 3 ) 42nd
Conclusions,
Minute 3
T H E P R I M E M I N I S T E R said that on 5 O c t o b e r the 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 would hold his f i r s t joint m e e t i n g with
r e p r e s e n t a t i v e s of 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 and the A l l i a n c e P a r t y to d i s c u s s the f o r m a t i o n
of an E x e c u t i v e ,
T h e Cabinet ­
2,
T o o k note of the statement b y the P r i m e
Minister,
5
3,
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
m e e t i n g of the International M o n e t a r y Fund in N a i r o b i had as
e x p e c t e d , f a i l e d to make any substantial p r o g r e s s on the subject
of m o n e t a r y r e f o r m .
T h e C o m m i t t e e of T w e n t y w e r e t o m e e t a g a i n
in January 1974,
T h e r e had h o w e v e r been useful m e e t i n g s of s m a l l
g r o u p s on the s i d e .
T h e m e e t i n g of C o m m o n w e a l t h F i n a n c e
M i n i s t e r s had led to a useful d i s c u s s i o n , conducted i n a f r i e n d l y
spirit.
T h e r e had b e e n s o m e muted c o m p l a i n t s about o u r a l l e g e d
f a i l u r e t o consult fully on the s t e r l i n g a r r a n g e m e n t s , but w e had not
c o m e under s e r i o u s p r e s s u r e ,
g
T h e Cabinet T o o k note of the s t a t e m e n t by the C h a n c e l l o r of the
Exchequer.
INDUSTRIAL
AFFAIRS
The Motor
IndustryPrevious
Reference:
C M ( 7 3 ) 42nd
Conclusions,
Minute 4
4.
T H E S E C R E T A R Y OF S T A T E F O R E M P L O Y M E N T s a i d
that, although the d e c i s i o n of the e l e c t r i c i a n s at C h r y s l e r s
L i n w o o d f a c t o r y t o r e m a i n at work had enabled production to b e
maintained and the s t a r t of the d i s m i s s a l s t o be postponed, i n t e r ­
union d i s c u s s i o n s at C o v e n t r y on the p r e v i o u s day had f a i l e d t o
lead to a s e t t l e m e n t of the dispute about the e l e c t r i c i a n s ' pay
increment.
T h e r e w e r e to b e further negotiations b e t w e e n
C h r y s l e r s and r e p r e s e n t a t i v e s of the E l e c t r i c a l , E l e c t r o n i c ,
T e l e c o m m u n i c a t i o n s and Plumbing Union l a t e r that day.
1
The B r i t i s h L e y l a n d M o t o r Company had now told t h e i r w o r k e r s
at their L o n g b r i d g e f a c t o r y that they had d e c i d e d t o challenge
i n the H i g h Court the P a y B o a r d ' s i n t e r p r e t a t i o n of the P a y Code
i n refusing to a l l o w the w h o l e of the a g r e e d pay i n c r e a s e of
£ 4 , 00 a w e e k to b e b a c k - d a t e d to July.
A l t h o u g h the unions had
a c c e p t e d this c o u r s e t h e r e w e r e s t i l l s o m e doubts about the
l e g a l i t y of such a c h a l l e n g e .
It w a s , h o w e v e r , hoped that t h e s e
could b e o v e r c o m e with the c o - o p e r a t i o n of the P a y B o a r d ,
T h i s should a l l o w further industrial action t o b e a v o i d e d .
A g r e e m e n t had been r e a c h e d that the sacking of the w o r k e r
c o n c e r n e d in the dispute at F o r d s should be r e f e r r e d to a r b i t r a t i o n ,
and this had enabled production at D a g e n h a m to be r e s u m e d .
The E l e c t r i c i t y
Industry
The E l e c t r i c a l P o w e r Engineers A s s o c i a t i o n ( E P E A ) w e r e
d i s g r u n t l e d o v e r the i n d u s t r y ' s i n a b i l i t y under the P a y Code to
i m p l e m e n t an a g r e e m e n t f o r i n c r e a s e d a l l o w a n c e s f o r standby
duties r e a c h e d during the p r e v i o u s D e c e m b e r , and w e r e a l s o
seeking to r e s t o r e a 25 p e r cent l e a d i n pay o v e r the manual
w o r k e r s in the i n d u s t r y .
