(c) crown copyright
Catalogue Reference:CAB/128/54/3
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THIS D O C U M E N T IS T H E P R O P E R T Y O F 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
C C ( 7 4 ) 3rd
.
"
COPY NO
91
Conclusions
PARINET C O N C L U S I O N S of a M e e t i n g of the C a b i n e t h e l d at 10 D o w n i n g S t r e e t on T H U R S D A Y 14 M A R C H 1974 at 10. 30 a m PRESENT
T h e R t Hon H a r o l d W i l s o n M P P r i m e Minister The R t Hon E d w a r d S h o r t M P
L o r d P r e s i d e n t o f the C o u n c i l
T h e R t Hon J a m e s C a l l a g h a n M P
S e c r e t a r y of State f o r F o r e i g n and
Commonwealth Affairs
The R t H o n L o r d E l w y n - J o n e s
Lqrd Chancellor
T h e R t Hon R o y Jenkins M P S e c r e t a r y of State f o r the H o m e Department The R t Hon D e n i s H e a l e y M P
C h a n c e l l o r o f the E x c h e q u e r
T h e R t H o n Anthony C r o s l a n d 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
The R t Hon M i c h a e l F o o t M P
S e c r e t a r y o f State f o r E m p l o y m e n t
T h e R t Hon E r i c V a r l e y M P
S e c r e t a r y of State f o r E n e r g y
The R t Hon S h i r l e y W i l l i a m s M P
S e c r e t a r y o f State f o r P r i c e s and
Consumer P r o t e c t i o n
The Rt Hon B a r b a r a Castle 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
The R t Hon A n t h o n y W e d g w o o d Benn M P
S e c r e t a r y o f State f o r I n d u s t r y
T h e R t Hon P e t e r Shore M P
S e c r e t a r y o f State f o r T r a d e
T h e R t Hon R o y M a s o n M P
S e c r e t a r y of State f o r D e f e n c e
The R t Hon Reginald P r e n t i c e M P
S e c r e t a r y of State f o r E d u c a t i o n and
Science
The R t Hon W i l l i a m R o s s M P
S e c r e t a r y o f State f o r S c o t l a n d . .
T h e R t H o n John M o r r i s Q C M P S e c r e t a r y of State f o r W a l e s v
The R t H o n M e r l y n R e e s 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 r e l a n d
T h e R t Hon F r e d e r i c k P e a r t 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 The R t Hon H a r o l d L e v e r M P
C h a n c e l l o r o f t h e Duchy o f L a n c a s t e r
T h e R t H o n L o r d Shepherd
L o r d P r i v y Seal
ALSO
PRESENT
The Rt Hon Robert M e l l i s h M P
Parliamentary Secretary, Treasury
SECRETARIAT
Sir
Mr
Mr
Mr
Mr
Mr
Mr
John Hunt
H F T S m i t h ( I t e m s 1-4)
P B e n n e r ( I t e m s 1, 2 and 7)
J A H a m i l t o n ( I t e m s 5 and 6)
J Anson ( I t e m 5)
R J 0 ' N e i l l ( I t e m s 3 and 4 )
R L B a x t e r ( I t e m 6)
CONTENTS
Item
Subject
Page
1.
Q U E S T I O N S O F P R O C E D U R E
1
2.
P A R L I A M E N T A R Y A F F A I R S
1
3.
F O R E I G N A F F A I R S
2
4.
N O R T H E R N I R E L A N D
2
5.
THE ECONOMIC SITUATION
It
3
General
4
Concorde
5
Channel Tunnel, Maplin A i r p o r t
5
Defence
5
Agriculture
6
Education
6
Nationalised Industry P r i c e s
6
Subject
PRICES
POLICY
1974 U P R A T I N G O F S O C I A L S E C U R I T Y B E N E F I T S
iii
1.
T H E P R I M E M I N I S T E R s a i d that he had a l r e a d y u r g e d h i s
c o l l e a g u e s t o study " Q u e s t i o n s of P r o c e d u r e f o r M i n i s t e r s "
( C ( P ) ( 7 4 ) 1) v e r y c a r e f u l l y .
H e wanted now to e m p h a s i s e that,
a l t h o u g h i t w a s i m p o r t a n t that the G o v e r n m e n t s p o l i c i e s should
b e p u b l i c l y p r e s e n t e d t o the b e s t a d v a n t a g e , M i n i s t e r s should
e x e r c i s e c a u t i o n i n a g r e e i n g t o g i v e i n t e r v i e w s to the m e d i a ,
i n c l u d i n g the f o r e i g n p r e s s .
M i n i s t e r s w h o thought i t r i g h t t o
g i v e such i n t e r v i e w s s h o u l d n o r m a l l y c o n f i n e t h e i r r e m a r k s to
m a t t e r s for which they w e r e d i r e c t l y r e s p o n s i b l e ; in p a r t i c u l a r ,
p r o n o u n c e m e n t s should not b e m a d e about f i s c a l q u e s t i o n s ,
m a t t e r s involving public expenditure or f o r e i g n relations (which
o f c o u r s e i n c l u d e d this c o u n t r y ' s r e l a t i o n s h i p - w i t h the E u r o p e a n
E c o n o m i c C o m m u n i t y ) u n l e s s t h e r e had b e e n f u l l p r i o r c o n s u l t a t i o n
w i t h the r e s p o n s i b l e M i n i s t e r s .
The Cabinet T o o k note of the s t a t e m e n t b y the P r i m e M i n i s t e r .
2.
T h e C a b i n e t w e r e i n f o r m e d of the b u s i n e s s to b e taken i n
the H o u s e of C o m m o n s d u r i n g the f o l l o w i n g w e e k .
It w a s noted that t h e r e w a s a p o s s i b i l i t y that the G o v e r n m e n t c o u l d
b e d e f e a t e d on the a m e n d m e n t to the A d d r e s s i n R e p l y to the
G r a c i o u s S p e e c h w h i c h the C o n s e r v a t i v e P a r t y had put d o w n f o r
d e b a t e on 18 M a r c h , though i t s e e m e d doubtful w h e t h e r e i t h e r the
C o n s e r v a t i v e o r the L i b e r a l P a r t y w i s h e d in f a c t t o p r e c i p i t a t e an
early general election.
T h e s i t u a t i o n c o u l d i n any c a s e b e
c o n s i d e r e d a t the m e e t i n g of the C a b i n e t w h i c h had a l r e a d y b e e n
p l a n n e d f o r the m o r n i n g f o l l o w i n g the d e b a t e .
In the m e a n t i m e ,
i t w o u l d b e useful f o r 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 ,
i n a public s p e e c h w h i c h h e w o u l d b e m a k i n g o n the e v e n i n g of
15 M a r c h , t o s t r e s s the i m p o r t a n c e in the national i n t e r e s t that
t h e r e should b e s t a b i l i t y i n G o v e r n m e n t at the p r e s e n t t i m e .
FOREIGN
AFFAIRS
/
3.
THE S E C R E T A R Y OF STATE FOR FOREIGN AND
C O M M O N W E A L T H A F F A I R S s a i d that i t w o u l d b e n e c e s s a r y t o
r e v i e w our p o l i c y on n a v a l v i s i t s t o c e r t a i n c o u n t r i e s .
Pending
the o u t c o m e of this r e v i e w a v i s i t t o A t h e n s b y 2 s h i p s of the
R o y a l N a v y w h i c h w a s to h a v e taken p l a c e that d a y had b e e n
cancelled.
