§ Considered in Committee. [Progress, 12th February.]
§ [Sir CHARLES MACANDREW in the Chair]
§ Clause 7.—(DUTY OF PRODUCERS TO COMPLY WITH BOARD'S DETERMINATION OF MAXIMUM PRICES.)
§ 7.12 p.m.
§ Mr. E. L. Mallalieu (Brigg)
I beg to move, in page 7, line 30, to leave out "a substantial," and to insert "any."
This Clause is the one in which power is given to fix maximum prices for the sale of iron and steel products. Subsection (5) is the one in which the Government set out to try to prevent evasions of the maximum price orders. They do it by saying that if any iron and steel producer passes a substantial part of his production to a selling agent then the production so passed will be treated in exactly the same manner, so far as maximum price orders go, as if it had not been passed to a selling agent. In other words, that part will be subject to the maximum price order.
But the Committee will observe that to come within the mischief of this subsection a substantial part of an iron and steel producer's production must have been passed to the selling agent. The short point which we wish to bring home to the Government, and which we hope will be accepted, is that it would be much better if the two words, "a substantial "were omitted. That would make the Clause read that if any part of a producer's production were passed to a selling agency or agent for the purpose of resale then the maximum price order would apply to that part, however small it was, in exactly the same way as if it had been sold direct by the iron and steel producer.
We are trying to strengthen the very good intention of the Government. We hope that this Amendment will be accepted to make firm their intention and to put it to much better effect than it would otherwise be put if the words are left in the Bill. We want to stop up a loophole whereby perhaps a rather more than usually enterprising, though rather 1146 less than usually scrupulous representative of private enterprise could try to make a profit for himself at the expense of his fellow producers and at the expense of the consumers by undermining the price structure as far as he dares without actually bringing himself into contact with the provisions of the law on the subject.
The word "substantial" is one which is constantly before the courts. It is capable of definition. The trouble is that it is capable of just as many definitions in a court of law as there are contexts in which it may be used. For every context in which this word is used there could he a different definition. It is throwing wide open the gate to evasion if a word which is so unsatisfactory is imported into the Statute Book. It is bound to lead to a great deal of dispute and, it may be. to expensive litigation. It would be much better to leave out this word.
I ask the Government whether they can mention one instance in which any detriment would be suffered by any lawabiding person if these words were deleted. I submit that there could be none. On the contrary, it would help all who wish to play fair. It is true that a substantial portion of a man's production has to be handed over in this manner to a selling agent before the Clause as it is now worded can come into operation. But suppose that many people practise this form of activity to an extent which is held subsequently, after long litigation, to be just less than a substantial amount of the production of each one of them. The cumulative effect of all that might be considerable.
On more than one occasion the Minister has said that his approach to these people, who will be looking after the steel industry when it is taken over by private enterprise—if ever it is taken over, or to the extent to which it is taken over—will not be one of accusing them of being criminal before they have been shown to be criminal. That is an attitude which we entirely understand and thoroughly approve. It is one which should be appreciated.
Nobody wishes to queer the pitch of the country by branding as criminal people who may not be criminal, and the vast majority are not. Although we appreciate that to the full, we feel that if these words were deleted the Minister 1147 would be able to say to these people, "We do not want to do anything which would even appear to be against you now; we want to help you—all those of you who wish to play the game and act by the law as it is."
This Amendment merely seeks to make the provisions of this particular subsection more watertight, fairer to those who want to do right, and also make it clearer, so that there will not be any dispute as to what constitutes a substantial part of a man's production. It will be clearer so that it will, possibly, even deter those who are not scrupulous and who wish to make some kind of evasion in this way. If this Amendment were accepted, possibly such people might be deterred, and the time, trouble and energy of the authorities who might have to pursue them will be saved. It is therefore with some confidence as to what the Minister will do that I submit it for the consideration of the Committee.