Although i t would be p o s s i b l e to go s o m e
w a y t o w a r d s m e e t i n g t h e i r demands under the Stage 3 P a y C o d e ,
this could not be done until their next pay s e t t l e m e n t w a s due i n the
f o l l o w i n g F e b r u a r y ; and in the m e a n t i m e the E P E A w e r e
threatening to ban o u t - o f - h o u r s w o r k i n g f r o m 1 N o v e m b e r .
This
would b e l i k e l y to l e a d to s o m e interruption of supply, although
maintenance w o r k on s a f e t y grounds would b e undertaken.
C o n s i d e r a t i o n m i g h t be g i v e n t o the p o s s i b i l i t y that the P a y B o a r d
might take s o m e account of the e n g i n e e r s ' g r i e v a n c e s during
their study of r e l a t i v i t i e s .
The Railways
H e and the M i n i s t e r f o r T r a n s p o r t I n d u s t r i e s would be m e e t i n g
the C h a i r m a n of the B r i t i s h R a i l w a y s B o a r d ( B R B ) that afternoon
to discuss the negotiations on the r e s t r u c t u r i n g of d r i v e r s ' p a y .
T h e B R B had a l r e a d y o f f e r e d the d r i v e r s i n c r e a s e s of up to £ 6 . 20
a w e e k , in addition to any annual pay i n c r e a s e which might b e c o m e
due on 1 M a y 1974, to be paid in 3 annual i n s t a l m e n t s starting on
1 January 1974.
T h e A s s o c i a t e d S o c i e t y of L o c o m o t i v e E n g i n e e r s
and F i r e m e n ( A S L E F ) had r e j e c t e d both the amount and the staging
of the p r o p o s e d i n c r e a s e , which a p p e a r e d to be in b r e a c h of the
Pay Code.
S o m e b r a n c h e s of A S L E F w e r e a l r e a d y demanding that
i n d u s t r i a l a c t i o n be taken, and unofficial a c t i o n b e f o r e the end of
the month a p p e a r e d p o s s i b l e .
O f f i c i a l a c t i o n m i g h t be d e l a y e d
e i t h e r b y a r e f e r e n c e of the c a s e to a r b i t r a t i o n , or b y a d e c i s i o n
b y A S L E F to a w a i t the o u t c o m e of the S p e c i a l C o n g r e s s of the
T r a d e s Union C o n g r e s s ( T U C ) which w a s t o c o n s i d e r the T U C
attitude to the Stage 3 p o l i c y .
A f u l l - s c a l e national s t r i k e did
not, h o w e v e r , s e e m l i k e l y .
T h e r e w a s to be a m e e t i n g b e t w e e n the N a t i o n a l C o a l B o a r d and
the N a t i o n a l Union of M i n e w o r k e r s ( N U M ) on 10 O c t o b e r about
the m i n e w o r k e r s pay c l a i m .
Although t h e r e was p r e s s u r e f o r
i n d u s t r i a l a c t i o n f r o m m i l i t a n t b r a n c h e s of the N U M t h e r e w a s
hope that the p r o v i s i o n f o r shift a l l o w a n c e s m a d e i n the Stage 3
P a y Code would p e r s u a d e the N U M E x e c u t i v e not t o take i n d u s t r i a l
action.
T h e y would i n any c a s e need to conduct a b a l l o t of
t h e i r m e m b e r s on w h a t e v e r offer w a s m a d e .
1
H e c o n s i d e r e d that the s c o p e for taking a c t i o n t o t r e a t p a r t i c u l a r
pay p r o b l e m s as s p e c i a l c a s e s had now b e e n exhausted, s i n c e the
Stage 3 Code had a l r e a d y b e e n w e i g h t e d s i g n i f i c a n t l y in f a v o u r of
w o r k e r s i n the public s e c t o r .
T H E P R I M E M I N I S T E R said that he had r e c e n t l y m e t the 3 C h a i r m e n
of the P a y R e v i e w B o d i e s and they had a g r e e d that, b e f o r e
submitting t h e i r p r o p o s a l s to the G o v e r n m e n t , they would a s s u r e
t h e m s e l v e s , b y consulting the P a y B o a r d , that their r e c o m m e n d a ­
tions w e r e in c o n f o r m i t y w i t h the P a y C o d e .
