HC Deb 09 April 1974 vol 872 cc255-95

Order for Second Reading read.

8.10 p.m.

Mr. J. Bruce-Gardyne (South Angus)

On a point of order, Mr. Deputy Speaker. May I put it to you that this is a Bill of major constitutional importance that confers upon the Secretary of State and extra-parliamentary bodies far-reaching powers, and that it is not therefore a measure that should suitably be taken at this hour of night? It would be much more suitable for it to be deferred till a later date. So far as I can see, no particular purpose would be lost by deferring it.

Mr. Deputy Speaker (Mr. Oscar Murton)

I have listened to what the hon. Member has said, but that is not a matter for the Chair.

Mr. Patrick Cormack (Staffordshire, South-West)

On a point of order, Mr. Deputy Speaker. Could not discussions be undertaken through the usual channels, because this is a Bill of fundamental importance which should have been taken at 3.30 p.m. on a proper parliamentary day? We had an extremely important debate which was foreshortened and in which hon. Members had extremely important comments to make which they will not now be allowed to bring up. It would have been more sensible for that debate to have been continued and for the debate on the Bill to be postponed. I urge you, Mr. Deputy Speaker, to try to set in train through the usual channels an attempt to have the debate postponed until another day.

Mr. Deputy Speaker

The Chair has no power in this matter.

Mr. Bruce-Gardyne

On a separate point of order, Mr. Deputy Speaker. Of course I accept your ruling on my previous point of order, but there is another matter of some significance. It will not have escaped your notice that one clause of the Bill is of considerable importance in relation to the activities of the Pay Board, for which the Secretary of State for Prices and Consumer Protection has no ministerial responsi- bility. I submit that it is a contempt of the House that the Secretary of State for Employment, who has departmental responsibility for this aspect of the Bill, is not here. We canot expect a satisfactory reply to the debate unless the right hon. Gentleman is present to hear the arguments upon it.

Mr. Deputy Speaker

That is not a point of order. It is not a matter for the Chair.

Before I call the right hon. Lady to move the Second Reading of the Bill, I must inform the House that Mr. Speaker has not selected the amendment in the names of the hon. Member for South Angus (Mr. Bruce-Gardyne) and others.

8.16 p.m.

The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams)

I beg to move, That the Bill be now read a Second time.

It would be helpful to the House if I began by explaining the general approach of my Department to prices, as well as outlining the Bill is some detail. My hon. Friend the Under-Secretary of State for Employment is here and, of course, we shall deal in Committee with the matters referred to by the hon. Member for South Angus (Mr. BruceGardyne).

We live in a period of disturbing inflation. Prices are rising at a rate which may reach about 12 to 15 per cent. or even more by the end of the year. Some of the most reliable estimates given by independent economic sources suggest possible rates of inflation as high as 18 or 19 per cent. by the end of this year. Since 1970, all prices have risen by 39.2 per cent. and food prices by 54.4 per cent. These are higher figures than in almost any other country in the OECD group.

There is a point at which inflation gets out of control and begins to beget inflation. In such circumstances, no one saves and no one invests. It is not in the interests of industry for inflation to reach those levels and therefore the Government believe that it must be of the highest possible priority to take whatever action is open to them to attempt to modify the present terrifying rates of inflation. We also have to consider that built into the present situation is an accelerator in the form of threshold agreements. While they can in some circumstances act as a safeguard, they can also act as an accelerator.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)


Mrs. Williams

I hope that I shall be allowed to develop my argument a little more before giving way.

We therefore intend to take necessarily tough measures to curb inflation.

Mr. Ridley

Will the right hon. Lady give way?

Mrs. Williams

The hon. Member must give me a little time. He may intervene later. It is only proper to allow me at least to introduce my speech.

Industry has reached the end of what has been a period of rapid consumer boom and the end of a period which has seen the three-day week. It faces a rising cost of fuel and other raw materials and consequently the liquidity of companies in many instances is considerably reduced compared with a year ago. In some instances there are pressures upon profits.

The Government fully accept the need for investment and growth and will seek ways to protect the need for investment and growth.

Mr. Bruce-Gardyne


Mrs. Williams

I must ask hon. Members to allow me at least to begin to develop my arguments.

Mr. Bruce-Gardyne


Mr. Ridley

On a point of order, Mr. Deputy Speaker. Points have already been raised about the late hour at which discussion on the Bill has begun. Is it the Government's intention to steamroller the Bill through without giving chances for hon. Members to intervene? Will not the Minister give way at all on one of the most important Bills to come before the House for a long time? Does not her action reinforce the plea of my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) that the Bill should be taken away and brought back on another occasion?

Mr. Deputy Speaker

The hon. Gentleman's second observation is not within the competence of the Chair. The right hon. Lady has an absolute right to put her case, and I have no doubt that at an appropriate moment she will be prepared to give way to the hon. Gentleman if she sees fit.

Mrs. Williams

I have always given way in the past, and I do not intend to change my practice, but I ask for at least an opportunity to express the broad theme to which I shall be speaking before I give way.

We believe that the immediate need, despite the circumstances I have outlined, is above all to get control of the inflation that faces the country. It is a matter which is beyond party, a matter of which all right hon. and hon. Members must be acutely aware. Unless steps are taken to control the projected rate of inflation, there will be no future for industry, any more than there will be a future for the consumer.

It is for that reason that the Government will give absolute priority in the short term to measures to deal with inflation. They will take into account the need to take true cognisance of industry's needs. Industry knows that, and shares our view. I believe that the control of inflation is of overriding importance.

There is another Government objective of prime importance. Inflation, serious as it is for all our citizens, is most acute in its effect on those with fixed incomes or low incomes.

Mr. Bruce-Gardyne

Will the right hon. Lady give way?

Mrs. Williams

If I may first give my second point, I will give way.

Mr. Bruce-Gardyne

I wanted to ask—

Mrs. Williams

When I have set out my broad introduction, I shall discuss in detail the points I am now making. Hon. Members should restrain themselves until I return to those points, when I shall take questions they wish to raise.

Secondly, therefore, it is the Government's intention to take additional steps to protect those on low incomes or pensions, and those with large families. That is the reason for the concentration upon essential foodstuffs and essential goods in the non-food sector, but goods which are basic parts of the household budget. That forms an important part of what we are trying to do.

Families with incomes of less than £20 a week spend about a third of their incomes on food, whereas families earning more than £60 a week and up to £80 a week spend only 21 per cent. on food, while those with incomes of more than £80 a week spend only 17 per cent. on food. Therefore, steps to deal directly with essential foodstuffs, far from being indiscriminate, as the Opposition so often claim, are precisely directed towards assisting lower income families than larger income families, because the lower income families spend more of their income on food.

Mr. John Gorst (Hendon, North)

Will the right hon. Lady give way?

Mrs. Williams

May I finish my introductory remarks, and then give way?

Our second major object is to seek to protect from inflation those least able to fight it, those for whom the upward spiral of prices in the shops is not just a daily headache, but a daily nightmare. Seeking greater stability for the items to which I have referred, even where most of the cost thereby falls on other less essential items, is a vital part of what the Government are trying to do.

I am pleased to say that after detailed consultations with the retail trade—[Horn. MEMBERS: "Hear, hear."] I note that warm reception for my right hon. Friend the Secretary of State for Employment. My right hon. Friend will no doubt be pleased to have received it from the Opposition.

After detailed consultations with the retail trade, the food industry and the CBI, I think that there is some hope of voluntary agreement between them and the Government on the lines I have indicated. I shall return to that matter in greater detail later.

Mr. Ridley

I am grateful to the right hon. Lady for giving way. She said two or three pages back that inflation destroyed the incentive to save and to invest; but the Bill takes from saving and investment and gives to consumption, so surely its contribution towards accelerating the rate of inflation is quite the reverse of what she claims.

Mrs. Williams

I think that the hon. Gentleman is making a speech rather than an intervention. No doubt he will make his speech when the time comes. I can only say that I do not agree with him. Perhaps if he listens to the rest of my speech, he will not agree with himself.

Mr. Gorst

The right hon. Lady made a point about the nature of people's incomes and how much they spend on food as a proportion of their weekly budget. She used that as an argument for not giving subsidies discriminately. Can she give us any information about what proportion of the total population fall into the categories she gave, so that we may form a judgment about whether that would be practical?

