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We retn to public service, para. 5 of C. 10.

My informn is tht. I shan’t be pressed to-day on 4(b) if I can give assurance on 4(a).
P.M.G. National interest shd. be put fwd. in negotns & in arbitn in C. Service, tho’ that does encroach on full comparability.
M. Need for care in formula about relation to increased prodn.
H.B. I shall stand on S.Ll.’s M to T.U.C.
J.M. Para. 7. of C.10. Diffy here. Shall encounter injustice if this is rejected.
H.B. Shan’t face it at once: for non-industrial C.S. have no claim over 1 year old.
J.H. Support papers 9 & 10.

But first aim must be to get private sector on right lines (so that comparability may become manageable).

H.W. Service pay. Period for review: up to July ’61. Proposals shd. be publd in Feb. On true comparability: 4% for officers = 14% o. ranks. Tho’ for 2 yrs., latter is larger. Recruiting trend must not be reversed. By part debates we are deeply pledged to comparability. Shd like now to discuss with Ty. Ministers.
S.Ll. Yes: on basis of memo. agreed between Ty. and M/D. officials.
P.T. Danger of our policy: wd. collapse at end/pause. If it does, v. serious criticism from Party. Memo. proposes to revert to arbitn: tho’ national interest is to be argued. Look at proposals which are ahead in natd indies – 4% and more. If these went to arbitn, no matter what Ty. say in civil service cases, no hope of 2½% average.
H.B. “Go back” to arbitn. We have never w’drawn it, even in pause. V. drastic to do even more in following period. If we tried to do so, no chance of getting T.U.C. to join N.E.D.C.

………… [5 minutes not heard.]

S.Ll. In natd indies we shd. try for 2½%. In coal mines we shd. try to get award representg. 2½% over industry as a whole.
R.W. Somethg. between 2½ and 3% overall wd. be tolerable to N.C.B. But diff. for them to decline arbitn if men ask for it.
P.M. We must avoid that. He can’t reject award if made at arbitn: but he can refuse to have arbitn. He must refuse - & face a strike if need be. Agreed.
S.Ll. Gas. Electricity award = about 5%. Gas normally follows. Gas Bd. want to avoid trimmings & wd. like to offer 4% on hourly rate. I have suggested going to arbitn & trying to get less than 5%. They are reluctant because tradition to reach negotiated settlement.
R.W. Might persuade him to offer small figure & then go to arbitn, so long as he can rely on Govt.’s view of what is permissible in national interest.
S.Ll. Am seeing him this week & will press this strongly on him. Gas industry is only breakg. even: cd. not afford more.
E.M. Railways. B.T.C. sees Union Tuesday. No strike w’out arbitration. Neither side bound to accept award.
E.H. But ’58 they struck w’out arbitn.
S.Ll. Can’t authorise B. to offer 6%. Alternatives i) offer nothing & suggest arbitn. This wd. handicap moderate T.U. leaders. ii) Make small offer, not above 2%, and go to arbitn w’out saying in advance we wd. accept award.
M. Beeching won’t do that.
S.Ll. But we have more evce now of Unions’ views. Viz., tht. they don’t expect much & aren’t willing to strike.
P.M. B. not willing to make derisory offer. If we require him to do so, he may resign. But wd. he operate on “banker’s limit”?
E.H. Diff. if known to Unions tht. B.T.C. think they shd. have more. They wd. then go to arbitn, at which B.T.C. wdn’t fight v. hard. First arbitn since we accepted Gilleband – and evident now tht. we don’t for a limit is not consistent with that.
S.Ll. Addl supplementary for rlways, bringing total to £155 m.
M. Unreal to suggest there’s no more money: obviously there is, in Ty.
J.H. Agree with S.Ll. Posn has moved since last talk with B. Reason for him to take a more ‘national’ view.

P.M. Can’t we now persuade him to try for settlement at 3%.

P.T. Great danger in arbitn: B. who thinks 6%: Unions askg. 12%: and tribunal with t. of r. invitg. Gilleband solution.
E.M. Can’t hope to hold rlways. back when gas already gone ahead: for rlways. are already too far behind other natd industries.
P.M. It cd. be managed if rlway. wages were not on national basis. That cd. be brought out in arbitn. Pave the way for getting away from national rates.

