secret secret

---

SECRET

0V •

; D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C

MAJESTY'S G O V E R N M E N T

CC(81) 2nd

COPY

NO

Conclusions CABINET

CONCLUSIONS

o f a M e e t i n g o f the

h e l d a t 10 D o w n i n g S t r e e t THURSDAY

15 J A N U A R Y

a t 1 0 . 30

Cabinet

on 1981

am

PRESENT Rt Hon Margaret Thatcher

The

Prime

The R t H o n W i l l i a m W h i t e l a w

The R t H o n S i r G e o f f r e y H o w e C h a n c e l l o r o f the

Q C M P

The

The

Lancaster

Chancellor Rt Hon Sir Keith Joseph

Lord

Secretary of State f o r

The

Employment

The R t H o n S i r I a n G i l m o u r M P

Rt Hon L o r d President

M P

Industry

Soames

o f the

Council

Seal

S e c r e t a r y of State f o r the The R t H o n N i c h o l a s

Rt H o n John Nott

Secretary The

of State f o r

M P Defence

Rt Hon Peter Walker

M i n i s t e r of A g r i c u l t u r e ,

The R t H o n M i c h a e l H e s e l t i n e

M P

Environment

Edwards

S e c r e t a r y of State f o r

M P

The

Rt Hen George

Secretary The

Wales

The

Secretary of State f o r S o c i a l

Secretary

The R t H o n D a v i d H o w e l l of State f o r

M P

Energy

The R t H o n N o r m a n F o w l e r S e c r e t a r y of State f o r

Services

M P

Transport

The

and

Food

M P

Scotland

of State for N o r t h e r n

of State f o r

Rt Hon M a r k

Ireland

M P

Trade

Carlisle Q C M P

of State f o r E d u c a t i o n a n d

Rt Hon L e o n Brittan M P

Chief Secretary,

SECRET

Younger

of State f o r

Rt Hon John Biffen

Secretary The

M P Fisheries

Rt Hon Humphrey Atkins M P

Secretary

The R t H o n P a t r i c k J e n k i n M P

Secretary

of State for

General

The R t H o n J a m e s P r i o r M P

Lord P r i v y

Rt Hon L o r d Hail sham

Lord

Secretary

M P

C h a n c e l l o r o f the D u c h y o f and P a y m a s t e r

Department

Exchequer

The R t H o n F r a n c i s P y m

The

M P

S e c r e t a r y o f S t a t e f o r the H o m e

M P

Minister

Treasury

Science

SECRET

ALSO

PRESENT

The Rt H o n Michael Jopling M P Parliamentary

Secretary,

Treasury

SECRETARIAT Sir

Robert Armstrong

~

Mr

M D M F r a n k l i n ( I t e m s 2 a n d 3)

Mr

P L.e C h e m i n a n t

Mr

R L W a d e - G e r y ( I t e m s 2 a n d 3)

Mr

W N H y d e ( I t e m s 1 a n d 7)

Mr

D J L M o o r e (Items

Mr

L J H a r r i s ( I t e m s 1 a n d 7)

(Items

4-6)

4-6)

C O N T E N T S em

Subject

1.

PARLIAMENTARY

2.

FOREIGN

Page

AFFAIRS

1

AFFAIRS

Poland

1

Namibia

1

Libya/Chad

2

Spain

2

3.

COMMUNITY

4.

1981-82 C A S H L I M I T S Price

AFFAIRS A N D VOTES

Factors

5.

INFLATION-PROOFED

PENSIONS

6.

P A YA N D P E R F O R M A N C E

7.

REMUNERATION

O F JUNIOR MINISTERS IN T H E H O U S E

ii

SECRET

O F

LORDS

CONFIDENTIAL

L A M E N T A R Y

1.

AIRS

H o u s e of C o m m o n s d u r i n g the f o l l o w i n g

T h e C a b i n e t w e r e i n f o r m e d of the b u s i n e s s to be t a k e n i n the

be m a d e

that a f t e r n o o n that the

h i s B u d g e t o n T u e s d a y 10

The

Cabinet

Took

EIGN

2.

AIRS

in

C h a n c e l l o r of the E x c h e q u e r w o u l d

open

-

PRIVY SEAL

s a i d that m o r e

strikes

had taken

P o l a n d a n d the p o l i t i c a l s i t u a t i o n r e m a i n e d v e r y t e n s e .

and

would

note.

T H ELORD

had sharpened again.

Commander-in-Chief

of the

rence:

m i g h t a l s o be d e s i g n e d

51) 1st

vention.

as

place

T h e two

were Solidarity's demand for a five-day

the p r o p o s a l f o r a n i n d e p e n d e n t

comment vious

A n announcement

March.

i s s u e s c u r r e n t l y in dispute nd

week.

f a r m e r s ' union.

T h e tone of

T h e c u r r e n t v i s i t of the

Warsaw Pact forces,

Soviet

Soviet

Marshal

a r e m i n d e r of the p o s s i b i l i t y

main week

Kulikov,

of S o v i e t

inter­

lusions, jute 2

ibia

THE

LORD

conference vious rence:

PRIVY

SEAL

s a i d that the f a i l u r e of the

on N a m i b i a at G e n e v a was

United

r e g r e t t a b l e , a l t h o u g h it h a d so

p r o d u c e d l e s s r e c r i m i n a t i o n than m i g h t have been

80) 4 2 n d

P a r l i a m e n t a r y U n d e r S e c r e t a r y of State,

elusions,

Office

ute 2

reached.

that the S c u t h W e s t A f r i c a n

Organisation would dominate most likely reason more

F o r e i g n and C o m m o n w e a l t h

was

any free

for

But a crisis

sanctions

attitude

but

the

t h e i r hope that t h e i r N a m i b i a n p o l i c i e s w o u l d

sympathetically

b y the i n c o m i n g U n i t e d States

point,

in terms

against South A f r i c a ,

of a m o v e

was

be

Government

D i s c u s s i o n of N a m i b i a i n

United Nations G e n e r a l A s s e m b l y might now r e s u m e

future.

cr

People's

elections in Namibia;

than by P r e s i d e n t C a r t e r ' s A d m i n i s t r a t i o n . the

agreement

be b e c a u s e o f i n t e r n a l S o u t h A f r i c a n f a c t o r s

because they now believed

viewed

the

at G e n e v a that t h e y d i d not want to see

This might

far

expected.