Mrs. Williams

One of the problems about giving way in a speech is that there are often figures to come later which may go some way towards answering the questions asked. That is the case with the last intervention. The hon. Gentleman will have further information in answer to his question. That is why it may be helpful to proceed a little further before I answer more interventions.

Mr. Bruce-Gardyne

I am most grateful to the right hon. Lady for giving way. I, too, must refer her back several pages to a rather important point that she made. The right hon. Lady said that it was the Government's estimation that corporate liquidity was much diminished. Her right hon. Friend the Chancellor of the Exchequer said in the Budget debate that it was the Government's estimation that corporate liquidity was at present very extensive. Can the right hon. Lady explain the Government's view on the matter?

Mrs. Williams

I did not say that corporate liquidity was much diminished. I said that there were pressures on liquidity as a result of the three-day week and of some of the effects of rising costs. It is the Government's view—[Interruption.] Will the hon. Member for South Angus please allow me to reply, as I was polite enough to allow him to intervene? All I said was that liquidity was extremely high towards the end of last year, as my right hon. Friend the Chancellor of the Exchequer told the House. It has been put to me that since then there have been pressures on that liquidity, pressures that might well grow. I was conveying that thought to the House. It is a thought that has been put to me by the CBI and other representatives of industry.

One of the major instruments for restraining prices remains the Price Commission. I have put forward several proposals for amendments to the Price Code. The first was the cut of 10 per cent. in distributors' gross margins, and the second was a three-month interval, as a general rule, between price increases introduced by manufacturing firms. I ask the House to note the phrase "as a general rule ". The third was an end to the so-called sticky label scandal of pricing up goods on display, which the trade dislikes almost as much as the housewife does, and which it is anxious, with us, to police and prevent.

I also intend that there should be a more fundamental review of the Price Code early in the summer, which will allow both retailers and manufacturers to put to us their points on such questions as investment, the safeguards in the code, return on capital and the other matters that greatly concern them. I hope that the House will recognise that that is more appropriately done with time for fairly lengthy and detailed consultations.

The effect of the measures that I am putting before the House is undoubtedly to tighten control over prices. I now turn from what I have said about the Price Code to two other elements in our prices policy—first, food subsidies and then the Bill now before the House.

Clause 1 deals both with food subsidies and with the enforcement of arrangements made for subsidising food. It is only right to give the House as much information as I can, even when that information goes beyond what is in the Bill. Clause 1 gives the Government the power to honour the pledge made during the election to subsidise basic foodstuffs. We believe that the basis upon which those foodstuffs should be chosen is to decide whether they are items which bear proportionally larger in the expenditure of the poorer families.

I have been asked by the hon. Member for Hendon, North (Mr. Gorst) to give some figures and I can immediately give him figures relating to milk. The proportion of total expenditure on milk by pensioners is 65 per cent. more per head than for all the rest of the population, and pensioners constitute approximately one-fifth of the population. Similarly, the proportion of expenditure on bread by pensioners is 85 per cent. greater per capita than for the rest of the country. If we take only those two items, which have already been subsidised, the proportional expenditure is considerably greater for pensioners, with whom I hope the House will be concerned, than it is for the population as a whole. Generally speaking, that is also true of low-income families.

We are attempting by the use of food subsidies to break directly into the inflationary spiral. I have made it clear to the House time and again that we are not claiming to be able to cut prices at a stroke. However, we believe that there are some foodstuffs that are so essential and so necessary to the well being of families that it falls to the Government, in the present period of massively rising inflation, to attempt to control those prices as effectively as we can. In some instances, raw material cost increases are largely responsible. I repeat "in some instances "; it is not invariably true. In such instances, the subsidy may be an appropriate weapon, and we believe that it is.

We have noticed that previous attempts at means-tested subsidies, including cheap welfare milk and more recently the butter subsidy, all suffer from a relatively low rate of take-up. They suffer in that way because they identify the less well off as poor. We do not believe that those who are poor should be obliged, in effect, to lose their self-respect as well as to announce their poverty. Therefore, the Government are not attracted to means-tested subsidies instead of subsidies chosen to concentrate upon the lower paid family.

Mr. Cormack

The right hon. Lady believes that milk is an important item in our diet. Shy obviously believes that it is important for children. Why is it, when so much money is being spent on subsidising milk, that free school milk has not been restored?

Mrs. Williams

The hon. Gentleman should know the answer—that legislation would be reqt ired and it is impossible for the Government to reintroduce immediately any element of free school milk until the necessary legislation passes through the House.

The Bill authorises expenditure on subsidies up to a total financial limit of £700 million. As my right hon. Friend the Chancellor of the Exchequer indicated in his Budget Statement, we believe that in the current financial year, 1974–75, it will be right to spend about £550 million in all upon food subsidies. The financial limit in the Bill gives us something in hand. Clause 1(2)(a) provides for milk, butter and bread subsidies. Clause 1(2)(b) contains the power to add further food subsidies by order subject to the affirmative resolution procedure—in other words, the House will have an opportunity to pronounce upon any additional subsidy schemes in addition to those already embodied in the Bill.

Milk, of course, was subsidised by the previous administration, although sometimes when listening to Opposition right hon. and hon. Members might suppose that they had never subsidised anything. The subsidy on all grades of milk will increase by a penny a pint with effect from 21st April. The cost will be £127 million in 1974–75 and £134 million in a full year. The administration of the scheme will continue to be through the Milk Marketing Board. The effect on the overall food index—I am not referring to any specialised index concerned with pensioners—will be a reduction of nearly 3 per cent. We believe that milk is a valuable food and one well worth subsidising.

Butter is a second example of a commodity which was subsidised by the previous administration. It was subsidised on the basis of 2p per pound—I am now not talking about the so-called butter coupon system, but of the overall subsidy. This cost £18 million a year, of which half was met from EEC funds—the FEOGA fund.

The subsidy will be increased by 3½p per pound and will cost £33 million in a full year. The EEC will continue to make its contribution towards the original 2p per pound subsidy, but not to the additional subsidy, which will be implemented by the Intervention Board for Agricultural Produce and paid at the packing stage. The result will be a reduction of about ½ per cent. on the food index.

I made a statement about bread on 20th March, and I am grateful to the baking industry for co-operating in bringing in the scheme urgently. As a result, it has been possible to offset the proposed increase of a minimum ½p in the prices of ordinary standard loaves of 14 and 28 oz. which would otherwise have taken place on 25th March. The scheme is being worked out and will be operated by the Ministry of Agriculture, Fisheries and Food on my behalf.

In order to ensure that bread prices are held at their existing levels, the Ministry of Agriculture will be commencing payments to bakers once the House have given the Bill its Second Reading. Estimates will be presented to the House in due course, and in the meantime it will be necessary to have recourse to the Contingencies Fund.

Taking milk, butter and bread together, the total food index saving is about 3½ per cent., which we believe to be a useful start to the food subsidy programme. Clause 1(3) of the Bill provides for the nature of the scheme, which is to be non-statutory except in so far as these payments are embodied in Clause 1. This, of course, was also the case when the Conservative Government introduced their subsidy to the sugar refiners under Section 57 of the Finance Act 1973.

Mr. Michael Grylls (Surrey, North-West)

I have followed the right hon. Lady's comments on the effect of the subsidies on the food price index, and I think that they will help. But will she explain what effect on the index will be brought about by the price increases of the nationalised industries—for example, the increased price of oil?

Mrs. Williams

My right hon. Friend the Paymaster-General dealt with that aspect in the Budget debate, when he pointed out that the probable increase in the price index by the end of the year from nationalised industry prices would be about 1½ to 2 per cent. I want to stress that these subsidies, if the House approves, will be introduced immediately and will give immediate relief to families that are hard pressed. The Conservative Government clearly indicated the necessity, as they saw it, to increase the prices of the nationalised industries. This was said by the right hon. Member for Altrincham and Sale (Mr. Barber) and by the right hon. Member for Leeds, North-East (Sir K. Joseph) in the Budget debate.

