Smash Phase III

the tory fraud exposed

Author: Bert Ramelson;
Publisher: Communist Party of Great Britain;
Published: 1973;
Printer: Farleigh Press Ltd. (TU), Watford, Herts. - CP/D/38/12/73 - 25358;
ISBN: 0-90-030240-2;
HTML Markup: Pierre Marshall.


Cover of the book

For nearly ten years (ever since George Brown's notorious Declaration of Intent) successive governments have been issuing a stream of White Papers, Codes and Statutes, in efforts to con the working people into accepting drastic cuts in real earnings. Alongside this they have tried to justify authoritarian neo-fascist legal measures to outlaw traditional trade union activities — especially the basic right to take industrial action. But it is doubtful whether any previous legislation could match Phase 3 for its brazen dishonesty, double talk and outright lies.

First, the White Paper was presented as a basis for discussion, but it was no more meant for discussion than was Carr’s White Paper outlining the Industrial Relations Act. Carr’s idea of discussion then was that there could be no argument about the “eight pillars of wisdom”, ie. the guts of the Industrial Relations Act, and that all that could be discussed were irrelevant details.

So the White Paper precluded any discussion of what is really at stake — the right to free collective bargaining, the right of trade unions to perform their major function, the right to negotiate with employers on the merits of the case presented by the workers, and the basic right in the last resort to use industrial action to back up a claim.

The Counter-Inflation Act remains unchanged, making industrial action to support a wage claim or settlement not approved by the Pay Board a crime, punishable by an unlimited fine. And the NIRC’s viciously punitive fine on the AUEW is an indication of what the Tories have in mind for trade unions ignoring or defying the government — set norms.

The White Paper stated:

“... agreement over the whole field would, in the government’s view, require acceptance that there must be restraint in a form which guarantees its effectiveness. We cannot return to pay settlements giving increases ... of the kind which happened in the autumn of 1972.”1

Thus it is abundantly clear that the very core of Phase 3 the imposition of government-directed wage levels and the outlawing of free collective bargaining — was not subject to negotiation. It was, therefore, a swindle to describe it as a “discussion statement". Notice of an edict to be decreed, on a take-it-or-leave-it basis, was a more truthful description.

Conman’s chatter

The very first paragraph, using the typical conman’s chatter to mislead the public, set the style and tone for the whole document. It talked about common agreement with the TUC on the need to counter inflation and maintain growth.

The purpose was to create the impression that the government’s objective was to maintain high rates of growth, and that there was some measure of agreement between the TUC and the government on the question of inflation. Both were whopping lies. Later, in the document itself and at Heath’s press conference launching the swindle, the lie became obvious.

The economy, we were told, is already slowing down from its brief spurt forward, and the plans were to reduce growth to a rate no higher than 3½ per cent. Indeed, the fall to the lower target had already taken place.

This reduction in growth is the result of direct action by the government — through the now well — established means of high interest rates, cuts in government expenditure, wage restraint and credit squeeze. Now we are promised further cuts in government expenditures — not cuts in the huge wasteful arms bill or in the handouts to the rich, but cuts in spending on hospitals and schools so vital to improve the quality of life.

The latest government announcement, since the Code was published, of a 13 per cent bank rate, (which means a usurious 18 per cent on overdrafts and loans), plus further restrictions on credit are the response of the Tories to the astronomical October deficit in the balance of payments, equivalent to an annual deficit of £1,500 million, that is more than double the crisis deficit of 1966, and to the October rise in retail prices of 3 per cent (equivalent to a 36 per cent annual rate of inflation). These measures mark a return to the stop-go policies of the past with a vengeance, and, together with the oil crisis, make nonsense of any hope of even maintaining the lower target of a 3½ per cent rate of growth.

Even if the 3½ per cent growth rate were achieved, it would mean acceptance as a fact of life of a permanent army of unemployed of around 600,000.

Thus, Phase 3 brazenly presents deliberate actions to cut back growth as a commitment to growth, and then, in effect, it goes on to assert that the achievement of its phoney targets depends on accepting cuts in real wages and the out-lawing of trade union rights.

Talks between Heath and TUC fruitless

Equally brazen is the insinuation that a great area of agreement exists between the TUC proposals and those of the government. The exact opposite is the truth. The TUC General Council statement rejecting the White Paper2 quoted chapter and verse to show how every one of the TUC’s proposals had been thrown out by the government.

The tragedy of the TUC’s participation in the talks is that it enabled the government to exploit them to deceive the workers and to provide Heath with a measure of credibility. Had the leadership of the TUC responded to the demands of the militants, to the consistent, cogently argued case in the Morning Star for the breaking off of the talks, Heath’s job of putting over this swindle would have been more difficult, and the TUC’s effective campaigning to defeat it might very well have prevented the government from introducing Phase 3 altogether.

The Prices and Pay Code, which came into operation on November 1st, confirms up to the hilt that the White Paper was never intended as a discussion paper. The Code, at least as far as pay is concerned, is identical in every detail with the draconian restrictions contained in the White Paper. Its proposals, far from being flexible and easing the restrictions of Phase 2, are more rigid and plug up the few loopholes in the Phase 2 net through which small groups of workers had slipped.

This Code applies to all wage and salary earners, full time and part time, in small establishments of only a handful of workers as well as in big plants. It restricts the earnings of all workers whether on piecework or on bonus schemes, whether they are on hourly or weekly rates, on monthly or annual salaries, enjoying staff status or not.

Rigid wage control

Out of the 75 paragraphs of the Pay Code about 60 are devoted to ensuring that the 7 per cent or £2.25 increase permitted is not breached, and that the total cost to the employers does not exceed this amount. And it might be just as well to point out that the real maximum increase in take home pay after tax deductions will be 5 per cent, not 7 per cent.

Furthermore, the maximum 7 per cent, or £2.25, applies to the total labour costs of the employers rather than to the workers’ earnings. This vicious Phase 3 Order leaves no loopholes. It spells out in unbelievable meanness that any fringe benefit counts against the norm. The granting of luncheon vouchers, improvements in lay-off and stand-by pay, sickness benefits, loans at lower than the going interest rates, reduced rents to help with housing problems, car allowances and reductions in pension payments, (a device which was used incidentally to solve the last gas workers” strike) are all to be deducted from the 7 per cent.