R e s p o n s i b i l i t y l a y w i t h the S o u t h A f r i c a n s , who h a d t o l d (Mr Luce),

Nations

i n the

i n the S e c u r i t y

near Council

u n l i k e l y to be r e a c h e d u n t i l

of the n e w U n i t e d S t a t e s G o v e r n m e n t w a s

clearer.

the

Meanwhile

the i n t e r e s t s of B r i t a i n a n d the W e s t w o u l d be b e s t s e r v e d b y p l a y i n g whole

matter

down as far as

possible.

1

CONFIDENTIAL

the

CONFIDENTIAL

jya/Chad

THE

LORD

PRIVY

SEAL

c a i d tfiat C o l o n e l Q a d h a f i ' s G o v e r n m e n t i n

L i b y a h a d f o l l o w e d u p the securing agreement

s u c c e s s of its m i l i t a r y i n t e r v e n t i o n i n C h a d

on a m e r g e r b e t w e e n the two c o u n t r i e s .

by

Libyan

i n t e r v e n t i o n h a d b e e n d e p l o r e d i n a p u b l i c s t a t e m e n t b y the F o r e i g n a n d C o m m o n w e a l t h S e c r e t a r y d u r i n g h i s c u r r e n t v i s i t to E g y p t .

F r a n c e had

also condemned Libya,

Franco-

but b a d at the

Libyan oil agreement. been

s l o w i n r e a l i s i n g the d a n g e r s

policies,

Spain

expansionist

but P r e s i d e n t S a d a t of E g y p t h a d b e e n a w a r e

of the t h r e a t

some time,

a n d the N i g e r i a n s h a d n o w b e e n a l e r t e d b y L i b y a n

m e n t i n the

recent riots in Kano.

T H E

PRIVY S E A L

LORD

There had however

(ference: ;(80)

22nd

concluded a

inherent in Libya's

p r i m a r i l y to d i s c u s s •evious

same time

M o s t A f r i c a n Governments had unfortunately

s a i d that he h a d r e c e n t l y v i s i t e d

Spain's accession been considerable

of S p a n i s h c i t i z e n s

anclusions, |nute 2

continue.

to the E u r o p e a n C o m m u n i t i e s . talk about G i b r a l t a r .

in Gibraltar

to the n e g o t i a t i o n s

meantime

at official l e v e l

it w o u l d be p o s s i b l e c l e a r that this

Spain had made i m p r o v e m e n t s

The

Lisbon agreement

w o u l d be e a s i e r

i f i n the

o n the t r a d e f r o n t a n d h a d a l s o

on G i b r a l t a r .

He had also taken missiles.

note.

T H EL O R D P R I V Y S E A L s a i d that, f o l l o w i n g the s u d d e n d e a t h of

C o m m i s s i o n e r G u n d e l a c h , the D a n i s h G o v e r n m e n t h a d n o m i n a t e d Minister for Agriculture and F i s h e r i e s , the

M r Dalsager,

their

as a m e m b e r

of

C o m m i s s i o n , w i t h the h o p e that he w o u l d be g i v e n the A g r i c u l t u r e

leference*

portfolio.

:C(81) 1st

the G r e e k C o m m i s s i o n e r ,

fonclusions,

w i t h the

pnute

accession THE Mr

the

Cabinet

Took

3.

forth­

to g i v e f u r t h e r p o l i t i c a l

o p p o r t u n i t y to u r g e the S p a n i s h G o v e r n m e n t to b u y R a p i e r

3

should

f o r S p a n i s h e n t r y i n t o the E u r o p e a n

He had made

i m p l e m e n t e d the

Jevious

status

T h e S p a n i s h G o v e r n m e n t w e r e h o p e f u l that d u r i n g the

Communities.

AFFAIRS

The

which H e r Majesty's Government could

but it h a d b e e n a g r e e d that c o n t a c t s

coming British Presidency impetus

)MMUNITY

Madrid

S p a n i s h G o v e r n m e n t h a d a s k e d f o r u n d e r t a k i n g s a b o u t the f u t u r e not give,

for

involve­

Responsibility for F i s h e r i e s

subject,

who,

during

Greek

Communities. OF AGP.ICULTURE,

Dalsager had

strong claims

FISHERIES A N D FOOD

personal limitations,

he was

to a l i e n a t e

s a i d that

to t a k e o v e r the A g r i c u l t u r e p o r t f o l i o ,

given both his E u r o p e a n and a g r i c u l t u r a l experience. be a m i s t a k e

to

while not f a m i l i a r

h a d p r o v e d to be a n a b l e n e g o t i a t o r

to the

MINISTER

would now pass immediately

M r Kontogeorgis,

w e l l d i s p o s e d to this

h i m b y a t t e m p t i n g to o p p o s e

CONFIDENTIAL

W h i l e he h a d

c o u n t r y a n d it w o u l d his appointment

as

CONFIDENTIAL

Agriculture of

Commissioner.

The F r e n c h might

s u p p o r t the

appointment

M r O ' K e n n e d y , but it w o u l d not be i n B r i t i s h i n t e r e s t s to h a v e

Commissioner

responsible

the D u t c h C o m m i s s i o n e r , previous there

for Agriculture. M r Andriessen.

Other possibilities Discvssions

w o u l d be m a j o r d i f f i c u l t i e s

included

he h a d h a d

d a y with the F r e n c h M i n i s t e r of A g r i c u l t u r e c o n f i r m e d

negotiations,

an Irish

o v e r the f o r t h c o m i n g a g r i c u l t u r a l p r i c e

s i n c e the F r e n c h w e r e p r e s s i n g

for large

price

increases,

a r e v a l u a t i o n of the G r e e n P o u n d a n d c h a n g e s i n c o - r e s p o n s i b i l i t y w h i c h the B r i t i s h G o v e r n m e n t w c u l d h a v e that d i f f i c u l t i e s

had arisen over

w h i c h it h a d b e e n a g r e e d the

United Kingdom.

refusal

of the

to o p p o s e .

the r e c e i p t

during last year's

These

payment?