V i s i t s t o P o r t u g a l w o u l d a l s o b e s u s p e n d e d , but f o r
p r a c t i c a l r e a s o n s v e s s e l s of the R o y a l N a v y should b e a l l o w e d t o
v i s i t the A z o r e s .
T H E S E C R E T A R Y O F S T A T E F O R D E F E N C E s a i d that, in g e n e r a l ,
i t w a s d e s i r a b l e to a v o i d c a n c e l l i n g v i s i t s a t v e r y s h o r t n o t i c e .
A r e v i e w of o u r p o l i c y should be c o n d u c t e d j o i n t l y b y the
2 D e p a r t m e n t s , and t h e y had a g r e e d that this should b e d o n e .
The Cabinet T o o k note of the s t a t e m e n t s 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 and the S e c r e t a r y of
State f o r D e f e n c e .
NORTHERN
IRELAND
4.
THE S E C R E T A R Y OF STATE F O R NORTHERN IRELAND
s a i d that the s u c c e s s of the P r o t e s t a n t c a n d i d a t e s o p p o s e d to the
Sunningdale A g r e e m e n t i n winning 11 s e a t s i n the G e n e r a l E l e c t i o n
had b e e n a s e v e r e b l o w to M r F a u l k n e r and h i s s u p p o r t e r s i n the
N o r t h e r n I r e l a n d A s s e m b l y , and had a f f e c t e d m o r a l e i n the E x e c u t i v e .
W e m u s t continue t o m a k e i t c l e a r that the E x e c u t i v e and the
p r i n c i p l e of p o w e r - s h a r i n g had our full s u p p o r t .
W e should
continue to w o r k f o r p r o g r e s s on the Sunningdale A g r e e m e n t ; i t
would be unwise to y i e l d to p r e s s u r e f r o m those who w e r e
opposed to this.
The Cabinet ­
I
T o o k note of the s t a t e m e n t b y the S e c r e t a r y of State
for Northern Ireland.
5.
T h e C a b i n e t 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 ( 7 4 ) 4) on public e x p e n d i t u r e i n 1974-75.
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 s a i d that the c o u n t r y
c o n f r o n t e d an e c o n o m i c s i t u a t i o n w h i c h m i g h t w e l l b e the w o r s t
w h i c h had e v e r b e e n f a c e d i n p e a c e t i m e , and w h i c h w a s
deteriorating.
In the p a s t y e a r i n f l a t i o n had b e e n running at o v e r
10 p e r c e n t ; the b a l a n c e of p a y m e n t s d e f i c i t had b e e n around
£ 1 , 500 m i l l i o n ; the b o r r o w i n g r e q u i r e m e n t had b e e n £ 4 , 000
m i l l i o n ; and g r o w t h had v i r t u a l l y c o m e to a h a l t b y the end of the
year.
I n the a b s e n c e of any c h a n g e i n e c o n o m i c p o l i c i e s , i n f l a t i o n
this y e a r w o u l d b e o v e r 15 p e r c e n t ;
the b a l a n c e of p a y m e n t s d e f i c i t
w o u l d i n c r e a s e to about £ 4 , 000 m i l l i o n , w h i c h i m p l i e d a s i g n i f i c a n t
i n c r e a s e quite a p a r t f r o m the d e f i c i t a r i s i n g f r o m h i g h e r o i l p r i c e s ;
the b o r r o w i n g r e q u i r e m e n t w o u l d b e about £ 3 , 000 m i l l i o n ; and the
prospects for growth w e r e highly uncertain.
T h e 3 - d a y w e e k had
m u l t i p l i e d the p r o b l e m s b y r e d u c i n g the g r o s s d o m e s t i c p r o d u c t b y
10 p e r c e n t d u r i n g the f i r s t 2 m o n t h s of the y e a r , w i t h a cut i n
i n d u s t r i a l output of 2 0 - 3 0 p e r c e n t .
I n d u s t r y w a s n o w s h o r t of
b o t h m o n e y and s t o c k s , and t h e r e w a s g r e a t u n c e r t a i n t y about h o w
r a p i d l y the e c o n o m y w o u l d r e c o v e r .
There w e r e also uncertainties
about the future t r e n d of c o m m o d i t y p r i c e s and the p r o s p e c t s f o r
world trade.
!I
I t w a s c l e a r that t h e r e w o u l d b e no s c o p e f o r any i n c r e a s e i n l i v i n g
s t a n d a r d s this y e a r , although t h e r e m i g h t b e s o m e i m p r o v e m e n t i n
the s e c o n d half of the y e a r c o m p a r e d w i t h the p r e s e n t d e p r e s s e d
level.
T h e t h r e s h o l d a g r e e m e n t s w h i c h had b e e n i n c l u d e d i n
S t a g e 3 of the C o n s e r v a t i v e G o v e r n m e n t s C o u n t e r - I n f l a t i o n p o l i c y
w o u l d a c t as a s t r a i t j a c k e t to p o l i c y .
W h i l e not m a n y such
a g r e e m e n t s had y e t b e e n m a d e , t h e y w e r e l i k e l y to b e g e n e r a l i s e d ,
and the 7 p e r c e n t t h r e s h o l d l e v e l w o u l d p r o b a b l y b e r e a c h e d i n
A p r i l , w i t h the a g r e e m e n t s b e i n g t r i g g e r e d about 9 t i m e s during
the r e s t o f the y e a r .
W h i l e this w o u l d m a k e it e c o n o m i c a l l y v i r t u o u s
to s u b s i d i s e the c o s t of l i v i n g , i t w o u l d a l s o l i m i t ^ e G o v e r n m e n t s
f r e e d o m o f a c t i o n , p a r t i c u l a r l y i n the use of i n d i r e c t t a x a t i o n .
A g a i n s t this b a c k g r o u n d h i s a i m w o u l d b e t o e n s u r e that d u r i n g a
p e r i o d of s a c r i f i c e the b u r d e n s w o u l d b e f a i r l y s h a r e d .
He would
a l s o a i m to m a k e the m a x i m u m u s e of m a n p o w e r and m a t e r i a l s t o
i n c r e a s e g r o w t h as r a p i d l y as p o s s i b l e .
I t would b e n e c e s s a r y to
s h i f t r e s o u r c e s f r o m p r i v a t e c o n s u m p t i o n i n t o the b a l a n c e of
p a y m e n t s and i n v e s t m e n t , but not s o r a p i d l y as to d i s l o c a t e the
e c o n o m y and l e a d to l a r g e i n c r e a s e s i n u n e m p l o y m e n t .
In o r d e r t o
c l e a r the w a y f o r his f i n a l B u d g e t d e c i s i o n s , i t w o u l d b e n e c e s s a r y
to d e c i d e the t o t a l l e v e l of p u b l i c e x p e n d i t u r e b y the end of the w e e k .
H e had a l r e a d y m a d e p r o g r e s s i n s e t t l i n g the e x p e n d i t u r e on f o o d
s u b s i d i e s , and the C a b i n e t w o u l d b e d i s c u s s i n g the s i z e of the
u p r a t i n g of s o c i a l s e c u r i t y b e n e f i t s l a t e r i n the m e e t i n g .