The object of these subsidy payments is to reduce, prevent, or limit increases in food prices in the United Kingdom only. I make it clear that, under Clause 1(5), the subsidy must be repaid if the subsidised food is subsequently exported. The House will appreciate that it is important not to dislocate trade, and to satisfy both EEC regulations and to avoid any distortion of trade no subsidised foods will be exported without the subsidy being repaid.

The House will also want to know about the other possibilities for subsidies. I cannot at this stage give detailed information about complete discussions, because if I could it would only be proper for me to put them in Clause 1, and I have not been able to do that in the case of any food on which we have not been able to complete discussions. But we intend to use the basic criteria as in the existing cases, in that the food concerned shall be an essential basic food, one for which demand is relatively stable and relatively price inelastic, and one which looms large in the purchasing power or incomes of low-income families.

We also must seek as far as possible to subsidise only those foodstuffs for which mechanisms can be constructed relatively easily and without a great deal of bureaucratic procedures. We are exploring the possibilities in consultation with the Ministry of Agriculture, and we shall bring specific proposals to the House as soon as possible.

It would be helpful to the House if I were to say something about those foods that we do not believe can be subsidised. The chief foods that we do not believe can be subsidised—although I shall say a word later about other ways in which we think their prices might be effectively restrained—are fresh meat, fresh fish and fresh fruit and vegetables. As I indicated to the House when speaking during the debate on the Gracious Speech, there would be grave difficulties about subsidising fresh meat. The reason why the difficulties are grave is partly the dependence in the United Kingdom not on a few exporters, but on a wide range of exporters and on a large number of outlets and butchers, which makes proper control of subsidy extremely difficult.

In addition, we believe and hope that the recently announced producer subsidy to beef and pig meat will go some way to assist in increasing supply, but we do not believe that the suitable way to do so for this product is by attempting to subsidise. The same is true of fresh fish. Here again the external factors so much determine supply. It would seem impossible to make a subsidy cost effective in respect of a commodity whose landings varied so much according to the weather.

Fresh fruit and vegetables are other difficult products for which to bring in subsidies, because of sharp seasonal variations and the different commodities, but there are ways in which we believe we can to some extent restrain prices of these goods other than by subsidy.

Mr. Tom King (Bridgwater)

The right hon. Lady is most anxious to restrain price increases, which, as she rightly said, are the concern of both sides of the House. I hope that she does not believe what she says about the measures that have been taken being adequate to deal with the problem of beef production. I say to her right hon. Friend sitting next to her, the Minister of Agriculture, Fisheries and Food, that I hope that he will read in HANSARD what was said in the Adjournm ent debate. Acute concern has been expressed by farmers. This is not a party political point. It is known on both sides of the House that farmers' confidence in the industry is sadly lacking at the moment, and will be reflected in higher prices later in the year.

Mrs. Williams

Listening to the hon. Gentleman, I should not have thought that my right hon. Friend had just introduced a couple of useful producer subsidies. It is strange that these should have got such a reception.

Mr. Tom King

The Minister of Agriculture must ask farmers about the slaughterings of calves. If a calf is slaughtered, one does not then have a two-year-old beast for beef 18 months later. The figures show what will happen in this regard.

Mrs. Williams

My right hon. Friend has introduced a calf subsidy. I recollect that shortly before the election there was a great deal of stir from farmers throughout the country which was met by a last minute concession on milk, a concession then described as totally inadequate.

Mr. Richard Wainwright (Colne Valley)


Mrs. Williams

I give may to the hon. Gentleman, who is the first Liberal Member to rise, but I fear that I shall keep the House late if I am continually interrupted.

Mr. Wainwright

I am sure that the right hon. Lady will always wish to be as frank as possible, but I should like her to be a little more specific about some of the foods for which she may use the powers she is seeking. I should particularly like to know more about the prospects for margarine, which is a matter of great importance to many people.

Mrs. Williams

That is a fair comment, but the hon. Gentleman will recognise that it would be most improper to speculate about the possibility of subsidising foodstuffs because of the consequences for the market of doing so. I promise the House that I shall come at the earliest possible opportunity to ask for the necessary orders and the House will have a full opportunity to discuss future proposals and raise related questions. I ask the hon. Gentleman to accept that assurance.

Mr. John Biffen (Oswestry)

I appreciate that we are all under some constraints in this debate, but, reverting to the subject of obtaining fresh meat on the most advantageous terms, can the right hon. Lady in the presence of my hon. Friend the Member for Bridgwater (Mr. King) and the Minister of Agriculture, say whether she welcomes the prospect of a considerable amount of beef in this country from the Community bearing the compensatory payments which enable the Irish farmers, as far as one can judge, to offer beef around £16 per hundredweight?

Mrs. Williams

My understanding was that the purchases of United Kingdom beef into the intervention board were virtually non-existent. If the hon. Gentleman wishes to pursue this subject, he should do so with my right hon. Friend at a later stage, for it does not arise on Clause 1. I can hear the hon. Member being invited by practically everyone on my Front Bench to put down a Question. I am sure that if he did so, it would be answered.

Clause 2 gives power for a limited period to regulate by order particular food prices and the retail prices of other essential parts of the regular spending of low-income households. Power to regulate prices includes the power to do so by reference to cash or percentage margins. This power in Clause 2 is backed up by the power to require details of the regulated prices to be displayed in shops where the goods are sold in a specific place and manner.

The order will apply only until 31st March next year, subject to the power of the House to renew it for a further 12 months. The order regulating prices will be flexible enough to allow different provisions to be made for different trades and circumstances. I make it clear that we are seeking to control margins and prices over a relatively narrow range of products over and above those that are subsidised. It would certainly be the wish of the Government, as far as is possible, to reach agreement with the trade and manufacturers to lower the margins on those essential goods which appear every week in the shopping baskets of housewives and to allow the rest of the profit to be taken over less essential goods.

I said earlier, but there were a lot of interruptions at the time and hon. Members may not have heard, that it was hoped that manufacturers and the retail trade would agree to enter into a voluntary agreement with the Government on this subject. I should greatly welcome such an agreement and I should like here to express my thanks to those leading retailers who have taken the opportunity to reduce the margins that they are quoting on some of the most essential foodstuffs such as bread, butter and margarine. If we were able to come to such an agreement, we should wish not to use the statutory powers we are asking the House to give us. Because we believe there may be grounds for requiring the statutory powers at least to be retained as an ultimate sanction, we are asking the House. under Clause 2, to accept that we shall proceed with consultations to the best of our ability.

I come now to the display of prices in the shops. We recognise that there are great difficulties in setting a single price. I notice that the hon. Member for Rochester and Chatham (Mrs. Fenner), who was Parliamentary Secretary to the Ministry of Agriculture in the last administration has made this point forcibly to the House on an earlier occasion. Because there are difficulties about setting a single price, difficulties associated with the great range in the trade—from the efficient city centre supermarket to the small corner shop which has to cover a higher proportion of overheads—we believe that the proper thing to do is to set a range of prices with a maximum price.

The maximum price is required for subsidised goods and would also be required in the event of a voluntary agreement being reached with the trade on the basis of control over margins. We are proposing to discuss these matters in detail with the trade. We have already discussed them in considerable detail. We believe that this can be done. The powers in Clause 2 will be used in part in relation to foods attracting subsidy under Clause 1. As soon as the Bill reaches the statute book, we shall set maximum prices for subsidised foods.

In addition, we believe that it should be possible to give more information to consumers, not just in areas where there is an agreed or statutory maximum price, and the Government hone to discuss with the trade—which, I am pleased to say, is most co-operative in this matter—the extension of price marking in the clearest possible way. In addition, in Clause 4 we are taking powers to introduce unit pricing where appropriate, although we do not believe that unit pricing is appropriate across the whole field. My hon. Friend the Under-Secretary of State will say more about that later. The House will recall that a Bill dealing with unit pricing was introduced by the hon. Member for Staffordshire, South-West (Mr. Cormack) during the last Parliament.

Mr. Cormack

I am glad to see that provision in the Bill, but I am slightly puzzled. When my Bill was debated, it was thought necessary to have a much larger vehicle than there is in this much bigger Bill. Have the Government changed their mind? The hon. Member for Swansea, West (Mr. Williams), who is now the Minister of State, argued forcefully in the last Parliament for wider powers and a more comprehensive Bill.

