PRICE CODE (Hansard, 29 July 1975)

§ Mr. Giles Shaw
I beg to move Amendment No. 58, in page 3, line 17, at end insert: 'Provided that such sanctions shall only consist of the disallowance of excessive remuneration as defined in the Consultative Document containing Draft Amendments to the Counter-Inflation (Price Code) Order 1974 (as amended)'". It refers to the Consultative Document of July 1975, which is currently being discussed with the interested parties. We understand that there will be an opportunity of discussing the Price Code proposals after the consultation process has been completed, so the amendment is not designed to provide a discussion on the 1733 detail of the Consultative Document. That will take place on another occasion.
The amendment has a double purpose. First, it will confine sanctions to the disallowance of excessive remuneration as defined in the proposed amendments to the Price Code which will shortly be laid before the House. Secondly, it seeks to make clear that sanctions applied under the clause may be applied only in the form of price increase disallowance.
On Second Reading the Secretary of State made clear that the sanctions were financial and not criminal in nature and were related to the powers in the Counter-Inflation Act, which in Section 17 includes provisions for fines. But the Act also deals with the establishment of the Pay Board with its specific remit and procedures. Difficulties arise over the price control mechanism in this Bill in view of the absence of the Pay Board mechanism. The problem stems from the absence of the machinery which was evolved in the 1973 Act.
The first objective of this amendment is to confine sanctions to the disallowances proposed. The present position of most of British industry is, clearly, one which cannot easily accept a sanction which applies directly to reducing its profitability.
Bearing in mind, as the House must, that productivity deductions are still averaging 20 per cent. of wage costs and are significantly higher in some labour-intensive industries, such as food manufacturing, it is not surprising that the latest report of the Price Commission should have drawn specific attention to the present plight of profitability. I should like to quote briefly from page 8 of the report, which was published on 31st May. Under the heading "The level of profits" the Commission says: The present level of profits is unsatisfactory. For the large Category I manufacturing and service enterprises, profit margins are only a little above 50 per cent. of reference levels; for the large distributors, net profit margins, which showed a seasonal recovery at Christmas, have fallen back and are now fractionally above 50 per cent. of reference levels. It goes on to say, which I am sure the House will fully understand, that profits in its view are the main source of capital investment … a major source of revenue for the Exchequer. A substantial proportion of industrial capital is owned by insurance companies, pension funds 1734 which makes retained profits so valuable in the maintenance of pensions.
The House must be aware that under the present situation—the general economic deterioration and the biting of the present code—the contemplation of the imposition of sanctions is severe. It must seem only fair, therefore, that sanctions should be seen in this context to be limited in scope. They should be clearly defined and should be fully discussed within industry. Hence reference to the Consultation Document in this amendment. This is obviously a most important phase and one which will be reported on shortly.
The second objective of the amendment is to make it clear that no other form of sanction can be applied under the Act, if the Bill becomes an Act. The code can be amended by order of the Secretary of State from time to time and there is, therefore, a risk that, without this amendment, other forms of sanction could be introduced by order by means of further amendments to the Price Code. Frankly, that is a provision which Conservative Members would seek to avoid.
It is not good enough for the House to consider the existing emergency alone. The powers are being sought for a 12-month period. The Chancellor has already indicated that there could be a long and protracted period within which some form of controls would be necessary. I am sure that he is right.
However, it is also important that we should not only consider that but that we should also consider, for example, the tenure of office of the right hon. Lady the Secretary of State for Prices and Consumer Protection. Others may follow who are less sensitive to the need to maintain, in those immortal words, a vigorous, profitable and competitive private sector". Therefore, we strenuously oppose the idea of sanctions being associated with the Price Code. We did so when sanctions were mooted, which was when the right hon. Lady debated the White Paper on the Consultation Document in December 1974, and we do so again this morning when debating this amendment which seeks to tie down the type and uniqueness of sanctions to the present emergency.
Again, in the background lurks the reserve powers Bill, which could involve 1735 further measures. If it has some immediate influence on this amendment, it is that this shadowy measure should encourage the Secretary of State and the Government to accept this amendment and thus to define precisely the rôle of sanctions within the Price Code.

