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THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY'S GOVERNMENT

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C. P. (49) 193

23RD SEPTEMBER, 1949

CABINET

WAGES POLICY

Memorandum by the Chancellor of the Exchequer and the Minister of Labour and National Service

The main purpose of the change in the value of sterling, viz. to increase the competitive power of our exports by cheapening them to dollar buyers, will be frustrated if there is any serious rise in sterling costs here. Wages are the largest element in the costs of manufactured goods, and if a cycle of wage increases started in consequence of the change in the value of sterling, it might in a short time nullify the original purpose of that change.

2.

The situation as regards wages was already dis- quieting before the decisions announced on the 18th instant. There was unrest on wage matters among important bodies of workers and several large claims had been formulated and were in various stages of negotiation. The change in the value of sterling, bringing with it a rise in the price of bread and flour and the possibility of other rises in the cost of living later, though they should not be serious, increases the diffi- culty of holding our present wages policy. Yet the require- ments of the time are such that not only must we hold that policy but we must make it more effective in the future than it has been in the past.

3.

We feel that, subject only to the one exception as regards low-paid workers dealt with later in this memorandum, we must now do our utmost to secure that for some time there is a temporary standstill on wages. This object will not be easily attained and it can only be secured by consent. It cannot be enforced. It follows that there must be an appeal by the Government, couched in the strongest and most urgent terms, addressed to employers and workers. Such an appeal would have no hope of a favourable response by the Trades Union movement unless the T. U. C. are ready to support it. Equally essential is the support of the employers.

LL.

We think that the "standstill" should be for a period of nine months, subject to the T. U. C. being able to ask for a review at the end of three months. It must apply to all increases of whatever kind which, but for the suspension, would be granted or proposed after the 18th September, 1949, except increases which have been the subject of agreement or of a formal award or announcement before that date although not coming into effect until afterwards. In particular, it must apply to increases awarded or recommended by statutory bodies, e.g. Pages590662s, industrial courts and Prbitration bribunals increases negotiated through the normal wage-fixing machinery.

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