Try to get him to seek settlement at 3%.

If he won’t, put course (ii) above.

S.Ll. Play this out until result on rlways. is known.

E.M. I agree.
University Staffs.

H.B. Last increase Jan. ’60. U.G.C. dissuaded a year ago from putting in further claim because of teachers’ claim. They eventually submitted in July recommn for 17% from Aug. 1961.

One thing clear: any increase shd. date from Aug. 62.

Ty. view on merits: case for 8 or 9% tho’ U.G.C. wd. not endorse much less than 17%. E.P.C. divided: majority felt that Univ. expansion shd. be jeopardised rather than wages policy: not more therefore than 3%. Ascertained tht. U.G.C. re-action to that wd. be as set out in memo. paras 12-13. Stress para. 13. U.G.C. also said Robbins shd. be informed in advance.

R.A.B. Element of pre-pause commitment. Teachers and C.A.T.S. Views of Murray, who is reliable.

What about para. 10. – 3% rising over years to 9%.

H.B. Murray thinks that is worse.
P.M. Competition with C.S.
J.H. Agree: my informn is state Universities are not yet in diffy over recruitment.
E.H. They made the same noises 2 yrs. ago: and tho’ we didn’t do all they asked consequences did not follow.
Hail. 56% increase in teachers over 8 yrs. is plan. No chance of getting these numbers if C.A.T.S. pay more – let alone C. Service.

Importance of securing University expansion.

J.H. 17% wd. be reverting to full comparability. Wd wreck general policy.
H.B. My plan = 50% redn in U.G.C. claim.
E.P. If 8% offered, Health Ministers can’t get [l.a.’s] to [Enter K.

Offer 3% to nurses.

H.B. Nurses last increase was only 1 yr. ago: & comparison is with non-graduate teachers.

Easier to present this as rounding-off of award to teaching profn & separate from manual workers. Necessary for expansion p’mme.

S.Ll. Presentn of 9%: say that it wasn’t part of pay pause, but of teachers. Two stages.
R.A.B. Argument suggests there is more in my plan of 3% now rising gradually to 9%.
Ch.H. If real argument is recruiting, escalating scale is valuable.
R.W. Can we present it as pre-pause commitment.
S.Ll. No.
R.A.B. But they may bring it out, critically.

C.C. 6(62). 18th January, 1962.
1. Incomes Policy. Railways. [Enter E.P., R.W., P.M.G., M.R.
S.Ll. Other claims are being postponed.

B. Feels tht. on comparability nothing less than 6% wd. be

justifiable, and he is unwilling to offer less. He wd. like to see

the claim p’poned: and this cd. be explored. But we must put

Govt.’s view in writing to B. - 2½% average & this is basis on

which this claim must be handled either in negotn or at arbitn.

He wd. prefer to be free to tell the men tht. he himself wd. have

liked to offer more. But he will say they must lag behind because

of state of rlways: & if they raise recruitment he will reply with

argument v. national rates. Latter wd. be useful in arbitn.

E.M. Will see B. this p.m., with M. and J.H: ask him to seek p’ponement

until end/March – try to get Unions to agree. Danger of it –

unofficial strikes. Then discuss terms of proposed letter &

ascertain wtr. he wd. like to have it before or after he has seen

P.T. At what stage does Govt. say it won’t honour an arbitn award

inconsistent with their view of national economic interest.

Must make that clear before arbitn starts?
S.Ll. The Union won’t bind themselves to accept award. Nor need we?

This cd. be got across in guidance to Press – w’out formal Govt.

Ch.H. S.Ll. hasn’t yet publicly come down between his 3 alternatives in lr. to

T.U.C. Is this lr. to come down in favour of 1st alternative, in

terms of 2½%. It forces this issue. How otherwise can we give


M. Copy of this lr. will go simultaneously to Union.
I.M. It will clear tht. B. thinks the offer shd. be higher than Govt. direction.

This suggests we shd. direct him to offer nil. Won’t surprise

anyone tht. B. thinks it shd. be more than that.
J.H. Dangers of p’ponement i) unofficial strikes ii) public will deduce tht.