Any reduction in hours below 40, or increase in holidays over three weeks, or improvement in any overtime rates or holiday pay (eg. to average earnings, which is a popular demand) are all to be deducted from the 7 per cent or £2.25. Thus for every reduction of one hour in the working week, the Code cuts the norm by 2½ per cent.

Then there is the absolute prohibition against any pay increase whatsoever until 12 months after the last increase, whether it resulted from a national or local settlement. This Clause3 is the reason for the NCB’S refusal to grant the miners any increase until March, even though it had agreed after the Wilberforce award that the next increase should be made on November 1st.

Thus, far from Phase 3 being more flexible, it is far more rigid than any previous codes, norms or guidelines.

And in case anyone has any illusions that the Pay Board may be more flexible than in the past, or will have more room to manoeuvre in the interpretation of the Code, we have it straight from the horse’s mouth that they are way off the beam. Mr. Ken Johnson, deputy chairman of the Pay Board, made this crystal clear at a meeting of businessmen on the day of the Code’s release (October 31), when, according to the Financial Times, he told a London conference that the Pay Board, “will be just as tough under Stage 3 of the government’s wages policy as it was under earlier stages... the Board will still have very little discretion in the way it interprets it.”

Then there is the rough treatment handed out to the Greater London Council by Mr. MacMillan, the Minister responsible, who, in a speech made later in the week to a gathering of the business fraternity, underlined the inflexibility of the government by ruling out any appeals on the grounds of special cases.


What is the basis then for the misleading prattle of the government and mass media about “greater flexibility”?

Well there’s the additional 1 per cent — yes, one per cent — the equivalent of about 38p a week for those earning the average adult rate, and more like 25p a week for the majority of workers, which is made available for a complete change in the wages structure, regrading, improvements in holiday or sickness pay, and for added responsibility: not for each one of these items, but for all of them.

Merely to state this exposes the total ignorance of the government about what is going on in the real world. Tens of thousands of car workers and dockers (just to mention two groups) were tempted for years with offers of up to £10 a week to accept changes in their pay structures before they agreed to do so, and many thousands more are still resisting such bribery. But any lead-in money to entice workers to start discussions on new wage structures is specifically forbidden.

The railway workers have been involved in a restructuring exercise with the Pay Board for over 18 months. At the time of writing, drivers have been offered £1.50 for extra responsibility, which they have rejected as unacceptable, and are considering strike action to force a better offer. Under this Code, engine drivers would have to have a wage of £150 a week (nearly five times what they actually get) for the Pay Board to be able to approve this offer.

And even the 1 per cent “flexibility” extra is only available as part of, and at the same time as a general increase, ie. only after at least 12 months since the last pay settlement.

Productivity swindle

Then there is the offer of productivity deals. This proposal is even more ludicrous.

The first condition is that the maximum increase permitted is 3½ per cent (half of the pay limit), regardless of by how much productivity is actually increased. So that if as a result of such a deal, productivity is increased by say 15 per cent — not uncommon — the workers will get less than a quarter, and the bosses more than three quarters.

Then there are the strict provisions that any share of any increased productivity due to new capital equipment should not count in determining the amount of increased output. And who is to decide how much is due to capital and how much to the workers’ greater and better efforts? Why, the efficiency merchants (the bosses’ men) of course.

The Code specifically lays it down that work measurement is a condition for an approved productivity deal. To make doubly sure, it is subject to verification and supervision by the Pay Board’s own “experts”. And if later, for some reason or other, productivity drops, then the wage increase is to be cut accordingly.

But to cap it all, and to make absolutely certain that it is to be no alternative route to increased earnings outside the norm, there is the preposterous proposal, that after all that, the workers must work the new agreement for at least three months at the old rates. Only after they have proved that it has yielded more than their increase, as verified by the Pay Board, will they get the extra money — and then only up to the maximum of 3½ per cent.

Help to low-paid: a lie

Much is said by the government and the press to the effect that this Code is designed to help the low paid. This too is a lie. Workers, we are told, have a choice of £2.25 or 7 per cent, and as £2.25 is more than 7 per cent of a low-paid worker’s wage — say those earning below £25 a week — then they would receive preferential treatment via the fixed sum of £2.25.

But this is nonsense. You can’t eat percentages. In real terms the differential between the better and lower paid is actually widened. Those earning say £40 will get an increase of £2.80 as against the maximum of £2.25 for the low paid, so that in actual money terms — which is what matters — the low paid will get less not more.

But even this is not the full story. Many of the lowest paid will not even benefit to the full extent of the inadequate £2.25, for part of it will be deducted from the various social security benefits which the lowest paid are compelled to rely on.

Anomalies — nothing offered

There are certainly countless anomalies, piling injustice upon injustice, which have been created over the years by capitalist greed taking advantage of weakly organised sections of workers. The lower rates of pay for women exemplify “this.

Many workers doing the same or similar work receive lower wages in different enterprises or parts of the country. Then there are even more workers doing perhaps more arduous, dangerous, dirtier or more unpleasant work receiving much lower pay than others in less arduous or unpleasant conditions.

Such anomalies are in the main due to historical circumstances, in fields, for example, where trade union organisation has come late on the scene or where employers have taken advantage of the social and moral commitment of workers dedicated to their work (eg. teachers, or workers in the National Health and other public services) and who in consequence have acquiesced to moral blackmail, refraining from using their bargaining strength.

But in recent years many of the unorganised have become organised. Workers committed to their work in the social field have begun to realise that the capitalist state has no morals and is blatantly and unscrupulously exploiting their moral commitment to communal services in order to keep them on the lowest rungs of the wages ladder.

The struggle for “parity” to overcome these historic anomalies has been one of the new features in recent struggles.

Many of these workers fell for Heath’s promises to rectify “anomalies” under Phase 3, and patiently waited for the publication of Phase 3 to satisfy their demands. They now know better. There’s nothing in Phase 3 for them.

The only “anomalies” whose rectification is permitted under Phase 3 concern a tiny minority who have an absolutely established automatic link with another section of workers, and whose increase to maintain the link was blocked by Phases 1 and 2. They can have this link re-established, but even then not retrospectively but only as from November 7.

