HC Deb 27 October 1975 vol 898 cc1007-12
6. Mr. Canavan

asked the Secretary of State for Prices and Consumer Protection whether she will now introduce further measures to control prices.

17. Mr. Thorne

asked the Secretary of State for Prices and Consumer Protection what measures she proposes to take to prevent price rises for the consumer over the next six months.

Mrs. Shirley Williams

The present strict price controls are being continued. They permit price increases only when they are justified by costs. A price freeze now would only put more jobs at risk, since firms' margins, which are now little more than half the permitted reference levels set in 1973, would not allow them to absorb the additional costs themselves.

The Government have undertaken to take further consultative action on the prices of products of special importance in family expenditure once it is clear that costs have decelerated sufficiently to allow such action to be taken without causing bankruptcies and unemployment.

Mr. Canavan

In view of reports that by next spring the average family's weekly food bill will have increased by about £1.30 and that the £6 pay limit will have been more than used up by further price increases in such items as rents, rates and fuel, will my right hon. Friend investigate the possibility of introducing a selective price freeze on certain basic food items and also make mandatory the local price surveys which she has asked local authorities to introduce?

Mrs. Shirley Williams

On the first part of my hon. Friend's supplementary question, the purpose of the selective price restraint programme which we shall be negotiating with industry in the next few months will be to hold down the cost of essential goods across the range in order to marry with the restraint which is being shown in incomes. We recognise that people have a right to expect a return for the restraint which they are showing.

I ask my hon. Friend to await an answer to the second part of his supplementary question, because there is a later Question on the Order Paper which is directly concerned with it.

Mr. Giles Shaw

May I remind the right hon. Lady that in her answer she referred to the effects of price restraint on unemployment? Conversely, will she comment on the chances of an improved climate for employment and the creation of more jobs if she were to relax the Price Code?

Mrs. Shirley Williams

The House will know that over the whole of the counter-inflation programme we are walking a delicate tightrope between the need to maintain employment and the need to reduce inflationary pressures. Taking those two factors and attempting to balance them as best we can, I do not believe that further relaxation of the Price Code in the present counter-inflationary year would be sensible. However, I recognise that the effect of price restraint has been very sharply to lower profit margins, and the House should be aware of that.

Mr. Thorne

My right hon. Friend has talked about the possibility of jobs being placed at risk. Does she agree that jobs are already at risk following the Government's attitude to inflation policy? Does she think that confidence might be restored among the people if she really attacked the question of prices?

Mrs. Shirley Williams

If there had not been a counter-inflation programme—I notice that my hon. Friend does not support it—we would today be facing grave problems in attempting to sell exports and maintaining the credibility of this country. That is why many of my colleagues and I strongly support the counter-inflation programme. I have made it clear that it is my full intention to ensure that the easing of cost pressures, as soon as it begins, is reflected in the level of prices.

Mr. Norman Lamont

Has the Secretary of State seen the report of the economic development committee of the food and drink industry on investment in that industry? It shows that in 1976 that committee expects investment to be down 20 per cent., in 1977 to be down 30 per cent. and in 1978 to be down 40 per cent. Before her hon. Friends talk about relaxing the Price Code, should not she drum those figures into the "know nothing" Left?

Mrs. Shirley Williams

The food manufacturers have certainly seen a rapid drop in their profit margins. In the first quarter of 1975 they were approximately half what they were in the first quarter of 1974. In a counter-inflationary period, one must put a squeeze on profits as well as on incomes; I believe that that is right. We have recognised in the Price Code—we are the first Government to do so—that there is scope for investment relief, and that is why we have written it into the code.

22. Mr. Cryer

asked the Secretary of State for Prices and Consumer Protection if she is satisfied with the current Price Code; and if she will consider introducing legislation for a price freeze of essential commodities together with the publication of maximum prices to be charged, such price lists to cover a much wider range than solely subsidised foods.

Mrs. Shirley Williams

The Price Code is far from perfect, but it does keep price increases down in line with increases in costs. To superimpose a price freeze on essential goods when costs are still rising would endanger the jobs of those who make them. However, I shall shortly begin negotiations with the appropriate representative bodies for a programme of selective price restraint on a range of goods of special importance in family expenditure. The programme will come into operation when it is clear that the pay limit is being effectively observed and cost pressure begins to ease. Imposing maximum prices on unsubsidised goods does little to keep prices down. I am, however, initiating regular price comparisons very widely on which will be based price lists showing where prices are lowest in each locality covered.