On
n a t i o n a l i s e d i n d u s t r y p r i c e s , the C a b i n e t had a l r e a d y a g r e e d t o a
s u b s t a n t i a l i n c r e a s e i n the p r i c e of i n d u s t r i a l c o a l , and h e
c o n s i d e r e d that i t w o u l d b e n e c e s s a r y to a c c e p t i n c r e a s e s i n
p o s t a l and t e l e c o m m u n i c a t i o n c h a r g e s and r a i l w a y f a r e s .
The
G o v e r n m e n t w o u l d a l s o b e f a c e d w i t h a v e r y d i f f i c u l t j u d g m e n t on
s t e e l and e l e c t r i c i t y p r i c e s .
On d e f e n c e , h e p r o p o s e d that the
r e d u c t i o n announced b y the p r e v i o u s G o v e r n m e n t o f £175 m i l l i o n
i n 1974-75 should b e i n c r e a s e d to £ 2 5 0 m i l l i o n ; and that a n
a n n o u n c e m e n t o f this should b e l i n k e d w i t h the i n t e n t i o n , announced
b y the G o v e r n m e n t w h e n t h e y w e r e l a s t i n o f f i c e , t o w i t h d r a w
f r o m E a s t of S u e z e x c e p t H o n g K o n g .
On the m a j o r e x p e n d i t u r e
p r o j e c t s m e n t i o n e d i n p a r a g r a p h 6 of his m e m o r a n d u m , h e h o p e d
t o r e a c h a g r e e m e n t w i t h the S e c r e t a r y of S t a t e f o r the E n v i r o n m e n t
on a h o l d i n g p o s i t i o n f o r the C h a n n e l T u n n e l p r o j e c t , and on a
s u s p e n s i o n of e x p e n d i t u r e o n M a p l i n , at l e a s t f o r the c o m i n g y e a r
and p r e f e r a b l y l o n g e r .
On the C o n c o r d e p r o j e c t , he had c i r c u l a t e d
a m i n u t e to m e m b e r s of the C a b i n e t setting out the f a c t s , and t h e r e
w a s a l r e a d y P a r l i a m e n t a r y p r e s s u r e for these to be d i s c l o s e d .
H e h o p e d that a s a f i r s t s t e p the f a c t s could b e m a d e a v a i l a b l e
publicly.
In h i s v i e w the p r o j e c t should b e c a n c e l l e d , but t h i s w a s
a m a t t e r w h i c h the C a b i n e t w o u l d n e e d to d i s c u s s s e p a r a t e l y .
H e w o u l d s h o r t l y b e putting p r o p o s a l s to the C a b i n e t f o r the r e v i e w
o f p u b l i c e x p e n d i t u r e p r o g r a m m e s f o r the y e a r s f r o m 1975-76
onwards.
F o r 1 9 7 4 - 7 5 , h e i n v i t e d the C a b i n e t t o a g r e e that n e t
a d d i t i o n s to p u b l i c e x p e n d i t u r e should b e l i m i t e d to those a f f e c t i n g
p e r s o n a l i n c o m e s and e x p e n d i t u r e , a s i n d i c a t e d i n p a r a g r a p h 2 o f
C ( 7 4 ) 4; and that i n v i e w o f t h e s e a d d i t i o n a l e x p e n d i t u r e s and the
r i s k of s u b s i d i e s b e i n g n e e d e d f o r the n a t i o n a l i s e d i n d u s t r i e s ,
any o t h e r net a d d i t i o n s t o p u b l i c e x p e n d i t u r e p r o g r a m m e s i n 1 9 7 4 - 7 5
must be avoided.
I n d i s c u s s i o n , t h e r e w a s g e n e r a l a g r e e m e n t w i t h the a p p r o a c h
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 .
The limitation
p r o p o s e d on public e x p e n d i t u r e in 1974-75 w o u l d b e a r s e v e r e l y on
s o m e p r o g r a m m e s , p a r t i c u l a r l y t h o s e w h i c h had b e e n cut b y the
p r e v i o u s A d m i n i s t r a t i o n in D e c e m b e r .
Some M i n i s t e r s might
t h e r e f o r e w i s h to p r o p o s e s o m e v a r i a t i o n w i t h i n t h e i r t o t a l
allocation.
T h e C a b i n e t w o u l d h o w e v e r h a v e an e a r l y o p p o r t u n i t y
t o d i s c u s s the a r r a n g e m e n t s f o r r e v i e w i n g e x p e n d i t u r e i n 1975-76
and s u b s e q u e n t y e a r s ; and i t m i g h t a l s o b e a p p r o p r i a t e , l a t e r i n
the y e a r , to r e v i e w p u b l i c s e c t o r building p r o g r a m m e s i n the l i g h t
o f the p r o s p e c t s f o r the c o n s t r u c t i o n i n d u s t r y .
The following
f u r t h e r points w e r e a l s o m a d e in c o n n e c t i o n w i t h p a r t i c u l a r
expenditure p r o g r a m m e s .
B e f o r e a substantive d e c i s i o n w a s t a k e n on the future of the
C o n c o r d e p r o j e c t , i t should b e f u l l y d i s c u s s e d b y the C a b i n e t , w h o
w o u l d n e e d not o n l y a s t a t e m e n t of the f i n a n c i a l c o s t s i n v o l v e d , but
a l s o an e s t i m a t e of the s o c i a l c o s t s , i n c l u d i n g u n e m p l o y m e n t ,
s o c i a l s e c u r i t y b e n e f i t s , and r e t r a i n i n g .
T h e r e w o u l d be a v e r y
s t r o n g r e a c t i o n f r o m the F r e n c h G o v e r n m e n t to any p r o p o s a l f o r
c a n c e l l a t i o n , and the A t t o r n e y G e n e r a l should b e a s k e d t o a d v i s e
on the l e g a l p o s i t i o n . T t w a s a l s o f o r c o n s i d e r a t i o n w h e t h e r the
f i n a l d e c i s i o n should b e announced in the B u d g e t o r w h e t h e r , f o r
e x a m p l e , a S e l e c t C o m m i t t e e should b e a p p o i n t e d .
But w h a t e v e r
final decision w a s reached, there s e e m e d to be overwhelming
a d v a n t a g e in r e v e a l i n g the f a c t s at the e a r l i e s t opportunity a f t e r
the G e n e r a l E l e c t i o n , a s a b a c k g r o u n d t o the d e c i s i o n s
which
the G o v e r n m e n t w o u l d s u b s e q u e n t l y announce; and the F r e n c h
G o v e r n m e n t c o u l d not r e a s o n a b l y o b j e c t to this s i n c e they had
recently themselves issued a P r e s s statement unilaterally.
It
w o u l d b e d e s i r a b l e to g i v e a d v a n c e w a r n i n g t o the F r e n c h
G o v e r n m e n t , the m a n u f a c t u r e r s and the t r a d e s unions that a s t a t e m e n t
of the f a c t s w a s b e i n g i s s u e d .
The statement might give r i s e to a
d e m a n d f o r an i m m e d i a t e D e b a t e , but i n that c a s e the G o v e r n m e n t
should a v o i d c o m m e n t i n g on the substance and take c r e d i t f o r h a v i n g
b r o u g h t the f a c t s to l i g h t .
T h e w a y i n w h i c h the m a t t e r should b e
handled i n the B u d g e t should b e f u r t h e r c o n s i d e r e d i n the l i g h t of
p u b l i c r e a c t i o n t o the s t a t e m e n t .