Parity for similar work is specifically excluded; the anomalies of low pay for similar work or for dirty or dangerous work are to be continued and differentials even widened. Phase 3, far from solving anomalies, will be used by the employers as a shield to perpetuate them.

The press has made much of the provisions for London allowances over and above the norm. But their irrelevance to the cost of living problems facing workers in London is shown by the miserable offer made to the teachers in London.

The threshold carve-up

Finally, there’s the biggest swindle of all — the threshold agreement, presented as a guarantee against inflation. It provides for a 40p per week flat increase after the Retail Prices Index of October 1973 has risen by 7 per cent, and 40p a week for every further 1 per cent rise in the Index thereafter.

Far from being inflation proof, all the pay proposals including the threshold clause, are designed to ensure a cut in real wages over the next twelve months by anything between 7 to 10 per cent for all those who do not defy the Code.

The Retail Price Index is not a measure of the rise in the cost of living. It is not based on the expenditure of an average working class family. Whilst it includes the expenditures of families with incomes of up to £70 a week, it excludes families who receive a proportion of their income from social security. Yet many low paid working class families have to rely on social security to make ends meet. These are the tens of thousands caught in the poverty trap.

Because of this, expenditure on food, housing and transport, the cost of which has risen more steeply than for other items, is not given adequate weighting in the Retail Price Index. Neither is the rise in mortgage costs included. Further, the structure of the Index is based on information gathered three years ago, before the pattern of family expenditure had been affected by the galloping inflation of today. Thus, the Retail Price Index is nothing but a crooked yardstick for the real effect of increases in the cost of living.

Phase 3 means that workers are expected to accept a cut in the real value of take-home pay of at least 5 per cent4, and then to suffer a further erosion of another 6.99 per cent before qualifying for the next 40p under the threshold clause.

Furthermore, the 40p allowed for each 1 per cent rise in the Retail Price Index will not compensate workers earning more than £40 a week for the rise in the cost of living.

Nor will the low paid, for whose benefit the flat 40p is intended, fare any better. Since the low paid spend a bigger proportion of their wages on food, housing and transport, all increasing in price faster than other items and underweighted in the Retail Price Index, then a l per cent increase in the Index grossly underplays the effect of inflation on their living standards.

The very phrase “threshold” gives the game away. Workers are expected to allow their incomes to be eroded to the extent of the “threshold”, and it’s a pretty steep threshold at that.

The Tories seized on the threshold agreement when the TUC projected the idea a year ago at the start of their ill-advised discussions with the government. True, the TUC’s tentative proposals spoke in terms of a 3 to 5 per cent “threshold”, but the very idea provided the Tories with a stick with which to beat the workers.

Why should workers be expected to suffer any erosion of their living standards? Unlike the bosses, they have no “inflation proof" investments and assets. No threshold of any kind can be tolerated.

Automatic monthly increases in pay in line with rises in a modified Index of Prices, more honestly reflecting the true impact of inflation on living standards, rather than this phoney “threshold” related to an Index weighted against the workers is the only way wages can be insured against inflation. This is what should be fought for.

Unsocial hours

The real cunning in the Tories’ Phase 3 is shown by the clause about extra money for “unsocial hours”. It’s sole purpose was to try to “buy off” the miners.

It provides for an extra 20 per cent on the hourly rate for work between 8 pm and 6 am and weekends, but only for those whose contract of employment doesn’t include these hours in the normal working week.

Apart from the miners nearly all other workers get time and a half or even double time for such work and so will get no benefit at all from this provision. The Electricity Engineers won’t benefit from it because their “unsocial hours” are part of their contract of employment.

What are the conclusions as far as pay is concerned? This Code is more restrictive, rigid and reactionary than any previous one. If not challenged and defeated it will cut living standards to a greater extent than any previous “incomes” policy. It makes a mockery of collective bargaining, as the following statement by Mr. Derek Robinson, Deputy Chairman of the Pay Board makes clear: “It is very difficult to contain bargainers, brought up in the British tradition, to activity which is little more than the provision of information to satisfy certain predetermined and rigidly applied rules. This is not what our bargainers have been brought up on ... It is very difficult to persuade bargainers that the Code has no provision for militancy or muscle.”5


The title of the Phase 3 Code is deliberately misleading. Called a Prices and Pay Code, the intent is to suggest that it deals with prices on an equal basis with pay. It does nothing of the sort. Unlike the cast-iron restrictions on pay, there is no ceiling at all to price increases.

It cannot be repeated too often: the Code does not provide for any limit to any price increases at all. Neither did Phase 2, so there’s really no reason why anyone should have been surprised that prices rocketed under it faster than ever before.

Several pages of the Code are devoted to a long list of “allowable costs” which the bosses are entitled to pass on to the public in increased prices. And while there was no change at all in the rigid limit for pay increases between the so-called “discussion statement” and the actual Phase 3 Code, there was a considerable increase in “allowable costs” between the two documents, in ready response by the Tory government to the greedy demands of their masters.

Essential commodities exempt from “control”

But before coming to the “allowable costs” leading to unlimited price increases on all goods and services, it is worth mentioning those commodities which are specifically excluded from any control whatsoever.

These are given in sections 6 to 11. Section 6 alone lists 13 items which include all imported goods, raw materials and oil. The latter is an essential import whose price is reflected in almost all goods and which is rocketing and is likely to rise still further. The list also includes all goods subject to Common Market agreements, which includes steel and coal, the increasing cost of which is reflected in a whole range of goods in daily use. Steel prices, for example, have actually been increased by 20 per cent this year in two stages and this increase can of course be passed on to the consumer. Insurance premiums and interest rates which affect all families in one way or another are excluded from any control; so are the cost of armaments, for which we shall have to pay in extra taxation. But the biggest scandal of all is the exclusion from any control whatsoever of fresh food, rent, house prices and mortgage rates.

The so-called “control” of all other goods and services is not just ineffective; it amounts to an open invitation to raise prices, through the innumerable “allowable costs”, which includes almost everything conceivable.

