HC Deb 27 April 1977 vol 930 cc1254-373

Order for Second Reading read.

4.37 p.m.

The Secretary of State for Prices and Consumer Protection (Mr. Roy Hattersley)

I beg to move, That the Bill be now read a Second time.

Mr. Speaker

I have selected the amendment which stands in the names of the Leader of the Opposition and her right hon. and hon. Friends.

Mr. Hattersley

The Bill provides powers for the statutory control of prices. The propriety and utility of such powers are beyond question and have long been accepted by some of our most successful competitors. But it is equally certain that inflation in this country can be over come only by the creation of an economy in which the sterling rate is stabilised, domestic credit expansion is contained and progress towards increasing exports and expanding production is accelerated.

Nothing this House decides can determine the world price of oil or tea or coffee. Inflation cannot be abolished by Act of Parliament. It can be overcome, and I have no doubt that it will be overcome if we remain resolute in the pursuit of our present policies. But we shall not remedy any of our difficulties if we pretend that there is an alternative quick and easy way by which the present intolerable inflation rate can be held back.

The steady improvement in the inflation rate which we expect to begin in the summer depends on the successful completion of the policy we began last December. Within these policies and strategy statutory price control has an essential part to play. It cannot cut the overall inflation rate in half. But it can hold back unjustified price increases and have a significant effect on individual items in the Retail Price Index.

Mr. Dennis Skinner (Bolsover)

It has not done so yet.

Mr. Hattersley

At a time of high inflation, when working people are accepting wage restraint, it is the Government's duty to ensure that a small section of the industrial and commercial community does not make unacceptably high profits at the expense of the majority of consumers who accept restraint in the interests of national recovery. It is to combat such abuse that we propose taking powers to investigate price increases, and powers to freeze prices—powers that are flexible, effective and sharp enough to cut through specific abuses when they occur.

This, the most important part of the Bil—the power to investigate specific price increase proposals and to freeze individual prices for up to a year—is permanent. It is a new power, potentially stronger and more effective than the price controls we now operate. I anticipate that the new Price Commission will choose to make about 40 detailed investigations each year. Usually they will concern prices which guide and govern the costs of other goods and services.

Each investigation will certainly influence more prices than those that are actually within its terms of reference. Many companies will hold back possible increases in order to avoid investigation. Others will be affected by price limitations placed on their competitors. Ceilings on the prices of manufacturers' end products will restrain other prices, the prices of other manufacturers and the prices of wholesalers. The overall effect on the price level will certainly be greater than our present Price Code. The effect of each investigation and possible freeze will be significant and visible.

All that the Opposition are choosing to vote against. I trust they do not do so in the belief that by putting down the so-called reasoned amendment they are absolved from the charge of opposing any form of price restraint. Perhaps the hon. Member for Gloucester (Mrs. Oppenheim), applying the levels of political sophistication we have come to expect of her, believes that she can argue convincingly that the Conservative Party is not against control in general, but is just against these price controls. If that is the case, I hope that she will abandon her normal rule and actually tell the House something positive and constructive, actually let us into the secret of what she and her party would do.

I suspect that we shall be disappointed, for the amendment makes it absolutely clear that the Opposition prefer a political knock-about to an examination of alternative policies. That is the hon. Lady's choice. My task is to describe the Bill's contents and to offer my judgment of its value.

The advantage of the scheme I now propose over the cost control procedures that the Bill abandons are obvious. A general price code applied by cost control is unavoidably inflexible. It lays down rigid rules. The rules are inevitably arbitrary and indiscriminate. They attempt to relate a firm's pricing policy to its past performance: a straitjacket from which improving and expanding firms rightly wish to escape.

Within the rules every price increase is permissible. Outside them no increase is possible. So a scheme of general application has to be applied either so loosely that few firms feel the effect or so tightly that the expansion of many firms is postponed or prevented.