§ The Parliamentary Secretary to the Ministry of Supply (Mr. A. R. W. Low)
I think that the hon. and learned Member for Brigg (Mr. E. L. Mallalieu) has slightly misunderstood the point of this subsection. As he has told the Committee, his Amendment would allow the Board to extend their control over maximum prices as far as merchants and stockists, whereas the subsection, as now drafted, seeks to bring within the Board's control only any producer's selling agent who, in practice, sells the whole or any substantial part of that producer's output of any products. A number of producer companies have from time to time created and employed selling agents, and it was in recognition of this existing and legitimate arrangement that this subsection was included in the Bill, rather than with the purpose, which I think the hon. and learned Gentleman thought we had in mind, of trying to prevent evasion of the maximum prices through merchants or stockists.
The Bill is not designed to cope with shortage conditions when there may be a possibility of a black market or profiteering. The Board's price powers bite on the producers only. In times of no shortage, as, I think, the Committee will agree, if a merchant charges excessive prices, the consumer can go to another 1148 merchant or direct to a producer and buy at or below the Board's maximum prices. The Bill gives the Board powers of determining maximum prices in normal conditions, and my right hon. Friend, in the debate on the White Paper on 23rd October, 1952, when speaking of the second major responsibility of the Board, which will be in regard to prices, said this:Supervision may be necessary for two reasons. It may be necessary to prevent makers of iron and steel from charging excessive prices. On the other hand, it may be necessary to prevent speculators outside the industry in time of shortage buying steel and re-selling it on the black market. Those are quite separate and distinct problems. The task of curbing black market operations outside the industry has nothing to do with the iron and steel industry itself. It calls for Government action backed by the sanctions of the criminal law."—[OFFICIAL REPORT. 23rd October, 1952; Vol. 505, c. 1287.]That view of my right hon. Friend was also put to the House on Second Reading.
§ Mr. Low
Not just an injunction, because, as I think the hon. and learned Gentleman will have realised from the quotation from my right hon. Friend's speech which I have just given, the sort of thing he was thinking of there was a breach of maximum prices fixed by the Government and affecting not only the iron and steel industry, but everybody who might sell or buy.
This question of how wide the Board's price powers should extend is a question which has a comparison in the Bill presented to the House by the right hon. Member for Vauxhall (Mr. G. R. Strauss). The right hon. Gentleman may remember that, during the Committee stage of his Bill, on 22nd February, 1949, he used the following argument in proposing that he should not be given power in that Bill to fix the prices charged by producers outside the Iron and Steel Corporation's net. The point was whether, by means of the licensing procedure, the Minister should be given power to fix their prices, as well as to have some influence on the prices of the Corporation, and he used these words, which, I think, are very relevant:The purpose which I had in mind was. to ensure that there was no profiteering by such outside firms which, in times of shortage, might want to sell their products at very 1149 high black market prices, or at prices substantially higher than those offered by the Corporation. Therefore, there seemed to me to be a good reason for power to effect maximum price control in this way.The point which the right hon. Gentleman had in mind is very much the same sort of point as his hon. and learned Friend put to the Committee a little while ago. Then, he went on:However, I have given this matter much thought, and it has struck me that it will probably be more appropriate that that maximum price control to prevent—I will not say black marketeering,' but profiteering of this description—should be effected by some general order affecting prices of materials— steel and, maybe, other materials—rather than by provision in this Bill."—[OFFICIAL REPORT, Standing Committee C. 22nd February, 1949, c. 1145–46.]We took exactly the same view on the point put by the hon. and learned Member for Brigg, and we thought that this was not the place to tackle the question of price control affecting merchants or stockists. Clause 7 refers to iron and steel producers, and we have extended it by subsection (7) to their particular specified selling agents, through whom they sell the whole or a substantial part of their products. and we do not think it right. and we recommend this view to the Committee, to extend it any further to merchants or stockists. For those reasons. I hope the hon. and learned Gentleman will withdraw his Amendment.
§ Mr. E. L. Mallalieu
Could the hon. Gentleman tell us of a single way in which anyone who wished to abide by the law would suffer a detriment if these words were removed?
§ Mr. I. Mikardo (Reading, South)
May I put briefly a point which is different from any put by my hon. and learned Friend? I can well understand the point which he makes about seeking, in this way and in this Clause, to take powers for the Board over merchants and stockists, but I put it to him that there are some conditions in which we may have an authorised selling agent, an appointed agent, under a closely-drawn 1150 agreement, who, nevertheless, sells a fraction of the producer's output which would be considered to be substantial.
