The critical assumption for this forecast is that relating to pay policy when Stage Two expires in July. At the time of writing (early February), formal negotiations have not yet begun. Preliminary positions have, however, been taken up, and it seems clear that the gap between the hopes of the Government and the aims of the trade unions is much wider than at the comparable point in the Stage Two negotiations. Both the Labour Party conference and the Trade Union Congress last autumn passed motions which called for priority to be given, when Stage Two ended, to four factors in the next stage. These were the restoration of satisfactory differentials and the correction of anomalies and inequities, an emphasis on the improvement of the position of the low-paid, the consolidation of Stage One and Two increases into basic rates for the calculation of overtime, piece-work and shift payments, and provision for productivity agreements. Almost independently of the agreed basic norm, a liberal interpretation of these demands could lead to rises in average earnings in excess of 20 per cent. On the other hand, the majority of trade unionists seem to accept the need for continued restraint, though stressing that there is an imperative need for greater flexibility in Stage Three.