HC Deb 24 May 1976 vol 912 cc2-7
2. Mr. Tim Renton

asked the Secretary of State for Prices and Consumer Protection what new plans she has to revise the Price Code.

3. Mr. Rooker

asked the Secretary of State for Prices and Consumer Protection if she proposes to amend the Price Code.

7. Mr. Marten

asked the Secretary of State for Prices and Consumer Protection whether she will now take steps to relax the control of prices.

15. Mr. MacGregor

asked the Secretary of State for Prices and Consumer Protection whether she will make a statement on progress on revisions of the Price Code following the completion of the Chancellor of the Exchequer's negotiations on pay policy.

24. Mr. Neubert

asked the Secretary of State for Prices and Consumer Protection if she will make a statement on the future of the Price Code.

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

The Government's proposals will be set out in detail in a consultative document to be published next month. Profit and cost controls will be retained. Changes will be made, particularly to encourage investment and jobs.

Mr. Renton

While waiting for the Green Paper, can the right hon. Lady say how she sees the restructured Price Code leading to manufacturers increasing their capital investment in the United Kingdom? Is it not more likely that capital investment will still be held up—in fact, strangled—to judge by the web of controls and by further TUC demands for smaller profit margins?

Mrs. Williams

With regard to the first part of the question, it is not a Green Paper that will be produced but a consultative document—under the terms of the Counter-Inflation (Temporary Provisions) Act 1972 that is what is required—and it will be debated in the House of Commons.

With regard to the second part of the question, it is this Government who introduced investment relief. I have every reason to believe that that has been much appreciated by industry, and there is now a markedly improved desire to increase investment in domestic industry in this country.

Mr. Rooker

Does my right hon. Friend accept that any amendment to the Price Code which will allow price rises to be greater next time round than they were this time and which are announced after the TUC meeting on 16th June will be seen to undermine the policy for the vast majority of workers, who will consider that their leaders have been sold down the river by the Government?

Mrs. Williams

No. Sir. My hon. Friend will appreciate that the discussions between the Government and other organisations about the Price Code include the TUC—very much so—which is as concerned as we are about the effects on investment and jobs where the Price Code can be pointed to. Therefore, what we have to do is to walk what may be a difficult line between the maximum restriction and unnecessary increases in prices and the necessary measures that have to be taken to encourage investment and new jobs.

Mr. Marten

Does the right hon. Lady realise that the Government have to walk the plank? Is it not true that if more profitability were allowed for reinvestment this would be in the self-interest of the employees, because those concerned would be able to reinvest more in plant and equipment and there would be more jobs? Secondly, will the £5 million limit be raised, because it was fixed before a lot of this inflation took place?

Mrs. Williams

The hon. Gentleman, with his usual subtlety, replaced my tightrope with his plank, but I insist on replacing his plank with a tightrope since a tightrope has another end to it, whereas a plank ends in the sea. Having said that, I go on to say that there are certain sectors where the return at present is below the cost of borrowing money to invest. It is that kind of thing to which we are turning our minds, which I am sure the entire House will, on consideration, recognise is not in the national interest or in the interests of full employment.

Mr. Madden

Despite the carefully orchestrated campaign of big business to dismantle all the arrangements in the Price Code, will my right hon. Friend give an assurance that there will be safeguards to ensure that retained profits are channelled into investment, particularly in manufacturing industry? Will she also understand that price controls hold the only hope there is of getting the acceptance of working people for incomes policies?

Mrs. Williams

I hope my hon. Friend will give us a little more credit than that suggests. The investment relief is directly tied to relief in domestic manufacturing industry and in commercial vehicles. It is indeed our intention that any improvement in investment shall be directed towards the domestic economy and not dissipated in either investment in property or investment abroad.

Mr. MacGregor

Can the Secretary of State say whether it is also her intention to amend the code in order to remove the present disincentives to increased efficiency and productivity, and, if so, what form her proposals will take?

Mrs. Williams

I can tell the hon. Gentleman that both these matters are under consideration, but I cannot go further than that for the obvious reason that the discussions on this entire subject have only just begun.

Mr. Heffer

Although we accept that her intentions are good, can my right hon. Friend say what actual guarantees will come from the Government to ensure that such increases in prices, leading to increased profits, will be used for the necessary investment which is required?

Mrs. Williams

Yes, I will indeed. In the first year of the investment relief—1975—there was approximately £380 million-worth of relief which was associated with £1,955 million-worth of investment. All this was closely monitored by the Price Commission. The commission has informed me that it is satisfied that the investment relief went directly on investment which benefited the domestic economy, in particular manufacturing. That is indeed precisely in line with the policies of the Government and the Labour Party.

Mr. Neubert

Does not the Minister realise that British industry has been subjected to price control in one form or another for the last five years while wage costs have shot ahead? How will these meagre proposals redress that damaging imbalance?

Mrs. Williams

They will do so along the lines I have indicated. The hon. Member for Romford (Mr. Neubert) will be fair-minded enough to agree that it is important to assure those who are being asked to engage in a very harsh form of incomes restraint that there will not be unnecessary increases in prices and that where prices are increased it will be in order to benefit investment and jobs.

Mr. Molloy

Is my right hon. Friend aware that only last week in the Financial Times there was evidence of massive increases in profits? To the ordinary housewife there does not seem to be any dramatic reduction, or indeed holding, of prices. Is my right hon. Friend further aware that, when she receives supplications from the Conservative Party to allow prices to rise, official Shadow spokesmen tell us that she is pretty frightful to allow prices to rise and that this is a bad thing? My right hon. Friend ought not to take too much notice of this but should take heed instead of the TUC's request to hold prices as much as she can.

Mrs. Williams

I am well aware of the fact that, regardless of almost anything I do on prices, it will be wrong as far as the Opposition are concerned, but that is the nature of their particularly destructive contribution to the policy. With regard to the first part of my hon. Friend's question, let me say right away that the return on capital in real terms, allowing for inflation, has fallen from approximately 11 per cent. 10 years ago to 7 per cent. in 1970 and to 4 per cent. in 1974. I do not think it is unreasonable to say that, whatever else has benefited over the last couple of years, it has not primarily been profits.

Mr. Giles Shaw

While congratulating the right hon. Lady in setting out with vigour on the tightrope or the plank, may I ask whether she can be a little more encouraging to those who believe that the restrictions of the Price Code have been the major disincentive to the economy at the present time? Would she not agree that to remove the Price Code altogether would increase the Retail Price Index by only something like 1 per cent. or less? Would she not agree that in the present economic climate—I stress this—this would do more for jobs and investment than the tinkering with the code which she is proposing?

Mrs. Williams

I think the hon. Gentleman would also agree that one of the major factors in returning confidence has been the slowing down of the rate of inflation. I do not think it is reasonable to suggest that there can be a very tight control over incomes without any form of control over prices. Having said that, I believe that the TUC will fully accept that, where relaxations in prices are directly related to domestic investment improvements—they frankly were not between 1972 and 1974—there is a consensus for making these changes.