Attempts to graft exceptions into general rules rarely succeed. The Trade Union Research Unit's criticism of the 50 per cent. investment relief we introduced last August was broadly correct. It could not be limited to firms which planned additional investment. In consequence, it became simply a loosening of overall control.

At a time when we hoped to encourage more industrial expansion it was right to loosen the general code in that way. We estimated that it would produce 1 per cent. increase in the Retail Price Index, and we believed that that increase was a penalty we had to pay to avoid inhibiting new investment. As a result, in many cases market forces have held prices below Price Code ceilings.

The new attachment to the old prices policy which I have found in the backwaters of industry has a direct relationship to the fact that in some areas it is difficult to distinguish between the effects of the present code and the effects of no code at all. I am not interested in the appearance of statutory control. I want a prices policy which neither deters investment nor allows unnecessary price increases. The Bill provides it.

Under its provisions the Price Commission will receive 28 days' warning of price increases in all the manufacturing and service firms which notified price increases under the previous Act. These firms account for 70 per cent. of manufacturing output. The Commission will examine these proposals against the criteria in Clause 2. Price increases needed by efficient and competitive firms to finance investment, preserve quality or meet unavoidable costs will be allowed. Price increases which merely produce swollen profits not productively used, or, are the simple result of management's preference for passing on costs rather than attempting to improve efficiency, will not.

The flexibility of these powers makes them wholly consistent with the industrial strategy. It also makes them more effective. We do not apply general powers rigorously for fear of damaging companies which should be exempted from their effect. Specific powers can be applied firmly because they are applied with discrimination.

The principal power within the Bill provides support for both competition policy and the industrial strategy, neither of which is a short-term device. The criteria in the Bill are not designed simply to cope with a period of unacceptably high inflation.

Improving our competitive efficiency and influencing industrial performance in less than perfectly competitive markets is not a task confined to the next few years. Active promotion of competition is essential to create an expanding economy. But competition does not do the whole job. Unregulated it is callous and wasteful. Competition has a part to play in the mixed economy, but it does not solve all our problems, and sometimes it only exists because the Government directly intervene to ensure that market forces really operate.

My Department attempts to encourage competition through the Monopolies and Mergers Commission, the Restrictive Practices Court and the Office of Fair Trading. Most of the powers these agencies now possess are effective, but only after months—sometimes years—of investigation and inquiry. We need a new power that operates more swiftly. This Bill provides it. In the long term, these powers—though perhaps operated by one of the existing anti-monopoly agencies—will be used as part of our permanent competition policy.

That, however, is for the future. The immediate object of the Bill—the ability to freeze the price of particular goods and services and the right after a sectoral examination to regulate prices for an entire industry—plays a direct and significant part in the Government's counter-inflation strategy.

The success of this policy in holding back unacceptable price increases depends in part on the sort of Commission we appoint. I intend to appoint a Commission in which industry can have confidence, which represents all sections of the economy and which includes men and women of proven industrial success. Another essential qualification will be a positive commitment to the belief of selective Government intervention within the economy. This policy will succeed because it will be run by a Commission which wants it to succeed.

Mr. Frank Hooley (Sheffield, Heeley)

If the Commission is to be as powerful and as well composed as my right hon. Friend has said, what is the point of a veto, which he wishes to have on its investigation at any stage?

Mr. Hattersley

There are circumstances in which the Commission might want to make an investigation when other events were taking place in the industry that it was proposed to investigate. It might be that a merger was being proposed and that this might be part of the industrial strategy. We might be on the verge of a planning agreement and in those wholly exceptional circumstances—[HON MEMBERS: "A unique occasion"] It would be an occasion that I should want to become increasingly less unique. When that happens I should want to ensure that two conflicting powers were not working against each other. I shall explain this point in a moment.

I have stressed that the powers are selective and flexible and that when they are used, therefore, they can be used effectively. But they will also be comprehensive—and in this I refer to the overall margin controls that we are proposing to maintain under Clauses 14 and 15.