Unions have agreed because they believe they will get a better

deal in April.
P.M. These dangers wd. be less if delay were shorter e.g. end/February.
E.M. I fear negotn or arbitn under duress of unofficial strikes.
Hail. Offer from B.T.C. of delay = promise of more later. Dangerous.
P.M. In lr. avoid direct instn to offer 2½% (because at arbitn

that wd. be almost bound to lead to higher award).

Aim shd. be to get to arbitration w’out any offer.
2. Nuclear Tests.
Tels. to W’ton. 135/6. From W’ton. 457/8. To W’ton. 164.
P.M. Mr K. still hopes to avoid further tests. But pressures of p. opinion &

mil. & some scientific opinion favours them. He wants therefore

a loophole for escape but wishes to make prepns. For us it wd. be

a better posture to say now they are military necessary but before

we do it one more attempt to halt the race. Rather paradoxical


My formula attempted to reconcile this. Amendment in para. 3 of

W’ton. 164 goes round in a circle. We cd. accept ‘would justify’

vice “justifies”.
H.W. Already division in scientific circles, even in U.S., one ques. wtr.

further tests are military necessary. We may be defendg. decn

v. b’ground of U.S. statements are not necessary. We can’t make

our technical case in public.

P.M. If we agree to Xmas I., & Mr K. eventually decides to test, we can’t

C.S. We shd. do it only if obliged to do so.

Factor, places oblign on West, in default of para. 2, to hold

further series.

P.T. More than drafting. Mr K. wants to prepare, while reserving ultimate

decision. We can’t avoid therefore leaving decn to the U.S.

I.M. ?Tell Mr K. tht. he has our full assurance tht. we will support a decn

by him to test: but it must appear to be a joint decision.

Then announcemt. cd. be restricted to decision to prepare

Xmas Island.

P.M. Accept Rusk’s wording. Suggest we shd. say publicly it will be a

joint decision but private assurance we wdn’t veto.

P.T. This is a v. big moral decn. Only 8 wks. to [Enter H. Exit S.Ll.

prepare Xmas Isl. Wiser therefore to promise now to let U.S.

have it if they decide to do the series.
C.S. Supported this view.
P.M. After further discussion – accept U.S. words for para. A. & putting

“present” vice “joint”.

Then I wd. say that U.K. Govt. have decided this wd. be justified.

If then Mr K. decided it wasn’t necessary, I cd. defend that as

a new position.

C.C. 7(62). 23rd January, 1962.
1. I.C.I. and Courtaulds. [Enter M.R.
P.M. R.A.B. prefers to dissociate himself from Cab. discussion.
F.E. I.C.I. disclosure of 18/12 caused C. to break off discns for merger.

I.C.I. then announced take-over bid. Saw both sides to show

Govt. altertness.

Our policy so far has bn. one of non-intervention. No powers.

Private enterprise knows its own interests best. Took that

line over Press, but had to concede R. Commn. Public interest,

tho’ difft, here too – even on on our side some uneasiness. Shd

we because of this modify earlier policy.

Welcome views.
M. Unfortunate ‘image’ of private industry. Pity when firms can’t agree.

Better face this (? do nothing).

I.M. No validity in argument tht. this paves way for natn. I.C.I. is ripe for

it anyway. Came up in last election: did us no harm.

Public opinion: influenced by C. Market, for which larger units are

better. Don’t intervene.

K. L.P. referred to this in H/L. on 20/12. Agree with line he then took.

Monopoly condns existed before this deveopmt. occurred.

Mon. Commn too small to deal with such large issues.

C. Market argument is valid. We shd. not rush in.

S.Ll. Agree re natn and monopoly. On terms of offer Govt. did not

pronounce. But feeling tht. Govt. shd. satisfy itself tht. this not

contrary to natl interest. Yet how can it do this? Enquiry wd.

take too long.

D.S. V. dangerous for Govt. to take on oblign to express a view on mergers.

Where wd. you draw the line? Prefer to rest on Monopolies

machinery, which cd. be invoked after merger.
P.T. Right for F.E. to inform himself. But diff. for Govt. to judge the

merits. I.C.I. case if arguable: no justificn for us to express

dogmatic opposite view. There wd. be nil for M. Commn to

consider until about 3 yrs. after a merger.

J.H. Govt. look stupid if they have no view. Sympathise with S.Ll.’s

suggn. Can’t however suggest what our view shd. be.