I know of two conditions under which that might happen. The first is where we have a producer of a considerable number of products who gives the selling rights of one of these products—his whole output of that one product, which is only one of many products—to a particular agent. He may choose to sell all the rest himself or he may choose to have them sold by a different selling agent or a number of different selling agents. In that case we have the whole of this firm's output of one product—perhaps a key product—in the hands of a selling agent but with the price outside the control of the Board because of the use of this word "substantial."
The second possibility—and I have known this to happen is that a producing company hands to a selling agent the right to sell to a given class of consumer, to a given consuming industry or to a given internal market. Again, that consuming industry or consuming market may be only a fraction, a comparatively small fraction, of the total output of the company, but this agreement to sell this comparatively small fraction may nevertheless be a proper selling agreement formally entered into. I do not attempt to deceive the Committee by contending that either contingency is widespread, but of course there is no reason why any steel-producing company should not choose to do its selling in either or both of those ways, and indeed, it would be quite proper for any company to do so, and in some cases which I know it would be highly advantageous for them to do so. I think the Parliamentary Secretary would agree that it would be a pity if, because of a form of words, that point were omitted.
§ Mr. Robson Brown (Esher)
The argument is quite valid, but it is covered in the Bill. The hon. Gentleman's argument concerns a company making a particular product which is not a substantial part of its major product. But the Bill refers to any product of any company. It is clear and precise.
§ Mr. Mikardo
I am afraid the hon. Gentleman has not understood the purport of the Amendment. I will take 1151 a hypothetical figure. Suppose a company makes 10 products—and I am oversimplifying this, of course—all in equal quantities, and suppose that in the case of product number one it appoints Messrs. Smith, Jones, Brown and Robinson, Ltd., as its sole selling agency with a proper selling agency agreement. That is the sort of selling agency which the Minister seeks to cover in the Bill, but Messrs. Smith, Jones, Brown and Robinson are selling only 10 per cent. of the producer's output of iron and steel products to which a determination of the Board shall apply and—
§ Mr. Mikardo
If that was the point of the hon. Member for Ether (Mr. Robson Brown), I apologise to him for having misunderstood him. I am not well up in legal phraseology and I may be wrong here, but I had read line 30 quite closely and had not thought it would cover the contingencles which I have described. For example, I thought that if all 10 products of this hypothetical producer were all subject to a determination, then the fact that this one which was subject to the selling agreement was only 10 per cent. of them all would make it fall outside the Clause. I may be wrong, and is so I shall be glad to be corrected. Would the Parliamentary Secretary take advice as to whether his interpretation and that of the hon. Member for Esher is right and mine is wrong?
In any event, I put it to the Parliamentary Secretary that the whole of this subsection is only permissive and not mandatory. Ministers always say about statutory bodies that they are not morons and therefore, as responsible bodies, will not do silly things. If the Amendment were accepted, we could rely upon the Board not to use its permissive powers to go digging down into some fiddling little business of some small stockist. I should be glad if the Parliamentary Secretary would take steps to confirm his view, if only for my edification, so as to see whether his interpretation of the position is correct and mine is wrong.
§ Mr. G. R. Strauss (Vauxhall)
We are grateful to the Parliamentary Secretary and we shall be obliged if he will look into this a little further and consult his legal advisers so that we may be quite clear about what we are doing. At the moment we are not certain. We may be right, we may be wrong, but we think there is some point in our arguments, and in particular we should like some advice on some future occasion upon the meaning of the word "substantial." We do not know what it means. Supposing a man sells 10 per cent. of his output through an agent. Can the maximum price be exceeded for that 10 per cent.? Supposing it is 30 per cent. or 50 per cent. or 60 per cent.? Is that a substantial part of the output? It may be that a manufacturer will have an arrangement for selling x per cent. of his product through an agent. What sort of percentage is involved here?