P r o p o s a l s f o r the future of the Channel T u n n e l and M a p l i n A i r p o r t
p r o j e c t s would s h o r t l y b e b r o u g h t b e f o r e the C a b i n e t .
Full account
w o u l d n e e d t o b e taken of the e f f e c t on o t h e r a i r p o r t s if M a p l i n w a s
not b u i l t .
T h e S e c r e t a r y of State f o r D e f e n c e w o u l d c o - o p e r a t e w i t h the
C h a n c e l l o r of the E x c h e q u e r i n s e e k i n g w a y s of a c h i e v i n g the
a d d i t i o n a l r e d u c t i o n w h i c h he had p r o p o s e d .
I t w o u l d h o w e v e r not b e
e a s y because reductions, whether in manpower or in equipment
p r o j e c t s , tended i n the s h o r t run to e n t a i l a d d i t i o n a l e x p e n d i t u r e on
r e d u n d a n c y p a y m e n t s and c a n c e l l a t i o n c h a r g e s .
Moreover, while
an a n n o u n c e m e n t about w i t h d r a w a l f r o m E a s t of S u e z m i g h t heLp t o
s t r e n g t h e n the c r e d i b i l i t y of the e x p e n d i t u r e c u t s , i t would b e u n w i s e
t o t a k e this s t e p w i t h o u t p r o p e r c o n s u l t a t i o n , w h i c h m i g h t takes
a n o t h e r 2 or 3 w e e k s .
T h e r e would b e p a r t i c u l a r p r o b l e m s in r e g a r d to a g r i c u l t u r e , g i v e n
that t h e G o v e r n m e n t w a s c o m m i t t e d t o e x p a n s i o n and that o u r f a r m e r s
w e r e g e t t i n g l o w e r p r i c e s than in the o r i g i n a l m e m b e r c o u n t r i e s of
the E u r o p e a n E c o n o m i c C o m m u n i t y , but w e r e f a c e d with l a r g e
i n c r e a s e s in the c o s t of f e e d i n g - s t u f f s .
The G o v e r n m e n t s
c o m m i t m e n t w a s h o w e v e r l i m i t e d t o the m a x i m u m e c o n o m i c
e x p a n s i o n o f a g r i c u l t u r e , and t h e r e w a s r o o m f o r a r g u m e n t
as to the l e v e l of e x p a n s i o n that could b e c o n s i d e r e d e c o n o m i c .
T h e D e c e m b e r r e d u c t i o n s in t h e e d u c a t i o n p r o g r a m m e c c u l d l e a d
t o s o m e l i m i t a t i o n of t e a c h e r e s t a b l i s h m e n t s , with the r e s u l t that
a n u m b e r of t e a c h e r s l e a v i n g t r a i n i n g c o l l e g e s m i g h t not find
employment.
T h e r e d u c t i o n of 20 p e r cent i n c a p i t a l e x p e n d i t u r e
d u r i n g the y e a r w o u l d r e q u i r e a r e d u c t i o n o f 50 p e r cent i n n e w
s t a r t s , so that the s c h o o l building p r o g r a m m e would be l i m i t e d
to a c c o m m o d a t i n g i n c r e a s e d n u m b e r s in a r e a s w h e r e the s c h o o l
population w a s e x p a n d i n g .
T h e inner city a r e a s , which w e r e
p a r t i c u l a r l y d e s e r v i n g of h e l p , would t h e r e f o r e suffer d i s p r o p o r ­
tionately.
W h i l e at the p r e s e n t t i m e t h e r e w a s no r o o m f o r r e v e r s a l
of any of the D e c e m b e r c u t s , the m a t t e r m i g h t be r e v i e w e d l a t e r i n
the y e a r in any g e n e r a l r e v i e w of c o n s t r u c t i o n p r o g r a m m e s .
I n c r e a s e s would be n e e d e d in p o s t a l and t e l e c o m m u n i c a t i o n s c h a r g e s ,
A d e c i s i o n on s t e e l p r i c e s would b e m o r e d i f f i c u l t , and n e e d e d f u r t h e r
consideration.
In the e l e c t r i c i t y i n d u s t r y , the f o r e c a s t d e f i c i t w a s
n o w a r o u n d £ 5 0 0 m i l l i o n , and an i n c r e a s e would be p r o p o s e d taking
due a c c o u n t of the p o s s i b l e e f f e c t on t h r e s h o l d a g r e e m e n t s .
Where
i n c r e a s e s w e r e p r o p o s e d f o r d o m e s t i c c o n s u m e r s , the M i n i s t e r s
c o n c e r n e d should consult the S e c r e t a r i e s o f State f o r P r i c e s and
C o n s u m e r P r o t e c t i o n and f o r S o c i a l S e r v i c e s on the i m p l i c a t i o n s
f o r t h e l o w - p a i d and p e n s i o n e r s .
E v e n w i t h the i n c r e a s e s in
s u p p l e m e n t a r y b e n e f i t s which w e r e n o w b e i n g p r o p o s e d , an i n c r e a s e
i n s u p p l e m e n t a r y h e a t i n g a l l o w a n c e s w a s l i k e l y t o be n e c e s s a r y t o
o f f s e t h i g h e r b i l l s f o r e l e c t r i c i t y and p a r a f f i n ; and if s o m e help of
t h i s kind c o u l d b e g i v e n it m i g h t e n a b l e l a r g e r g e n e r a l p r i c e i n c r e a s e s
to be m a d e .
T h e r e w a s a c a s e f o r p l a c i n g m o s t of the b u r d e n of the
p r i c e i n c r e a s e s on i n d u s t r y , s i n c e o u r e x p o r t s a p p e a r e d at p r e s e n t
t o b e u n d e r p r i c e d in e x p o r t m a r k e t s .
N e v e r t h e l e s s , industry also
f a c e d c o n s i d e r a b l e l i q u i d i t y p r o b l e m s ; and the m o s t i m p o r t a n t
p r o b l e m t o b e t a c k l e d at p r e s e n t w a s i n f l a t i o n , which w a s m o r e
s e r i o u s h e r e than in our m a i n c o m p e t i t o r c o u n t r i e s .
B y the end
of the y e a r , w e m i g h t a g a i n b e b e c o m i n g ion c o m p e t i t i v e in e x p o r t
m a r k e t s , and a p o l i c y of i n c r e a s i n g i n d u s t r i a l c o s t s t o a c h i e v e a
t e m p o r a r y i n c r e a s e in e x p o r t p r i c e s could t h e r e f o r e be d a m a g i n g .
A c h o i c e w o u l d h o w e v e r n e e d t o b e m a d e b e t w e e n the v a r i o u s w a y s of
a l l o c a t i n g the p r i c e i n c r e a s e s , g i v e n t h a t , at the m a r g i n , an i n c r e a s e
i n one s e c t o r r e l e a s e d funds f o r s u b s i d i e s e l s e w h e r e .
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 the
C a b i n e t e n d o r s e d the b r o a d a p p r o a c h p r o p o s e d by the C h a n c e l l o r of
t h e E x c h e q u e r in G ( 7 4 ) 4 .
I n d i v i d u a l M i n i s t e r s should d i s c u s s the
d e t a i l e d i m p l i c a t i o n s f o r t h e i r p r o g r a m m e s w i t h the C h i e f S e c r e t a r y ,
T r e a s u r y , as n e c e s s a r y .