Mrs. Williams

My hon. Friend the Minister of State says that we have been able to abbreviate the drafting. We are advised—possibly because the Bill is now a Government Bill—that the powers the hon. Member for Staffordshire, South-West sought will be adequately taken for the purposes that he and the Government wish to see served.

There are at present no legal requirements on any shops to display prices, arid there are three requirements to be met. First, the most appropriate form of marking on the individual goods where that is appropriate; secondly, marking on the shelves where that is appropriate; and, finally, the need for a list of maximum prices to be prominently displayed in the shop where it can he seen by the housewife. It is the housewife who must satisfy herself that no more than the maximum price is being charged.

I hope that we shall meet many of the difficulties that the trade foresaw at one time by a suggested range of prices, of which the maximum price would be the upper end of the range.

Mr. Fred Silvester (Manchester, Withington)

Does the right hon. Lady envisage that a different maximum price will be displayed in different shops varying from the small to the large, so that one will see displayed a price for bread which is different according to whether the shop is a supermarket or a corner shop?

Mrs. Williams

No. The whole purpose of the range is to meet the problem that the hon. Gentleman has mentioned. At present, the maximum price for bread is 14½p for a standard loaf, apart from delivery charges. That would be the maximum price in all shops in all parts of the land. The lower end of the price range may be 1 1p or 12p for the same loaf. It is appropriate to give a range for this kind of product that will apply in large and efficient shops with a rapid turnover and in corner shops in the more rural parts of the country. The only way to deal with this is by a range of prices. Many of the questions which are being raised by hon. Gentleman are Committee points, that would be more appropriately raised in Committee.

Mr. Timothy Sainsbury (Hove)

Will the right hon. Lady enlighten the House as to how she would determine the lower end of this range?

Mr. William Hamilton (Fife, Central)

The hon. Gentleman is certainly not at that end of the scale!

Mrs. Williams

The answer—and I should have thought the hon. Member for Hove (Mr. Sainsbury) would know this better than most—is that it is not difficult to establish a price which is the fair price for the most efficient shop. That is the advice that I have received from some of the hon. Gentleman's colleagues in the trade.

Mr. Gorst


Mrs. Williams

I am sorry, but I cannot give way. If there are to be any back-bench speeches in this debate at all, it will be inappropriate for me to continue to give way.

Mr. Bruce-Gardyne

On a point of order, Mr. Deputy Speaker. I apologise for interrupting the right hon. Lady, but she appears to give the impression that she is under a misapprehension. Am I not right in thinking that the Government have proposed that the rule should be suspended and that there is no limit to the length of this debate? Therefore, there is no reason why she should not give way and take up as much time as she likes in explaining the Bill.

Mr. Deputy Speaker (Mr. Oscar Murton)

Whether or not the right hon. Lady wishes to give way is entirely within her own discretion.

Mrs. Williams

The hon. Member for South Angus (Mr. Bruce-Gardyne) is hoist with his own petard. If there is no limit to the debate, everybody may make his case in his own speech. Perhaps that is the appropriate thing to do.

Mr. Gorst


Mrs. Williams

I must invite the hon. Member for Hendon, North (Mr. Gorst) to make his point in his speech. I turn to Clause 3—

Mr. Gorst


Mr. Deputy Speaker

The hon. Member for Hendon, North (Mr. Gorst) must not remain on his feet if the right hon. Lady does not give way.

Mrs. Williams

I turn to Clause 3, which deals with the additional powers of the Price Commission. I wish to draw the attention of the House to the fact that this clause builds on the existing system of price control through the Price Commission and the Price Code. It confers certain additional powers on the Price Commission to prevent or restrict price increases in "exceptional circumstances".

Perhaps I should make clear how the clause arose. In paragraph 6 of Schedule 2 of the Counter-Inflation Act 1973 the Conservative Government took a power under which the Minister, after consultation with the Price Commission, could override the Price Code in exceptional circumstances. He could only override the code in exceptional circumstances by moving above it—in other words, the Minister had discretion to go above the code, but had no discretion to go below it. The Labour Government believe that, if there is to be a discretion of that kind for the Minister, it is only appropriate that it should work in both directions.

We say this for the straightforward reason that, if the code is in any way anomalous in certain cases, it may as easily be anomalous below the code as it may be above it. For example, it may be anomalous in cases where prices should be reduced as well as in cases where prices should be allowed to go above the code. In practice, as spokesmen for the Conservative Government made clear in the debates on the Counter-Inflation Bill, the circumstances regarded as likely to be exceptional would be only rarely used. We accept that Clause 3 should be applied only where circumstances are exceptional and that it will be only rarely used. I emphasise that the Labour Government believe that power should not operate in only one direction, but in both directions. This is the reason why Clause 3 has been introduced.

We also believe that it is important to recognise that the "exceptional circumstances" are always a source of disturbance or worry, and it is right and proper to indicate that there would be full consultation with any interests which felt themselves to be affected. That has been written into the Bill after consultation with industry.

It is also the case that the Secretary of State could not act without a recommendation from the Price Commission and that any action under Clause 3 would depend on the Price Commission's advice and on the Secretary of State's acceding to that advice after full consultation. I wish to make this point clear because there has been considerable misunderstanding about the terms of Clause 3. I ask the House to look at the clause closely in relation to paragraph 6 of Schedule 2 of the Counter-Inflation Act, which will put the matter into its proper perspective. I notice that one hon. Member suggests that it makes it worse. He should have made that point to those who introduced the Counter-Inflation Bill. [HON. MEMBERS: "We did ".] Very well. I accept that.

I turn now to Clause 5, which deals with a very different matter—the power to abolish the Pay Board. Clause 5 provides a power for the Secretary of State —in practice this would be the Secretary of State for Employment—by order to abolish the Pay Board and all its functions and the machinery of the Counter-Inflation Act associated with the board. In effect, the clause makes provision for removing the statutory pay controls at a date yet to be proposed.

I ask the House to note that the order would be contained in a statutory instrument to be laid in draft and to be subject to the affirmative resolution procedure in both Houses. My right hon. Friend made this clear in his speech in the House on 18th March, and I do not wish to add to what he said. The intention, however, is that once this has happened, the Counter-Inflation Act, which at present applies both to the Pay Board and to the Price Commission, should be gradually unravelled. On the abolition of the Pay Board, the statutory controls of prices would remain in force and would be strengthened along the lines that I have indicated.

The order made under Clause 5(1) would make repeals of and amendments to provisions of the Counter-Inflation Act and any supplementary and transitional provisions which the Secretary of State for Employment thought necessary or expedient in connection with or in consequence of the abolition of the hoard. They would cover the requirement to have a code dealing with pay as well as with prices, the power to require pre-notification of pay settlements, the powers to restrict pay and the associated penalties.

With regard to the timing, as the Secretary of State has said, he will be consulting both the TUC and the CBI in the course of discussions on methods of securing the orderly growth of incomes on a volurtary basis. There will be ample opportunity to debate the clause in Committee, and there will be a Minister from the Department of Employment present in the Committee so that there will he art opportunity for detailed questions to be put to him.

Mr. Bruce-Gardyne

Before the right hon. Lady leaves Clause 5, will she explain why the clause is needed? She will recall that Section 4(2) of the Counter-Inflation Act reads: The period for which this Part of this Act"— that is, the part imposing pay controls— is in force may at any time be terminated by Her Majesty by Order in Council. Why do we need the clause?

Mrs. Williams

Because, being an extremely democratic party, we think that it is appropriate to adopt the affirmative procedure rather than an Order in Council. I should make it clear that one of the objections that my party had to the Counter-Inflation Act was its reliance on this kind of order without any debate in the House.

Mr. Biffen

The right hon. Lady will recall that the Counter-Inflation Act says that an order under subsection (3) shall not be made unless a draft of the order has been approved by resolution of each House of Parliament. Surely that was just as democratic as that which is proposed now.

Mrs. Williams

It is always pleasing to hear the hon. Member for Oswestry defending the Counter-Inflation Act, which was not one of his favourite Acts. We are giving the House exactly that opportunity to debate the abolition of the Pay Board.