“Allowable costs”

Thus the costs of material and components, fuel and power, can be passed on. They are all bound to rise for some are excluded from control altogether under Common Market agreements, and others will increase in price as the constant devaluation of the pound pushes import prices up even above the soaring level of world prices as a whole.

Increases in the rent of business premises can be passed on. At the same time as the Code was published, Heath announced the unfreezing of business rents, thereby guaranteeing price increases because of the rent increases bound to follow, as well as giving at the same time millions of pounds to the property speculators.

Increases in interest charges can be passed on. And within a few days of the Code’s publication overdraft rates jumped to a usurious 18 per cent.

All increases in the employers’ insurance stamps and payments into redundancy funds can be passed on, so that it is the people who will really foot the bill.

Then there is the new basis for calculating depreciation, an “allowable cost”, using the present inflated value of stocks and equipment, not what the employers actually paid for them. This is a new innovation not provided for in Phase 2, which obviously favours the employers and is bound to shove prices and profits up. Then there is the provision allowing half of the total pay increases and as much as two-thirds of pay increases in labour intensive industries to be passed on in higher prices.

Furthermore, while retrospective payment of wage increases is specifically forbidden, prices can be raised on the basis of increased costs going back to April 30th 1973 or even to September 30th 1972, whichever is more favourable to the bosses. Thus, employers who had not raised prices previously can now make up for it retrospectively, unlike workers whose wage increases were blocked by Phases 1 or 2 or both.

The Phase 3 Code therefore allows prices to be increased not only by all the increased costs of production permitted under Phase 2, but also by additional charges which were not allowed under Phase 2, and which, like the depreciation provisions, do not involve increased cost to the employer at all.

It would, therefore, be the height of stupidity to believe that Phase 3 can or is intended to keep prices down, any more than Phase 2 did.

Rampant inflation

Official government figures show that under Phase 2 the Retail Price Index rose at an annual rate of 12 per cent, despite the fact that wage increases were held to £1 + 4 per cent. And as we have seen, Phase 3 will continue to encourage prices to use.

The continued floating of the pound will ensure that import prices rise even faster than world prices. The jacking up of interest rates and the restriction of credit is bound to slow down the economy, creating excess capacity, and thus increasing unit costs of production, which will then become an “allowable cost” to be passed on to the consumer in increased prices. And as there is no ceiling to price increases, there is no reason at all why prices should not rise even faster than the present record rate of increase.

Dividends and profits

The limiting of dividend payments to 5 per cent above the previous year is meaningless. Control of dividends has long been exposed as a fraud. It merely delays payment, does not deprive the shareholder of anything and adds to the capital value of the shares, which can be sold at any time and the profit cashed.

Profit margin and dividend controls were shown to be no obstacle to either profit or price escalation under Phases 1 and 2. While the same technique of “control” is used in the Phase 3 Code it has been considerably modified to the advantage of the employers and is therefore bound to be even less effective in preventing rocketing prices and profits. Pursuing their basic policy of “being tough with the workers and kind to the bosses”, the Tories have added a whole string of additional loopholes for the profiteers and speculators to make a killing and raise prices almost at will.

The way Tory policy was already allowing the bosses to have a field day is beyond dispute.

The Prices Commission, for example, published its second report on September 28th, and this was launched by Sir Arthur Cockfield, its Chairman, with the understatement of the year: “There’s no hard evidence that the Prices Code has been harmful to industry... industry’s profitability has not been damaged by the two phases”. The Times leader the following day was a little more forthright: “In a phrase — though doubtless one that even Sir Arthur would find unduly explicit — the report says that industry has done very well out of Phase 2 and that the tears now being shed by the Confederation of British Industry over the proposed terms of Phase 3 are those of an exceptionally brazen crocodile... It invokes the decisive evidence that gross trading profits have in fact tended to rise as a proportion of all home incomes during the period of Phases 1 and 2.

“The report could have gone on to point out, though discretion doubtless dictated otherwise, that the economic arithmetic of Phase 3, as so far officially expounded, entails that profits will continue to rise as a proportion of the national income.”

The actual facts of soaring profits during Phases 1 and 2 show that this Times quote (as is only to be expected) also plays down the real state of affairs. During this period a random selection from some of the “top 100 companies” reports shows the following:

Company Percentage increase in
trading profit per worker
in 1972/73 over 1971/726
EMI 109%
Pilkington 130%
Boots 53%
Associated Portland 49%
GEC 47.5%
Courtalds 45%

And in case any reader should think that soaring profits are confined to just a few organisations, the Financial Times analysis of the 807 companies reporting profits up to August 1973 shows that their average profits rose by 31.6%. Within this average is concealed the higher profits of whole sectors of industry, eg. motors and components 62.5%, newspapers and publishing 44.7%, financial companies 71.9%, and the Big Five Banks nearly 100%. The new Phase 3 loopholes will ensure that profits will rise even faster in the coming year by providing them with additional reasons for increasing prices.

Profits con-trick

The confidence trickery begins with the definition of profits to be regulated. Instead of calculating profits as a return on capital, the normal definition of profits, para. 58 defines it for purposes of “control” as a return on sales or turnover. Thus it is possible to double or even treble profits in terms of a return on capital without any interference at all. Even then the limit on profit calculated in this way is to be equal to the best two out of the last five years. This is the same as in the previous Codes except that this year, 1973, a record profit year, as we saw above, now becomes one of the years to choose from.

New businesses set up in the past two years are not controlled at all and for them the sky is the limit. But not so for workers taking up new or different jobs: they are limited to the going rate.

The brazen bias towards higher profits and prices is shown in two other new provisions under Phase 3. first, the Prices Commission can approve increased prices yielding higher than the profit limit laid down in order to encourage new investments through self-financing (from extra profits) if borrowing has proven difficult. As investments today are generally sluggish and the government’s latest credit squeeze makes borrowing difficult, this is the go-ahead for nearly all companies to raise prices. The only condition is that the investment should take place within twelve months after the prices have been increased. Note the difference with the treatment meted out to the workers: a limit of 3½ per cent to the increase in workers’ pay from a productivity deal which is not to be paid until 3 months after they have actually proved to have increased productivity.