The Cabinet would be considering l a t e r in
the m e e t i n g the p r o p o s a l s r e g a r d i n g the u p r a t i n g of s o c i a l s e c u r i t y
benefits.
It w a s i m p o r t a n t that n o p r o p o s a l s f o r i n c r e a s e d
e x p e n d i t u r e should b e r e v e a l e d b e f o r e t h e C h a n c e l l o r of the
E x c h e q u e r w a s a b l e in h i s B u d g e t s t a t e m e n t , t o d e m o n s t r a t e
h o w t h e y would b e f i n a n c e d .
T h e C a b i n e t w o u l d n e e d to g i v e
e a r l y c o n s i d e r a t i o n t o the f u t u r e of t h e C o n c o r d e p r o j e c t , C h a n n e l
T u n n e l and M a p l i n A i r p o r t , in the l i g h t o f m e m o r a n d a c i r c u l a t e d b y
the M i n i s t e r s c o n c e r n e d , w h i c h should t a k e account o f t h e s o c i a l a s
w e l l a s the e c o n o m i c i m p l i c a t i o n s .
In the m e a n t i m e , the C a b i n e t
a g r e e d that the S e c r e t a r y o f State f o r I n d u s t r y should r e l e a s e a
s t a t e m e n t o f the f a c t s c o n c e r n i n g the C o n c o r d e p r o j e c t f o r p u b l i c
discussion.
A d r a f t of t h i s s t a t e m e n t should b e c l e a r e d w i t h h i m s e l f
and w i t h the L o r d P r e s i d e n t , 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 , the C h a n c e l l o r of the E x c h e q u e r and the A t t o r n e y
G e n e r a l ; ai/d p r i o r w a r n i n g o f i t s i s s u e should be g i v e n t o the
F r e n c h G o v e r n m e n t , and the m a n u f a c t u r e r s and t r a d e s u n i o n s .
T h e C a b i n e t would c o n s i d e r at a l a t e r m e e t i n g the a r r a n g e m e n t s
f o r p r e p a r a t i o n of p u b l i c e x p e n d i t u r e p r o g r a m m e s f o r 1975-76 and
t h e r e a f t e r ; and n o t e d that i t m i g h t b e d e s i r a b l e to r e v i e w p u b l i c s e c t o r
b u i l d i n g p r o g r a m m e s l a t e r in the y e a r , in the l i g h t o f the p r o s p e c t i v e
l e v e l of d e m a n d on the c o n s t r u c t i o n i n d u s t r y .
r
T h e Cabinet ­
1.
A p p r o v e d the r e c o m m e n d a t i o n in p a r a g r a p h 8
of C(74) 4.
2.
I n v i t e d t h e S e c r e t a r y of State f o r I n d u s t r y ­
a.
T o i s s u e a s t a t e m e n t o f the f a c t s o f t h e
C o n c o r d e p r o j e c t , 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 s u m m i n g u p .
b.
In c o n s u l t a t i o n w i t h 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 , the C h a n c e l l o r o f
the E x c h e q u e r , 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 and the A t t o r n e y G e n e r a l , t o
c i r c u l a t e a m e m o r a n d u m on t h e C o n c o r d e
p r o j e c t f o r c o n s i d e r a t i o n by the C a b i n e t .
' 7
v
3.
I n v i t e d the S e c r e t a r y o f State f o r the
E n v i r o n m e n t t o c i r c u l a t e m e m o r a n d a on the
future o f the C h a n n e l T u n n e l and M a p l i n A i r p o r t .
4.
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 t o
c i r c u l a t e a m e m o r a n d u m on a r r a n g e m e n t s f o r
p r e p a r a t i o n of public expenditure p r o g r a m m e s
f o r 1975-76 and l a t e r y e a r s .
PRICES
POLICY
6.
T h e C a b i n e t c o n s i d e r e d a m e m o r a n d u m by the S e c r e t a r y of
State f o r P r i c e s and C o n s u m e r P r o t e c t i o n ( C ( 7 4 ) 5) o n p r i c e s p o l i c y .
T H E S E C R E T A R Y OF S T A T E F O R PRICES A N D C O N S U M E R
P R O T E C T I O N s a i d that she sought the a g r e e m e n t of h e r c o l l e a g u e s
t o the u r g e n t p r e p a r a t i o n of a B i l l g i v i n g p o w e r s t o :
i.
a u t h o r i s e e x p e n d i t u r e on s u b s i d i e s ,
ii.
p r e s c r i b e p r i c e s and m a r g i n s f o r s u b s i d i s e d g o o d s ,
iii.
p r e s c r i b e p r i c e s and m a r g i n s f o r c e r t a i n o t h e r
essential foods,
iv.
v a r y d e c i s i o n s of the P r i c e C o m m i s s i o n ,
v.
r e q u i r e p r i c e s to b e d i s p l a y e d and g o o d s t o b e m a r k e d
w i t h unit p r i c e s .
In c o n s i d e r i n g t h e p a y m e n t o f s u b s i d i e s she had b e e n o b l i g e d t o
r e j e c t the i d e a of o p e r a t i n g t h r o u g h the m e c h a n i s m of the V a l u e
A d d e d T a x ; t h i s w o u l d h a v e r e q u i r e d the r e w r i t i n g of a c o m p u t e r
p r o g r a m m e w h i c h w o u l d h a v e t a k e n months to c o m p l e t e .
She had
d e c i d e d t o c o n c e n t r a t e on c e r t a i n e s s e n t i a l f o o d s and t o u s e e x i s t i n g
m e c h a n i s m s as far as p o s s i b l e .
She p r o p o s e d t h e r e f o r e t o s u b s i d i s e
b r e a d and m i l k , both of w h i c h w e r e w e i g h t e d h e a v i l y in t h e r e t a i l
p r i c e i n d e x ( R P I ) ; a l s o c h e e s e , b u t t e r and s u g a r , in s p i t e of c e r t a i n
d i f f i c u l t i e s that w o u l d a r i s e in r e l a t i o n to the E u r o p e a n E c o n o m i c
Community.
She w o u l d l i k e to add o n e o t h e r p r o t e i n f o o d to the l i s t
and w a s i n v e s t i g a t i n g the p o s s i b i l i t i e s o f e g g s , b a c o n o r h a m .
It
would be n e c e s s a r y t o i n t r o d u c e the subsidy on b r e a d i m m e d i a t e l y
in o r d e r to f o r e s t a l l a price i n c r e a s e .
T h e o t h e r s u b s i d i e s would
b e announced i n t h e B u d g e t .
T h e c o s t would b e in t h e r e g i o n of
£400 m i l l i o n a y e a r , excluding the existing m i l k subsidy.
The
t o t a l w o u l d d e p e n d m a i n l y on the c o s t o f holding b r e a d p r i c e s at
the p r e s e n t l e v e l .
She thought i t r i g h t t o r e t a i n the P r i c e C o m m i s s i o n
a s an independent a g e n c y t o c o n t r o l p r i c e s in a c c o r d a n c e w i t h a
g e n e r a l p r i c e c o d e , a s i t w o u l d b e u n w i s e to i n v o l v e the G o v e r n m e n t
i n the d e t a i l e d c o n t r o l o f p r i c e s ; but she p r o p o s e d t o i n i t i a t e
statutory c o n s u l t a t i o n on t h r e e a m e n d m e n t s t o the C o d e : f i r s t
t o i m p o s e a g e n e r a l r e d u c t i o n of 10 p e r cent on a l l d i s t r i b u t o r s ' i
g r o s s m a r g i n s ; s e c o n d l y to i m p o s e a m i n i m u m p e r i o d of t h r e e
m o n t h s b e t w e e n p r i c e i n c r e a s e s ; and t h i r d l y if p o s s i b l e to d e a l
w i t h p r i c e i n c r e a s e s on e x i s t i n g s t o c k s .