He also

of r e f u n d s

price fixing

The

s h o u l d b e p a i d to

Took

181-82 C A S H

4.

IMITS A N D

recorded

He

Office

-

note.

The Cabinet's discussion

a n d the c o n c l u s i o n s

separately.

QTES rice F a c t o r s Tevious eference: C(80) 3 9 t h onclusions, linute 3

CONFIDENTIAL

reached

the

was

take.

Cabinet

exports

h a d b e e n d e l a y e d b e c a u s e of

E u r o p e a n P a r l i a m e n t to g i v e a n o p i n i o n .

could

levies

reported

on whisky

c o n s i d e r i n g u r g e n t l y w i t h the F o r e i g n a n d C o m m o n w e a l t h a c t i o n we

the

that

are

what

CONFIDENTIAL

5.

The Cabinet considered

E x c h e q u e r a n d the L o r d attached

a m e m o r a n d u m b y the C h a n c e l l o r of

President

of the

THE

C o u n c i l ( C ( 8 1 ) 3) t o w h i c h

a c o p y of the R e p o r t of the C o m m i t t e e

c h a i r m a n s h i p of S i r B e r n a r d S c o t t , CHANCELLOR

commissioned

of I n q u i r y ,

i n t o the v a l u e

OF T H E EXCHEQUER

of

under

pensions.

s a i d that the R e p o r t h a d

recognised

that t h e r e

In s e t t i n g u p the I n q u i r y ,

w o u l d be

severe difficulties

p r o o f i n g of p u b l i c s e c t o r p e n s i o n s , to r e d u c e d i s p a r i t i e s contributions. ment

step he,

a n d the

P a r l i a m e n t a r o u n d the in

L o r d President

of

THE

LORD

no

study within

Council,

paper and presented

The Government

but without a n y c o m m i t m e n t

welcome indicated

on particular subject

Government.

O F T H E COUNCIL

s a i d that the R e p o r t

ment

contributions

a g o o d b a s i s f o r p r o p o s i n g i n c r e a s e s i n the

was Govern­

-

either

d i r e c t o r t h r o u g h a b a t e m e n t of p a y - of p u b l i c s e c t o r e m p l o y e e s to T h e r e would, u p to the

servants;

contributions

that

to

should

a n d i d e a s i n the R e p o r t s h o u l d t h e n be the

PRESIDENT

contributions

As

recommended

It o f f e r e d t h e

civil

study,

index-linked bonds.

h e l p f u l i n r e f u t i n g a n u m b e r of m i s c o n c e p t i o n s .

pensions.

the

firm

a n d o f f e r a n u m b e r of i n i t i a l c o m m e n t s o n the l i n e s

The proposals

farther

of the

a Command

e n d of J a n u a r y .

p a r a g r a p h 15 o f C ( 8 1 ) 3 ,

points.

treat­

but a n u m b e r o f s u g g e s t i o n s f o r f u r t h e r a c t i o n o r

the R e p o r t s h o u l d be p r i n t e d as the R e p o r t ,

way

pension

but d i d not c o n d e m n

It m a d e

i n c l u d i n g the i n t r o d u c t i o n of G o v e r n m e n t - i s s u e d a first

inflation­

that the b e s t

the d i s p a r i t y i n p e n s i o n s

sector schemes,

of p u b l i c s e c t o r p e n s i o n s .

recommendations,

in abolishing

and had considered

The Report recognised

of

Cabinet had

w o u l d be b y i n c r e a s i n g p u b l i c s e c t o r

between public and private

inflation-proofing

the

been

the

p r i v i l e g e d p o s i t i o n o f p u b l i c s e c t o r e m p l o y e e s i n the e n j o y m e n t pensions.

was

the

i n r e s p o n s e to the w i d e s p r e a d p u b l i c c r i t i c i s m of

inflation-proofed

the

however,

be d i f f i c u l t i e s

l e v e l s of those m a d e ,

and there

were

by salary abatement,

obvioi^s o b j e c t i o n s to

about prospective

by

increasing

to a l e v e l w h i c h i m p l i e d that the G o v e r n m e n t w a s

pessimistic assumptions

their

in bringing all

endorsing

r e a l r a t e s of r e t u r n on i n v e s t ­

ment.

In d i s c u s s i o n a.

the f o l l o w i n g The private

Many private difficulties schemes.

points

were made

s e c t o r w o u l d be h i g h l y c r i t i c a l of the

sector companies

were currently facing

i n m a i n t a i n i n g the t e r m s

of t h e i r p r e s e n t

be r e d u c e d b y s t r e n g t h e n i n g

sector occupational pension

schemes.

c r i t i c i s e d f o r f a i l i n g to c o m m e n t the p u b l i c s e c t o r ;

pension

4

CONFIDENTIAL

private

of j o b s e c u r i t y

a n d f o r not putting f o r w a r d f i r m

protection.

of

Report

The Report would also

on the v a l u e

f o r the i n t r o d u c t i o n of a c u t - o f f

inflation

Report. severe

T h e y w o u l d not w e l c o m e the p r o p o s a l i n the

that the d i s p a r i t y c o u l d

dations

­

be

in

recommen­

p o i n t to l i m i t the e x t e n t of

CONFIDENTIAL

b.

A l t h o u g h the G o v e r n m e n t m i g h t w i s h to m a k e

present

arrangements,

acknowledge ceptions c.

that the

it should,

in fairness

i n the R e p o r t ,

raiped,

be

better

t h e G o v e r n m e n t t o p u b l i s h che R e p o r t w i t h o u t a n y c o m m e n t a n d t h e n to c o n s i d e r

i*s

r e s p o n s e i n the l i g h t of p u b l i c

w i t h o u t a n y p r o m p t i n g f r o m the G o v e r n m e n t ,

PB.IME MINISTER,

discussion,

no c o m m e n t s

should"prepare a guidance

s a i d that the

o n i t at the t i m e

say

concerned,

but the

in

under

the i s s u e s r a i s e d

by

a n d s h o u l d r e p o r t to the C h a n c e l l o r of the E x c h e q u e r a n d the

P r e s i d e n t of the

Council,

who w o u l d t h e n m a k e p r o p o s a l s

Ministers.