This is a matter for legal definition. I understand that the courts always consider, on the merits of the case, what is meant by "substantial," but I do not know what guidance they would have in a matter of this sort. I will not press the Parliamentary Secretary for an answer now, but we think this is of some importance, and if he will undertake to look into it and to tell us on a future occasion what is the legal advice and what is the situation, I am sure that my hon. and learned Friend the Member for Brigg (Mr. E. L. Mallalieu) will be willing to withdraw the Amendment. If we are not satisfied, we can take it up later.
Mr. Frederick Wiley (Sunderland, North)
Before my hon. and learned Friend withdraws the Amendment, I should like to draw attention to the fact that no Law Officer is present. I accept the construction given by the Parliamentary Secretary, who is well versed in these things, but I think it is discourteous to the Committee continually to have to refer things back. I hope that one of 1153 the Treasury Ministers will be able to find a Law Officer so that we can attend to these matters more expeditiously.
§ Mr. Low
I am sure the Committee do not want to make too much of this. This is a difference of opinion between laymen, and such a difference of opinion can take place whether a Law Officer is present or not, as the right hon. Gentleman knows. I have given the assurance and I will certainly look at the matter again, but, of course, in drafting the Bill and introducing it, my right hon. Friend and I took full legal advice and we formed our own opinion about what the words meant.
If the right hon. Gentleman reads the Clause he will see that this is not a matter which is likely to come before the courts—and I think the hon. and learned Member for Kettering (Mr. Mitchison) would agree to this—because the subsection begins:Where it appears to the Board thatTherefore, what is likely to happen on this occasion is not an appeal to the courts. I gather from the mirth of the right hon. Gentleman the Member for Vauxhall (Mr. G. R. Strauss) that he is indicating that it is all the more necessary that we should be clear what "substantial" means. I am bound to say that I am fairly clear what "substantial" is, just as I am fairly clear what an elephant is when I meet one, but I find it more difficult to define the word. I will take advice and if hon. Members opposite want to press this matter further I am sure that there will be an opportunity for it.
§ Mr. G. R. Mitchison
What we propose to do is to leave it to the Board whether they do or do not exercise these powers when a part of the production is sold in this way. I understand from the Parliamentary Secretary that at present it is for the Board and entirely the Board to decide what is "substantial." The result comes to this—that anyhow it rests with the Board. "Substantial" is much less easy to recognise than an elephant. Why on earth should it not be left to the Board instead of to the meaning of this rather vague and unfortunate word? I suggest to the Parliamentary Secretary that when the Solicitor-General arrives he should consult him on the question of how he will 1154 obtain an interim injunction, the favourite remedy for peccant steel owners in the mind of the Solicitor-General, if that decision depends upon the Board's opinion of what "substantial" means? It might place a judge in a considerable difficulty.
§ Mr. Low
Surely the hon. and learned Member is misleading the Committee on that point. What the court would have to know is whether the Board had by notice in writing to the selling agent in formed him that this section of the Act. as it will then be, applied to sales by him. That is a clear matter which the court could find out quite easily.
§ Mr. Mitchison
That is not so. The question is whether the Board are entitled to send the notice at all. A gentleman who has been brought up for the purpose of an interim injunction—instead of being put in "quod" or fined—might get away with it because it was said that 5 per cent. was "substantial."
§ Mr. Jack Jones (Rotherham)
May I remind the Parliamentary Secretary that this is not altogether a matter of one-way traffic? Whilst the Parliamentary Secretary may be quite certain that he knows what an elephant is, we want to know whether, under this Bill, the elephant knows what a Parliamentary Secretary is.
§ Amendment, by leave, withdrawn.
§ Mr. Low
I beg to move, in page 8, line 3, to leave out "forgings and."
The object of this Amendment is to make the Board's power to determine the maximum price of a forging extend to forgings which have been machined incidentally to the forging process. This applies, of course, only when the Board have the power to determine the maximum prices of forgings. I say that because I have in mind the new Clause relating to the application of price provisions to forgings, which defines the conditions under which the power may be exercised. The Committee are probably aware that most of the steel industry's forgings are normally sold after rough machining. It is generally accepted that this practice of the forgemasters of doing some machining is an economical practice and we are anxious to recognise that. That is what the Amendment does
1155 Following the Amendment to the Third Schedule which we discussed earlier, engineering forging is now outside the Bill altogether and there is no fear that the expression "incidental process or operation" might cover purely engineering processes. I hope, therefore, that the Committee will accept this Amendment.
