HC Deb 16 June 1966 vol 729 cc1860-70

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Harper.]

1.9 a.m.

Mr. William Hamilton (Fife, West)

This debate arises out of a letter from Fife County Council, which I received a week or two ago, enclosing examples of rising prices of building materials. The list was provided by the works manager of the county council's works department. His letter is dated 3rd May, 1966, and he gives examples of about 30 building materials the prices of which have increased since March, 1965.

I propose to give a few examples to show the problems which Fife County Council and other local building authorities are facing. Yorkshire fittings—my hon. Friend knows what I am talking about—increased in price by 7½ per cent. in November, 1965, by a further 5 per cent. in January, 1966, and a further 6⅔ per cent. in February, 1966. Securex fittings, which are a similar refinement of the Yorkshire fitting, increased in price by 5 per cent. in November, 1965, and 7½ per cent. in February, 1966. Brass screws increased by 5 per cent. in November, 1965, another 5 per cent. in January, 1966, and another 5 per cent. in February, 1966.

The council then gives a whole series of further increases. Ironmongery increased in price by 10 per cent. in January, 1966, copper tubing and copper sheet which went up tremendously in price for reasons which are well known to the House, glass increased and water storage heaters went up by 15 per cent. in December, 1965. Significantly enough, the Scottish National Coal Board brickworks had a very good record in this respect. In the Fife area the average price increase over the last four years has been about 2½ per cent. to 3 per cent.

The most startling price increases are in connection with electric wiring cables. Figures given by the Fife Council show an increase of 2: per cent. in June, 1965, a further 10 per cent. in November, 1965, a further 9 per cent. in January, 1966, 4 per cent. in February, 1966, 3 per cent. in March, 1966, 6 per cent. in April and 12½ per cent. in May. In every month of the year prices have gone up, making a tota' increase of 47 per cent., which, compounded, is well over 50 per cent. for the period referred to by the works manager.

The result of these continuous increases is that no supplier is willing to submit a fixed price. All contracts have an escape clause. The Fife Council quote the example of the Queen Anne School in Dunfermline, when a quotation was given by the supplier of the main switch gear in June 1965, and on that basis the electrical schedule was priced and submitted. But when the order was recently placed the price had risen by 200, an increase of 20 per cent. But the material is not required for several months, and it is therefore possible that there will be a further increase before that time.

At the same time, on the same contract, the cost of the main cables had increased by £616 10s. 8d. The works manager concludes his comments with these words: It does seem to me ridiculous that one of the largest industries in the country should he quoting for contracts extending over a period of two years in this precarious way, and no doubt this is the reason why there are more bankruptcies in the building industry than in any other industry in the country. He included a cutting from the Building Contract Journal dated 24th February, 1966, which says: Firm-price tendering for public works in Scotland is facing a crisis. Responsible officials have warned building firms that the position is critical, and that changes are essential. Rising costs have created a situation which makes nonsense of the original prices in many instances. Advice offered by local authority officials, consultants and others in charge of contracts to 'use alternative materials' is regarded as unhelpful. Sometimes there are no alternatives, or none which can be used without involving substantial additional costs."

I should like to ask my hon. Friend whether that is the case, whether alternative materials are available, especially in Scotland, and in quantity and whether their use would involve the local authorities in substantial additional costs.

Following the receipt of this communication from the Fife County Council, I wrote to the Minister and received a reply from him dated 31st May, in which he expressed regret about the price increases but explained that they were not abnormal, if allowance was made for the increases in copper prices which are outside his control. He pointed out that a close watch is kept, that several building materials are included in the early warning system, and that a reference to the Prices and Incomes Board would he considered, if appropriate.

My immediate reaction to the letter was that it was extremely complacent, and I wrote to the Minister and told him so. At the same time I asked him for figures of the profits and dividends of some of the leading companies, which he was good enough to send me. I took those figures to the House of Commons Library to have them cross—checked by our Library staff. Had I not done so I would have been quoting wildly inaccurate figures in this debate-figures which were supplied by the Ministry.

I wish to give some examples. The profit figures given by the Ministry for Associated Portland Cement for the year ending December, 1964, were £112.7 million. The Library figure, which is the correct, provisional figure, was £24.8 million. The figures for the following companies are of trading profits before charging depreciation, directors' emoluments and taxation. In the case of the London Brick Company, for the year ending December, 1965, the Ministry figure that was given in the letter was £17.1 million. The Library correct figure was £4..47 million.

For British Plaster Board, for the year ending March, 1965, the Ministry figure was £27.8 million and the Library, correct figure was £6.77 million. The Ministry figure for Crittall Manufacturing Co. Ltd. for the year ending December, 1965, was £11 million, and the Library figure was £1.15 million. That was the 1964 figure, but the 1965 would presumably not be very much different.

The Ministry figure for the Austin Hall Group for the year ending March, 1965, was £3.8 million and the Library, correct figure was £567,000. For Hoveringham Gravels Limited, for the year ending December, 1965, the Ministry figure was £13.4 million and the Library correct figure was £2.265 million, which was the provisional figure of the trading surplus.

