Profit Margins (Hansard, 15 November 1976)

§ 25. Mr. McCrindle
asked the Secretary of State for Prices and Consumer Protection on what criteria he refers profit margins to the Price Commission.

§ Mr. Hattersley
References to the Price Commission are usually made in response 923 to public concern about prices or when traders have complained that margins are inadequate. But most references have been concerned with matters wider than profit margins.

§ Mr. McCrindle
On the question of profit margins, does the right hon. Gentleman take into account the margins of profit in areas of activity comparable with that where a reference is sought? Does he take into account the possible effect on employment, or is it simply a question of some sort of presumed protection to the consumer by reducing prices?

§ Mr. Hattersley
No. The things that are taken into account—in the terms in which the hon. Gentleman asked his question—are taken into account not by me but by the Price Commission, and they are taken into account according to the provisions of the Price Code, which the House debated and agreed without amendment about seven weeks ago. I take the hon. Gentleman's point that there are some problems associated with a Price Code the reference dates of which are historic and a code which is in many ways likely to stratify existing patterns of profit and economic performance. That is why, when I look to the future prices policy, I should like to find a rather more flexible policy than that which we have at present.

§ Mr. John Garrett
Will my right hon. Friend refer to the Price Commission the retail margins made by multiple footwear retailers?

§ Mr. Hattersley
In all these matters one must reconcile the problems associated with margins and prices with the necessity to preserve confidence in industry and, therefore, to preserve investment and employment. I have looked at the question to which my hon. Friend refers, and I do not believe that a good case could be made at present for making the reference which he suggests.

§ Mr. Lawson
Is the right hon. Gentleman aware that many foreign companies, particularly American ones, are being deterred from investing in Britain, or investing further in this country, by the existence of profit and dividend control? Is he further aware that if he were to relax those controls the investment to which I have referred would raise the 924 value of the pound and help the consumer far more than he will be helped by any of the measures about which the right hon. Gentleman has been talking?

§ Mr. Hattersley
No, Sir, I am not aware of that, nor do I believe is anyone who examines the Price Code. Anyone who examines it objectively will agree that the Price Code is inhibiting investment and profit in only a marginal number of cases. In others, it is the level of activity within the economy that determines how companies operate and what they invest. The hon. Gentleman's question implies a situation which no sensible commentator would suggest exists.