She would a i m to b r i n g
the B i l l , the s u b s i d i e s and the a m e n d m e n t s t o the P r i c e C o d e into
e f f e c t m o r e o r l e s s at the s a m e t i m e i n A p r i l .
In the l o n g e r t e r m
she would l i k e t o r e c o n s i d e r the p r o v i s i o n f o r a l l o w a b l e c o s t s in the
P r i c e C o d e , and t o c o n s i d e r w h e t h e r the p r e s e n t a t i o n of c o m p a n y
a c c o u n t s c o u l d b e m a d e t o d i s t i n g u i s h b e t w e e n p r o f i t s on h o m e s a l e s
and on e x p o r t s .
T h e p r o p o s e d a m e n d m e n t s t o the P r i c e C o d e had
b e e n d e l i b e r a t e l y stated in u n c o m p r o m i s i n g t e r m s .
The Confederation
o f B r i t i s h I n d u s t r y and the R e t a i l C o n s o r t i u m would o b j e c t s t r o n g l y to
s o m e o f t h e m , and i t m i g h t b e n e c e s s a r y t o o f f e r s o m e c o n c e s s i o n s in
o r d e r to g e t the p r o p o s a l s through P a r l i a m e n t .
T h e r e might in .
p a r t i c u l a r b e a r e a l c a s e f o r a l l o w i n g s o m e e x e m p t i o n s f o r the sake
of i n v e s t m e n t ; t h e m o r e t i g h t l y g r o s s m a r g i n s w e r e s q u e e z e d the
m o r e n e c e s s a r y such e x e m p t i o n s would b e c o m e .
T H E P R I M E M I N I S T E R s a i d that he had h e l d a m e e t i n g the p r e v i o u s
d a y t o d i s c u s s t h e a b o l i t i o n of the P a y B o a r d .
T h e m e e t i n g had .
a g r e e d that the p o w e r t o a b o l i s h the P a y B o a r d should b e i n c l u d e d
within this B i l l .
T h e p r o s p e c t s of P a r l i a m e n t a r y a p p r o v a l s e e m e d
b e t t e r at p r e s e n t than t h e y m i g h t b e l a t e r and the p r o v i s i o n would
i m p r o v e t h e p r o s p e c t s f o r the n e g o t i a t i o n s w i t h the T r a d e s Union
C o n g r e s s on a v o l u n t a r y i n c o m e s p o H c y .
T h e c l a u s e would h o w e v e r
b e d r a f t e d i n such a w a y that i t s d e l e t i o n in P a r l i a m e n t wotild not
d a m a g e t h e r e s t of the B i l l .
It would e n a b l e the S e c r e t a r y of State
t o a b o l i s h the P a y B o a r d b y m e a n s of an o r d e r r e q u i r i n g an
A f f i r m a t i v e R e s o l u t i o n of the H o u s e , and it w o u l d b e m a d e c l e a r
that t h i s would n o t b e done until s o m e p r o g r e s s e d been m a d e in
w o r k i n g out a v o l u n t a r y p o l i c y .
In d i s c u s s i o n it w a s a r g u e d that the p u b l i c would e x p e c t a m o r e
g e n e r a l i n t r o d u c t i o n of c a s h m a r g i n c o n t r o l s .
T h e y would a l s o
e x p e c t a c t i o n on s h a r p i n c r e a s e s in the p r i c e s of f o o d s such a s
spaghetti which m i g h t not be r e g a r d e d as e s s e n t i a l f o o d s .
Against
t h i s i t w a s a r g u e d that t h e c o n t r o l of p r i c e s and m a r g i n s would h a v e
t o b e l i m i t e d to a s m a l l n u m b e r of e s s e n t i a l f o o d s i n o r d e r t o e n a b l e
the f i r m s to c o v e r t h e i r l o s s e s by c r o s s - s u b s i d i s a t i o n f r o m t h e i r
p r o f i t s on o t h e r f o o d s .
T h e p r o p o s e d 10 p e r c e n t cut in m a r g i n s
w o u l d b e r e i n f o r c e d w h e r e n e c e s s a r y b y t h e u s e of p a r a g r a p h 80
o f the P r i c e C o d e , w h i c h e n a b l e d t h e C o m m i s s i o n t o r e c o m m e n d
a r e d u c t i o n i n m a r g i n s w h e r e the c o s t of any g o o d s r o s e s u b s t a n t i a l l y .
T h e c o s t s o f the w h o l e p o l i c y would h a v e to b e b o r n e by i n d u s t r y ,
w h i c h w a s a l r e a d y f a c i n g c a s h f l o w d i f f i c u l t i e s and d e f e r m e n t s o f
investment.
M a n y f i r m s , p a r t i c u l a r l y m a n u f a c t u r e r s hit b y f r e q u e n t
i n c r e a s e s in w o r l d p r i c e s , would n e e d to t a k e a d v a n t a g e of any
provisions for special exemption.
In f u r t h e r d i s c u s s i o n it w a s a r g u e d that t h e p r i n c i p a l s h o r t - t e r m a i m
should b e to d e l a y the f i r s t t r i g g e r i n g of t h e t h r e s h o l d a g r e e m e n t s ;
t h e r e w a s a d a n g e r of t w o t r i g g e r i n g s i n A p r i l .
H o w e v e r , the
s u b s i d i e s could r e d u c e t h e R P I b y o n l y 1 p e r c e n t and i t w o u l d b e
n e c e s s a r y t o l o o k f o r o t h e r w a y s to m o d e r a t e o r at l e a s t to d e l a y
i n c r e a s e s in the c o s t of l i v i n g .
In p r e s e n t i n g t h e s e m e a s u r e s to
the p u b l i c , M i n i s t e r s w o u l d h a v e to m a k e i t c l e a r that t h e y could
do n o m o r e than m o d e r a t e the p r i c e i n c r e a s e s w h i c h w o u l d o t h e r w i s e
have taken p l a c e .
It w o u l d b e r a s h t o set any p a r t i c u l a r t a r g e t , a s
e c o n o m i s t s d i f f e r e d w i d e l y i n t h e i r j u d g e m e n t s about the r a t e of p r i c e
i n c r e a s e s that c o u l d b e e x p e c t e d o v e x the next f e w m o n t h s .
In the
l o n g e r run t h e r e w a s s t i l l the p o s s i b i l i t y o f downturn i n c o m m o d i t y
prices.
T h e following points w e r e made in further discussion
­
a.
It w a s i l l o g i c a l t o d e a l s e p a r a t e l y w i t h t h e m i l k s u b s i d y ,
w h i c h should n o w b e t r e a t e d a s a c o n s u m e r s u b s i d y l i k e the
rest.
If the m i l k subsidy w e r e b r o u g h t within the B i l l i t
w o u l d b e n e c e s s a r y to r a i s e the f i n a n c i a l c e i l i n g t o
accommodate it
t
i ,
b.