The

The

P r e s i d e n t of

note on' what M i n i s t e r s m i g h t should examine

Cabinet

of p u b l i c a t i o n ,

Lord

O f f i c i a l s of the D e p a r t m e n t s

c h a i r m a n s h i p of the T r e a s u r y ,

the R e p o r t ,

in

end of J a n u a r y .

t h e n the C h a n c e l l o r of the E x c h e q u e r a n d the

r e s p o n s e to q u e s t i o n s .

the

findings.

s u m m i n g u p the

G o v e r n m e n t should offer

on

reaction.

T r e a s u r y and C i v i l S e r v i c e C o m m i t t e e m i g h t w e l l take

a g r e e d that the R e p o r t s h o u l d be p u b l i s h e d b y the

Lord

a n d the i s s u e s

It w o u l d t h e r e f o r e

it,

e x a m i n i n g the R e p o r t ' s

the

miscon­

for

initiative,

Council

employees,

schemes.

The recommendations

The

before

c h a n g e s i n the

R e p o r t h a d i d e n t i f i e d a n u m b e r of

about public sector

were highly complex and difficult.

THE

to i t s

Cabinet ­

1.

I n v i t e d the C h a n c e l l o r of the E x c h e q u e r a n d the

Lord

President a.

of the

Council:

T o a r r a n g e f o r the R e p o r t of the

I n q u i r y i n t o the v a l u e

Scctt

of p e n s i o n s to be

a s a C o m m a n d p a p e r w i t h the a i m of

printed

presentation

t o P a r l i a m e n t a r o u n d the e n d o f J a n u a r y . b.

T o c i r c u l a t e to the

guidance

C a b i n e t a note of

o n the l i n e w h i c h M i n i s t e r s

t a k e i n r e s p o n s e to q u e s t i o n s o n the 2.

I n s t r u c t e d the S e c r e t a r y of the

should Report.

C a b i n e t to

a r r a n g e f o r an i n t e r d e p a r t m e n t a l g r o u p of

officials,

under T r e a s u r y chairmanship,

the

of the

Inquiry,

to e x a m i n e

the C h a n c e l l o r of the E x c h e q u e r a n d the of the

findings

a n d to r e p o r t f u r t h e r i n d u e c o u r s e

Council.

5

CONFIDENTIAL

Lord

to

President

to

C O N F I D E N T I A L

AY A N D

6.

T h e C a b i n e t c o n s i d e r e d a m e m o r a n d u m b y the

'ERF O R M A N C E

t h e C o u n c i l ( C ( 8 1 ) 2) o n t h e i n t r o d u c t i o n o f p e r f o r m a n c e - r e l a t e d p a y f o r civil

Lord President

of

servants.

THE

LORD PRESIDENT

d i s c u s s i o n i n the

O F T H E C O U N C I L s a i d that,

following he

had

c i r c u l a t e d p r o p o s a l s f o r the i n t r o d u c t i o n of a p e r f o r m a n c e - r e l a t e d

pay

s c h e m e f o r the

Ministerial

C o m m i t t e e on E c o n o m i c Strategy,

U n d e r S e c r e t a r y g r a d e f r o m 1 A p r i l 1981.

M i n i s t e r s had c o n s i d e r e d that, w o u l d be b e t t e r to c o n s i d e i

r a t h e r than d e a l with that g r a d e a l o n e ,

launching a wider C a b i n e t to a g r e e

s c h e m e at l o w e r

He

a c c o r d i n g l y i n v i t e d the

for

f u r t h e r i n t e r d e p a r t m e n t a l w o r k on p r o p o s a l s ,

f r o m A p r i l 1982,

c o v e r i n g the g r a d e s

scheme

assure

the

w o u l d m e a n the This

servants setting

for

up of e l a b o r a t e

arrange

implementation

Senior Principal

desirable

to

performance-related a n d to

being operated

fairly,

new b u r e a u c r a t i c m a c h i n e r y .

w o u l d be l i k e l y to a d d to s t a f f n u m b e r s a n d w o u l d be w a s t e f u l

the t i m e

of s e n i o r m a n a g e r s .

A m u c h better

a p p r o a c h w o u l d be

of to

r e w a r d o u t s t a n d i n g m e r i t b y a c c e l e r a t e d p r o m o t i o n a n d to f a c i l i t a t e e a r l y d e p a r t u r e f r o m the their weight.

It w a s

C i v i l S e r v i c e of those who w e r e

THE

PRIME scheme,

MINISTER,

s u m m i n g u p the d i s c u s s i o n ,

o n the l i n e s

m e m o r a n d u m (C(81) 2), Lord

the

out i n the L o r d

1.

promotion and,

performance-related

P r e s i d e n t of the

Council's

Instead

the

at the

same time, who w e r e

for better

by

arrangements

no l o n g e r f u l l y

effective.

Cabinet ­ A g r e e d that the p r o p o s a l s i n C(81) 2 f o r

Service grades

scheme for

Ciril

s h o u l d not be p u r s u e d f u r t h e r .

I n v i t e d the L o r d P r e s i d e n t o f the

Council

a r r a n g e f o r e x a m i n a t i o n of the p o s s i b i l i t i e s

to

of

rewarding m e r i t by accelerated promotion and, the

the

s h o u l d c o n s i d e r the p r o p o s a l that

introducing a pay and p e r f o r m a n c e

2.

s a i d that

s h o u J d n o t be p u r s u e d f u r t h e r .

e a r l y r e t i r e m e n t of officials

The

possibilities

s h o u l d be i n t r o d u c e d to p r o v i d e f o r r e w a r d i n g m e r i t

accelerated for

set

P r e s i d e n t of the C o u n c i l

measures

but the

arrangements

further.

C a b i n e t a g r e e d t h a t the p o s s i b i l i t y of i n t r o d u c i n g a pay

same time,

officials

the

not p u l l i n g

r e c o g n i s e d that p e n s i o n and g r a t u i t y

c o u l d be a n i m p e d i m e n t to s u c h e a r l y r e t i r e m e n t , s h o u l d be e x a m i n e d

and

grades.