§ Amendment agreed to.
§ 7.45 p.m.
§ Mt. Low
I beg to move, in page 8, line 21, at the end, to add:(8) Where a determination is in force under the preceding provisions of this section with respect to any products, and it appears to the Board that, in the case of any sales of those products in the United Kingdom by a particular iron and steel producer (or the selling agent of that producer) to a particular purchaser, the maximum price ought, owing to unusual requirements by the purchaser or unusual methods of manufacture or other special circumstances, to be in excess of the maximum price under the said determination, the Board may, by notice in writing to that producer and that purchaser, determine a maximum price for those sales in excess of the maximum price aforesaid, and thereupon the duty of the producer under this section shall, as respects those sales, be a duty not to charge prices greater than the maximum price determined under this subsection:Provided that the power conferred by this subsection shall not be exercised in relation to any determination made or varied in pursuance of an order made by the Minister under the next following section, unless that order or any order varying that order authorises the power to be exercised in relation to that determination and any requirements imposed by the order, which may include the obtaining of the Minister's consent, are complied with.A determination under this subsection may be varied or replaced by a subsequent determination thereunder, or may be revoked by the Board by notice in writing to the said producer and purchaser, and the preceding provisions of this section, except subsections (1), (3) and (4) thereof, shall apply to a determination under this subsection.This Amendment which seeks to add a new subsection (8) is designed to enable the Board to vary their price determinations for particular out-of-course transactions, in the same way as the Minister of Supply can under the current Iron and Steel Prices Order and could do under all previous Orders. The right hon. Gentleman the Member for Vauxhall (Mr. G. R. Strauss) will remember those orders.
We had understood that Clause 7 (2) gave the necessary flexibility, but the best legal opinion now is that that subsection 1156 and subsection (4) cannot be used to allow special variations for particular transactions. Flexibility is, of course, necessary in this complex industry which provides a variety of products for customers requiring a wide variety of specifications; otherwise a customer who has a particularly tight specification or some special requirement may suffer and may not obtain what he wants at all because his needs could only be met by the producer making a loss on the transaction, which naturally he would be unwilling to do, or by the producer selling above the maximum price, which would be illegal and which he would not do.
If an individual consumer, because he has a special requirement costing somewhat more to produce, is prepared to pay a reasonable price in excess of the maximum, it is only right that he should not be debarred from doing so because of an over-rigid rule. Individual exceptions will not destroy the main safeguard.
There are two points, of importance in this rather long Amendment. The first paragraph of the Amendment makes it clear that in cases of a sale or series of sales between a particular producer and a particular purchaser, where the requirements or "the methods of manufacture" are unusual or there are other special circumstances, the Board will be able to vary the price determination for these sales. Such variations will be entirely at the discretion of the Board. The Board's determination to vary their general determination will be conveyed by notice in writing to both producer and purchaser. There will be a minimum of formality in arranging these special transactions. When the Board have made a special determination, the producer has a duty not to charge more than the maximum price determined.
The proviso in the second paragraph makes it clear that the Board will not have a general power to vary, in special cases, determinations made following a Minister's order if he has used his reserve powers under Clause 8. It would clearly be wrong to provide such a general power which in theory could be used to frustrate the Minister's intentions, even though in practice the Board would not be likely to adopt such a course. Since, however, it will be just as necessary to provide for flexibility where the Minister directs the Board to determine a price, 1157 the proviso makes it clear that the Minister's order—which will be debatable in Parliament—may lay down the circumstances in which the Board will be able to vary a determination made following the Minister's order.
§ Mr. Jack Jones
I should like to thank the Parliamentary Secretary for giving this detailed and technical exposition of what this new subsection means. We would boil it down to a very few words. It safeguards the interests of the person or persons called upon to supply a very useful one-off article—if I can put it in technical terms—the person providing something in special material or something of rather unorthodox manufacture which requires flexibility. This Amendment gives flexibility. We are grateful to know that the main proceedings are safeguarded, and we have no objection to this Amendment.
