HC Deb 22 January 1973 vol 849 cc184-92

10.57 p.m.

Mr. Evelyn King (Dorset, South)

I am fortunate to have the opportunity to divert the attention of the House from Iceland to Weymouth. First, in order to avoid any misunderstanding, may I say that I am a determined supporter of the Government's policy in the matter of wages and prices. The Government have behaved with determination and resolution, and nothing that I say is intended to weaken that statement. I am, however, a little concerned about the implementation of that policy in the sense that it cannot succeed unless there is a great deal of flexibility and imagination in the execution of it.

With that beginning I turn to the major scene that I want to set. First, there is the date for which, in a sense, I apologise. I should have liked to raise this matter on 18th December. Indeed, I tried to do so. I realise now that it is a little out of date, but there is still enough in it to merit my not withdrawing it.

Secondly, there is the place. I represent South Dorset. Within South Dorset, the biggest town in Weymouth. As the Under-Secretary—my hon. Friend the Member for Honiton (Mr. Emery)—knows, Weymouth is an area of high unemployment and low wages, the sort of area that one finds all too frequently within the West Country and parts of the country leading to that area. The local authority has for many years sought to provide trading estates and to attract light industry, and my hon. Friend knows that that is difficult to do.

I now turn to the particular industry that I have in mind. The firm concerned is Blundell Harling Ltd. which makes drawing instruments, slide rules and scale rules and is also a contractor to the Ministry of Defence and constructs specialised calculators for use in defence systems. It is an employer on a fair scale, and if it has difficulties—and it has some which I shall illustrate—these are caused not by not having full order books but by over-loyalty to Government policy and to CBI directives.

The firm has done something which is perhaps unusual. It has been guilty of under-charging. We have heard a great deal in recent weeks about over-charging. Too little has been heard of the many firms in my constituency—and they are the majority—which are moderate and responsible and do not over-charge It would be no bad thing if sometimes we had praise for them.

I now quote from a letter written by the sales director of Blundell Harling on 10th November 1972. He had no idea he was going to be quoted and he did not write for that purpose. However, the letter puts the position as clearly as anything can. The letter dated 10th November was written following the announcement on 7th November. It says: The present Government announcement has presented our company with a serious problem.…For many years it has been our practice to issue a nett price list of our standard products once a year. We find, however, through maintaining our prices for the year April 1971 to March 1972 in accordance with the CBI initiative that our trading profit was reduced to a dangerous level. It was decided that in future we would issue new price lists at approximately six-monthly intervals…in an effort to keep increases to a minimum.…However, when our half-yearly accounts to the 30th September 1972 showed a trading loss of"— I shall not give the figure but it was tens of thousands of pounds— we immediately checked costings of those items not increased in price in July, and found urgent action was necessary. A new price list was drafted to take effect from 1st November. The dates now become important. The letter continues: … but, due to delays, it was not received from the printers until the afternoon of 2nd November. In the interests of economy it was decided to distribute the price list with the monthly statements which were due to be posted off on Tuesday 7th November". The following is of vital significance: …except for some which were sent by post to our largest distributors on Friday 3rd November. My hon. Friend will recall that the Government announcement about prices and increases was made on 7th November. Blundell Harling was placed in a difficult position. The price list had been printed and some lists had been posted but others had not. Then the announcement, which was not a law, was made in the House. The firm did what it should have done. The directors spoke to me on the telephone and came up to London. I immediately telephoned the Department. Clearly this was a case where there was a doubt. I spoke to the private office of the Minister for Trade and Consumer Affairs.

As a result I was able to write to Blundell Harling thus: I have been in touch with Sir Geoffrey Howe's office and I am assured…that if there is evidence that prior to 3.30 p.m. on the 6th November 1972 a decision by your firm to vary prices had been taken and the day on which the prices were to be varied were to be made known in writing outside the office, then you will be in order to stick to the decision you have taken. I took the precaution of sending a copy of that letter to the Minister's office. As I understand it, there is no dispute that I wrote accurately what I had been told on the telephone. The firm believed what I wrote to be the position.

However, on 28th November—I will not quote the whole of the letter—there was received a lengthy letter from the Department, of which only two sentences are of consequence. It said: I am afraid I am now writing to tell you the issue was not as clear cut as I imagined. It goes on to give four points, only one of which I will quote, which says: Where increased prices have been announced, or a price list published before 6th November, this will not entitle those prices to be changed.… So we get a position where a firm has behaved properly. It is a firm which has a record of sticking loyally to what the Government sought to do. The firm was in difficulty and it went to its Member of Parliament and he took the matter straight to the Minister. The firm sought to do what the Minister said and then it suffered in the way I have described.