Secondly, there is the provision for special dispensation from the profit norm for those companies with fixed assets over £10 million (excluding land and buildings) or up to £2,000 net assets (excluding land and buildings) per employee — that is the really big boys — if they had been operating under capacity before 30th September 1972, and their rate of capacity utilisation has risen since then by 12½ per cent.

Before September 1972 we had over one million unemployed, and most of industry was working below capacity. Since then, until fairly recently, there has been an upturn in economic activity. So this dispensation just about applies to every company as well.

The new provisions cited here — and there are others — for exempting profits from the very limited controls of Phase 3 show that the Counter-Inflation Act is not designed to control either inflation or profits. The real and only objective is to control pay rigidly — the rest is a very thin camouflage to deceive the public. And indeed, under capitalism it must be so; there is no way of keeping wages and earnings down without profits rising.

The latest government measures — credit squeeze, astronomic interest rates, cuts in government expenditure and determination to keep earnings down are bound to accelerate the trend to increased profits. This is their aim. The Times leader of October 17 spelled it out — “every 1 per cent diverted from personal earned income adds more than 5 per cent on profits.”

All the forms of “incomes policy” we have had over the years, including Phases 1, 2 and 3, were never really intended to deal with inflation or the control of profits. This was always a smoke screen to hide the real aim: to destroy free collective bargaining; to hamstring the trade unions’ growing strength and militancy; to depress living standards and push up profits, through the pincer movement of rising prices and restraint on money wages; and in that way, to shove on to the shoulders of the working class the consequences of capitalism’s chronic crisis.

Phase 3: not intended to control inflation

This brief analysis of Phase 3 demonstrates that its real purpose is not to hold back inflation but to reduce real wages and earnings, to ensure that increases in take home pay are kept well below the rapidly rising cost of living. Above all, it strikes at collective bargaining.

The Counter-Inflation Act is the counterpart of the Industrial Relations Act, laying down legal sanctions in an attempt to compel unions and workers to accept state regulation of wages. In the present crisis, the sharpest of post-war British capitalism, the effects of enforcing the Phase 3 norm on the working population will be even more disastrous than in any previous incomes policy. The depth of the crisis is now visible to all. The balance of payments deficit is a record. The economy after a short burst is rapidly slowing down, whilst no prospect is in sight of an end to the rampant inflation.

Rocketing prices whilst wages were held down during Phases 1 and 2 show that wage increases are not the cause of inflation. The new scapegoat for the government is “world conditions beyond its control”. If that is now admitted as the cause of inflation what possible justification can there be for attacking wages?

But of course inflation is not beyond the government’s control. It is the direct result of its own policies. World prices affect all countries, yet real wage increases and living standards have been rising faster in almost every European capitalist country — and much more so in the socialist countries — than in Britain.

The latest measures introduced by the government — credit squeeze, higher interest rates, and cuts in government expenditures on social needs and the nationalised industries — can only aggravate the crisis. No amount of double talk can hide the simple fact that it is a return to the stop phase of the stop-go policies of the past, with the equally dire consequences of rising unemployment and economic stagnation. Phase 3, if the government gets away with it, would only make a bad situation even worse.

The timing of the announcement of the State of Emergency was designed to divert the people’s anger against the government’s policies — the real cause of the crisis — on to those workers in the front line of the growing revolt against the erosion of living standards.

Growth — despite Tory policy

The recent short-lived boom which temporarily reduced unemployment, took place despite the government’s policy, rather than because of it. It was the dustmen’s and miners’ defeat of the government’s first attempt at wage restraint which led to the wages breakthrough in 1972-73, thereby increasing spending power and consumption and stimulating expansion and a fall in unemployment to the still intolerable level of 600,000, which incidentally would be over 800,000, but for the raising of the school-leaving age which reduced‘the available labour force by 250,000.

A similar breakthrough on the wages front now is essential, not only to keep up with and improve living standards, but to prevent economic stagnation and an unemployment total of over one million. Wage increases of at least 20 per cent are necessary to ensure that the real purchasing power of last year’s settlements is maintained till the following year’s claim. Further, it is high time to make an advance towards the 35 hour week and the achievement of equal pay now. Such demands cannot be met within the terms of Phase 3. No amount of tinkering or sophisticated calculations or re-jigging of figures can come anywhere near it. Phase 3 must be smashed. It won’t be easy but it can be done.

It won’t be easy because the government’s very existence may very well be at stake, and aided by the mass media they are doing all in their power to inhibit the workers, to intimidate them, confuse them and brainwash them into acquiescence. But they are frightened men. Heath’s, Barber’s and Walker’s almost daily statements of their determination, cost what may, to defend Phase 3 is reminiscent of Nixon’s constant repetition that he won’t resign! It’s a sign of their vulnerability in the face of the rapidly developing mass revolt against Phase 3. It’s essential that their propaganda be exposed.

Law of the land?

First there is the constant harping on the theme of the law of the land which must be obeyed even if workers disagree with it. That’s the Tories’ concept of democracy.

Phase 3 is part of the Counter-Inflation Act, which just like the Industrial Relations Act, is a class biased law imposed by a minority on the vast majority. No law which is a direct attack on the basic democratic rights of the people won in long and bitter struggle can be respected. It was defiance of such laws as the Combination Acts which laid the basis of free trade unions.

It is the defiance of the Industrial Relations Act and NIRC by the AUEW and tens of thousands of other trade unionists in solidarity with them which is inhibiting the Tories and Sir John Donaldson from the full use of the Industrial Relations Act. Tens of millions of workers involved in strikes in the last few years have successfully defied the Industrial Relations Act which makes all such strikes illegal. It was their defiance of these anti-democratic laws which themselves defy the much more legitimate natural law — freedom of association — that has maintained their present level of earnings, however inadequate they may be.

It was the defiance of the capitalist biased property laws by the UCS and thousands of other workers which has kept 100 factories open and provided jobs for tens of thousands who otherwise would have been out on the stones.

So long as there are different laws for the rich and the workers, so long will it be necessary and morally justified to defy those laws enacted not for the benefit of the people as a whole but only to enrich the tiny minority who control state power and the legal machine.

Then there is the insidious propaganda that the alternative is galloping inflation and mass unemployment. The facts of life, as we have argued earlier, prove the contrary.