H e had a l s o m e t the
N a t i o n a l Staff Side about the pay of c i v i l s e r v a n t s under Stage 3;
they had adopted a r e a s o n a b l e attitude, i n w h i c h the G o v e r n m e n t s
undertaking to take steps to p r o t e c t the p e n s i o n p o s i t i o n of those
whose s a l a r y on r e t i r e m e n t had b e e n a f f e c t e d b y the pay p o l i c y
had p l a y e d a p a r t .
He had a l s o had f u r t h e r d i s c u s s i o n s with the r e p r e s e n t a t i v e s of the
T U C and the C o n f e d e r a t i o n of B r i t i s h I n d u s t r y ( C B I ) on the Stage 3
P a y and P r i c e s C o d e , but had not d i s c l o s e d the G o v e r n m e n t s
thinking about the l e v e l of the pay l i m i t .
T h e T U C , capably ar I
e f f e c t i v e l y l e d b y t h e i r new G e n e r a l S e c r e t a r y , w e r e expecting
f r e e r , r a t h e r than w h o l l y f r e e , c o l l e c t i v e b a r g a i n i n g to be i n t r o ­
duced in Stage 3.
T h e r e w a s a genuine a n x i e t y on the p a r t of the
C B I about the i m p a c t of the P r i c e Code on i n v e s t m e n t , at a t i m e
when the Stage 2 C o d e w a s beginning t o take e f f e c t .
The C B I had
a l s o b e e n c o n c e r n e d about the e f f e c t on p r o f i t a b i l i t y of any i n c r e a s e
i n the p r o d u c t i v i t y o f f s e t .
W h e r e a s the T U C wanted f l e x i b i l i t y on
pay and r i g i d c o n t r o l of p r i c e s , the C B I could e n v i s a g e only v e r y
l i m i t e d r e l a x a t i o n of the pay l i m i t s and, i d e a l l y , would have
l i k e d the P r i c e C o m m i s s i o n to be disbanded and for the
G o v e r n m e n t t o have r e l i e d upon c o m p e t i t i o n t o a c h i e v e the
n e c e s s a r y r e s t r a i n t on p r i c e s .
They w e r e , however, right to
s t r e s s the i m p o r t a n c e of p r o f i t s in s e c u r i n g g r e a t e r i n v e s t m e n t .
T h e Cabinet T o o k note of the statements b y the P r i m e M i n i s t e r
and the S e c r e t a r y of State for E m p l o y m e n t .
MORTGAGE AND
MORTGAGE
LENDING
5.
T h e Cabinet had b e f o r e them a m e m o r a n d u m b y the
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 about m o r t g a g e s and
m o r t g a g e lending ( C P ( 7 3 ) 9 3 ) .
Previous
Reference:
C M ( 7 3 ) 40th
Conclusions,
Minute 5
T H E S E C R E T A R Y O F S T A T E F O R T H E E N V I R O N M E N T said that
h i s m e m o r a n d u m r e c o m m e n d e d that, subject to a s a t i s f a c t o r y
r e s p o n s e f r o m the building s o c i e t i e s , the G o v e r n m e n t should
e n d o r s e the M e m o r a n d u m of A g r e e m e n t on S t a b i l i s a t i o n which had
been p r e p a r e d f o l l o w i n g d i s c u s s i o n with the C o u n c i l of the
Building S o c i e t i e s A s s o c i a t i o n ( B S A ) ; and that the p r e p a r a t i o n of
l e g i s l a t i o n g i v i n g a p p r o p r i a t e r e s e r v e b a c k - u p p o w e r s should be
put in hand.
A s r e g a r d s m o r e i m m e d i a t e a c t i o n , t h e r e did not
s e e m to be grounds f o r shielding the g e n e r a l i t y of e x i s t i n g o w n e r ­
occupiers from present interest rates.
There was, however, a
strong c a s e f o r s e l e c t i v e a s s i s t a n c e to f i r s t - t i m e p u r c h a s e r s ,
and a p o s s i b l e s c h e m e was d e s c r i b e d in A p p e n d i x D of his p a p e r .
Such a s c h e m e could be b a s e d e i t h e r on grants o r l o a n s .