This is not helpful to wage restraint or to ec. planning


Hail. If anything contrary to public interest emerged, powers of modern

State are sufficient to deal with situation.

Ch.H. Mon. Commn procedure isn’t v. good – no power to act in advance,

need to wait some time before enquiry, no power to enforce


Jenkins’ Cttee?

F.E. No report until April: then only techniques of take-over.
P.T. Duties 20-30% wd. enable us to break up monopoly if we thght, it

E.H. Attitude to monopolies & size of firms will be greatly changed by

C. Market competition, whether we are in or out of it.
P.M. Better if opinion realised what problem is. Nothing to do with

Clore type of transaction. Exposition of technical issues

at stake.

Courtaulds don’t in fact dispute the main case – or they wd. not have

considered merger in first place. If the argument is over terms,

we need not pronounce on that.

F.E. Cd I say: after aid of 2 assessors at mtg. with both cos: nothg.

contrary to p. interest or somethg. else. At least wd. show

we were not disinterested.

Mght. lead to I.C.I. reverting to policy for agreed merger. Some

indications tht. Courtaulds mght. be willing.
Hail. There will not be enough evidence to warrant Govt. in expressing a

definite view.

D.S. F.E. wd. be assumg. function of M. Commnin a half-baked way
M. Don’t have 2 assessors. If further conversations, keep them informal.

(V. complex: doubt if F.E. will understand it.)

P.T. Dangerous precedent. Shd be pressed to do the same in other cases.
S.Ll. Don’t want Govt. to pronounce wtr. this is good or bad.

But desirable tht. Govt. shd. satisfy themselves, by further

enquiry, that there is no reason why we shd. intervene.
D.S. It is not a responsibility of Govt. to decide what is the most

efficient way for private enterprise to conduct its business.

P.T. Further conversations wd. affect movement of share prices.
D.S. And result wd. pre-judge any eventual reference to M. Commn.
P.M. Let F.E. circulate drafts of statements – one continuing

to suggest further conversations and the other not.

We can foreshadow a statement in H/C. “shortly”.

Ask I.C.I. to submit in writing their technical case for

a single unit.
2. Indonesia. [Enter R.A.B.
H. Read draft statement.
Hail. ‘Stop’ or ‘suspend’?
F.E. Must revoke licences.
S.Ll. That ‘suspends’ exports.
P.M. Then say “suspend”. Make plain in answer to Supplementary that

method will be revocation of licences.

3. Laos.
H. Since memo. sitn improved. 3 Princes promised to produce national

delegn to Geneva by ½. Phonma likely to produce natl govt. –

agreed any dispute over p’folio can be resolved by King. Risk

tht. Phonmi may cheat.

Not anxious now to be precise with U.S. in last para. of memo.

10(i) and (ii) will now suffice: in conversation in W’ton:

no message.

Believe now it will be more diff. for Princes to frustrate a settlement.

P.M. No formal message. Amb. cd. talk gently to Rusk tht. it will be diff.

for us. Or, better, thro’ Bruce.

4. United Nations: Finances. [Enter Perth
a) Contribution to Congo Operations.
H. We must continue our contribn – at least while Int. Court is

considering the reference.

S.Ll. Month to month, in arrear, and holding back equivalent of services


P.M. None of Sec. Council members pay – save U.S. and ourselves.
H. Only possibility of doing otherwise wd. be if C. operation had to be

condemned by us.

Hail. At least until Ct. decided, overwhelming case for continuing to pay.
P.M. But remain free to dissociate ourselves from the operations and then

decline to pay any more towards them.

b) General Finances: Bonds.
H. Mr K. has identified himself with plan to get $100 m. from Congress.

U.S. percentage 32%: ours 17.5%. If we do that share = $15 m.

They have asked us to buy $25 m. Practical alternatives as in

memo. I strongly favour $12 m: that will give us some influence

with U.S. We cd. space it out up to ’63.

x| We cd. say we can’t repeat this & do it on understanding tht. U.N.

puts its house in order before ’63.
I.M. Uneasy over H/C. re-action. But, as U.S. put it to us, we can’t

decline to contribute. We shall be attacked for this.

H. Surely x/ will help.
Hail. Must be once-for-all. Must be conditional on U.S. getting approval.

Subject to that, I agree.