Now it is true that the fight against Phase 3 is against the government, and that for complete victory a united struggle involving masses of workers is desirable. The real question is how does such a struggle develop? Certainly not by everyone waiting for someone else to move. It has to be started by some section or other and from there to gather up momentum. Who starts the ball rolling depends primarily on the circumstances prevailing. The dustmen started the process in 1972 and this was brought to complete victory by the miners in 1973.

The miners are once more in the vanguard of the struggle, but this time tens of thousands of other workers alongside them are challenging the Government’s attack on their living standards and millions more are preparing to join in.

The Tory Government and the Establishment know full well that the outcome of this challenge will determine whether efforts to even temporarily stabilize the almost daily deepening crisis at the expense of the peOple will succeed, or whether this whole strategy will collapse and with such a collapse perhaps bring down the Government itself.

Tory campaign against the miners

That is why we are witnessing an unprecedented campaign against the miners — the Declaration of the State of Emergency within hours of the miners’ ban on overtime, designed to panic the public into believing that the miners are at the bottom of the energy crisis threatening the whole economy of the country; the crude lies about the generosity shown to the miners by the Tory Government writing off the industry’s losses and the assertion that the offer to the miners is more than generous in that they will get more than anyone else under Phase III; the insinuations that the miners are being coerced by the “extremist” leadership to comply with the ban against their will because there has been no ballot; the smear that this vital struggle is being manipulated by the miners’ leaders not to get wage increases at all but for the purely political purpose of bringing down the Government; the false claim that granting the miners’ just demands would lead to galloping inflation and mass unemployment; the frantic distortion of a straightforward claim for wages as an issue of democracy versus anarchy. Then there are the inspired rumours and contrived leaks from “authoritative sources” that unless the miners come to their senses, Heath will spring a snap election on the sole issue of “who runs the country — the Trade Unions or the Government?”.

It is important to expose all these phoney arguments. firstly, to frustrate their objective of isolating the miners, and to ensure instead mounting solidarity with them. And secondly, to deepen the understanding of the people that this campaign heralds a pattern of fabrications by a desperate ruling class fighting for its life to preserve the privileges of the few at the expense of the many. Today it is the miners who are abused and lied about, tomorrow it will be whatever other section of workers joins the battle. Let us then, take the arguments one by one.

The energy crisis — who is responsible?

The timing of the Declaration of Emergency within hours of the miners’ decision to take industrial action was obviously intended to give the impression that it was their decision that lay at the heart of the energy crisis. This is the crudest of lies. The energy crisis has been maturing for years.

The Communist Party produced its “Fuel and Energy Policy” in 1967. Six years ago, in that statement, we warned that we were heading for an energy crisis of our own making. We warned that the deliberate destruction of our mining industry by successive governments, Labour and Tory alike, through pit closures, starving it of capital, under-pricing of coal to private industry, and low wage policies, was not only a social crime against the miners and the mining communities, a doctrinaire policy of undermining confidence in nationalized industries, but economic suicide.

We argued that the relative economic advantage of oil over coal was a temporary phenomenon engineered by the oil magnates to destroy coal competition, and that having achieved its contraction, oil prices would soar.

We argued that wholesale pit closures, and reliance on an uncertain foreign supply of oil rather than the coal available under our own soil, was criminal lunacy. firstly, it put at risk an uninterrupted supply of energy vital to keep the wheels of industry moving. Secondly, it would cost us hundreds of millions in foreign currency, producing thereby record balance of payments deficits and making certain the return to the stop-go policies which we are witnessing today.

We warned that the miserly approach to miners’ wages would drive thousands of the youngest miners from the pits to more remunerative and less dangerous jobs, thus causing a crisis due to labour shortages in those pits allowed to remain. This, of course, is precisely what has been and is happening today with 600 miners leaving the pits every month.

These are the real reasons for the energy crisis. Far from the miners’ actions being responsible for it, it is the consequence of deliberate government policies which we and the miners warned against. Furthermore, a victory for the miners would make a valuable contribution to solving the energy crisis by halting the flight from the mines.

The miners claim and Phase III

Then there is the claim of “generosity” to the mining industry in general, and to the miners’ wage claim under Phase III in particular. There is no truth in this whatsoever.

The so-called generosity of writing off accumulated losses and debts is a typical confidence trick. Government policies have forced the Coal Board to sell coal to the big monopolists below costs of production, obliged it for years to import coal at high world prices and sell it at a loss to British big business, and compelled it to borrow at usurious rates of interest for capital development. This has made losses inevitable despite the higher-than-average annual productivity increases in the industry...

The facts then are that the Government forced on the mining industry policies which made certain that losses would be incurred, and having written some of these losses off — losses for which the Government itself was responsible — it has the nerve to claim this as an act of generosity.

What about the offer itself? How generous is it? Is it true that the miners will be better off under this offer than the rest of the workers? Again the answer is “No”. That, too, is a lie.

All this “generosity of extras” is based on the fact that miners working “unsocial hours” (night shift) are to be paid 20% more. For the rest of the offer, it is the same inadequate 7% or £2.25 available to all. But nearly all other workers already get more than 20% more — most get time and a half or even double time for such work. Far from making the miners better off it would only partly correct an anomaly which has lasted far too long and would still not give them what the rest already have.

Consultation and the ballot

Then there are the insinuations that the miners haven’t been consulted and are somehow coerced against their will. In other words, the action is “undemocratic”.

What are the facts? The public may be forgiven if, due to the welter of false propaganda, they are unaware that it was not a “handful” on the Executive of the NUM which took the decision for an all-out ban on overtime, but a National Conference of delegates (the majority of whom are working miners) from every coalfield in the country. It was this delegate conference, the highest policy — making body of the Union, which took the decision, and delegated to the National Executive only the choice of the date when the ban should start to operate.

As to a ballot, the miners have voted with their feet, by the 100% response they are demonstrating daily. The rules of the Union call for a ballot only on the question of an all-out, unlimited strike. It is for the miners and not their adversaries — the Tory Government or the Press — to decide when that point has been reached.