§ The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams)
The amendment has been moved very fully by the hon. Member for Pudsey (Mr. Shaw), with many indications of what he has in mind. I can assure him that the Government's intentions are those that are set out in paragraph 21 of the White Paper and that they constitute what is listed in the Price Code.
The reason, however, that I cannot accept the amendment that he proposes is that it does not permit the envisaging of any new situation, whatever might arise in the coming year. Perhaps I can outline to the hon. Gentleman one or two of the possibilities that might arise, to which I have already referred in Committee and on Second Reading.
The sanctions which at present are covered by the amendment are those that have been explained fully to the House: the disallowance of any given settlement and, in addition, the possibility of an extra disallowance for firms which are capital-intensive.
The problem is that if we were to accept the amendment we would lose any vires under the Act for any further amendments to the code whatsoever other than that connected with the question of settlements under the Price Code. This we cannot accept, for the straightforward reasons, as I have said, that—this is just about the only situation that we can envisage—we might have to act in respect of those firms the great bulk of whose products does not come within the Price Code at all because they are fundamentally exporting firms. We do not suppose that this would arise.
There are very few such firms, incidentally, and those few firms are mostly not engaged in consumer products of any kind. It is just possible that this might arise. We have not deliberately legislated for it, as it is not a strong possibility, but in a policy of this kind 1736 it would obviously be quite wrong to be unable to exercise any financial sanctions at all in regard to a handful of firms if they proved to be in an area in which there was a breach of the policy. While I assure the hon. Gentleman that I see little likelihood of this happening and that that is why we have not taken steps in regard to it, we cannot rule out completely the vires of being able to do it.
Let me say this loud and clear to the House: if there had to be any amendment of the code at a future date—of the kind we do not now envisage—first there would have to be consultations which would involve trade unions, employers and any given sector of industry. Second, there would have to be a further amendment laid before the House for consideration. Third, there would have to be an affirmative order. Therefore, there is no doubt that there is a full parliamentary procedure to be gone through. If we had envisaged the necessity of that amendment, we would have stated that in the Consultative Document.
The hon. Gentleman's amendment goes too far at the beginning of a year in which we cannot completely prophesy how the policy will develop and the kinds of situation that could arise. It would not be fair to the CBI, among others, which has made it clear that it does not agree to the separate treatment of a small number of firms as a way out of sanctions which apply to all their colleagues.

§ Mrs. Sally Oppenheim
It has taken this amendment to flush out the answer that I have been trying to obtain from the Secretary of State since we embarked on the White Paper and this legislation. During the debate on the White Paper I asked her what she wanted to do about export prices. I asked her again during the debates we had last Friday morning. This is the answer we have now got, at last, as a result of the amendment, which we felt she would be prepared to accept.
After all, the amendment seeks to limit the powers within Clause 3 by the proposed amendments to the Price Code. The only reason the right hon. Lady has to activate Clause 3 in this case at all is the continuation of the Counter-Inflation Act. Indeed, she was going to embark on similar action last autumn without needing any of the power in 1737 Clause 3. Now she is going for the next idea of further sanctions under the Price Code. The House is entitled to know what sort of action she is envisaging. Is it to limit export prices or to have other sanctions against such companies? If the latter, what are the sanctions to be?
It seems quite incredible that at this very late hour this answer has been brought forward as a result of the amendment. If this were envisaged, why was it not included in the Consultative Document that is before us? It is less than satisfactory to say "If there are any further steps or further sanctions with regard to exporting companies, I hope, we shall have an opportunity to debate a consultative document", when we have had no opportunity to debate this Consultative Document and are not likely to have one. We are likely to have the debate on the statutory instrument itself and further proposals that may be made under the powers of Clause 3 along the lines the right hon. Lady has proposed. This would he subject to a debate late at night, after 10 o'clock, on a consultative document or possibly a statutory instrument. That position would be most unsatisfactory.
This serves to illustrate the importance of our amendment in limiting the right hon. Lady's powers under this clause with regard to further amendment of the Price Code in circumstances in which we are having an opportunity to consider—or perhaps not having an opportunity to consider—the present amendment.
The right hon. Lady owes it to the House to give a further explanation of what sort of sanctions she contemplates as being necessary in the case that she has described.