A l t h o u g h the w h o l e B i l l should a p p l y t o N o r t h e r n
I r e l a n d i t w o u l d b e r e a s o n a b l e t o m a k e the N o r t h e r n I r e l a n d
E x e c u t i v e r e s p o n s i b l e f o r the p o w e r s in i i . , i i i . and v , of the
s t a t e m e n t b y the S e c r e t a r y of State f o r P r i c e s and C o n s u m e r
Protection.
c.
A l t h o u g h the e x i s t i n g P r i c e C o d e e x e m p t e d s t e e l
b e c a u s e of our o b l i g a t i o n s under the E u r o p e a n C o a l and
S t e e l C o m m u n i t y , it w o u l d b e d e s i r a b l e i f p o s s i b l e t o c o n t r o l
s t e e l p r i c e s , p a r t i c u l a r l y the p r i c e of t i n p l a t e w h i c h f e a t u r e d
h e a v i l y in consumer expenditure.
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 sionj s a i d that the
C a b i n e t a g r e e d that the S e c r e t a r y of State f o r P r i c e s and C o n s u m e r
P r o t e c t i o n should set in hand u r g e n t l y the p r e p a r a t i o n of a B i l l on the
l i n e s p r o p o s e d in h e r p a p e r , w i t h the a d d i t i o n of an e n a b l i n g c l a u s e
f o r t h e a b o l i t i o n o f the P a y B o a r d .
She should c o n s u l t f u r t h e r w i t h
the C h a n c e l l o r of the E x c h e q u e r and the M i n i s t e r o f A g r i c u l t u r e ,
F i s h e r i e s and F o o d about the i n c l u s i o n of the m i l k s u b s i d y ; and
w i t h 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 about the p o w e r s
to b e a s s i g n e d to the N o r t h e r n I r e l a n d E x e c u t i v e .
It would a l s o
b e h e l p f u l i f she w o u l d c i r c u l a t e a n o t e t o h e r c o l l e a g u e s g i v i n g
the a n s w e r s t o q u e s t i o n s that t h e y m i g h t b e a s k e d about the p r o p o s a l s :
i n p a r t i c u l a r , w h y t h e r e w e r e t o b e no s u b s i d i e s on m e a t , c h i c k e n , o r
fish.
It w o u l d b e d e s i r a b l e to r e - e x a m i n e the p o l i c y on p r i c e c o n t r o l
and s u b s i d i e s d u r i n g the s u m m e r in t h e l i g h t of the m o v e m e n t o f
commodity prices.
T h e Cabinet T o o k note 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 by 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 P r i c e s and C o n s u m e r
Protection
to b e g u i d e d a c c o r d i n g l y .
7.
T h e C a b i n e t had b e f o r e t h e m a m e m o r a n d u m b y the S e c r e t a r y
o f State f o r S o c i a l S e r v i c e s ( C ( 7 4 ) 6) about the 1974 u p r a t i n g of s o c i a l
security benefits.
T H E S E C R E T A R Y O F S T A T E F O R S O C I A L S E C U R I T Y s a i d that the
G o v e r n m e n t w e r e c o m m i t t e d b y the Election Manifesto to i n c r e a s e
p e n s i o n s t o £10 f o r s i n g l e p e o p l e and £16 f o r m a r r i e d c o u p l e s .
At
t h e t i m e when h e r m e m o r a n d u m had b e e n c i r c u l a t e d t w o p o i n t s had
b e e n outstanding - the m e t h o d of financing the u p r a t i n g and the date
f r o m w h i c h the i n c r e a s e s should b e i m p l e m e n t e d .
On the f i r s t point,
she had now b e e n a b l e to r e a c h a g r e e m e n t with t h e C h a n c e l l o r o f the
Exchequer.
F o r r e a s o n s o f d e m a n d m a n a g e m e n t he had found i t
n e c e s s a r y , d e s p i t e t h e s u b s t a n t i a l surplus at p r e s e n t in the N a t i o n a l
I n s u r a n c e F u n d , t o s e e k s u b s t a n t i a l i n c r e a s e s in c o n t r i b u t i o n s .
A g r e e m e n t had b e e n r e a c h e d on a r r a n g e m e n t s w h i c h w o u l d p r o t e c t
t h e l e a s t w e l l p a i d by i m p o s i n g p r o g r e s s i v e l y h e a v i e r b u r d e n s on
t h e b e t t e r off.
T h e r e would b e a substantial i n c r e a s e in the f l a t
r a t e contribution payable by e m p l o y e r s .
So f a r a s e m p l o y e e s w e r e
c o n c e r n e d , the flat r a t e c o n t r i b u t i o n would b e r e d u c e d but t h e r e would
b e substantial p r o g r e s s i v e i n c r e a s e s in the e a r n i n g s r e l a t e d
contributions.
T h e o v e r a l l e f f e c t w a s that the c o n t r i b u t i o n s
p a y a b l e b y t h o s e e a r n i n g l e s s than £25 a w e e k w o u l d b e s l i g h t l y
r e d u c e d w h i l e the c o n t r i b u t i o n s p a y a b l e b y t h o s e e a r n i n g m o r e
than that amount would be p r o g r e s s i v e l y i n c r e a s e d by amounts
r i s i n g t o a m a x i m u m of 57p at the p r o p o s e d n e w e a r n i n g s c e i l i n g
o f £62 a w e e k .
So f a r a s the d a t e o f i m p l e m e n t a t i o n w a s c o n c e r n e d , i t w a s i m p o r t a n t ,
i n v i e w o f the M a n i f e s t o c o m m i t m e n t , that t h e r e should b e no
avoidable delay.
T h e e a r l i e s t d a t e which w a s a d m i n i s t r a t i v e l y
p o s s i b l e w a s 22 J u l y , and t h i s should be a c c e p t e d as the o b j e c t i v e .
T h e S o c i a l P o l i c y C o m m i t t e e of the T r a d e s Union C o n g r e s s ( T U C )
h a d , at a r e c e n t m e e t i n g w i t h h e r , i n d i c a t e d that t h e y hoped f o r
i m p l e m e n t a t i o n in A p r i l ; and d e f e r m e n t until O c t o b e r , w h i c h w a s
t h e d a t e p r e f e r r e d b y the C h a n c e l l o r of t h e E x c h e q u e r , w o u l d c a u s e
great disappointment.
In the i n t e r e s t s of e a r l y i m p l e m e n t a t i o n she
had d e c i d e d not to p r o p o s e i n c r e a s e s in a n u m b e r o f b e n e f i t s w h i c h
w e r e u r g e n t l y in n e e d of r e v i e w .
But i n i t s p r o g r e s s t h r o u g h the
H o u s e of C o m m o n s the B i l l w o u l d b e open t o a m e n d m e n t t o s e c u r e
i m p r o v e m e n t in t h e s e b e n e f i t s , and i t m i g h t be d i f f i c u l t t o r e s i s t
such a m e n d m e n t s e x c e p t o n the g r o u n d that the B i l l had b e e n d r a f t e d
in such a w a y a s to m a k e p o s s i b l e i m p l e m e n t a t i o n at t h e e a r l i e s t
possible date.
M o r e o v e r , d e f e r m e n t o f the o p e r a t i v e d a t e u n t i l
the autumn w o u l d m e a n that b y O c t o b e r 1975 p e n s i o n e r s would b e
l i t t l e b e t t e r off u n d e r the G o v e r n m e n t s s c h e m e than t h e y w o u l d
h a v e b e e n u n d e r the p r o p o s a l s put f o r w a r d in the C o n s e r v a t i v e
P a r t y s Election Manifesto, which involved six-monthly uprating.