I commend the Bill to the House, and I hope that right hon. and hon. Members will recognise that I have given detailed explanations of its powers. There is no doubt that it is concerned primarily with methods of attempting to restrain inflation. I have no doubt that the Opposition will attempt to criticise the Bill and possibly to tear it to pieces. But in a situation of inflation of the kind facing the country it is not only foolish but irresponsible to adopt a wholly destructive attitude towards proposals intended to control prices.

The Opposition, when in Government, took little action of this kind, arguing that it was not possible to do so. I ask them to treat the Bill in a constructive manner and to attempt to assist those who are presently finding the constant rise in prices a daily horror. They should recognise that industry, which has legitimate points to make about investment and growth, will not be served by runaway inflation any more than anybody else in our community. I hope that they will also recognise that every one of us in his or her rôle as a producer also has a rôle as a consumer. Therefore, it is incumbent upon us to do all that we can to put our economy straight again and to end the situation that has arisen over the past few years.

9.6 p.m.

Mr. Paul Channon (Southend, West)

This is the first occasion on which I have had the opportunity of following the right hon. Lady the Secretary of State for Prices and Consumer Protection. I am sure that the whole House congratulates her on assuming this appointment. As has been said of many other Ministers in this Government, we hope that she has an exceedingly happy and comparatively brief tenure of office.

Most of the right hon. Lady's remarks, although they were somewhat lengthy and did not answer all the questions put to her by my right hon. and hon. Friends, at least explained the Bill. However, there is no need to lecture us about our attitude to the Bill. We shall make our attitude clear to the measures that we believe are right and we shall make a constructive approach to any measures put before us.

The whole House will at least agree with the part of the right hon. Lady's speech where she mentioned the extreme importance of inflation and rising prices to everybody in the community. Hon. Members in all quarters of the House are deeply disturbed about inflation and rising prices. I agree that it is the duty of hon. Members on both sides of the House to suggest ways in which it may be possible to deal with the problem of inflation, but I think that what will probably emerge from our discussions is that the right hon. Lady's proposals are not the right way to set about what she has in mind.

Mr. Arthur Lewis (Newham, North-West)

The hon. Gentleman put up rents.

Mr. Channon

If the right hon. Lady was allowed to proceed, I admit with some interruptions, perhaps I may be allowed to continue. However, I will give way to the hon. Gentleman if he wishes.

Mr. Arthur Lewis

I am obliged to the hon. Gentleman. He had three years in Government to attempt to control inflation, but was not very successful. Indeed, hardly a day went by without there being a price rise on something—not halfpennies, but pennies, twopences and threepences.

Mr. Channon

I am just coming on to deal with action for dealing with rising prices and what this Government are proposing to do in this proposed legislation. It is common ground, perhaps with the exception of the hon. Gentleman, that the problems of tackling inflation, which is rampant throughout the world, are extremely complicated. Indeed, no party in any portion of the globe has yet found the magic cure for inflation.

Mr. Arthur Lewis


Mr. Channon

I will give way to the hon. Gentleman if the Houses wishes.

Mr. Arthur Lewis

The hon. Gentleman increased rents.

Mr. Channon

The hon. Gentleman has a very loud voice, but the intelligence of his contribution is not matched by its volume.

Mr. Arthur Lewis

The hon. Gentleman increased rents.

Mr. Deputy Speaker

Order. The hon. Member for Newham, North-West (Mr. Lewis) made his intervention earlier. I should be grateful if he would not make interventions from a sedentary position.

Mr. Arthur Lewis

The hon. Gentleman personally increased rents.

Mr. Deputy Speaker

Order. I was not inviting the hon. Gentleman to interrupt.

Mr. Arthur Lewis

The hon. Gentleman increased rents.

Mr. Deputy Speaker


Mr. Channon

The hon. Gentleman has made his point. [HON. MEMBERS: "Answer."] If there were something intelligent to answer, I should attempt to do so. Perhaps I could move to a more rational criticism of the Bill. Of course, we all welcome the hon. Gentleman's intervention and no doubt look forward to his serving on the Committee, which I am sure he is only too anxious to do.

Mr. Arthur Lewis

I will not increase rents.

Mr. Channon


Mr. Arthur Lewis

The hon. Gentleman did.

Mr. Channon

I shall come to that in due course.

I think it is reasonable for the House to look at the whole question of prices and, indeed, at the action of this Government in introducing the Bill to deal with the problem as they see it.

The right hon. Lady has been designated by the Prime Minister as the focal point of action against prices generally. That is the responsibility that she has been given, as we were told in answer to questions a short while ago. We are therefore entitled to look to the right hon. Lady and her Department—[Interruption.]—for action on the whole prices front. The Government collectively have a responsibility in the matter, but the right hon. Lady is the focal point for action. If the hon. Member for Burnley (Mr. Jones) has something to say, I shall give way.

Mr. Dan Jones (Burnley)

When the hon. Gentleman said that action against prices was the responsibility of my right hon. Friend and her Department, I added "with the assistance of this House" because I have evidence of gross profiteering which I intend to put to the House to assist my right hon. Friend and her Department in their task. I hope that if hon. Gentlemen opposite have similar evidence they will put it to my right hon. Friend.

Mr. Channon

I have no doubt that the House is eagerly awaiting the hon. Gentleman's speech. Perhaps I can get on with mine and leave the hon. Gentleman to tell us later of the problems that he wishes to raise.

Everyone agrees that at a time of record increases in world prices it is essential for all hon. Members to try to protect those who are worst off in our community. The Conservative Government did so in a variety of measures which hon. Members generally welcomed. The Conservative administration helped by increasing pensions. The right hon. Lady talked a great deal about the increase in prices since the 1970 election, but she failed to say that both earnings and pensions were considerably higher than any increases in prices during the last three and a half years. I should have made that point to the hon. Member for Newham, North-West (Mr. Lewis) had he stayed to hear the remainder of my speech.

The Conservative Government increased pensions by 55 per cent., and for the first time introduced an annual review of pensions. In addition, they paid the £10 Christmas bonus, started the Family Income Supplement scheme and introduced a national system of rent rebates and allowances. If I am challenged about rents, my reply is that until the previous Conservative Government took the action they did only 40 per cent. of local authorities had a rent rebate scheme, and many of those schemes were wholly inadequate. No private tenant had any protection against increasing rents until we introduced our system of rent allowances. Those are just some of the measures taken by the Conservative Government during their period of office.

The Bill represents the action that the Government have so far deemed it appropriate to take to deal with prices. No doubt the right hon. Lady will in due course tell us about the proposed changes in the Price Code. I hope that when her consultations are complete the right hon. Lady will inform the House of the changes that she proposes to make. The right hon. Lady is engaged in this exercise of keeping down prices, but, bearing in mind the actions of the Government as a whole, I think it is right to ask whether the right hand knows what the left hand is doing. It is not only the right hon. Lady who is dealing with prices. The Bill has many points of dubious value, and I think that one is entitled to consider the actions of the Government as a whole.

What have the Government done about prices—rather than spoken about what they would do—during the five weeks or so that they have been in office? The Bill provides for the possibility of £700 million for food subsidies to be distributed indiscriminately, although the right hon. Lady is trying to concentrate help on the foods that figure in the budgets of pensioners and those who are worst off. Where will the money come from? It will not appear out of the air as if by magic. The Chancellor has chosen to raise the money in a number of ways, and when somebody sets out to tackle the problem of prices he ought to consider the effect of the Budget on prices.

What have the Government done to raise the revenue to pay for these food subsidies? First—this is a small point but not unimportant—they have raised VAT on sweets, chocolates and ice-creams, for example, which are foods.

Mr. Dan Jones

That is not a bad idea.

Mr. Channon

I know that argument, but does the hon. Gentleman realise that the foods affected include yoghourt—which is a health food—quick-frozen orange juice, chocolate biscuits and ice-cream? All these items represent a substantial part—not an enormous amount; I do not want to overstate the case—of the budgets of the worst off. They are not all luxury foods and the extent of VAT here has gone much wider than people imagine.

Mr. Stanley Newens (Harlow)

Is the hon. Gentleman seriously suggesting that the less well off members of the community should be satisfied with being fed with ice-cream and crisps? I have worked during the last three years in Hackney and have seen some of the worst-off members of society. I saw their conditions deteriorate as a result of his Government's actions. It is an insult to say that the present Government are cutting people's standards.