His
p r e f e r e n c e was for the l a t t e r . It had until r e c e n t l y b e e n e n v i s a g e d
that the c o s t would h a v e to be m e t b y the G o v e r n m e n t ; but t h e r e
w e r e now indications that the building s o c i e t i e s m i g h t p r e f e r to
o r g a n i s e and finance such a s c h e m e t h e m s e l v e s .
If s o , this
would be the p r e f e r a b l e solution; no public expenditure would be
i n v o l v e d ; l e g i s l a t i o n would not be n e c e s s a r y ; and the a r r a n g e ­
ments could be b r o u g h t into e f f e c t much m o r e q u i c k l y .
The
building s o c i e t i e s w o u l d no doubt r e q u i r e an E x c h e q u e r g u a r a n t e e ;
but this would c o s t l i t t l e and should b e p r o v i d e d . A s a t h i r d
m e a s u r e he p r o p o s e d that no steps should b e taken t o r e s t r i c t
lending b y l o c a l a u t h o r i t i e s to o w n e r - o c c u p i e r s , e v e n though it
would s h o r t l y e x c e e d the total sum f o r which p r o v i s i o n had b e e n
made in 1973-74.
If no r e s t r i c t i o n s w e r e i m p o s e d the e x c e s s
lending during the y e a r w a s l i k e l y to amount to about £ 13 0 m i l l i o n .
F i n a l l y , the t i m e s e e m e d to have c o m e for a r a d i c a l r e v i e w of s o m e
i m p o r t a n t l o n g e r - t e r m i s s u e s , including the o r g a n i s a t i o n of the
building s o c i e t i e s t h e m s e l v e s and the methods used f o r conducting
t h e i r financial a f f a i r s , n e i t h e r of which m i g h t now be suitable f o r
modern needs.
A study should t h e r e f o r e b e set on foot at once,
with a v i e w to an e a r l y r e p o r t being m a d e t o the Cabinet.
In d i s c u s s i o n i t w a s a r g u e d that the p r o p o s e d s c h e m e f o r helping
f i r s t - t i m e p u r c h a s e r s w a s u n l i k e l y to m a k e a m a j o r i m p a c t .
The
indications w e r e that the n u m b e r of houses s t a r t e d in 1974 m i g h t , if
no action w e r e taken, f a l l to about 150, 000, c o m p a r e d with s o m e
215, 000 t h i s y e a r .
T h e s c h e m e might w e l l f a i l to p r o d u c e any
substantial i n c r e a s e in this v e r y l o w f i g u r e f o r 1974, and in that
event the G o v e r n m e n t s reputation m i g h t be d a m a g e d b y a c c u s a t i o n s
that the action taken had been i n e f f e c t i v e and h a l f - h e a r t e d .
As
against t h i s , it w a s a r g u e d that the s c h e m e was on b a l a n c e l i k e l y
to make a significant i m p a c t on the number of s t a r t s s i n c e , although
it could not of i t s e l f r e m e d y the p r e s e n t s h o r t a g e of housing finance ­
in which no i m m e d i a t e i m p r o v e m e n t s e e m e d l i k e l y in v i e w of the
unfavourable S e p t e m b e r i n v e s t m e n t f i g u r e s - it would channel the
a v a i l a b l e finance w h e r e it w a s m o s t n e e d e d .
It would b r i n g into
the m a r k e t f o r houses a substantial number of f i r s t - t i m e p u r c h a s e r s
who would o t h e r w i s e h a v e b e e n excluded and thus f o s t e r confidence
amongst b u i l d e r s and m o d e r a t e the d e c l i n e in the number of houses
started.
Such a s c h e m e would m o r e o v e r b e a v a l u a b l e e l e m e n t in
the p a c k a g e of p r o p o s a l s which the G o v e r n m e n t would be putting
f o r w a r d f o r Stage 3 of t h e i r c o u n t e r - i n f l a t i o n a r y p o l i c i e s .
The
G o v e r n m e n t should if n e c e s s a r y be p r e p a r e d to p r o v i d e finanee
based on loans r a t h e r
­
f o r the s c h e m e , w h i c h should
D e
than on g r a n t s .
It would h o w e v e r be much p r e f e r a b l e f o r the
building s o c i e t i e s t h e m s e l v e s to finance and run the s c h e m e .