T o ran such a scheme,

c o n c e r n e d that it was

it

levels.

should now

while it was

the p r o p o s e d

s h o u l d not be p u r s u e d . civil

specialist

g e n e r a l l y a g r e e d that,

r e w a r d m e r i t i n the C i v i l S e r v i c e , pay

that he

of P r i n c i p a l ,

A s s i s t a n t S e c r e t a r y a n d the e q u i v a l e n t

In d i s c u s s i o n i t w a s

A m a j o r i t y of

of p r o v i d i n g f o r e a r l y r e t i r e m e n t

who w e r e

no l o n g e r f u l l y e f f e c t i v e , 6

C O N F I D E N T I A L

at of

a n d to

report.

CONFIDENTIAL

[UNERATION

7.

The Cabinet considered

iF J U N I O R

the

[INISTERS I N

H o u s e of

C o u n c i l ( C ( 8 l ) 4) a b o u t t h e

a m e m o r a n d u m b y the L o r d P r e s i d e n t

of

r e m u n e r a t i o n of j u n i o r M i n i s t e r s i n the

Lords.

HE H O U S E F

LORDS

THE

LORD PRESIDENT

discussion revious

the

M i n i s t e r s i n the H o u s e

eference:

any such increase

C(80) 4 2 n d

had

onclusions,

The

.'inute 7

O F T H E C O U N C I L s a i d that at t h e i r of L o r d s

salary and allowances available

of

Lords were

59? a y e a r ,

£18,284.

while

his

and it c r e a t e d

of C o m m o n s c o u l d r e c e i v e u p to

holders,

b u r d e n s a n d e x p e n s e s of

Ministers,

i n c l u d i n g the

O p p o s i t i o n C h i e f W h i p i n the H o u s e w o u l d be a b o u t h a l f the a m o u n t Commons

Ministers.

allowance.

It w a s

junior L o r d s j u s t i f y the special the

of L o r d s ,

of a r e s p o n s i b i l i t y allowance

by

the p r o p o s e d i n c r e a s e s disproportionate

specific on t h e

Commons;

s h o u l d r e m a i n the

c o u l d be

the G o v e r n m e n t c o u l d i n d i c a t e t i o n g i v e n to j u n i o r L o r d s

of P e e r s

that the

the

in Ministerial salaries

w o u l d be r e q u i r e d to i m p l e m e n t

and

by reference Lords,

position higher

to

the

to

these proposals.

He

s h o u l d be t a k e n i n the

remunera­

w i t h i n the

recommended that

If t h a t w e r e a g r e e d ,

p r o p o s e d that the

existing

s h o u l d a l s o r e m e d y the

C a b i n e t to a p p r o v e

the p r o p o s a l s

set

CONFIDENTIAL

out i n C(81)

l a c k of p o w e r

He invited 4.

over­

Legislation

s a m e B i l l as

pay Ministerial salary increases retrospectively.

to

Parliament,

a l r e a d y planned on P a r l i a m e n t a r y pensions. Bill

the

of adequate c a l i b r e

current year.

and that

remunera­

and

proposals

the

to

He believed

c o s t of a n y a d d i t i o n a l

f o r the

and

the p a y o f L o r d s

M i n i s t e r s w o u l d be c o n t a i n e d

that the a p p r o p r i a t e p o w e r s

therefore

He had come

d i f f e r e n t i a l b e t w e e n the

In p r e s e n t i n g

an

questions about

same.

readily defended

d i f f i c u l t y of r e c r u i t m e n t and retention

to

scale envisaged;

s t r a i g h t f o r w a r d w a y to i m p r o v e the

s i z e of the p r e s e n t

s e r v e as j u n i o r M i n i s t e r s .

This

expenses i n c u r r e d by

would raise

t i o n of j u n i o r M i n i s t e r s i n the C o m m o n s a n d the

all increase

£ 3 , 50C a y e a r .

M i n i s t e r s w o u l d be to g i v e t h e m a d i f f e r e n t

Cabinet Ministers

and

O p p o s i t i o n a n d the

a n d b u r d e n s to be r e w a r d e d .

of p a y f r o m j u n i o r M i n i s t e r s i n the

Commons

the

be d i f f i c u l t to p a y t h i s a s

of a t a x - f r e e a l l o w a n c e

the

Lords

to i n c r e a s e

P a r l i a m e n t a r y salary payable

however,

not p o s s i b l e to i d e n t i f y

c o n c l u s i o n t h a t the m o s t

of

Commons

including Lords Whips,

L e a d e r of the

of the

It w o u l d ,

responsibilities

of j u n i o r L o r d s rate

maximum

M i n i s t e r s w h i c h s h o u l d be r e i m b u r s e d a n d w o u l d

payment

the p a y m e n t

a

entirely in terms

H e c o n s i d e r e d that it w o u l d be r e a s o n a b l e

office

disadvantage.

r e a l financial hardship for m a n y junior

r e m u n e r a t i o n of j u n i o r L o r d s other

and

allowance.

junior

c o u n t e r p a r t i n the L o r d s r e c e i v e d

T h i s d i s p a r i t y c o u l d not be j u s t i f i e d

Ministers.

that

Parliamentary

to C o m m o n s M i n i s t e r s ,

Parliamentary responsibilities, Ministers,

b e c a u s e of the

s u b j e c t to a v e r y c o n s i d e r a b l e

M i n i s t e r of State i n the H o u s e

£37,

had concluded

the b e s t w a y of i n t r o d u c i n g s u c h a n

a t t a c h e d to C(81) 4 s h o w e d that,

M i n i s t e r s i n the A

s h o u l d be i n c r e a s e d ,

s h o u l d be p a i d b y m e a n s o f a t a x - f r e e a l l o w a n c e ,

i n v i t e d h i m to c o n s i d e r table

earlier

C a b i n e t h a d a g r e e d that the r e m u n e r a t i o n of j u n i o r

the

he to

CONFIDENTIAL

In d i s c u s s i o n i t w a s increase

r e a f f i r m e d that t h e r e

o f t h e o r d e r p r o p o s e d i n the

Ministers.

