HC Deb 05 July 1976 vol 914 cc933-4
1. Miss Fookes

asked the Secretary of State for Prices and Consumer Protection by how much she expects the profits of the corporate sector to rise as a result of the changes she proposes in the Price Code.

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

The Government are retaining controls over prices and profits, as I stated to the House on 30th June. Profit recovery depends on the pace of the upturn, and it is, therefore, impossible to make any accurate estimate. But in the market conditions expected, the proposed Price Code changes on their own could make a difference of around and rather below £1 billion.

Miss Fookes

By how much does this fall short of what industry itself thinks is necessary?

Mrs. Williams

There has never been a clear statement of exactly what industry believes to be necessary, but I think it is widely recognised that in many fields the market is at least as great a constraint upon the code as what the industries can obtain.

Mr. Madden

Can my right hon. Friend give any estimate of the number of new jobs which she expects to flow from the measures she recently announced?

Mrs. Williams

That is difficult to do, but we asked those negotiating with us, and in particular the CBI, for individual cases which indicated where the Price Code had inhibited jobs or led to redundancies. We have a number of cases of that kind.

Sir John Hall

As last year, according to a statement by, I think, the Prime Minister, profits were running at about 2 per cent. of capital employed, is this increase in prices likely to increase profits on capital employed to as much as 3 per cent.?

Mrs. Williams

Again it is difficult to estimate, but the most recent estimates for all forms of industry were of the order of a 2 per cent. real rate of return after allowing for depreciation. For industry, however, and specifically manufacturing industry, the figure was rather better at around 3 per cent. It is clear that the changes made in the code will lead to some improvement in that position, but I do not pretend that what has been a long deterioration in the rate of return will be wholly reversed by the changes in the Price Code.

Mr. Norman Lamont

Did not the Price Commission's report reveal that the larger companies are now operating at 58 per cent. of their profit levels? Is it not clear, as the right hon. Lady has indeed admitted, that the Price Code is irrelevant in a recession? Would it not have been better to do away with it altogether?

Mrs. Williams

No, it would not, for two reasons. First, the position of each individual firm is very different, and there are areas where the market is not operating the constraint to which I referred. That constraint is certainly used at the retail end. Secondly, the code tends to bite more as business picks up. We are entering a year in which business is expected to pick up, and it would have been most unwise to get rid of price controls of this nature completely.