1
In d i s c u s s i o n , i t w a s a r g u e d that in o r d e r to p r o t e c t t h o s e who had
l o w i n c o m e s but d i d not q u a l i f y f o r s u p p l e m e n t a r y b e n e f i t , i t w o u l d
b e n e c e s s a r y t o m a k e i m p r o v e m e n t s in t h e r e n t and r a t e r e b a t e
s c h e m e s ; and this would r e p r e s e n t a f u r t h e r s i g n i f i c a n t n e t addition
t o public e x p e n d i t u r e .
A s t i l l f u r t h e r a d d i t i o n , , of t h e o r d e r o f .
£ 8 0 m i l l i o n , w o u l d c o m e f r o m t h e p a y m e n t l a t e r t h i s y e a r of t h e
£10 C h r i s t m a s bonus tc t h e c o n t i n u a n c e o f w h i c h the L a b o u r P a r t y
had c o m m i t t e d i t s e l f .
In f u r t h e r d i s c u s s i o n , it w a s a r g u e d that t h e r e w e r e s t r o n g f i n a n c i a l
r e a s o n s f o r p r e f e r r i n g i m p l e m e n t a t i o n in O c t o b e r .
T h e extra cost
o f i m p l e m e n t a t i o n i n July w a s v e r y c o n s i d e r a b l e - i t would in f a c t b e
the e q u i v a l e n t of an addition of about lp to the s t a n d a r d r a t e of i n c o m e
tax.
U p r a t i n g w o u l d m o r e o v e r h a v e an u n f a v o u r a b l e e f f e c t o n the
r e t a i l p r i c e i n d e x , w h i c h i t w a s d e s i r a b l e to d e f e r a s l o n g a s p o s s i b l e .
It a l s o could not b e o v e r l o o k e d that i t m i g h t w e l l p r o v e I m p o s s i b l e in
the e v e n t of an u p r a t i n g in July t o hold the p o s i t i o n that t h e r e should b e
no f u r t h e r u p r a t i n g until O c t o b e r 1975.
The position was m a d e all
the m o r e d i f f i c u l t b y the a d d i t i o n a l e x p e n d i t u r e a r i s i n g f r o m t h e
C h r i s t m a s bonus and l i k e l y c h a n g e s in the r e n t and r a t e r e b a t e
schemes.
T h e r e w a s in f a c t n o c o m m i t m e n t t o i m p l e m e n t a t i o n
b e f o r e the autumn; and although t h e r e would no doubt b e d i s a p p o i n t ­
m e n t that i m m e d i a t e i m p l e m e n t a t i o n w a s a d m i n i s t r a t i v e l y
i m p o s s i b l e , i t w a s doubtful w h e t h e r O c t o b e r w o u l d p r o d u c e
a s i g n i f i c a n t l y m o r e u n f a v o u r a b l e r e a c t i o n than J u l y ,
An interim
d a t e h o w e v e r - f o r e x a m p l e , 1 S e p t e m b e r - had l i t t l e m e r i t : i t s
f i n a n c i a l b e n e f i t s would b e r e l a t i v e l y s m a l l , but i t w o u l d not b e
e a r l y enough t o s a t i s f y t h o s e w a n t i n g v e r y r a p i d i m p l e m e n t a t i o n .
.
'
'
-
'
On the o t h e r hand, i t w a s a r g u e d that the u p r a t i n g o f p e n s i o n s had
b e e n f i r m l y i d e n t i f i e d a s the G o v e r n m e n t s f i r s t p r i o r i t y .
T h e fact
that i t w a s t o b e put into e f f e c t at the e a r l i e s t m o m e n t w h i c h w a s
a d m i n i s t r a t i v e l y p o s s i b l e w o u l d b e of g r e a t h e l p in the d i s c u s s i o n s
w i t h the T U C on v o l u n t a r y a r r a n g e m e n t s f o r d e a l i n g w i t h p a y ; and
i t w o u l d m a k e e a s i e r the c o n t i n u a n c e o f the P a y B o a r d u n t i l a
s a t i s f a c t o r y a g r e e m e n t had b e e n r e a c h e d on v o l u n t a r y a r r a n g e m e n t s .
M o r e o v e r , the p o s s i b i l i t y of an e a r l y E l e c t i o n m a d e it v e r y d e s i r a b l e
that the G o v e r n m e n t should b e a b l e to show that t h e y had a c t e d as
r a p i d l y a s p o s s i b l e t o g i v e e f f e c t to t h e i r u n d e r t a k i n g t o i n c r e a s e
pensions.
In any e v e n t i t w a s p u b l i c l y known that i m p l e m e n t a t i o n
by t h e end o f J u l y w a s a d m i n i s t r a t i v e l y p o s s i b l e ; and t h e r e would
b e g r e a t d i f f i c u l t y in e x p l a i n i n g t h e r e a s o n s f o r any d e l a y b e y o n d that
date.
If, h o w e v e r , 22 J u l y w e r e to b e a c h i e v a b l e , an i m m e d i a t e
d e c i s i o n w a s n e e d e d b e c a u s e the n e c e s s a r y a r r a n g e m e n t s w o u l d h a v e
t o b e put i n hand at o n c e .
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 the
C a b i n e t a p p r o v e d the p r o p o s a l s w h i c h had b e e n w o r k e d out f o r
financing the p r o p o s e d u p r a t i n g o f p e n s i o n s and c o n g r a t u l a t e d
the M i n i s t e r s c o n c e r n e d on the i n g e n i o u s s o l u t i o n w h i c h had b e e n
found.
A s r e g a r d s t i m i n g , the C a b i n e t a g r e e d o n b a l a n c e that the
n e w r a t e s should b e p a y a b l e f r o m 22 J u l y r a t h e r than f r o m a date in
O c t o b e r , i n v i e w p a r t i c u l a r l y of the a s s i s t a n c e that an e a r l y date
would g i v e to the d i s c u s s i o n s w i t h the T U C on v o l u n t a r y
arrangements for pay.
But the C a b i n e t r e c o g n i s e d that
i m p l e m e n t a t i o n in July m i g h t o b l i g e the C h a n c e l l o r o f the
E x c h e q u e r to s e e k a h i g h e r i n c r e a s e in t a x a t i o n and g r e a t e r
r e d u c t i o n s i n s o m e a r e a s o f p u b l i c e x p e n d i t u r e than w o u l d
o t h e r w i s e h a v e b e e n n e c e s s a r y ; and h e w a s e n t i t l e d to e x p e c t
c o - o p e r a t i o n f r o m his c o l l e a g u e s if f u r t h e r e x p e n d i t u r e r e d u c t i o n s
in fact p r o v e d n e c e s s a r y .
T h e C a b i n e t ' s d e c i s i o n s would b e
announced by the C h a n c e l l o r of the E x c h e q u e r i n the c o n t e x t of
the B u d g e t ; and the 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 should
put in hand t h e s t e p s n e e d e d to s e c u r e i m p l e m e n t a t i o n on 22 J u l y ,
including t h e p r e p a r a t i o n o f l e g i s l a t i o n .
)I
T h e 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
s u m m i n g up of t h e i r d i s c u s s i o n .
Cabinet Office
14 M a r c h 1974
Ministers