Mr. Channon

That shows the unwisdom of giving way. I am making a whole case and the hon. Gentleman interrupts me on what I said was only a small point. His imputations are untrue. I am coming to the totality of the price increases imposed by this Government, who, on the one hand, pretend to hold down prices with food subsidies because they think it is popular and will help them to win an election, while, on the other hand, they put up prices in the Budget.

VAT was the first item. The second, which is very important and has a great indirect effect on many budgets and a direct effect on many others is the petrol tax, which will raise £150 million. That hits the private motorist and will work its way through the economy in many other ways. I read my opponent's election address in the General Election and those of a number of other hon. Members. There were few references in them to their intention to put up the prices of tobacco, drink and betting to pay for some of these other things. They have had to raise extra taxation. [Interruption.] The hon. Member for Newham, North-West has been out while I have been referring to him, and I do not see why I should be subjected to constant interruptions now.

To raise the £600 million or so that the rieht hon. Lady will spend on food subsidies, which will operate in what I shall show will be a wholly indiscriminate way and will be of very little help to those on low incomes, the Government have raised all these other items. That is the price for their dogmatic and doctrinaire insistence on proceeding in this way.

Apart from the tax increases on which the Chancellor freely decided, electricity prices will rise 30 per cent. from August.

Mr. Arthur Lewis

They would have done anyway.

Mr. Channon

This Government have decided to adopt that course, which may be right or wrong. The price of industrial coal—

Mr. Cormack

Does my hon. Friend realise that, at least in the West Midlands, people are being charged for electricity on meter readings taken as from 1st May? So people are paying these increases at once.

Mr. Channon

That reinforces my point that we must consider the totality of the effects on retail prices.

Mr. Arthur Palmer (Bristol, North-East)

I can claim to know something about the electricity supply industry. Does the hon. Gentleman seriously suggest that if his party had remained in power they would have continued indefinitely with the prevailing enormous electricity subsidies? If so, that contradicts what one of his colleagues said in the House before the General Election.

Mr. Channon

I am not saying that. If I were allowed to continue, that would become clear from my remarks. I am merely pointing out that the cost of electricity will have a very great effect on people's budgets, as will the extra cost of coal and of rail fares. It will affect my constituents very much. I expect that it will greatly affect the right hon. Lady's constituents when rail fares rise by 12 per cent. There is the extra cost of postal service and telecommunications charges. All these costs will rise during this year.

When one looks at what the Government are proposing and the totality of the policy in relation to prices, one must ask what will be the effect on prices—before taking any account of inflation. The effect on the retail price index, as we have been told in answers by the Paymaster-General, is that the indirect tax increases will put up the retail price index by 1¾ per cent. and the higher nationalised industry charges will put it up by 2 per cent., making a total of 3¾ per cent. The right hon. Gentleman then adopts some offsetting savings which he says will bring down the index to show an increase of 1½ per cent.

That is the increase in prices which is the direct responsibility of the present Government since they came to office. It is no use pretending that the food subsidies which are to come into force will do anything significant to outweigh the effects of the price increases that I have outlined.

I now deal with one or two of the subsidies which the right hon. Lady has announced in the past. I entirely accept that she cannot speculate as to what other subsidies she might come forward with. Obviously, that would be an unreasonable thing for the House to expect her to do. First, on the question of milk, the right hon. Lady was saying that the cost would be £127 million. But the total cost of the milk subsidy this year, given in an answer to a Question from my hon. Friend the Member for Melton (Mr. Latham) today, will be £275 million. I do not think that I can be seriously challenged on that figure. If I am wrong, I should be grateful if I were challenged, because it is a very important point. Out of the £550 million that the right hon. Lady will have for food subsidies this year, £275 million is to be spent on milk alone.

Mrs. Shirley Williams

No, that is wrong. I gave the figure of £127 million as the price of the additional subsidy on milk because the figure of £500 million is the figure of additional subsidies. The other £200 million, making a total figure of £700 million in the Bill, is accounted for by existing subsidies introduced by the hon. Gentleman's administration.

Mr. Channon

So, the reason that the right hon. Lady gave to the House for having £700 million in the Bill was so that she had room for manoeuvre, but she is now saying that that is all taken up by the subsidies already in existence. A great deal of it must be. If £127 million is the extra milk subsidy that she is introducing out of her £500 million and the total cost is £275 million, unless my mathematics are dottier than I thought, that is £148 million of her £200 million gone straight away. Out of the £700 million, £275 million goes on milk.

Mrs. Shirley Williams

It is important for this point to be made clear. The existing subsidies, when the present administration took office, on milk and butter amounted in all to a little under £200 million. That £200 million, therefore, is part of the £700 million maximum in the Bill. That leaves us about £500 million, or a little more, for new subsidies. Out of the £500 million, the hon. Gentleman is right in saying that £127 million will go for milk. In addition, £43 million will go for butter, of which part is taken account of by the old subsidy. Finally, there will be an additional £21 million for bread. Therefore, on the basis of subsidy schemes already announced to the House, there is about £300 million left to be distributed. I hope that that information is helpful to the House.

Mr. Channon

It is helpful that we should get these facts right. If I have understood the right hon. Lady correctly, out of the £700 million, therefore, £275 million will be spent on the milk subsidy, and that is 50 per cent. I hope that the House realises that. If it is not 50 per cent., I only wish that the parliamentary answer had not said so.

The estimated expenditure in 1974–75, in millions of pounds, is milk 275, proportion of total allocation 50 per cent.; bread 17, proportion of total allocation 3.1 per cent.; and butter 43, proportion of total allocation 7.8 per cent. That is the answer I have been given by the Minister, and I am sure that it is accurate. I think I am therefore right in what I say. The exact proportion is irrelevant, but my point is that in all this great fanfare of food subsidies totalling £700 million, £275 million of that will go on milk. But what will be the effect? First, it has been estimated that there will be an increase in demand for milk of 30 million gallons a year. The total effect of the subsidies on milk, butter and bread as they have been announced are as I shall explain. In the last quarter for which figures are available the consumption of milk was 4.81 pints per person per week. Therefore, the total saving to the average person will be 4.8p per week. To achieve that the Secretary of State will incur expenditure of £275 million.

Mrs. Shirley Williams

I am sorry but the hon. Member is not quite right.

Mr. Channon

The consumption figure is 4.81 pints per person per week, and the Secretary of State is subsidising it to the extent explained. That works out to 4.8p per person per week. That is roughly correct if not exact, but no doubt the Minister who is to reply will correct me if I am wrong.

I estimate that the bread subsidy will save the average person approximately 1p per week. The butter subsidy will save 2p per person per week, and the consumption figures there are easily checked. That is the extent of the subsidies which have so far been announced by the Secre- tary of State. Today a new application for a bread price increase was forecast in The Times. What is the Secretary of State's position on that? Will she keep the price of bread down to the level at which it is pegged? What will happen if another application for a bread price increase, as The Times says, is on the way? Will it be her policy to allow it or does she propose to subsidise bread further? I have seen estimates and heard from people who are knowledgeable on the topic and it seems that the price of breads subsidies might have to rise to a £100 million a year if the price of bread is to be held during the course of this year The Secretary of State should tell the House the implications of her policy on bread.

This vast expenditure of public money is being poured away to give very little help to the ordinary man in the street but will require the maximum amount of taxation to provide it. What is to be the future of the policy? What will happen next year? Is the Secretary of State proposing food subsidies in perpetuity in this way at this level? Will the figure next year be £700 million or will it be £1,000 million? The Secretary of State has two choices. Is her policy to be a permanent feature? If it is, does she realise that apart from the other consequences there will probably have to be a vast increase in taxation to pay for it? If it is not to be permanent, what will be the effects on the consumer when the subsidies are removed? By that time the real price levels will have risen considerably. It is important for everyone to know the long-term consequences of the Secretary of State's proposals.

Some extremely dangerous propositions are advanced by the right hon. Lady in the Bill. I believe that she said that she will try to subsidise products the demand for which is not elastic. That must be right, for otherwise she will very much affect consumption, and there will he shortages of food in the shops, because there will not be sufficient supplies to meet the extra demand artificially created.