Heath & Co. really have no doubts about what the outcome of such a ballot would be. If they really believed the miners were against this action, they would have balloted them themselves. Under the Industrial Relations Act, the Minister has the power to order a ballot, a power the Tories used during a previous railway dispute to their cost. The talk about a ballot is a propaganda stunt and a cheap one at that.

The arguments about democracy versus anarchy and the insinuation of political motives to bring the Government down are equally phoney and are arguments likely to be used against all workers challenging Phase III.

Democracy versus authoritarianism — the issue

We have dealt earlier in this pamphlet with the general argument for defying class-biased anti-democratic laws. But it is worth pointing out that this struggle is indeed about democracy. It is democracy versus authoritarianism, and the miners are on the side of democracy.

If we are talking about democracy, then it is the people’s will that is the issue. In the last election both the Tories and the Labour Party specifically declared their opposition to State regulation of wages. The Tories, indeed, concentrated on their utter opposition to any Government regulation of wages or norms. They preached the sanctity of the free market on the issue of wages and non-interference in negotiations between trade unions and employers.

It is the Tories, by using their majority in Parliament to introduce the Counter-Inflation Act and Phases 1, 2 and 3, who have betrayed democracy, and the miners who, by challenging this Act, are in a real sense carrying out the expressed will of the people in the last General Election, and therefore in the real meaning of the word are implementing democracy.

Undoubtedly the miners, railwaymen, firemen, ambulancemen, dockers, car workers, and many others in challenging Phase III are also challenging the Government, and are therefore participating in industrial action which is highly political in content. But the responsibility for that rests fairly and squarely on the shoulders of the Government and bosses. They introduced state regulation of wages. They introduced laws to prevent normal negotiations on their merits. They are the ones who have converted every economic and industrial issue into a political one. They are responsible for changing every wage struggle from being an argument with the particular boss or bosses into one against the Government.

The Tories are adept at creating division amongst workers and experts at using smear tactics to achieve this end. There are no differences between the miners and other workers challenging Phase III. Their object is to realize their just claims. In order to do so they are striving to force the Government to change its policies, to permit a breach of this “law” or to repeal it altogether.

If they achieve their objective, it may very well have certain consequences. Attacking workers’ wages is so central to the Government’s strategy, that its defeat on this issue by masses of workers could shatter the last traces of the Government’s credibility so that its ability to govern would be seriously undermined. If that should happen there would hardly be many tears shed within the Labour movement or many other strata of the population. That is the price that any Government in a democracy has to pay if its policies collapse because they are rejected by the mass of the people and they lose all credibility.

Who governs?

Talk of a snap election on the issue of “who governs, the Unions or the Government?” is likewise a diversionary stunt mainly directed to those who have no faith in the people. Its purpose is to alienate the faint hearts in the Labour movement particularly in the Parliamentary Labour Party from all-out support to the wage earners in struggle. It is tragic that some right wingers like Reg Prentice, Shirley Williams and others have seized on this empty threat to attack the workers challenging the Tories, the very workers on whose support their seats in Parliament depend.

If they had any faith in the class they are supposed to represent, if they intended to fight for, propagate and pledge to implement Labour Party Conference decisions, then they should be welcoming an early election to get rid of this vicious anti-working class Government. The real issue in such an election would not be “Who runs the country... ?” but “In whose interest should the country be run — the majority of wage and salary earners or the handful of big monopolists and parasites?”

There could be no doubt of the outcome of the election if such were made the issue by a determined, united movement committed to the alternative policies adopted by Labour movement conferences.

The last argument is that giving in to a breach in Phase III would lead to galloping inflation and mass unemployment. Life itself has proven this to be a false argument. We have shown earlier that inflation is a world phenomenon, a symptom of the crisis of capitalism, that the wage freeze of Phase I and the wage restraint of Phase II did not hold inflation. On the contrary, prices soared higher than ever and are continuing to do so. We have shown that the Government’s policies of devaluation, credit squeeze, high interest rates, VAT, rent increases, entry into the Common Market, tax concessions to the rich, are the real reasons why our inflation has exceeded that of other countries.

All the signs are that the assumption in Phase III that the prices of imported raw materials could drop has already proven false. The oil crisis, which will last for a long time even if peace is achieved in the Middle East, will boost prices still more. The second assumption of commitment to growth and maintaining the present level of employment is also belied by events. The consequences of present policies will lead this country back to stagnation and rising unemployment.

It was the miners’ break through in 1972, leading to general wage increases, that sparked off the boom and reduced unemployment. The real choice therefore is Phase III and inflation and rising unemployment, or smash Phase III and maintain the value of real wages, increase purchasing power and consumption, and so boost the economy and reduce unemployment.

Train drivers join in

The train drivers have joined the miners in the struggle against Phase III and already the campaign against them shows the same disregard for facts and truth. It is not only the forms of struggle — non-cooperation, bans on overtime and rest day working — which bear a similarity with those of the miners. The Beeching axe, closing down hundreds of miles of lines and driving thousands of railwaymen out of the industry has its parallel in the pit closures. De-nationalizing road haulage and discriminating in its favour against the publicly owned railway system diverted freight from rails to the overcrowded roads, built at public expense with no charge to the hauliers. Successive governments, Tory and Labour alike, succumbed to the hauliers’ lobby as they did to the oil lobby.

The promise that a modernized, efficient industry would provide a reduced but highly paid labour force was betrayed, just as the mechanization of the pits did not provide the expected higher wages. The scandalously low wages in rails as in mines has led to a mass exodus of railwaymen as also with the miners.

To earn anything like a decent wage means permanent long hours of overtime as a way of life. Due to the shortage of staff neither the pits nor the railways can function without this excessive all-embracing overtime.

The proof of this is there now for all to see. When the miners and railwaymen decide to work normal hours and ban overtime and working on their days off, both industries face being ground to a halt.

The train drivers’ industrial action is the only way they can realize what they were promised two years ago. They know that Phase III will reject even the inadequate offer made to them under this so-called “restructuring”. Going together with the British Railways to the Pay Board is a time-wasting manoeuvre even if the offer were acceptable to them — which it isn’t. They also know that whatever they would get out of “restructuring” would be deducted from their normal wage claim under Phase III.