It would then b e p o s s i b l e to a v o i d the n e e d f o r l e g i s l a t i o n , and
t h i s was highly d e s i r a b l e , b e a r i n g in m i n d the p o l i t i c a l e m b a r r a s s m e n t
which would be caused b y the a m e n d m e n t s w h i c h would no doubt be
m o v e d to widen the s c o p e of the s c h e m e .
M o r e o v e r j , it w a s i m p o r t a n t
that the s c h e m e should b e c o m e e f f e c t i v e q u i c k l y , and this would not be
p o s s i b l e if l e g i s l a t i o n w e r e a p r e r e q u i s i t e .
In further d i s c u s s i o n , i t w a s a r g u e d that if the building s o c i e t i e s
d e c l i n e d to finance the s c h e m e e v e n with an E x c h e q u e r g u a r a n t e e
and it consequently b e c a m e n e c e s s a r y f o r the G o v e r n m e n t t h e m s e l v e s
to finance i t , i t m i g h t b e p r e f e r a b l e t o p r o v i d e in the l e g i s l a t i o n f o r
the s c h e m e to c o m e to an end a f t e r a f i x e d p e r i o d - p e r h a p s two o r
t h r e e y e a r s - u n l e s s i t w e r e r e n e w e d by a f f i r m a t i v e r e s o l u t i o n .
Changes might w e l l b e c o m e n e c e s s a r y in the light of changing
c i r c u m s t a n c e s , but it would b e m o r e difficult t o m a k e t h e m if
the l e g i s l a t i o n p r o v i d e d f o r the s c h e m e t o continue unchanged
i n d e f i n i t e l y unless s p e c i f i c action w e r e taken to a l t e r o r discontinue
it.
It w a s noted that a s c h e m e on these l i n e s would r e q u i r e significant
public e x p e n d i t u r e , and that offsetting s a v i n g s would h a v e to b e sought.
In subsequent d i s c u s s i o n , t h e r e was g e n e r a l a g r e e m e n t that it would
not be p r a c t i c a b l e to r e s t r i c t lending to house p u r c h a s e r s b y l o c a l
authorities.
It w a s noted that e a r l y action m i g h t be n e e d e d to
a u t h o r i s e continued lending b y the G r e a t e r London C o u n c i l , which
had a l r e a d y m a d e l e a n s up to the l i m i t a u t h o r i s e d by the D e p a r t m e n t
o f the E n v i r o n m e n t f o r the y e a r 1973-74.
I n c r e a s e d lending by l o c a l
a u t h o r i t i e s would s i g n i f i c a n t l y o f f s e t the shortage of p r i v a t e housing
finance and, since it w a s r e s t r i c t e d to p r i o r i t y c a t e g o r i e s , would be
d i r e c t e d w h e r e the n e e d w a s g r e a t e s t .
A s r e g a r d s the l o n g e r t e r m ,
t h e r e w a s g e n e r a l a g r e e m e n t that a r a d i c a l r e v i e w of the o r g a n i s a t i o n
and financial m e t h o d s of the building s o c i e t i e s should be undertaken.
T h e s o c i e t i e s w e r e h i g h l y c o n s e r v a t i v e in t h e i r outlook and had so far
set t h e i r f a c e s against changes in methods which had been found
d e s i r a b l e in f o r e i g n c o u n t r i e s .
I t was doubtful w h e t h e r , as at
p r e s e n t constituted, t h e y w e r e capable of m e e t i n g c o n t e m p o r a r y
n e e d s , and i t w a s i m p o r t a n t that i n the c o u r s e of d i s c u s s i o n about
s h o r t - t e r m m e a s u r e s no a s s u r a n c e s would be g i v e n which would
p r e c l u d e the G o v e r n m e n t f r o m seeking r a d i c a l changes in the l o n g e r
term,
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, in the light of the p r e s e n t s h o r t a g e of housing
f i n a n c e , the d a n g e r of a s e r i o u s d e c l i n e in house building and the
p o l i t i c a l d i f f i c u l t i e s caused by the i n c r e a s e in the m o r t g a g e r a t e s
t o 11 p e r c e n t , m e a s u r e s m u s t b e taken on the l i n e s p r o p o s e d b y the
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 M e m o r a n d u m of
A g r e e m e n t on S t a b i l i s a t i o n should be put into e f f e c t a s soon as
p o s s i b l e , and the p r e p a r a t i o n of l e g i s l a t i o n c o n f e r r i n g b a c k - u p
r e s e r v e p o w e r s should be p r e s s e d f o r w a r d .
