HC Deb 12 March 1936 vol 309 cc2311-2

asked the Chancellor of the Exchequer whether, in view of the declared intention of the Government to prevent the making of excessive profits by suppliers in connection with the re-armament programme, he will say what is the Government's criterion of excessive profit, stated in terms of net profit per £100 worth of material supplied?


The policy of His Majesty's Government is that, in cases where it is impossible to secure effective competitive tendering, contracts should be settled on the basis of allowing a fair and reasonable profit, having regard to the circumstances of each case, including such factors as the extent of the orders and a reasonable return on the capital assets directly employed. A standard percentage of profit on the production costs of the goods supplied would be found in practice to lead to indefensible results.


Is the right hon. Gentleman aware that there is very keen public interest in the matter, and will he be rather more exact in defining what he understands to be a reasonable profit?


I am aware that there is a good deal of interest in the subject, but it is not quite as simple as the hon. Member appears to imagine. It is not really susceptible of definition by stating a particular rate of profit. The assets on which the profit is made have to be considered, and there are many other factors which make it impossible to lay down any hard-and-fast rule without leading to exactly the opposite result to that which the hon. Member and the Government desire.


Is it not the case that fixing a flat rate of percentage would result in very abnormal profits in some cases?


That is exactly what I intended to convey.

68. Lieut. - Commander FLETCHER

asked the Chancellor of the Exchequer with reference to the Treasury inter-service committee, what is the nature of the proposals to depart from the principles normally governing the placing of contracts which the committee is to consider; whether it is part of the duty of the committee specially to supervise contracts with a view to preventing profiteering; whether the committee will have any power to prevent profiteering in armaments manufacture; and whether he will make a statement giving full details of the committee's functions?


A general description of the cases in which the principles normally governing the placing of contracts may need to be modified is given in paragraph 54 of the White Paper relating to Defence. In deciding what special arrangements are suitable, the committee will pay particular attention to the prevention of excessive profits; and the general responsibility implied by Treasury control will continue to be supplemented by a specific responsibility on the part of each Defence Department to ensure in placing orders that prices are fair and reasonable. As regards the last part of the question, I would refer the hon. and gallant Member to the Treasury Minute of 4th March, to which I have nothing to add.