I do not know the right hon. Lady's intentions with regard to cheese. There are rumours that she may subsidise it. What will happen to it if she does? I hope that there is no question of her subsidising foreign cheese. That would be ludicrous. [Interruption.] I am glad to have the support of the hon. Member for Wolverhampton, North-East (Mrs. Renee Short) on that. We shall make common cause if camembert and brie are subsidised. [Interruption.] I am speaking of subsidisation; I am not talking of stopping anyone from eating it.

There is a serious point here. If the right hon. Lady is contemplating the subsidisation of English cheese alone, she will find herself in great difficulties, because the consumption of liquid milk is going up and its production is going down. There will certainly be a shortage of cheese if an attempt is made to subsidise it.

I am told that the Minister of State for Agriculture, Fisheries and Food will open a new cheese factory in Devon just after Easter, although already the factory is having great difficulty in obtaining sufficient liquid milk to get its production going. because there is a shortage. [An HON. MEMBER: "Why? "] What I am saying is that this is an example of what may happen if the Government pursue a policy of indiscriminate subsidies which create shortages, because the demand is increased but not the supply. That is inevitable unless a subsidy policy is carried out very carefully.

Mr. Gorst

Could not the position be even more difficult, because if Danish bacon is one of the foods on the right hon. Lady's list we may find ourselves with a subsidy on that but nothing on Danish cheese, on the basis of my hon. Friend's argument, and that might create difficulty in our relations with Denmark, not to say with the rest of the Common Market?

Mr. Channon

That is an important point. I hope that my hon. Friend will seek an opportunity in Committee to deal with it.

If hon. Members say that we are against subsidies, it is only fair to reply that I believe that there are many better ways of spending £700 million than on indiscriminate food subsidies. I have already dealt with a number of measures the Conservative Government took over the years, which had a considerable effect. [Interruption.] The hon. Gentleman is entitled to his opinion. If he wants me to read them all out again, I shall do so, but in the interests of the House I shall try not to be provoked by him.

What could be done to help those who need help in a far better way than by indiscriminate use of food subsidies on the proposed scale? One answer is to raise family allowances and to give a family allowance for the first child. That might cost £350 million a year.

Mr. Richard Wainwright

Why was that not done during the hon. Gentleman's party's three and a half years in office? Does the hon. Gentleman recall that on the eve of the 1970 election there was made from the Front Bench at which he now stands an explicit Conservative pledge to introduce family allowances on a much more generous scale?

Mr. Channon

What I am trying to tell the House is that there are better ways of spending the £700 million than that which the Government have proposed. I had understood from the speeches of members of the Liberal Party that that was a point of view they shared. I do not think that it is worth fighting the battles of the past on this occasion. The Conservative Government had a record in the social services of which any party could be proud. Any objective person who looks at the tenure of office of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) would accept that to be true. If we are to spend large sums of money we could make a good start on disability income, for example, with £340 million, which is under half of what the right hon. Lady is proposing to spend on food subsidies.

The House is being asked to make a choice. The right hon. Lady asks the House to agree to spend £700 million in the way that she has described. I claim that if we are to spend that amount of money there are many other ways of doing so that would not necessarily involve means-testing but which would give direct help to those who most need it in a far less indiscriminate way than that which the right hon. Lady proposes. That is the argument against indiscriminate food subsidies.

The bread subsidy, if it is continued for a long time, will have a curious consequence on the pattern of buying in the bread industry. The totality of the measures that the Government are taking would also have curious consequences. It is extremely important, as the right hon. Lady recognised in her opening remarks, to realise the importance of investment and of saving. At present such matters are crucial.

When we consider the prospects for small shopkeepers—namely, their fuel costs going up as well as many other costs—the right hon. Lady must be extremely careful when she squeezes their margins still further not to squeeze them out altogether. To do so would have serious implications. There would be the short-term implications for those involved, but in the longer term there would be serious implications for the consumers and the housewives. It is extremely important that we should do what we can to preserve the small shopkeeper at what is an extremely difficult time.

The effect of subsidies when applied indiscriminately will be to distort. For example, when there is a fixed maximum price on one item it may be that there will be a total change in demand and a change in the prices of other items. If the policy of subsidising is continued, we shall run the risk that goods will be removed from the shelves. If the Government increase demand and do nothing to supply there may well not be some goods on the shelves.

What will happen when the subsidies are lifted? That is a crucial matter unless the Government envisage having them in perpetuity. There are many other features of the Bill that must be considered. Clauses 2 and 3 provide for some remarkable powers.

I understand that the right hon. Lady is engaged in discussions about the Price Code. I hope that she will report fully to the House when the opportunity comes. I imagine that she will seek to do so when her main proposals for revising the Price Code are complete. We all agree with her about the need for detailed consultations on that matter and we welcome her statement that there will be detailed consultations with those concerned before major changes in the Price Code take place.

I do not know whether the right hon. Lady is able to tell us about the representations that have been made to her about the 10 per cent. gross margin reduction on net margins and the action that she proposes to take following the representations that have been made to her. It is interesting, in view of what some Government hon. Members were saying throughout the election, to note that the work of the Price Commission has been so triumphantly vindicated by the present Government. As we all know, the Price Commission was set up by the previous Government. In its first report it showed conclusively how many hundreds of millions of pounds it had saved by examining price increases.

Clause 3 seems unnecessary. It provides that if the Price Commission persuades the Secretary of State that a trader has been operating lawfully under the Price Code but has increased his price or charge and there are exceptional circumstances that are totally undefined, the Secretary of State can give directions that empower the Price Commission to exercise its powers as if the trader had been acting in breach of the code. That strikes me as an astonishing proposition. First, the right hon. Lady may give directions not only in regard to price increases in the future, but to price increases that have been in operation for any length of time. Indeed, it could apply to increases made before the introduction of the Bill. Is that a reasonable proposition?

The right hon. Lady is taking wide and retroactive powers. If she does not need them, she could deal with any problems by changing the Price Code. I can only conclude that she needs Clause 3 because she foresees a possible situation in which she may need to use these powers retrospectively. I hope that she has no such intention, but if she has no such intention, what is the need for Clause 3?

I give one example. One can have a perfectly lawful situation in which a price rise for a fabric is authorised and implemented. The woven fabric would reflect the increased price. The price of the garment made from the fabric would be increased. All this would be perfectly legal. But the right hon. Lady could then introduce an order to reduce the price of the fabric. The price would then become illegal. All along the line there would be a retrospective change for people who had been acting in perfectly good faith. I hope that the right hon. Lady will consider in Committee the provisions of Clause 3 very carefully. We shall certainly do so.

We shall also have to have careful assurances about the use of Clause 2. The right hon. Lady is taking sweeping draconian powers by order to regulate the prices to be charged for the sale of food of any description… and also …for the sale by retail of such other goods…which…may be so specified; I hope that the right hon. Lady will tell us what she has in mind here.

These powers being taken by the right hon. Lady could literally bankrupt people if they were used inflexibly and unreasonably. I do not pretend that she intends or wishes to bankrupt people, but she is taking very wide powers and Parliament is entitled to ask how they are to be exercised and to write in safeguards to protect people from being dealt with in a harsh or unreasonable way by the use of such powers.

I do not think that these powers are necessary in the interests of consumers. There is no mention of quality in the Bill. The right hon. Lady is to regulate prices, but she does not say what the quality of the goods is to be. The consumers may well suffer if she decides to use Clause 2 in an unreasonable way. We were grateful to hear that she intends to use these powers rarely and hopes for voluntary agreements. Nevertheless, these powers exist, and one of the greatest services one can do for the consumers is to ensure that they have reasonable choice through a wide range of outlets.

If the right hon. Lady were to use some of these powers in a retroactive way, there would be great difficulties. She would find that, in the end, they would act to the disadvantage of the consumers, who would find their choice restricted. We shall want to hear more about the way in which she is to operate the system of maximum prices and the range of prices. As the right hon. Lady pointed out, the same prices cannot be expected in the little shop on the corner as in the supermarket. We shall have to ask her to give us a more detailed description of what she has in mind so that we know what is proposed and how both small shopkeepers and consumers are to be safeguarded.