§ Mr. Peter Roberts (Sheffield, Heeley)
There are two short questions I should like to ask. First of all, is it quite clear that the producer as well as the purchaser can approach the Board? I am not quite certain how this procedure is going to work. The Amendment says, "and it appears to the Board." Can we assume, therefore, that the producer as well as the purchaser can make the representations to the Board in the first place?
The second point is this. Is my hon. Friend not frightened that there may be some delay while the Board considers these various points? It may be that it may have a number of special cases. Quite a number of contracts may have to be put to the Board. There is no question of a time limit in the Clause, and there is a certain amount of worry that the Board may sit considering such matters for two or three weeks or even longer when a special case has to he put through quickly. I would ask, therefore, whether my hon. Friend is satisfied that the producer and purchaser can go to the Board, and second, whether he thinks there ought to be some special Amendment dealing with delay.
§ Mr. Mikardo
Before the hon. Gentleman answers that question, may I put one of my own? He told us that he turned his back on the advice given to him by the Solicitor-General on a point covered by subsection (2) and went and got the best legal advice which must be outside 1158 the ranks of the Government—which induced him to change his mind. May we ask him to tell the Committee where he got that advice, and if, in fact, he meant what he said, and has been consulting my hon. and learned Friend the Member for Kettering (Mr. Mitchison), is that not the dangerous beginning of a coalition?
§ Mr. Low
I think the hon. Member for Reading, South (Mr. Mikardo) knows the answer to his question. My hon. Friend the Member for Heeley (Mr. P. Roberts) asked me first whether the producer and the purchaser could go to the Board to make representations to get special advice. The answer is, of course, that the producer is the only person covered by the Board's powers. I think that really answers the question. If the purchaser wants to get something very badly and the producer wants to sell it to him there is no need for them both to go to the Board. It is quite obvious that the producer would go automatically to the Board.
My hon. Friend's second question expressed his fear that there may be some delay in this matter. I think he will remember my telling the Committee that some kind of provision has been embodied in iron and steel price control orders for many years, and our experience is that we get about 30 applications a year for this sort of thing, and I do not think that there have been any complaints—certainly, I have no knowledge of any complaints—of any undue or unreasonable delay in the matter, and I am sure that the Board will be just as alive as the Government are at present to the importance of avoiding delay in all these sorts of things.
§ Amendment agreed to.
§ The Solicitor-General (Sir Reginald Manningham-Buller)
I beg to move, in page 8, line 21, at the end, to add:() For the purposes of this section, the sale of any iron and steel products for export to a place outside the United Kingdom shall not be treated as a sale in the United Kingdom, but save as aforesaid the sale of any iron and steel products which, at the time when the property therein passes to the buyer, are situated in the United Kingdom shall be deemed to be a sale in the United Kingdom.I hope I shall carry the Committee with me when I say that without any doubt this should be regarded as a substantial 1159 Amendment. It is not "one off." The Amendment in fact covers two points. The first point is a quite simple one. It was never intended that the powers of the Board should extend so far as to apply to sales of iron and steel products for export; it was never intended that the Board should be able to fix maximum prices of those products for export; and on further consideration it was thought right to express that perfectly clearly in the Bill, so that in any proceedings brought for an injunction it would be a clear defence for the person against whom, or company against whom, such proceedings were brought, to establish that the sales in respect of which those proceedings were launched were in fact sales for export.
The second part of the Amendment is designed to stop a possible loophole, and to make it clear that the Board's maximum prices cannot be evaded just by making contracts for sale outside the United Kingdom of products within the United Kingdom. Without those words at the end of this Amendment it might have been thought possible for someone to have evaded the operation of the Board's maximum prices, when they come to be laid down, by making the contract of sale of products within the United Kingdom outside the United Kingdom. That part of this Amendment makes it clear that that cannot be done. With those short observations in support of this substantial Amendment, I beg to commend it to the Committee.
§ Amendment agreed to.
§ Clause, as amended, ordered to stand part of the Bill.