It w a s ,

however,

was

a strong case for

r e m u n e r a t i o n of j u n i o r

a r g u e d t h a t i t w o u l d be p o l i t i c a l l y a n d

p r e s e n t a t i o n a l l y u n a c c e p t a b l e to p r o v i d e f o r a n i n c r e a s e c e n t i n the

salaries

of G o v e r n m e n t M i n i s t e r s at a t i m e

b e i n g m a d e to h o l d p u b l i c and

M e m b e r s of P a r l i a m e n t .

of

powers

pension

a n d w o u l d set

salaries

additional allowances

be a n o n ­

O p p o s i t i o n as

an unfortunate

The inclusion

precedent for future pay and

a r g u e d that M i n i s t e r s should r e c e i v e

to w h i c h e v e r

a member

House they belonged.

and what was

needed was a

of the H o u s e of L o r d s .

A t one t i m e

of the H o u s e of L o r d s ,

a b l e to d r a w the a t t e n d a n c e

M i n i s t e r s i n the

allowance

secretarial

allowance

in full,

c o m b i n e d w i t h the i n t r o d u c t i o n of a s u b s i s t e n c e a l l o w a n c e allowances

for their

spouses,

such as

M i n i s t e r s i n the H o u s e of C o m m o n s ,

were there

paying such allowances

It w a s

a n d of t r a v e l

to

being made

The particular circumstances

of a l l o w a n c e s

i n the H o u s e of

be i n t r o d u c e d e i t h e r

concession

b y the Inland R e v e n u e ,

by means

in which justify

These might,

second if

of a n a d m i n i s t r a t i v e

or by means

of l e g i s l a t i o n i n the

next

Bill.

PRIME

MINISTER,

s u m m i n g u p the

discussion,

C a b i n e t r e a f f i r m e d the n e e d to i m p r o v e the M i n i s t e r s i n the H o u s e of L o r d s , be u n a c c e p t a b l e the

Lords

to t a k e a c c o u n t of t h e i r n e e d to r e t a i n a

i f t h e y d i d not l i v e i n L o n d o n w h e n a p p o i n t e d .

necessary,

T H E

of

would,

j u n i o r M i n i s t e r s i n the H o u s e o f L o r d s h a d to w o r k s e e m e d to s p e c i a l tax a r r a n g e m e n t s





p a r t i c u l a r l y i m p o r t a n t that it

system

to t a x .

allowance.

T h e tax i m p l i c a t i o n s

s h o u l d n o t l e a d to the w h o l e subject



substantial

to M i n i s t e r s i n the H o u s e o f L o r d s

need further study.

payable e n t i t l e ­

perhaps

already available w o u l d be a

i m p r o v e m e n t in their total r e m u n e r a t i o n . however,

to

fresh

bvtt t h e y h a d l o s t t h i s

m e n t w h e n t h e y h a d b e e n g i v e n the n o n - t a x a b l e If t h e y w e r e



that m i g h t be a p p r o p r i a t e f o r a M i n i s t e r

L o r d s h a d b e e n e n t i t l e d to d r a w p a r t of the a t t e n d a n c e to o t h e r m e m b e r s

the

The

r e c e i v e d b y M i n i s t e r s i n the C o m m o n s r e l a t e d

e x a m i n a t i o n of the a l l o w a n c e s

Finance

into

p a r t of t h e i r

r e t r o s p e c t i v e l y w o u l d be p a r t i c u l a r l y

t h e i r m e m b e r s h i p of that H o u s e ,

home

of Bill

negotiations.

Ministerial

who was

i n the p a y a n d p e n s i o n s

c o n t i n u e d e x i s t e n c e of the H o u s e of L o r d s .

In f u r t h e r d i s c u s s i o n i t w a s same

by

w o u l d t h r o w the i n c r e a s e s

a n d m i g h t be u s e d b y the

to p a y the i n c r e a s e s

contentious

one,

cent

i n the H o u s e of C o m m o n s

w o u l d t u r n what s h o u l d o t h e r w i s e

c o n t r o v e r s i a l B i l l into a contentious a t t a c k o n the

were

A d d i n g the p r o p o s a l s to the f o r t h c o m i n g

P a r l i a m e n t a r y pensions

sharper relief,

per

r e f u s a l to i m p l e m e n t i n f u l l the r e c o m m e n d a t i o n

the T o p S a l a r i e s R e v i e w B o d y fo~ i n c r e a s e s on

o f s o m e 25 when efforts

s e c t o r p a y s e t t l e m e n t s d o w n to a b o u t 6 p e r

w h e n the G o v e r n m e n t s t i l l f a c e d a debate

arising f r o m their

an

Lords

srio. that

the

r e m u n e r a t i o n of j u n i o r

but r e m a i n e d of the o p i n i o n that it w o u l d

in present economic

circumstances

to p a y i n c r e a s e s

o r d e r p r o p o s e d to j u n i o r M i n i s t e r s a n d o t h e r o f f i c e

CONFIDENTIAL

h o l d e r s i n the

of

CONFIDENTIAL

H o u s e of L o r d s b y w a y of a n i n c r e a s e the a r g u m e n t s

o n the r e m u n e r a t i o n of j u n i o r L o r d s Parliamentary pensions. reasonable

however,

M i n i s t e r s to be e l i g i b l e

for

Commons. Peers;

be d o n e other

to M i n i s t e r s i n the H o u s e

concession

feasible,

to a c h i e v e

or by legislation

the a l l o w a n c e

travelling

allowance

t h i s b y m e a n s of a n I n l a n d taxable

If t h a t w a s

p r o v i d e d that that

both H o u s e s

and other allowances

i n the H o u s e of L o r d s

President

of the

in consultation

Council

should now examine with the

to j u n i o r M i n i p t e r s a n d The

the i m p l i c a t i o n s

s h o u l d m a k e a f u r t h e r r e p o r t to the C a b i n e t s e t t i n g out the of i m p l e m e n t a t i o n .

Cabinet would decide necessary,

available,

the i n c l u s i o n of a n y n e c e s s a r y

Cabinet

Invited the

to be t a k e n ,

consultation

President

w i t h the

of the

l e g i s l a t i o n i n the

Council,

C h a n c e l l o r of the

what f u r t h e r a l l o w a n c e s

a v a i l a b l e to j u n i o r M i n i s t e r s a n d o t h e r i n the H o u s e

of L o r d s ,

Exchequer, office

made holaers

a n d to r e p o r t f u r t h e r to

C a b i n e t a s i n d i c a t e d i n the

Prime Minister's

up.