This is wrong on three counts. First, it puts an hon. Member in an impossible position when in good faith what he says does not turn out in the end to be true.

I accept that we all make mistakes. Anyone can make a mistake. All Government Departments make mistakes. I make no criticism of that. But I suggest that when a Government Department makes a mistake of this character which is not of international significance but affects only a small firm but is vital to it, the Minister and the Government should stand by their mistake. I am afraid that in this case the Minister has not done so. That is my first and biggest point.

I do not want to make too much of my second point but it is a fact that this directive and the letters to the firm and to me were given without sanction of law but were based only on a directive or statement by the Prime Minister in the House. The Bill had not been passed at the time the second letter went out. It is doubtful whether in law the Minister had any legal power to do what he set out to do. That makes his case weaker still. I will not put it stronger than that.

Lastly, here we have a firm which is selling its product at less than it costs to produce. It employs in my constituency sufficient people to be of consequence to the economic life of that constituency. But I now go wider than my constituency. While this is a small point affecting a small firm, on the national scale decisions affecting many other firms are now likely to be taken every day and it is important that when an unwise decision is taken by a Minister it should receive criticism, because if the Government's policy is to work, as I want it to work, nothing in the world is more likely to spoil it than a misjudgment of the kind I have described.

I was impressed by the fact that my right hon. Friend the Prime Minister, on television and radio last week, used the one word "fair" again and again. He said that the Government must be fair, because only if they were fair would their policy succeed. I accept what my right hon. Friend said. But I find it a little hard to accept that the Minister in the case I have quoted and in the circumstances I have outlined has in fact been fair. If my hon. Friend the Under-Secretary of State is able to persuade me otherwise, no one will be more pleased than I.

11.8 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Peter Emery)

I thank my hon. Friend the Member for Dorset, South (Mr. Evelyn King) for the support he has made clear for the Government's policy on standstill on prices and incomes. For myself, I thank him for the immensely reasonable way he has presented his case tonight. It would have been possible for him to have done so in a bombastic, aggressive manner. But he has marshalled his facts fairly and reasonably. As a West Country Member myself, I have sympathy and understanding for his approach as far as his constituency is concerned and for the problems of his area in Dorset. I well understand them, as I think he knows.

I do not in any way wish to argue with any of the facts my hon. Friend has stated. He has put them clearly and I see no point in adding to the detail. My Department acknowledges the real and substantial embarrassment caused to the firm by the incorrect advice it was given and the fact that that advice was not immediately detected and withdrawn.

As has been made clear to the House on other occasions, the Government introduced the standstill measures only when it became clear that it was not possible to reach agreement on the methods by which the objectives of economic management which had been agreed between the Government, the TUC and the CBI should be pursued. We could no longer delay taking quick and effective action.

In order to deal effectively with the public's questions and complaints, the Department set up an organisation to give rapid advice to inquirers. This centred upon a specially established prices unit in London, supported in a most important way by regional officers throughout the country. It does not make the error more acceptable, but it puts it more into ratio if I illustrate the whole gamut.

It serves to illustrate the pressures under which this organisation was working at the beginning if I say that more than 8,000 calls were handled during the first week, of which nearly 5,000 came to the prices unit in London. In the second week more than 14,000 calls came in, of which the prices unit handled 8,000. These calls were supplemented by a large volume of written inquiries, and business is being maintained still at a high level of intensity. The unit in London and the regions has received more than 36,000 calls and I am pleased to say that in very few cases has incorrect information been given.

The question put to the Department by my hon. Friend centred upon the effectiveness of prices increases which Blundell Harling considered itself to have implemented before 6th November 1972. Hon. Members will appreciate how crucial this was because if it could be demonstrated and accepted that price increases had been implemented before the standstill, no breach of the standstill could have been involved in their continuation.

The incorrect advice given was that the higher prices sought by Blundell Harling would be regarded as having become effective when the firm first said they were to be effective—that is, on Friday 3rd November when it sent out notification of new prices to some but not all of its customers. On that basis the increased prices would have held good throughout the period of the standstill.

The true position however, and one which shortly afterwards became widely disseminated, was that for a price to be effective before the standstill began, it had to be demonstrated that sales had actually been completed at the higher price. That was the judgment of whether one was on one side of the line or the other. In the case of the sale of goods, the point at which sales would be regarded as completed would generally be the despatch of the goods.

