HC Deb 05 July 1976 vol 914 cc947-52
10. Mr. Newton

asked the Secretary of State for Prices and Consumer Protection if she will make a statement on recent developments in counter-inflation policy.

Mrs. Shirley Williams

My proposals for changes in the Price Code are set out in full in the White Paper, Cmnd. 6450, which I laid before the House on 30th June, and I would refer hon. Members to my statement on that day.

Mr. Newton

Can the Secretary of State explain precisely how the huge reported increase in Post Office telecommunications profits fits into last year's prices policy or this year's? Does she agree that if it had happened in the private sector there would have been a major outcry among her hon. Friends and demand for price reductions? What will she do about it?

Mrs. Williams

It is a matter for the Price Commission, as with any private or public company which exceeds its reference margins. In some cases the Commission insists on a roll-back, and in other cases on the stabilisation of prices over a period until the position is restored. Both practices have been followed in the private sector. It remains for the Commission, not me, to decide which approach it wants to take.

Mr. Clemitson

My right hon. Friend referred several times this afternoon to a 2 per cent. return on capital employed in private industry. Does that estimate take into account the transfer pricing practices of multinational companies?

Mrs. Williams

It is a general figure that is based upon the profits of all companies after allowing for depreciation at the real rate of inflation. If my hon. Friend wants specific information about multinational companies, I must ask him to put down a separate Question. The figure covers all companies.

Mr. Neubert

When the right hon. Lady says that pay restraint must be matched by price control, has she forgotten that for a whole year prices were strictly controlled while wages were allowed to let rip? What prospects does industry have of recovering from the damage that was being inflicted upon it?

Mrs. Williams

The position under the Price Code, as I think the hon. Gentleman knows, bearing in mind that he is one of the people in the House who is an expert in these matters, is that certain retrospective costs can be brought forward if they are unable to be recovered at the time. There are limitations upon that. I repeat that the major limitation arises from the market itself, as is evidenced from the fact that profits are running well below reference margins. It is not reference margins that are imposing the ceiling in this type of case.

Mr. Atkinson

Does my right hon. Friend agree that the Government's leading priority should be to ensure a smooth return to free collective wage bargaining? Does she agree that the best way for the Government to achieve their objective of a reduction in price inflation is to ensure the continuation of price control, so that when we are in phase three we can freely bargain wages against fixed-price ceilings?

Mrs. Williams

My hon. Friend will recall in this context a remark by Jack Jones and other trade union leaders about the need for a controlled re-entry from the present wages policy. I think that the same is true about prices. I envisage that in the relatively near future we shall start discussions with both sides of industry on what kind of price control the consumer shall enjoy.

Mr. Costain

Surely the right hon. Lady must admit that all private industry is affected directly and indirectly by the prices charged by nationalised industries. If the profits and prices of nationalised industry are to be allowed to soar, how can she expect private industry to keep down its prices?

Mrs. Williams

I am sure the hon. Gentleman is aware that the major reason for the increase in nationalisation prices over the past couple of years, apart from commodity price increases, was the need to set aside the large subsidies made to nationalised industry by the pricing policy of the Conservative Administration. We are now returning to a philosphy of effective commercial prices. There has been considerable reportage on this matter today. I think the hon. Gentleman will recognise, in fairness, that that was one of the most important factors behind the increases in nationalised industry prices from which the private sector also suffered last year.

14. Mr. Dodsworth

asked the Secretary of State for Prices and Consumer Pro- tection what consultations she has had, and with whom, concerning the relationship between changes in the Price Code and the next stage of the Government's incomes policy; and if she will make a statement.

18. Mr. Norman Lamont

asked the Secretary of State for Prices and Consumer Protection whether she will make a statement on her discussions with the CBI and TUC about the Price Code.

Mrs. Shirley Williams

Since April I have had numerous talks with the TUC, the CBI, the Retail Consortium and other organisations over the next stage of the attack on inflation. I wrote to them on 30th June to invite comments on the consultative document on a new Price Code.

Mr. Dodsworth

Will the right hon. Lady elaborate on the results of her discussions on the subject of the phasing out of food subsidies, which is her declared policy, because those subsidies have now reached the authorised level of £1,700 million and they do not seem to be fully reflected in the social contract for 1976–77? Does this not make clear that she will now press for a continuance of food subsidies at their present level?

Mrs. Williams

The hon. Gentleman almost takes my breath away, because his Question about the Price Code has no direct relationship to food subsidies. This was not part of our consultations. The present position is that in the current year food subsidies will run at about £400 million. A statement about the rate of run-down was given many weeks ago in the PESC statement on the current financial year. The hon. Gentleman can obtain all the information he wants from that document.

Mr. Pavitt

Will my right hon. Friend give special consideration to assisting the co-operative movement by including shops within the provisions for investment relief, since some 200,000 building construction workers are out of work? Is not this a way of helping the situation in regard to the other side of the coin?

Mrs. Williams

Yes. I am happy to tell my hon. Friend, whose concern about the co-operative movement is well known, that we have included shops in the investment relief. This will benefit retailers, such as Co-ops, who own their own shops.

Mr. Lamont

Is the right hon. Lady aware that both the Retail Consortium and the CBI have said that her proposals will fall a long way short of what they believe necessary to achieve profitability in the private sector? If she does not intend to abolish the Price Code, will she use the month of consultation time to make some realistic proposals in restoring profitability to the private sector?

Mrs. Williams

The Retail Consortium has been kind enough to say that my proposals help, so far as they go. I am not so sure about the position of the CBI. In terms of marks given to me by the President of the CBI, he appears to have been a rather hard marker. The CBI's comments bear no relationship to what was said in the informed Press, including The Times, Financial Times, the Investors Chronicle and The Guardian. The hon. Gentleman could well ask whether the CBI position is other than a bargaining one.

26. Mr. Giles Shaw

asked the Secretary of State for Prices and Consumer Protection whether she is satisfied with the operation of the Price Code.

Mr. Shirley Williams

I refer the hon. Member to the reply I gave the hon. Member for Braintree (Mr. Newton) earlier today.

Mr. Shaw

While thanking the Secretary of State for that full and charitable response, might I ask, in relation to the consultative document which she has published, whether she is satisfied that the number of firms coming within the Price Code will be reduced? It would appear that, having allowed for inflation to take its toll, even more companies are within the scope of the code than previously. Would the right hon. Lady care to comment?

Mrs. Williams

The hon. Gentleman is right in the sense that prior to the amendments to the code many more firms were within the pre-notification controls than previously. For that reason we have suggested an uprating in the categories to two times over for manufacturing firms and 1.5 times for distribution firms to bring back the amount of prenotification to roughly where it was when the code was first introduced.

Mr. Heffer

As I understand that the objective is to ensure increased investment, and as I understand well that in the capitalist system, unless one allows higher prices, one does not get the investment—(Interruption.]—it is time we started to control investment—what plans do the Government have for directing and ensuring that investment is made where it is needed and is not left to chance and hope?

Mrs. Williams

My hon. Friend will recognise that part of what he has said, particularly about fiscal considerations, is necessarily a question for other Ministers. But may I say again as loudly and clearly as I can that I am absolutely satisfied that with its present monitoring system the Price Code ensures that, if there are any increases in price related to investment, that investment will take place in exactly the areas about which I have told the House on more than one occasion.