Through the margin controls we shall be able to ensure that profits are not increased by unacceptable amounts. At a time of wage restraint it is no more than simple justice to limit profit margins and to welcome the element of price control that that provides, but it would clearly be impossible to have effective general price control without some form of wages policy. For that reason the power to enforce a general code based on net and gross margin expires in three years and even during that time needs renewal annually by order.

The power to operate margin control was first introduced in 1973 by a Conservative Government. I know that much history is being re-written on the other side of the House, but I hope that even the Tory Ministers who voted for it then will recall their pasts.

I am not surprised that the reaction to the Bill of the hon. Lady has been both trivial and intemperate. Let me confirm some of her prejudices. There are many ways in which the Bill is inimical to all that she stands for. The Bill does imply that Government intervention within the economy is right and necessary. It does seek to protect the consumer against the normally stronger forces of industry and commerce. It does require private industry to be publicly accountable for its actions. The Bill is not based on the principle that what is right for big business is right for Britain. I do not expect the honourable Lady to share or even understand those views.

I turn again to the Bill's contents and the central rôle that the Commission will play in its operation. It will be to the Commission that price increases in manufacturing and service industries will be pre-notified and the profit margins of distributors reported. It will be the Commission that will decide which of them will be investigated. Nationalised industries will be included in exactly the same way as companies within the private sector. From time to time the Secretary of State of the day may ask under Clause 10 that the Commission examines prices or charges in a whole sector of the economy. When this request is made, the Secretary of State will be able to regulate prices within that sector if the resulting report so recommends. He will have power to freeze prices at their existing levels, or to require an actual reduction.

The sectoral references made by the Secretary of State will take up only a small part of the Commission's time. Most of the Commission's work will be done under its own initiative and in accord- ance with its own judgment. However, it will be required to use its initiative and exercise its judgment against the background of principles laid down in Clause 2. That clause requires the Commission to make its judgment after considering all matters which appear to it relevant to the business of restraining prices and charges. Price restraint is the prime objective and principal purpose of the Commission's work, but that work must be carried out after reference to those parts of Clause 2 which require the Commission's judgment on any firm to be consistent with the efficient company's need to earn adequate profit. Clause 2 contains a set of criteria to which the Commission must pay proper regard.

The first and primary consideration is the restraint of prices but there are a number of other matters important to the protection of efficient industry that need to be taken into account. We have met a number of suggestions from industry about the contents of this clause.

The concept of criteria approved by Parliament as a guide to the behaviour of statutory authorities is not new. The Monopolies and Mergers Commission is guided by a similar device set out in Section 84 of the Fair Trading Act. All such criteria are subject to the criticism that they are too vague and that rules written flexibly can be interpreted capriciously. When the Government intervene in the economy, in proposed mergers or intended price increases, we have to make a choice about the nature of those rules on which they operate. They can be general and absolute, applying without exception irrespective of the damage they do, or their irrelevance to a specific situation, or they can be statements of principle interpreted according to individual circumstances.

I have no doubt that the second alternative is right. As with monopolies and mergers legislation, there will be criticisms of individual judgments. This is unavoidable, but the overwhelming advantage of such flexibility is that it enables the Commission to examine a price proposal and recommend prohibition when it is appropriate and yet allow other and unexceptionable increases to go ahead unhindered.

Since the Bill was published I have said continually, and I repeat today, that the efficient, socially responsive company has nothing to fear. Clause 2 will indicate to the Commission that it should take into account the effect of a price freeze for one company on the viability of its competitors.

We have also built into the Bill a series of formal safeguards. Investigations not completed within three months will automatically lapse. A recommended freeze or restriction will be extended for a full year only if the recommendation of the Commission is endorsed by me. I shall have power to increase the maximum price allowed by the Commission, but I shall not have powers to reduce it. All my decisions—and that means every decision to prolong a price freeze—will be subject to the negative resolution procedure. Clause 9 requires me to construct a system of safeguards to protect the viability of companies during the temporary freeze which accompanies a Commission investigation and during the life of any order that results.