Office

16 J a n u a r y 1981

9

CONFIDENTIAL

a n d the the

1980

in

m i g h t be

and

including,

-

Lord

to c o n s i d e r

Cabinet

the tax p o s i t i o n ,

Bill.

The

of t h i s

increased

In t h e l i g h t o f t h i s f u r t h e r r e p o r t ,

on what a c t i o n needed

of

Lord

C h a n c e l l o r of the E x c h e q u e r ,

r e m u n e r a t i o n which would become

whether

c o u l d be effected b y R e s o l u t i o n

of P a r l i a m e n t o r would r e q u i r e l e g i s l a t i o n .

approach,

not

could for

C o n s i d e r a t i o n s h o u l d a l s o ba g i v e n to the q u e s t i o n

holders

Finance

other

w i t h o u t c a l l i n g i n q u e s t i o n the t a x i m m u n i t y of a l l o w a n c e s

Peers.

method

of should

of L o r d s a s w e l l a s to

i n the F i n a n c e B i l l .

c o u l d be p a i d a s

the p a y m e n t of attendance office

of

of

s p o u s e s a l r e a d y a v a i l a b l e to M i n i s t e r s i n the H o u s e

it m i g h t be p o s s i b l e

Revenue

a n d the

It w o u l d b e p r e f e r a b l e t h a t t h e a t t e n d a n c e

be n o n - t a x a b l e

on

for

of the H o u s e

s h o u l d be g i v e n to thp p o s s i b i l i t y

p e r m i t t i n g t h e m to c l a i m s u b s i s t e n c e a l l o w a n c e s allowance

provisions

t h a t i t w o u l d be

a v a i l a b l e to o t h e r m e m b e r s

and that c o n s i d e r a t i o n

accepted

M i n i s t e r s i n the f o r t h c o m i n g B i l l

for junior L o r d s

allowances

They also

against including any

They agreed,

and defensible

the attendance Lords,

in salary.

put f o r w a r d i n d i s c u s s i o n

the

summing

if

SECRET

S DOCUMENT

IS T H E P R O P E R T Y

O F H E R BRITANNIC

MAJESTY'S

GOVERNMENT NO

COPY

CABINET

LIMITED

CIRCULATION

C C ( 8 1 ) 2nd C o n c l u s i o n s , T h u r s d a y 15 J a n u a r y 1 9 8 1

^81-82

CASH

T H E

ANNEX Minute 4

at 10,30

am

C H A N C E L L O R O F T H E E X C H E Q U E R

s a i d that the

Ministerial

IMITS A N D

C o m m i t t e e o n E c o n o m i c S t r a t e g y h a d d e c i d e d o n 14 J a n u a r y t h a t

OTES

p a y f a c t o r i n the (NHS)

1 9 8 1 - 8 2 c a s h l i m i t s f o r the N a t i o n a l H e a l t h

a n d the C i v i l

Service

Service

s h o u l d be 7 p e r c e n t r a t h e r than 6 p e r

a s i n the c a s h l i m i t s f o r the R a t e S u p p o r t G r a n t . rice F a c t o r s

the

that the p r i c e f a c t o r i n the N H S a n d C i v i l 10 p e r c e n t r a t h e r t h a n t h e

H e now

Service

cent

recommended

cash limits

should

11 p e r c e n t w h i c h h e h a d a n n o u n c e d

revious

a p p l y i n g g e n e r a l l y f o l l o w i n g the C a b i n e t ' s d e c i s i o n on 6 N o v e m b e r .

eference:

He

C(80)

for

39th

d i d not h o w e v e r cash limits,

conclusions,

promulgated.

inute 3

other

propose

A r e d u c t i o n t o 10 p e r c e n t i n t h e

cash l i m i t s was

L a d l e d the T r e a s u r y , optimistic Price

view

and independent

of i n f l a t i o n .

o v e r the l a s t s i x m o n t h s ,

prospects time

and slightly below

good as

of 1 9 8 1 - 8 2 ,

the N H S t o g e t h e r ,

a n d the

were changed in this way,

that

but on

cent three

between present the

of 1 p e r c e n t l e s s

of a 7 p e r cent p a y

£ 1 2 0 m i l l i o n f o r the C i v i l

Service

If b o t h t h e c a s h l i m i t

factor factors

the G o v e r n m e n t c o u l d s t i l l p o i n t o u t to

and others

to b r o a d l y the

the l o c a l

f o r the R e t a i l

s a v i n g s f r o m r e d u c i n g the p r i c e

cent would p a r t l y offset this.

local authorities subject

T h e use

the which

he j u d g e d t h a t the f o r e c a s t s w h i c h he w o u l d p u b l i s h at in November

the

that c e n t r a l g o v e r n m e n t a n d the N H S w e r e

same financial disciplines

as

t h o s e a p p l y i n g to

authorities.

In d i s c u s s i o n a.

the f o l l o w i n g p o i n t s w e r e

made:­

T h e p r i c e f a c t o r o f 11 p e r c e n t h a d a l r e a d y

announced. f o r e c a s t s ,

T o reduce it now,

down, damage

o n the b a s i s o f

been

uncertain

w o u l d b e c o n t r a r y to t h e p r i n c i p l e t h a t o n c e

cash l i m i t was

set it s h o u l d not be a m e n d e d ,

the i n t e g r i t y of the c a s h l i m i t s

a

e i t h e r up o r

to t a k e a c c o u n t o f c h a n g i n g c i r c u m s t a n c e s ,

SECRET

beer,

more

that o v e r the l a s t

of the B u d g e t w e r e l i k e l y to s h o w a n i n c r e a s e

1 per

to t a k e a

The last published figures

factor i n 1981-82 would cost some by

since N o v e m b e r

i n c r e a s e s at a n a n n u a l r a t e of 8 j p e r

of 1 9 8 0 - 8 1 a n d the a v e r a g e

than he had a s s u m e d and

amended

which had already

forecasters,

H e d i d n o t e x p e c t t h e f i g u r e to b e a s

the a v e r a g e

s h o u l d be

price factor for

justified by developments

Index (RPI) showed

months.

that the p r i c e f a c t o r

s u c h a s the R a t e S u p p o r t G r a n t ,

be

as

system.

and would

SECRET

b.