It was not my original intention to attack the Ministry for the supply of such shockingly inaccurate information. Nor is it now my intention to do so, but it make it clear that the Moodies index the Department and I hope that the Minister will discover who supplied those statistics to him and that he will take appropriate action.

I want now to take a closer look at those profits and dividends. I asked the Library for figures of the dividends which were distributed, and I should make it clear that the Moodies index cards, the only basis on which the Library can go, do not make clear whether the figures which I am now quoting are gross or net.

The dividends paid out on preference and ordinary shares by London Brick have increased from £716,000 in 1961 to £1,224,000 in 1965—an increase of 70 per cent. in five years and an average of 14 per cent. per year. The equivalent figures for British Plaster Board are 68 per cent. up in five years, an average annual increase of 14 per cent. Associated Portland Cement showed an increase of 45 per cent. in distributed dividends in five years—an average annual increase of 9 per cent., and the Austin Hall Group increase was 50 per cent. in five years, or 10 per cent. per year.

Of the price increases quoted by Fife County Council, electrical wiring cables are easily the most flagrant example. The council buys most of these from what was Callender Cables, which is now British Insulated Callender's Cables Ltd. The amount paid out in dividends by that company has increased by 130 per cent. in five years, which is a 26 per cent. annual increase over the past five years.

The Government have been seeking for some while to secure a prices and incomes policy. They also have ambitious targets for the building industry in regard to building houses, schools, hospitals, roads, and so on. Because of that, there is a very great need to increase, improve and encourage the efficiency of the building industry. Therefore, I should be the last person in the world to say that profits are any other than a necessary incentive to that end. Clearly, a vastly expanded demand for building and building materials can and does increase chances of profiteering. If that is allowed to go unchecked and unchallenged, it may jeopardise both the prices and incomes policy and the building targets.

I ask my hon. Friend to do two things. I ask him, first, to examine carefully the facts as I have given them. I ask him, secondly, to investigate the profit margins and dividend distributions, if he thinks any of them may be worth referring to the National Board for Prices and Incomes.

The Fife County Council has expressed a wish to see the Minister to discuss the problem with him. I hope that this request will receive favourable consideration. I hope that if the Minister does see the Council he will ensure that representatives of the Scottish Office are present, because the Scottish Office is obviously vitally concerned in a matter which is troubling more authorities than Fife County Council. If the Minister will do that, this debate will have been worth while

1.27 a.m.

The Parliamentary Secretary to the Ministry of Public Building and Works (Mr. James Boyden)

My hon. Friend the Member for Fife, West (Mr. William Hamilton) is a great zealot for public economy. Tonight he has carried his zeal for economy much further and looked at the private sector as well. The Ministry of Public Building and Works is a great buyer of these commodities. Therefore, my hon. Friend does a service to the House by drawing attention to difficulties which are arising.

We share my hon. Friend's concern about price rises. We naturally wish to have prices as stable as they can be and, indeed, wish them to fall a little. My hon. Friend may be surprised to know that this has actually happened in the case of some building materials. This makes cases where prices have shot up all the worse. The average rise in building material prices over the whole field has not been unreasonable. However, we are not complacent about this and I give my hon. Friend an undertaking to look into and check the facts he has mentioned.

I cannot off-the-cuff explain the discrepancy between the figures I gave my hon. Friend in a letter and the figures lie obtained from the Library. There is obviously some different definition of "profits". I will certainly clear this matter up and will write to him. I am certain that both sets of figures are accurate. It is just a matter of interpretation.

The best way to satisfy the Fife County Council is perhaps if representatives of the council meet the Under-Secretary of the Ministry of Public Building and Works in Edinburgh to discuss he problem. This would save everybody a certain amount of trouble. If the matter is then still unresolved perhaps they could come to London, or I could go to Edinburgh to meet the county council; but I suggest that this is the best preliminary.

A constant watch is kept on prices as part of the Government's prices and incomes policy. We have made representations about some prices. Before I come o the details of that, perhaps I could give some general indication of movement of building material prices as a whole over the last few years. Building material costs are a very important factor in construction. They represent about 55 per cent. of the cost of house construction and a rather lower percentage of other types of construction.

They therefore play a very important part in the Government's policy of trying to enable as many people as possible to buy their own houses, and if building material costs do get out of hand it could frustrate the whole of the Government's policy in relation to house buying as well as council house building.

Mr. Reginald Eyre (Birmingham, Hall Green)

Is it not extraordinary that some of the steepest increases in prices quoted by the hon. Member for Fife, West (Mr. William Hamilton) took place against a background of falling house production in Scotland?

Mr. Boyden

I was coming to this. The biggest rises in prices are among non-ferrous metals, which are quite outside the control of the Government, copper particularly so. This enters into cables and things of that sort. The hon. Gentleman was good enough to give me copies of his correspondence and I have the figures. I will certainly look into copper, wiring and cable figures, but I would be surprised if there were profiteering in this. There could be. I have a strong suspicion that it is partly due to shortages.