A further safeguard is my ability to veto a Commission decision to investigate a specific price increase. I know that that power has caused concern to some of my hon. Friends. I believe that that power will be used rarely if at all. It is simply intended to ensure that if a company is in negotiation with the Government—considering a merger which might be directly relevant to our industrial strategy, or contemplating a planning agreement—it should not be required at the same time to accept a Price Commission investigation. Were I, however, to use such a veto it would be a public act for which I should be accountable to Parliament, and I should have to explain my reasons for preventing the Price Commission's initiative going ahead. The law would require me, like the Price Com mission, to act in accordance with the criteria in Clause 2.

Mrs. Audrey Wise (Coventry, South-West)

Will my right hon. Friend explain why he thinks that the negotiation of a planning agreement should excuse a company from being subjected to a Price Commission investigation? Would not the possible Price Commission investigation actually strengthen the hand of the Government in such negotiation?

Mr. Hattersley

It might well. I have not said—and nothing in the Bill contains this—that where a Price Commission investigation is contemplated it should not be carried out if there is the prospect of a planning agreement, or vice versa. All I have said is that we need a power in some circumstances conceivably not to run the two things side by side. I can imagine a situation in which it would reveal the need for a planning agreement. I can also hypothesise the situation in which such an investigation would prejudice a company coming to agreement with the Government. I want flexibility and to use it in a way most effective to pursue the aims that my hon. Friend and I share.

The Bill contains one major power which is dependent on the initiative of the Secretary of State rather than that of the Commission. Clause 10 enables me to direct the Commission to examine any question related to prices and charges within a whole industrial sector. The Bill also provides the power to act upon the Commission's recommendation and to regulate prices throughout that sector or actually to reduce them. I anticipate making up to about 10 references of this sort every year. They will result initially in the Commission investigating sectors in a way broadly similar to that adopted under the existing programme of Ministerial references. That investigatory power has existed for four years, but throughout that time the Government have been denied the specific power to act on or implement any recommendation that the investigation produced. We have had to rely primarily on the good will and common sense of the investigated firms in voluntarily accepting either the spirit or the letter of the Commission's recommendation.

I hope that when sectoral examinations are made the industries examined will co-operate with the Government in the same way. But if an examination revealed excesses or abuses that the industry was not prepared voluntarily to remedy, it would clearly be in the public interest to ensure that the Government could act against the offending companies. Clause 12 provides that power.

I want to describe only one other specific clause in some detail. That is Clause 17, which extends beyond 31st July, when it would otherwise lapse, the provisions of the Remuneration, Charges and Grants Act 1975. That Act has four distinct parts. The first is support of voluntary pay policy. The second continues the power of the Price Commission to enforce a Price Code. The third continues the power to modify other Acts relating to prices or charges. The fourth continues the ability to control dividends.

Clause 17(1) refers to Section 1(1) of the 1975 Act, which exempts employers from liability for breach of contract entered into before 1st August 1975 to the extent necessary to comply with pay limits set out in the White Paper referred to in the Act. Clause 17(1) extends this relief to agreements made at any time in respect of increases payable after 31st July 1977.

This clause appears in the Bill after discussion with the TUC. It does not introduce new elements to pay policy, but merely continues the status quo. The TUC knows that it forms part of the Bill, and it has chosen not to include this clause among those to which it suggested changes. This afternoon the General Secretary of the TUC made it clear in a public statement that the TUC would not agree with any Member who—in my view, misguidedly—voted against the clause.

Mr. Ron Thomas (Bristol, North-West)

Will my right hon. Friend give way?

Mr. Hattersley

When I have concluded my remarks on this clause, I shall gladly give way to my hon. Friend.

This clause contains powers essentially in support of a voluntary pay policy. The powers in the Remuneration, Charges and Grants Act, which this clause extends, do not enable pay limits to be imposed on anyone. They merely enable an employer to comply with a voluntary pay policy when a previous contract would otherwise require him to breach it. The pay policy concerned would have to be voluntary, because no powers exist to impose a pay policy statutorily.