S.Ll. If it’s a once-for-all, I wd. favour $12 m. At $10 m. we shd. be

pressed for more.

P.T. We have no oblign here. It’s a phoney proposition. Put more pressure

on U.N. to put house in order.

K. If we want U.N. to continue: if we want U.S. to get Congress to

subscribe: then U.N. collapses. That is not our policy.

M. Morally bound to support this organisation financially if we belong

to it.
J.M. Yes: but hope we can look at its future some day.

R.A.B. Morally bound.
H.W. Must assure our supporters tht. we also mean to try to reform U.N.
D.S. Must also have a row in U.N. over defaulters.
H. No moral oblign beyond this year. Must have time to re-organise it.
P. Cd we offer “up to $12 m.” & make full payment conditional on

“better behaviour”, especially over Congo.

E.H. Influence in U.N. – important to our Colonial policy etc., over next

4 years – depends on our retaining U.S. support in U.N.

P.M. Next 6 wks. in H/C. will be critical. Is this the moment?

Half-Agreed in principle: P.M. to consider timing,

and conditions.

C.C. 8(62). 25th January, 1962.
1. I.C.I. and Courtaulds. [Enter M.R.
F.E. Alternative drafts. A. wd. cause immediate row & show Govt.

powerless. B. wd. avert that, but land us in a row 2 wks. ahead if

I then seemed to have no firmer opinion on the merits.

On balance, favour B.

On powers, we wd. technically be able to revive Control of Borrowing

Act – cd. prohibit issue of shares.

Jenkins, however, will say tht. take-over bids & mergers are essential

to growth of national economy.

Other mergers are under discussion e.g. Charringtons.
P.M. Ignore personalities & current conflict. Concentrate on merits: is this

in national interest.

M. Mistake to promise (as in B.) that we will pronounce after discussions.

Tho’ I prefer B. For A. implies tht. we dislike I.C.I. pressure on

I.M. Avoid pronouncing what is & what is not in public interest.

Prefer A. – re-worded so as to avoid green light for I.C.I.

Don’t promise talks.
Hail. Favour posture, not words, of A. B. suggests there may be a Govt.

position in this: there isn’t. There is no natl reason yet why we

shd. intervene.
H.W. Against intervention.
E.H. Favour this merger, in natl interest. Against enquiry. Bad precedent.

Non-intervention, with bias twds. either company.

H. Agree. Clear we shan’t intervene.
K. We shd. not intervene. But worried at reception of such a policy by

S.Ll. Not yet in posture where we cd. say we won’t intervene. Favour B.

Tho’ agree tht. we shd. ultimately decide not to intervene.
H.B. Our position shd. be as positive as possible. We shd. not intervene,

but shd. be seen to take time to reach that concln.

D.E. How big has a merger to be before oblign on Govt. to look into it &

decide wtr. to intervene.

All intelligent people in City wd. see that this was a bluff.
P.T. This has brought to a head pressures on mergers which we shan’t be

able to ignore. Against intervention in this case. No powers.

Monopolies Commn useless. Against Govt. expressg. opinions

which they can’t enforce.

Add to statement references to i) consumers ii) use of tariffs.

We may be forced eventually to consider takg. powers on mergers –

after Jenkins reports.
J.H. Against intervention, but support S.Ll.
E.M. Prefer S.Ll. B. – adding x/ “especially on technical & research


C.S. We can’t judge public interest here: don’t pretend we can: false to

suggest tht. in a little time we could.

Ch.H. If we cd. isolate x/, & if we cd. see what judgmt. we cd. form on it,

I mght. favour S.Ll. But I see no hope of that.

If we really believe we shan’t intervene, better take that line

soon. No advantage in delay.

D.S. We shall get into deep water if we start expressing views on mergers.

This one is prob. in natl interest, esp. because of C. Market.

Two public interest aspects i) monopoly: no real danger because

increasing internatl competn. ii) efficiency: we aren’t

competent to judge. F.E. won’t be any the wiser for further talks.
J.M. Agree with Ch.H. If there is need for further mtgs. with Chairman,

hold them w’out this preliminary statement.

S.ll. Probe reasons for change of attitude of Courtaulds. P’pone any

statement m’while.

E.H. Delay is not advantageous.
Hail. Esp. when we are not really doing anything – we are not.
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