I take up at once the point that has been raised about substitutes. We would be very happy to see substitutes for copper, and I would strongly recommend local authorities, and anyone else concerned, to visit exhibitions such as plumbing exhibitions to see what there is there. There is a great extension these days in the case of plastic pipes. In the Ministry we have encouraged the use of thin-wall non-bendable copper tube, and we had a British Standard, 3931, accepted last year which economises in the amount of copper used.

We are still experimenting and pressing forward with still more economical uses of copper, but sometimes water authorities and local authorities are very "sticky" about using substitute materials. In the same way they are sometimes difficult about using thinner copper materials. They are often not progressive in the use of substitutes. We would be very glad indeed if the maximum use were made of these.

I was trying to explain that the general position about building materials has not been out of step with ordinary price rises and that one should not stigmatise the whole of the building material industry for excessive price increases. Some of the materials in the column of statistics sent to me by the hon. Gentleman show that there has been practically no price movement at all since January, 1965. Asphalt had risen by a point since then. My figures refer to April, 1966, and that is the position comparing 1st January, 1965, with the end of April, 1966. I will give some further examples.

Asphalt had risen by only a point; cast-iron stoves and grates, etc., were stable; cast stone and concrete products by only two points; clay partition blocks by the same; fencing by two points, fire-clay sanitary ware by three points, but it went up in two months at the beginning of 1965 and has not gone up at all since; imported hardwood, imported softwood and imported plywood, have if anything gone down; lime hydrate is stable; lime lump has gone up two points; paint by a point; plaster a point; plastic furnishing hardware has gone down four points; conduits are stable, polythene tubing has gone down six points; wallpaper has been stable. A good many of the materials right across the board, have been pretty stable.

The general rise tends to be in the price of goods over which the Government have not very much control, for example copper and non-ferrous metals. The general picture since 1954 has been of a rise in house building materials averaging about 2.7 per cent. per annum. Prices tended not to move up in the "stop" part of the "stop-go" between 1957 and 1959 and between 1961 and 1963.

My hon. Friend asked about the reference of prices, for example that of cement, to the Prices and Incomes Board. The price of cement has risen 6½ per cent. since 1962. The increase took place in two stages, one of about 4 per cent. in 1963–64 and the other of 2½ per cent. in 1964–65. The latter price was discussed with the Government, and, in fact, originally it was higher than the 2½ per cent. since it included the element caused by the need to import higher priced foreign cement at a loss to meet a shortage in the United Kingdom. My hon. Friend knows about all this. We have often had discussions about it. When the imports of foreign cement ceased, the price was reduced.

The cement makers have large capital commitments ahead of them. They have been investing large sums, and they are making considerable progress in overcoming the shortages. There is no general shortage at the moment, except where it is brought about by causes which are rather outside our control, and it looks as though that situation will continue.

The price of bricks has risen 11 per cent. since 1962, but there has been very little movement in price since June, 1965.

The interesting thing about the London Brick Company, to which my hon. Friend specifically referred, is that its bricks have been fairly stable in price. A number of local companies have gone bankrupt charging higher prices than the London Brick Company has been charging. The tendency in times of surplus, of course, is for the London Brick Company to extend itself further and undercut the local people, because of its great efficiency. The price of its Fletton bricks is currently £6 14s. per 1,000, and the last time the price was lower than this was in 1963 when it was £6 10s. per 1,000. It is fair to say that the London Brick Company is highly efficient and highly competitive, and it cannot be charged with excessive prices and holding the country to ransom in that way.

There are other problems. In the Ministry we have considerable sympathy with the brick producers at the moment. My right hon. Friend and I have seen them on several occasions, and we are trying to do what we can to assist.

Glass was another subject which came under the early warning system. There were five building commodities which came under this non-statutory system. Sand and gravel is under discussion. Glass has been referred to the Monopolies Commission. Bricks, cement and plasterboard, have come into it. Plasterboard has met somewhat similar production difficulties as with cement—shortages through under-investment in the past. This is rapidly being taken up now, but the profits of the industry, therefore, need to go very considerably into new investment.

I can summarise the position by saying that we shall certainly collaborate with the Board of Trade and the D.E.A. in any steps to draw their attention to what seem to be excessive prices. We are very much concerned to have adequate productive capacity in the building materials industry, and, therefore, where profits are largely used for increased investment and increasing capacity we are very pleased. For example, the investment required in cement manufacturing is very great, and this is going on steadily all the time.

A word now about the way in which the index of these prices is made up. The Board of Trade publishes data on the movement of prices of 52 materials associated with construction. There are two sets of figures, one for the price movement of all construction materials and one for the price movement of house building materials. It is upon these that the data I have given the House are based. They give the general impression that, on the whole, building materials have not jumped excessively, except in cases where there are world shortages for political reasons.

I give my hon. Friend the pledges he asks for. We shall examine the facts. We shall draw the attention of the Prices and Incomes Board, through the D.E.A., to the matters it should have before it, and we shall gladly arrange a meeting between the Fife County Council and our Under-Secretary in Scotland.

Question put and agreed to.

Adjourned accordingly at twenty minutes to Two o'clock.