It w a s h i g h l y u n l i k e l y t h a t t h e p a y s e t t l e m e n t s

t h e N H S g r o u p s w o u l d b e l e s s t h a n l\ would therefore the c o e t a w i t h i n

be n e c e s s a r y

the p a y p r o v i s i o n f o r

accommodate

7 p e r cent.

These

£ 2 5 m i l l i o n which it had

should be found i n 1981-82 f r o m i m p r o v e d

i n the N H S .

for

and it

to f i n d s a v i n g s to

s a v i n g s w o u l d be o n top o f the agreed

p e r cent,

been

efficiency

A r e d u c t i o n i n the p r i c e f a c t o r b y 1 p e r

cent

w o u l d a d d f u r t h e r to the p r e s s u r e on the N H S c a s h l i m i t a n d l e a d to m o r e

volume

o n l y f a l l u p o n the

cuts on hospital

services,

which

non-pay elements in N H S expenditure.

T h e s e w o u l d b e c o n t r a r y to t h e G o v e r n m e n t ' s to m a i n t a i n t h e s e s e r v i c e s ,

undertaking

and would moreover

d a m a g i n g to p r i v a t e i n d u s t r y w h i c h w o u l d l o s e , maintenance c.

could

contracts

and equipment

be for

example,

orders.

If i n t h e e v e n t a p r i c e f a c t o r o f 10 p e r c e n t t u r n e d o u t this would cause

to b e o p t i m i s t i c ,

those cash l i m i t s where for

example,

serious

difficulties

non-pay items were

the p r i s o n s e r v i c e

a n d the

cash limits

departmental administration costs which were travel

d.

­

on

already

v u l n e r a b l e to r e l a t i v e l y h i g h i n c r e a s e s i n p o s t a l , and

for

significant

telephone

charges.

A l t h o u g h 11 p e r c e n t h a d

already been announced

the p r i c e f a c t o r f o r i n c l u s i o n i n a l l c a s h l i m i t s ,

it would

w r o n g to p e r s i s t w i t h i t f o r t h o s e l i m i t s y e t to be

set

t h e u p to d a t e f o r e c a s t s j u s t i f i e d a m o r e o p t i m i s t i c the p r o s p e c t s

for inflation.

sector expenditure.

r e l a x i n g its

Failure

be

when

view

The G o v e r n m e n t would

criticised for unnecessarily

as

of

be

c o n t r o l of p u b l i c

to c o n t r o l the P u b l i c

Sector

B o r r o w i n g R e q u i r e m e n t w o u l d b e h i g h l y d a m a g i n g to p r i v a t e s e c t o r i n d u s t r y who w e r e looking for l o w e r and

interest

f o r G o v e r n m e n t h e l p i n r e d u c i n g the c o s t b u r d e n s o n

e.

The Government were

in November assumed

1981

rate of inflation.

of the B u d g e t

was

circumstances time

point l e s s than

T H E

PRIME

for

time the

In t h e s e

i t w o u l d b e v e r y d i f f i c u l t to h o l d at the

to the p r o p o s i t i o n t h a t the p r i c e s f a c t o r f o r

MINISTER,

s h o u l d b e h e l d a t 11 p e r

s u m m i n g up the d i s c u s s i o n ,

the C a b i n e t a g r e e d that the p r i c e f a c t o r

t h o s e c a s h l i m i t s yet to be p r o m u l g a t e d .

11 p e r c e n t w o u l d s t a n d f o r t h e c o n t r a r y to b i s e x p e c t a t i o n s , took a m o r e p e s s i m i s t i c

the

said that

SECRET

on cent

of

had already been based.

C h a n c e l l o r o f the E x c h e q u e r

v i e w o f the p a t h o f i n f l a t i o n the

2

inflation

s h o u l d b e 10 p e r

The factor

i m p l i c a t i o n s of this f u r t h e r .

same

cent.

cash limits which had already

announced o r on which c o m m i t m e n t s

would consider the

the

If t h e a s s e s s m e n t a t t h e

f o r a 10 p e r c e n t r a t e o f i n f l a t i o n

in public expenditure

them.

c o m m i t t e d to u p r a t i n g p e n s i o n s

by one p e r c e n t a g e

u p r a t i n g f a c t o r f o r p e n s i o n s w o u l d be 9 p e r cent.

balance

rates

been If, later

Cabinet

If p o s s i b l e

neither

SECRET

the

7 p e r c e n t p a y f a c t o r n o r the

announced before there

was

10 p e r c e n t p r i c e f a c t o r

the e n d of J a n u a r y ,

a r i s k that the f i g u r e s

p r e p a r a t i o n o f the E s t i m a t e s

w o u l d l e a k i n the

that

this p r o b l e m ,

The

and

the

concerned

sector.

Cabinet ­

1.

A g r e e d that the p r i c e f a c t o r i n the

limits 2.

y e t to b e a n n o u n c e d I n v i t e d the

a n d the S e c r e t a r i e s further

cent.

the

in

L o r d P r e s i d e n t o f the

of State for E m p l o y m e n t ,

and E d u c a t i o n and Science,

to

the t i m i n g o f the p u b l i c a n n o u n c e m e n t

7 p e r c e n t p a y f a c t o r a n d the c e r t a i n o f the

1981-82 cash

Office

16th J a n u a r y

10 p e r

cash

C h a n c e l l o r o f the D u c h y of L a n c a s t e r

and P a y m a s t e r G e n e r a l , Social Services

should be

1981-82

C h a n c e l l o r o f the E x c h e q u e r ,

c o n s u l t a t i o n w i t h the

Cabinet

be

of

further with those M i n i s t e r s

w i t h c u r r e n t p a y n e g o t i a t i o n s i n the p u b l i c

The

course

f o r p u b l i c a t i o n w i t h the B u d g e t .

C h a n c e l l o r o f the E x c h e q u e r s h o u l d c o n s i d e r t i m i n g o f the a n n o u n c e m e n t ,

should

a l t h o u g h the C a b i n e t n o t e d

1981

3

SECRET

Council

Environment, consider of

the

10 p e r c e n t p r i c e f a c t o r limits.

for