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Issue 17 - December 1973
Three Phase Trick
On 13 November, Peter Walker, Secretary for Trade and Industry said "The Modern Conservative Party has a unique opportunity to transform the free enterprise system which, for good reason, it has traditionally supported. We can create a new capitalism where the dreadful attitudes of 'them and us' fade out of the system".

On 18 November, Francis Pym, Conservative Chief Whip said "I have never believed that anything but good can come from taking people into your confidence. That is why the Government has sought to be fair and open with the public in its counter inflation policy."

So we can all look forward to a comfortable, honest, benevolent future. Nice thought, if you believe it. We hope to be able to show, in this article, just how honest and equal the Government has been with us all. A lot of the information we've used has come from the recent CIS anti-report - Three Phase Trick, a handbook on inflation and Phase Three.

Well let's start at a suitable beginning - which is the last few years of the Labour Government.

At this time, industrial expansion, for a variety of reasons, was held back, resulting in record unemployment figures and a cut-back in profits which, in turn, resulted in a 'voluntary' wage freeze. When Heath came to power it was relatively simple for his Government to create a minor boom by taking up the slack in the economy created by Wilson. So industry started to increase their profits substantially. Naturally, the workers - whose wages had been involuntarily held back during the freeze, rightly thought they should be due to a share of these profits in the form of wage increases.

But Heath, and the Confederation of British Industries, thought otherwise. After all, profits are to do with firms and shareholders and not the people who made the goods which make the profits. But Heath and the CBI couldn't say this outright. So they thought up a tax concession scheme which sounded good but typically, resulted in the workers being literally no more than a few pence (new) better off - though industry and the large salary earners gained substantially and privately from it. The workers suitably conned, Heath then started to persuade the country that a hold back on wage increases was necessary for everybody's good (sic). However, the miners' successful strike defeated the Government as far as this idea was concerned so Heath had to think again. This thought resulted in Phase One, in which next to no wage increases would be allowed.

This was followed by Phase Two in which he would allow small increases. During this period he kept telling everybody that it was for their benefit and that they weren't the only people to suffer. Industry, he said, had to restrict profits. Really? How come, then, that during the actual freeze period ICI's first half profits were up a staggering 144%, and that during the period generally the top 20 companies increased profits by an average 26%? To see just how fair, honest and equal the Government was during this period here are a few enlightening statistics: Courtaulds increased its average wage per employee by 13.6% while the average profit per employee increased by 45%. Pilkingtons increased its average wage per employee by 13.6% while the average profit per employee increased by 130%; EMI increased its average wage per employee by 8.8% while its average profit per employee increased by 109%; and Boots increased its average wage per employee by 12.2% while its average profit per employee increased by 53%. So much for profit restrictions.

All during this time these firms continued to ask and get price rises from the Price Commission - a Heath con. All during this time the Pay Board - a Heath class con was rejecting or reducing wage claims.

So Phase One and Two passed over, with profits and prices going up, real wages (the amount of goods you can buy with your money) going down, and lots of people going on strike in protest at the rising prices, the sinking value of their wages and the refusal of the Pay Board and the Government to do anything about it - especially in the form of real wage increases, or even just increases to keep up with rising prices.

After Phases One and Two came Phase Three, which was not substantially different from Phase Two except that it allowed the workers a little bit more money - though not nearly enough to allow them to make up for what they have lost in the previous Phases.

But how has the cost of living really been affected?

Between 1951 and 1969 real earning of the average manual worker rose by 2% per year. But State Contributions (income tax, national insurance, graduated pension, superannuation etc) increased also and ate deeper and deeper into the average manual worker's pay packet; to such an extent that now, a low paid worker might be worse off after an increase than before because he could lose more in government contributions (Family Income Supplement, free school meals etc) than he could gain in his wage packet.

But from 1969 his situation got even worse. For a start Phases Two and Three have helped the better off wage earners more than the poorer. Phase Two said you could increase your wage packet by £1 plus 4%. So if you earned £40 per week your new wage (if granted by the Pay Board) would be £40 + £1 + £1.64p (4% of £41) which is £42.61p. However, if you only earned £20 a week, your new wage would be only £20 + £1 + £0.84p (4% of £21) which is £21.84p. So before the increase the difference in the two pays was £20, after the increase it was £20.80p.

Similarly, under Phase Three you are allowed an increase of either £2.25 or 7% (whichever is the greater and Pay Board allowing). Basically this means that any person earning less than £32 per week is limited to a rise of £2.25 while anyone earning over this amount will get progressively more than the £2.25 depending on how big his wage is. Increases of over £350 per year are not allowed but this still allows the high wage (or more often salary) earner a maximum increase of over £6.70p a week.

So the richer are getting richer and the poorer poorer. And all the while prices are spiralling. In October 1972 the average industrial wage was £36.20p. At this time with everything in his favour a person could have received, under law, a maximum net increase of 5.4% in his wage. Meanwhile prices increased by 9%. Last month alone prices increased by a further 3.5%. For a lower paid worker, who spends a greater proportion of his money than the more affluent on necessities (rent, food, electricity) his situation was even worse. His living costs rose by more than 10%. During Phase Two he would have had to raise his gross pay by some 18% to cover this. But Heath, in his honesty and equality restricted him to £1 plus 4% at the most.

So if the workers haven't benefited from Heath and his Phases then who has? Well, as has already been shown, big business has. So too have the shareholders. That's how Sir John Stratton, Chairman of FMC, was able to increase his pay by £16,000 a few months back, and how Lord Samuel of Wych Cross who is very interested in property, was able to make £2,000,000 in the first 24 hours following Phase Three. One law for the rich and another ...

But more and more people are becoming wise to Heath and the CBI and are refusing to just sit back and be made poorer. This has become more and more obvious in the past few weeks when first the firemen, then ambulance men, then miners, electricity workers, dockers, teachers and post office workers either went out on strike, worked to rule, or began threatening action, while council workers, hospital staff and many others have big pay claims in the pipeline and are not willing to be ruled by the pay board and its £16,000 a year chairman (Sir Frank Figgures) and one of the reasons why the Government has had to declare its Fifth Emergency Powers Act since Heath came to office.

Anyway, one last kick in the face from Patrick Jenkin, Chief Secretary to the Treasury, who, on 18 November said: "The Government simply cannot yield (to industrial action). To do so would be to allow an organised group of workers to override the express terms of a policy embodied in statute law passed by Parliament. One can understand and sympathise with the disappointments of those whose expectations have been cut back by the operation of the pay controls. But that cannot possibly justify what would be a direct and overt threat to Parliamentary democracy."

For more in-depth details of the Heath Con by 'Three Phase Trick' - a handbook on inflation and Phase Three - a very good and not very complicated pamphlet by CIS, 52 Shaftesbury Avenue, London W1.