The background to this in terms of the Act is that it is necessary in deciding whether the standstill has been infringed to compare the price of a transaction effected after 6th November 1972 with the price of a transaction of the same description before 6th November. It is important to emphasise that the issue of a price list indicating an intention to charge higher prices before 6th November is not of itself an effective transaction and cannot therefore be regarded as an implementation of a price increase before the standstill.

When the initial error was discovered it had to be considered as to whether the Government should have stood by the first advice given and allowed the price rise. Whilst in some ways there can be an argument mounted to support that line of action—indeed that is my hon. Friend's criticism of the error made—I have to reject it. Two wrong actions would confuse rather than help the situation, and it would certainly have been quite unfair to other traders, who might have been in the same position but who were not given this advice.

The incorrect information was relayed to Blundell Harling through my hon. Friend, and some two weeks passed before a correction was notified to him. In this period Blundell Harling continued to attempt to pass on, in good faith, its increased prices. Arising from that action, two of the customers complained to the Department.

Apart from the action taken on its behalf by my hon. Friend, Blundell Harling had written to the Department almost at the outset of the standstill describing its position. Guidelines had been drawn up by the time that letter arrived which set out the precise information required for consideration of an application for approval of an exceptional price increase during the standstill. The company was accordingly invited to supply detailed information on which its case could be considered.

On 6th December, after the incorrect advice had been recognised, my right hon. and learned Friend the Minister for Trade and Consumer Affairs met Blundell Harling's sales director and the company secretary. He explained to them, as they had by now already learned, the criterion which had been adopted for the establishment of price increases to be effective before the standstill. He felt it would be indefensible for him to uphold the wrong decision given to them earlier. To do so would have been to extend to Blundell Harling a favoured accommodation during the prices standstill which was denied to other suppliers in a similar position. This also comes back to what I accept is the main criticism of the Government's decision.

My right hon. and learned Friend invited the firm, if it wished, to supply the information required for further consideration of its case for approval of an exceptional price increase during the standstill. The company replied in a letter to the prices unit earlier this month expressing its thanks to the Minister for the meeting and saying that it did not consider it worth while pursuing the matter further.

This is the background to what I readily admit is an unfortunate case, against which we are debating the Government's prices policy. The central plank of that policy is already well known to the House, and it is based on the desire to be fair to all. It might even be considered more dfficult for a Government to admit a mistake, as we have done, than to hush it up. We wanted to ensure that there was no favouritism. The central plank is that prices during the standstill should not exceed those charged in transactions of the same description before the standstill began.

We have been at pains to apply that policy as fairly as possible, while acknowledging that it would bear more harshly on some suppliers than on others, particularly those who had implemented price increases just before it was introduced.

We have been prepared from the outset to consider applications for approval of exceptional price increases, especially from firms which consider themselves quite unable to absorb increased costs for the period of the standstill. The Government have not disguised the fact that such applications will be considered in the light of many factors. These must include an assessment of the applicant's ability to absorb increased costs. It is right that they should be based on detailed information about the business being pursued.

It is still open to Blundell Harling to develop its specific argument, though I am pleased to be able to say that I take it that the firm has accepted our policy, as it has indicated so far that it does not wish to do so.

Mr. King

I am grateful for the courtesy of my hon. Friend's reply. This started in early November. We are now in mid-January. If the firm was to produce facts and figures to justify the need for an increase, it already would have been, for three months, selling at a loss. Whatever the decision might be, how long would it take for the Department to give a decision?

Mr. Emery

I do not know what my departmental brief would be, but I give my hon. Friend the assurance that if an application was made, because of the error the Department made originally, I would ensure that it was dealt with as a matter of immense urgency as soon as was humanly possible.

It is, perhaps, a measure of the widespread acceptance of the Government's policy by commerce and industry that only 1,760 applications for approval of price increases have been received. These are rather relevant figures. Only 230 of these have been approved. Therefore, the Government have made it plain that the policy of the prices standstill is intended to have effect as such only for the period of the standstill, whether it was for 90 or 150 days. It is not surprising, therefore, that I shall do everything possible to maintain this policy, with a fair consistency, until the succeeding programme, which has been outlined by my right hon. Friend the Prime Minister, comes into effect.

Therefore, in conclusion, all that I can say is that I regret that this error should have been made. I should like those regrets to go out publicly to the company. They have been conveyed in private. We realise the embarrassment this is causing, but I only hope that the company understands, from my explanation, that it is right and proper that we should be fair overall, even if it means harshly having to correct an error that we may have made.

Question put and agreed to.

Adjourned accordingly at twenty-three minutes past Eleven o'clock.