In the long run, as the pattern of demand is distorted, the consumers themselves will be badly affected by these changes. The Bill is an extremely blunt instrument with wide powers. It can deal with every shop, but each shop has its own trading pattern, and that pattern may well be totally changed if the right hon. Lady uses some of the powers in the Bill.

For example, I do not know whether the right hon. Lady has in mind subsidising eggs or potatoes. I do not expect an answer tonight, but how would she operate such a subsidy? Many eggs and potatoes are sold direct to the consumers and do not go through the shops at all. There is a whole host of difficulties, which no doubt the right hon. Lady is aware of, on which we are entitled to have explanations.

Clause 4 relates to price marking. The House owes my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack) many thanks for his work in this matter over a number of years. We shall want more information on how unit marking will be carried out. The right hon. Lady says that it will not be on too wide a scale, but it will be interesting to know exactly how it will be done. Is it to be done by manufacturers or retailers? How will the system of unit marking be worked? I hope that in Committee there will he an explanation of subsection 2(d) which contains wide powers.

Finally, I come to a moment of farce, relating to the introduction of Clause 5. As my hon. Friends have shown, this clause is totally unnecessary. It is some-what ludicrous to introduce in a Bill called the Prices Bill power to abolish the Pay Board. There are different views in the House about the working of the Pay Board, but I should have thought that many Members would realise that the likely abolition of the Pay Board is scarcely likely, in the short term, to do a great deal towards helping with prices.

We shall be interested to hear in Committee what are the criteria which the Government are to adopt before deciding whether to put forward a draft order that would enable the House to abolish the Pay Board. Why is the Secretary of State not taking action on this matter now rather than later? What will be the considerations that will lead him to take the course referred to in Clause 5?

The House knows that statutory control of wages was not welcomed by the Conservative Government. [Laughter.] I recall that hon. Members opposite who are now laughing supported their own Government when they introduced something not dissimilar a few years ago. The House knows that statutory control of wages was not welcomed by the Conservative Government. It was adopted because it was thought to be necessary by that Government at the time, unpalatable though it was.

At present we presume that the statutory arrangements are to continue. We have been told by the right hon. Lady that the law of the land continues, that phase 3 is in operation and that the work of the Pay Board goes on. I understand that to be the present policy of the Labour Government, although they want voluntary arrangements.

Do they intend to keep the Pay Board until voluntary arrangements have been completely worked out? What are their proposals and their timing for abolition of the Pay Board? No doubt at present the Pay Board is an essential feature in the Government's economic strategy. It will be interesting to learn what they have in mind.

The reason for including this unnecessary Clause 5 is to give a sop to the Left-wing of the Labour Party so it would believe that something was being done—instead of the charade which is taking piace. The real criticism of the Government is that they fought the last election on prices—admittedly there were a few disclaiming words about world prices, although little was made of that. The general impression was given that it was the Tory Party that was responsible for price increases. [Interruption.] Let Labour Members cheer now. The impression given was that all would be well when the Socialists took office and that when they walked in, prices would go down, as if by a miracle.

Hon. Members who read the Daily Mirror will see what has happened to the shopping basket in the last month since Labour has been in power. Faced with the reality of power, faced with the Budget and faced with the bill, the action which the Labour Party has chosen to take will put prices up rather than bring them down.

The Government are going through a charade, a miserable attempt to pretend that the problems of inflation can be masked by a presumably temporary period of rigid control, by the sweeping use of these powers and indiscriminate food subsidies which will provide very little help indeed to those whom they are designed to help, but who are being clobbered in many other ways.

At a time when burdens are being placed on industry by way of increased raw material and fuel costs, higher national insurance payments, increased postage rates, higher prices for all these things—

Mr. Arthur Lewis

And Guinness!

Mr. Channon

That is not my fault: it is the hon. Member's.

The effect of all of this on the small man will be bad. Unless the powers contained in the Bill are used sparingly, the effect of the Bill could be serious for the small shopkeeper and the food industry alike. Already we are told that investment in the food industry will be cut sharply, some people say by as much as 50 per cent. The long-term effect of that will be that the consumer will suffer.

Those who heard the debate earlier today about the beef situation will know how the consumer will suffer unless something is done. The Bill needs serious amendment. In Committee my hon. Friends and I will give it the most careful scrutiny to ensure that the plans that we consider to be so necessary are adopted. The Government's policy is a charade. It will not reduce prices. The Government are actively engaged in increasing prices. I believe that the country has already seen through that charade.

9.53 p.m.

Miss Betty Boothroyd (West Bromwich, West)

I regret the fact that the hon. Member for Southend, West (Mr. Channon) regards this Bill as a sop to certain hon. Members sitting on the Labour benches. It was referred to earlier by those sitting on the Opposition benches as being an important item of legislation. In introducing the Bill my right hon. Friend has spoken of the frightening forecasts arrived at by various institutes concerning the inflationary period we are going through. The figures mean that we may reach levels of inflation when the situation will become totally out of hand. Whatever can be done to restrain prices must be done, and done quickly. Speed is of the essence. My right hon. Friend has brought to her job the integrity and application which the House have come to expect of her.

I see the Bill falling into two distinct categories. The first is that part which gives power to the Secretary of State and the Price Commission to regulate prices. The other category is that which gives protection to consumers. In recent years we have seen the consumer interest become of paramount importance. Consumers have become a central issue in a way that could never have happened 10 or even five years ago. It is this part of the Bill, which acknowledges that the consumer is not a walking computer with a slide-rule mind, upon which I particularly want to dwell.

No one can deny that the housewife is the big spender. But I see this Bill not merely as a housewife's charter; it is something of a consumers' charter. It acknowledges that we are all consumers, and that the big spender, the housewife, acts on behalf of all consumers for whom she provides. It also acknowledges that all have the same right to protection, the need to know, and the right to be informed so they may obtain the best value for money.

Clause 2 provides for the regulation of other basic household necessities. I am curious about those words "certain other basic household necessities". A basic necessity in one household is not a basic necessity in another. What is the intention of the Bill? It leaves a great deal to the imagination. How will a basic necessity be determined and who will determine it?

I am concerned mainly with Clauses 4 and 6 and the schedule. Clause 4 is a protectionist clause and gives power to require the price per unit to be shown as matter of routine for any particular commodity that is being retailed. I hope that we shall not look upon the clause as a panacea for all ills and the answer to every consumer problem. It is not as easy as that.

Various methods may be appropriate in different circumstances, just as various methods of marking may be appropriate in different kinds of retailing. My right hon. Friend mentioned three methods. The first is the obvious one of labelling individual items. That method can be adopted only by large supermarkets and large chain stores. Then there is the shelf method, which can be used by medium-sized stores. The best method for the corner shop is the display of lists where retail foods are on sale.

The hon. Member for Southend, West spoke about corner shops. There is no doubt that a case for exemption can be made on behalf of the small retailer. It has been suggested that the criteria should be based on the turnover of the business, and that if the turnover falls below a certain level the retailer should be exempt from unit pricing. I do not go along with that idea, and I hope that the Government will not take that view.

The hon. Member for Southend, West referred to the value of neighbourhood shops, and I agree with him. These retailers have always performed a valuable social function, and I want them to continue to thrive and to receive as much assistance and advice as possible. If they were to be exempted it would mean that consumers with limited mobility would be denied the protection of this legislation. It is no consolation to the elderly invalids and working housewives to be told, as they were by the previous administration, that if they shop around they can do better. To say that if they shopped in a larger store they would be able to get a better bargain is simply to except sections of the community from this legislation, and deny the advice and assistance given to the rest of the community.

I have said that unit pricing is not a total answer. It has its limitations and may not be as valuable as is the alternative method of specifying standard quantities, which might be the most valuable piece of armament in protective legislation of this nature. Here I wish to speak for the environmentalists. We should look carefully at the standardisation of packets and containers. We might do a lot worse than look at the experience of other countries in which standardised containers have assisted enormously in environmental problems by making possible the recycling of domestic waste. Canada is a case in point where the authorities have carried out recycling of domestic waste with great success because of a form of standardisation.

I turn to the question of the cost of marking. It is not clear who will be responsible for these costs.

It being Ten o'clock, the debate stood adjourned.