We abolished the whole apparatus of statutory pay control in 1974. But if there is a voluntary policy, the powers are essential, not to limit the wages of the vast majority of employees whose unions will have voted for a further agreement on pay, but to ensure that employers are not inadvertently forced to breach the policy by previous contracts of employment. Of course, if there is, as I hope, a third wage round, the White Paper to which the parent Act refers will be debated in the House.

Mr. Ron Thomas

I think that my right hon. Friend will be aware that many of us are anxious about Clause 17(3), which would give power to the Government to extend the policy to 31st July 1980—beyond the next General Election. That means that we could have a fourth or fifth round of the pay policy. That is the part about which many of us are concerned.

Mr. Hattersley

There is no such assumption on my part. It appears in this form because all the time-limited parts of the Bill have a similar life. Were the move towards an orderly return to collective bargaining to take two years rather than one year—my hon. Friend's judgment on that is as good as mine—it is conceivable that we might want to apply the powers again. However, I assure my hon. Friend that it is not intended to extend the pay policy unacceptably and unnecessarily. If there is to be a third round, which seems possible, or even a fourth round—that is something about which I do not speculate—the same rules would apply. I am sure that my hon. Friend's fears are wholly groundless.

I come to my last words on the Bill. I repeat what I said at the outset—that the propriety and utility of the Bill are beyond question. I hope that Opposition Members who are aware of the need to stimulate competition and the relationship between competition and prices will make their position equally clear. Perhaps one is about to do that.

Mr. John Gorst (Hendon, North)

On the contrary, I was hoping that before the right hon. Gentleman abandoned the Bill to the House for discussion he would give us an insight into his thinking on Clause 12, which is potentially inflationary. What is the thinking behind the desire to abolish double pricing?

Mr. Hattersley

My hon. Friend the Minister of State, who pays particular attention to these matters in the Department, will deal with that point later tonight. In view of what has been a somewhat long speech, because of interruptions, I think that the House would prefer me to leave that topic to my hon. Friend.

I want to make only two points in conclusion. The first is the perhaps vain hope that we might hear tonight the voices of some of those hon. Members who voted for prices policy four years ago raised again in its support today. I hope that they will say a word not only in favour of a prices policy in general—the principle of the Bill—but in favour of the details in the Bill that I offer to the House. I offer them two reasons why they should—both quotations: There is little doubt that in countries such as France, Belgium and Sweden, price controls have contributed to diminishing the impact of inflation."; and: We must aim as soon as conditions permit for a much more selective and discriminating system of price surveillance. Those are the views of the Shadow Chancellor, the right hon. and learned Member for Surrey, East (Sir G. Howe), speaking in London in January 1974. If there is any doubt about his wholehearted support for what I go on to propose, let me quote the right hon. and learned Gentleman on the same occasion on permanent powers: Sir Alec Cairncross probably struck the correct balance when he said 'at all times the Government needs some machinery for investigating complaints of excessive prices'. I suspect that measured judgment is very different from what we are about to hear. I have no doubt that we are about to be told that prices are rising too quickly and that, bad as the rate of inflation is, figures will be carefully selected to make it seem worse. I hope that we shall also have a couple of words about how things could be made better, particularly in the absence of any form of statutory restraint, for that would be the result if the Opposition amendment were carried tonight.

The powers in the Bill will provide a way of holding back unjustifiable price increases. But, I repeat, its major provisions are not a temporary measure. I offer the Bill as a development of the rules that ought to govern the mixed economy. I believe in that sort of economy and—as the Bill makes clear—the mixed economy must be profitable. But its profits must result from efficient and competitive enterprise, not from restrictive practices and exploitation of the consumer. That is the result that the Bill will promote. I commend it to the House.

5.9 p.m.