So, like the miners and other sections of workers, they see no alternative but to challenge Phase III and the Government. The engineers are faced with the same problem. It is illusory to think that their modest claim of a basic £35 for a week of 35 hours and another week’s holiday can be realized within the terms of Phase III. The longer they delay in taking action to enforce their claim, the more deter — mined the employers and Government will be to resist it. By joining in the struggle now alongside the miners and railwaymen they would encourage millions of others in the queue and form an irresistible force that could smash Phase III to smithereens.

Solidarity and action — the key

Many Unions have already expressed solidarity with and pledged help to the miners. This should be stepped up. Every trade union organisation, shop stewards committees and so on, should express their solidarity now with the miners, train drivers and all others in the battle.

But that alone is not enough. There are millions of workers with claims in, all of them in excess of the Government-dictated norm. The sooner they get involved in action in support of their claims the greater the chances of their own and everyone else’s success. If that were to happen, the Tory calculation of defeating one section at a time would be turned against them; it would isolate the Government.

It is a crying shame that when so many workers are involved in or are on the verge of struggle against a policy condemned by the TUC, the General Council does nothing tangible to help them realize the TUC’s own declared policy.

There has never been a time when there was a greater need for a co-ordinated mobilization of the whole organized movement against the Government’s attack on real wages and living standards. The TUC is the only body capable of organising this. It came into existence to safeguard the interests of the trade unions and organize solidarity and support for those in struggle.

What is at stake is not only wages and jobs but the very survival of the trade unions’ rights to freely negotiate wages and conditions. If the Government succeeds with Phase III it spells an end to free collective bargaining and so the main function of the trade unions will have been destroyed. Such a defeat could lead to the demoralization of the movement and the perpetuation of Tory rule.

That is the objective of the Government and they are determined to persevere with it by a combination of cunning, persuasion, and force if they can achieve their ends in no other way. Their policy is the “iron fist in a velvet glove”. To search out or create divisions amongst workers is the standard Tory technique.

That is why William Whitelaw was put in charge of this operation straight from Ulster. It is a technique that Whitelaw has shown himself to be adept at in Northern Ireland, combining smooth talk, the permanent smile, with internment, the brutal use of the Army, and the playing off of one group against another.

Defeat of Phase III would restore collective bargaining, consolidate free trade unionism, impose a fatal defeat on the Tories and their big business backers, raise the morale and confidence of the vast majority of the people, and lay the foundation for a Labour victory with a commitment to radically alternative policies orienting Britain in a socialist direction.

In such circumstances and with such major issues involved it is almost criminal neglect of their duties and responsibilities for TUC leaders to stand aside. The crying need is for an urgent reconvening of an emergency TUC to adopt a strategy of action involving the whole Labour movement to achieve these objectives.

The TUC must act

Hugh Scanlon at the last TUC called for just such an Emergency Congress, once the “talks with Heath” broke down and Phase III became law. The Liaison Committee for Defence of Trade Unions, reflecting the mood of rank and file feeling at its last very representative Conference, called for such a Congress. Now that the T&GWU at its December Executive meeting decided also to demand a Special Congress, there are great possibilities for this being achieved. But time is of the essence; it must not be too long delayed. If the demand for such an Emergency Congress starts streaming into Congress House from all unions and all levels of trade union organisation it can be brought to fruition.

It must be made clear, however, that the crisis facing Britain is not solely the result of this Government’s policies. It is inherent in capitalist society itself and will recur in ever sharper forms so long as the basic structure of capitalism remains Intact.

The crisis of capitalism

World inflation; the collapse of the International Monetary System and an inability to devise a new one; growing unemployment; stop-go policies spreading throughout the capitalist world with the emphasis on “stop”; energy crises; economic crises; trends towards authoritarianism and fascism; cut-throat competition between capitalist countries at their workers’ expense; the rapid growth of multinational firms dominating the economies of most countries and accountable to no one, not even the State of their home base; growing contrasts between mass poverty and affluence both within countries and between countries: all these are manifestations of the chronic, incurable disease of an outworn system that should long ago have disappeared into the archives of history.

There are now enough resources and skills, both scientific and technological, to provide an ever-rising standard of living for the people and a finer quality of life to fulfil man’s finest dreams. But capitalism lacks the capacity for rational planning and utilization of these resources for the benefit of man. Capitalism is incapable of doing so because its driving force is production for maximum profit and not for the benefit of mankind. It is this drive for profit that leads to the irreconcilable conflict between the minority who own all the means of production, distribution, and exchange, and the vast majority whose only asset is their labour power, their skills and energy.

Only in an entirely different society, where the people who have the skill and energy (the producers) own in common the tools they use in production (the factories, pits, depots and enterprises) will it be possible to plan democratically the rational use of labour and resources to satisfy the needs of the people. Production for use not profit would be the basis of such a society, in other words, a socialist society.

Join the Communist Party

The Communist Party came into existence to achieve such a society. Its members are committed to help transform crisis-ridden capitalism into socialism. Communists realize that such a task in the face of stubborn resistance of the vested interests who benefit from the present crisis-ridden social order cannot be achieved by wishful thinking or without struggle.

To transform capitalism requires the understanding of the nature of the beast, what makes it tick, and how changes are brought about. Because our Party is based on Marxism-Leninism — the science of social change — we are better able to understand the world we live in and how to change it. It is not an easy task, nor will it be achieved in one jump, and certainly not by a handful of dedicated socialists acting on their own. It will require the unity in struggle of the majority of our people with, as the core, the mass organisations of the working class. But to achieve this level of mass activity and socialist understanding, active application of Marxism to British conditions is needed. This party is the Communist Party, and it plays a key role in the development of the movement.

But to realize this aim of socialism, our Communist Party must grow in numbers and influence, and the circulation of the Morning Star which daily puts forward the socialist case must be increased.

I would conclude by asking the readers of this pamphlet who agree with its analysis and conclusions to seriously consider joining the Communist Party and be involved in the most satisfying experience of consciously playing a part in creating a better world, fit for mankind to inhabit.


1 Programme for Controlling Inflation: Stage 3. Page 6, paragraph 3
2 October 15th
3 Clause 115
4 The difference between the permitted increase and the rise in the cost of living since the last increase
5 Times, November 10th, 1973
6 The true measure of Company rate of exploitation