Mr. Cryer

Does my hon. Friend agree that the TUC would welcome a price freeze, particularly in view of its cooperation over the development of the social contract? Does she accept that the publication of a much wider range of prices, which I have outlined in the Question, would be widely welcomed and could be adequately policed by the local authority price and consumer units which my right hon. Friend mentioned in reply to an earlier Question? Would that not be implementing that section of Labour's 1973 programme on the machinery of price control?

Mrs. Shirley Williams

On the first part of the question, my hon. Friend will appreciate that I, too, would like a price freeze, but I am faced with the fact that, for example, in the two months to September the price of material inputs into food manufacture alone—we are talking not about farm gate prices but about import prices—rose by 10½ per cent., and last month oil prices rose by 10 per cent. If these costs are simply stopped from being followed through they will lead to wide-scale redundancies. Therefore, much as I should like to see a price freeze, I am satisfied that it is not on, without driving firms into bankruptcy. I am doing my best to reflect any reduction in costs all the way through by the price restraint programme which I have described.

On the second part of my hon. Friend's question, I think that he will accept that there is a wide range of shop prices, from the small corner shop to the city centre supermarket. If we set a maximum price which enables the small shop to stay in business—its income is often less than £2,000 a year clear—we shall be put in a position which will ensure very large profits for the supermarkets. The most effective method is not maximum prices, but the method that we have introduced, of widely publicising comparative prices.

Mr. Michael Morris

I declare an interest. When will the right hon. Lady recognise that the food manufacturers have borne the brunt of the restraints imposed by the previous Government and this one? Bearing that point in mind, and also that commodity prices are now rising again, does she realise that, far from any further restrictions, there will have to be a relaxation of the Price Code for food manufacturers in general? Far more good would be done by restraining rate increases, which are becoming a bigger problem for the lower paid, than food increases.

Mrs. Shirley Williams

In a period when we are asking for wage restraint at the level of £6 a week, which for many people means rises of less than 10 per cent., it would be unfair to leave any section of the community outside such restraint, including food manufacturers. There has been some improvement in the position of food manufacturers. I do not quarrel with that, but they, also, must make their contribution to the counter-inflation programme, because it is as much in their interests as anybody else's that it should succeed.

Mr. Kilroy-Silk

Is my right hon. Friend aware that many workers at the Kraft factory at Kirby are now on short-time working because of the reduction in demand for margarine, following the butter subsidy? Is she aware that there is great resentment among them that butter, which is largely imported, is subsidised out of their taxes, whereas margarine is an indigenous product? Will she consider giving a similar, if not an equal, subsidy to margarine as is given to butter?

Mrs. Shirley Williams

I think my hon. Friend should be aware that, to the best of my knowledge, the raw materials used in the manufacture of margarine are not grown in England. We do not frequently grow oil seeds, and we do not have many whales floating up the Channel. Therefore, that point is ill taken.

Regarding the relative position of margarine compared with butter, there is likely to be some widening in that position, which will protect my hon. Friend's constituents. However, they have pointed out that they are not opposed to the Government's policy of food subsidies to help the lower paid.

Mr. Norman Lamont

Is it not absurd that Associated British Foods should have had to ask the right hon. Lady's permission to reduce the price of a standard loaf by ½p? Is it not equally absurd that some manufacturers should be prevented from selling loaves in traditional waxed paper at lower prices than loaves in plastic bags? Does this not show that in some respects the Price Code is preventing manufacturers from exercising price competition to the benefit of the consumer?

Mrs. Shirley Williams

The hon. Gentleman will recognise that Allied Bakeries got permission immediately, when it asked for the right to decrease the price of bread by ½p. The hon. Gentleman will also appreciate that we have a direct responsibility to this House and to the general public to protect the use of subsidies and to ensure that they benefit the consumer rather than any particular firm. For that reason, firms must ask permission to change their prices—properly so—and we grant that permission if the position is clear.