Mrs. Sally Oppenheim (Gloucester)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House declines to give a Second Reading to a Bill which establishes a system of price control that will discourage investment and destroy jobs without any genuine benefit to the consumer and does nothing to mitigate the Government's disastrous record on prices which are rising at 19.9 per cent. compared with 8.4 per cent. in October 1974. Despite the Secretary of State's extravagant claims for this measure, it represents no more nor less than the latest episode in the continuing saga of this Government's so-called attack on inflation—an attack that has become a rout as one disaster has followed upon another.

I noticed that not once during his remarks did the right hon. Gentleman refer to real people. The amount of hardship and suffering that has had to be endured by the people of this country as a result of the Government's continued failure to defeat inflation cannot be over emphasised.

Nor can the fact that it is likely to intensify in the coming months as prices leap ahead again and the cumulative effect of three-and-a-half years of double figures inflation takes its toll. No wonder hon. Members on both sides are deeply concerned or that consumers are at their wits' end. If only the Bill were the painless panacea that it is represented to be, we could all rejoice and welcome it. Alas, there can scarcely have been anything more ill-fated than the succession of attempts by this Government to manipulate prices. That is why we were singularly unimpressed to learn on 22nd February that the Secretary of State had another prices policy.

In the beginning we had the Prices Act 1974, which introduced food subsidies, which we were told were the answer to inflation. Few will forget the earnestness of the then Secretary of State when she said: Our major object is to seek to protect from inflation those least able to face it."—[Official Report, 9th April 1974; Vol 872 c. 259.] Those least able to face inflation have told this Government what they think about that protection in Walsall, Stechford and Workington. They will tell them again tomorrow in Grimsby.

When food subsidies were first introduced, food prices were rising at an annual rate of about 17 per cent. Now that they are rising at an annual rate of about 20 per cent., food subsidies are being phased out, because the Government are running out of money and credit and can no longer afford them, as we predicted from the beginning. As a result there will be a sharper increase in food prices this year than ever before.

I warned that this would be the out come of food subsidies way back in 1974. During the Third Reading debate I said: We are also very concerned … at the whiplash of price increases that consumers will have to face … when these subsidies are withdrawn."—[Official Report, 12th June 1974; Vol. 874, c. 1782.] When food subsidies were first introduced, food prices were rising at a rate that was far less than it is now. By the time subsidies have been phased out, they will have cost nearly £2,000 million. Apart from their indiscriminate application, the measurable help that food subsidies have brought to the poorer families and pensioners is less than those affected have had to pay in extra indirect taxation to finance them. So much for helping those who are less able to fight inflation! So much for the extravagance and futility of the Government's policy!

After food subsidies we had Shirley's Shopping Basket Mark 1. That was followed by the now notorious price scheme. That was another abysmal failure. It cost £1 million to publicise and it was followed by a rise in the cost of processed food of about 19 per cent.

Mr. Ron Thomas

Will the hon. Lady also include in her list the effects of the indefensible common agricultural policy on food prices in Britain?

Mrs. Oppenheim

We have already had a long session following the statement today by the Minister of Agriculture, Fisheries and Food. Labour Members and the Government in particular knew precisely what those effects would be when they told the country that they had satisfactorily renegotiated the CAP. As a number of hon. Members wish to take part in the debate, I shall continue with what I intended to say. Perhaps the hon. Member for Bristol, North-West (Mr. Thomas) would like to address those remarks to the Secretary of State, who was a supporter of the CAP long before I was.

As a background to these gimmicks over the past three years we have had the most stringent price and profit control. Yet none of those gimmicks and none of the price and profit controls has prevented inflation from rising by over 72 per cent. in this period—an all-time record. At the same time, investment has been virtually paralysed and unemployment has soared. The Government have the most abysmal record on prices of any Government in the history of this country.

It is no good trotting out moth-eaten alibis, as the Secretary of State and the Chancellor do so often. This Government are responsible, and no one else. It is no good their bleating on about commodity prices and drought. The same drought and commodity prices have had to be faced by most of our main competitors, who have managed to keep their rates of inflation down to half ours.