T h e p r o v i s i o n of
help f o i f i r s t - t i m e p u r c h a s e r s w a s a m a t t e r of u r g e n c y .
It should
t a k e the f o r m of i n t e r e s t - r e d u c i n g l o a n s , and the a r r a n g e m e n t s should
i f p o s s i b l e b e financed and run b y the building s o c i e t i e s t h e m s e l v e s .
A n E x c h e q u e r guarantee should b e made a v a i l a b l e to the building
s o c i e t i e s if t h e y sought o n e .
If in the end the building s o c i e t i e s
p r o v e d unwilling o r unable to finance a loans s c h e m e t h e m s e l v e s ,
G o v e r n m e n t m o n e y s should be m a d e a v a i l a b l e .
The G o v e r n m e n t s
d e c i s i o n on s t a b i l i s a t i o n and on help f o r f i r s t - t i m e p u r c h a s e r s
should b e announced in the f o r t h c o m i n g White P a p e r on Stage 3
of c o u n t e r - i n f l a t i o n a r y p o l i c i e s , a draft of which w a s due to b e
c o n s i d e r e d b y the Cabinet on the f o l l o w i n g T h u r s d a y .
Before
then, t h e r e should b e u r g e n t consultations with the B S A in o r d e r
to d i s c o v e r h o w f a r t h e i r l e a d e r s w e r e p r e p a r e d to g o in undertaking
t o r e c o m m e n d to t h e i r m e m b e r s an i n t e r e s t - r e d u c i n g s c h e m e f o r
f i r s t - t i m e p u r c h a s e r s financed and run b y the building s o c i e t i e s
themselves.
T h e p r e c i s e t e r m s of the p a s s a g e in the White P a p e r
would depend on the o u t c o m e of t h e s e c o n s u l t a t i o n s .
T h e Cabinet
a l s o a g r e e d that r e s t r i c t i o n s should not be i m p o s e d on lending to
o w n e r - o c c u p i e r s by l o c a l a u t h o r i t i e s and noted that the public
e x p e n d i t u r e p r o v i s i o n m a d e f o r 1973-74 was l i k e l y to b e e x c e e d e d
b y £130 m i l l i o n .
It would be p r e s e n t a t i o n a l l y d e s i r a b l e to l a y s t r e s s
on the extent to which public e x p e n d i t u r e was thus being used t o make
g o o d the c u r r e n t s h o r t a g e of housing finance in the p r i v a t e s e c t o r .
A s r e g a r d s the l o n g e r t e r m , a study should be a r r a n g e d on the
g e n e r a l l i n e s which had been p r o p o s e d .
It should c o v e r a l l a s p e c t s
of p r i v a t e s e c t o r housing finance and should not shrink f r o m making
r a d i c a l p r o p o s a l s i n v o l v i n g , f o r e x a m p l e , m a j o r changes in the
s t r u c t u r e of the building s o c i e t i e s and i n t h e i r f i n a n c i a l m e t h o d s .
I t s findings should b e r e p o r t e d to the Cabinet at an e a r l y d a t e .
T h e Cabinet ­
l.
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 summing up of t h e i r d i s c u s s i o n .
2,
I n v i t e d the 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 C h a n c e l l o r
o f the E x c h e q u e r : ­
a.
In the light of e a r l y consultations with
the building s o c i e t i e s on the l i n e s i n d i c a t e d in
the summing up to p r e p a r e a suitable p a s s a g e
f o r inclusion in the draft "White P a p e r on Stage 3
of c o u n t e r - i n f l a t i o n a r y p o l i c i e s .
b.
Subject to the r e s p o n s e of the Building
S o c i e t i e s A s s o c i a t i o n to the M e m o r a n d u m of
A g r e e m e n t on Stabilisation, t o a r r a n g e f o r
the p r e p a r a t i o n of the n e c e s s a r y b a c k - u p
legislation.
c
T o a r r a n g e f o r a r a d i c a l study of the
l o n g e r - t e r m p r o b l e m s of p r i v a t e s e c t o r
housing finance and to r e p o r t the c o n c l u s i o n s
to the Cabinet b y the end of the y e a r .
fl
Cabinet Office
2 O c t o b e r 1973