This Government "got it wrong"—to quote the Chancellor—right from the beginning and they have not got it right since. It was their level of public expenditure, their silent acquiesence to wage explosion in 1974, their belated and inadequate attack on inflation in 1975 and their appalling record that led to the fall in the value of the pound last year. It is their fault that the average family now need over £30 a week merely to live. It is their fault that many thousands of people are seeing their savings wiped out by inflation and that living standards are plummeting and have fallen by 3 per cent. in the last three months of last year alone. It is their fault that families and pensioners are now doing without everyday things that they have taken for granted all their lives. It is their fault that the internal purchasing power of the pound fell from 100p in 1974 to 50p today.

These are the realities that lie behind the Government's record on price inflation. On top of everything else, this Government have continually tried to delude consumers with short-sighted, short-term cosmetics and artificial manipulation, all of which, one by one, have left consumers worse, not better off. Yet once again we are asked to accept that yet another set of convoluted price manipulations will be of value to consumers when all the records show that the most that they can produce is more short-term distortion of prices—a disguise rather than a cure for inflation. At the same time they will undermine investment confidence and possibly cause even higher unemployment.

All this is being done in the name of the social contract. Draconian measures are being introduced, not because they will help the Government's so-called industrial strategy, not because they will contribute to economic recovery or in the long-term help consumers. It is being done because, having got all the inflation forecasts wrong for the umpteenth time, this Government are confronted by a restless TUC. The Government's case is that the preservation of the social contract is crucial at any price and that wage restraint is vital to economic recovery. But so far this Government have not got a phase 3 pay policy. Under the Bill business and industry are being asked to settle for the cart without even seeing the horse.

Some Labour hon. Members no doubt will refer to the sacrifices that TUC members have already made in order to remain within the social contract. Although that is undeniably true, and I agree with it, one is entitled to ask about all those people who have been keeping a social contract all their lives, who know of no other way of life and who have never had any of the pay-offs that have been given to those with more power who have merely kept a social contract for the past two years.

Those are the people who are suffering most today and who have suffered most in the past three years from the worst price inflation that we have ever known. Those people have been let down again and again and will be let down once more by the falsely optimistic forecasts and the consistent failures of the Government. This Government have turned their backs on those people and they will be let down again if they believe any of the guff that the Secretary of State meted out this afternoon. They will not be helped by this measure. It is cruel to suggest that they will.

We are not alone in our scepticism of the Bill. When the measure was first announced, there was hardly a word of praise for it, and what little there was was qualified. The Guardian took the view, rather benevolently I thought, that the Government's proposals were designed to get the best of both worlds and looked like getting the worst. The Financial Times, more realistically, described the proposals as The worst of both worlds. Another newspaper said of the Bill: The Government Bill announced yesterday can frighten no one except possibly the hapless shopper. I heard an hon. Member ask "Which newspaper?" It was the Morning Star. The TUC was equally unimpressed, the CBI was appalled, while consumers were, understandably, plain cynical: they had heard it all before.

We heard from the right hon. Gentleman this week that the electors of Grimsby supported this Bill. We shall see tomorrow whom they support. It will not be this Bill. It will be the Conservative candidate. Most of them have never even heard of this Bill. Those who have distrust it in the same way that they distrust anything that this Government do. What the right hon. Gentleman has done is to make the fundamental mistake of misunderstanding and miscalculating the common sense of the people.

Having dealt with the record up to date, I turn to that part of the Bill which deals with the continuation of profit margin controls. In continuing the Price Commission and the Price Code, albeit in a relaxed form, the Secretary of State has opted to perpetuate the vast and costly control of the Price Commission and a great deal of existing bureaucracy for an indefinite period, and he also intends to discriminate differently in his treatment of manufacturers compared with his treatment of distributors.

On the surface, the abolition of allowable costs will provide considerable relief for manufacturers, though not complete relief, but distributors will be as badly off as ever under the Bill, because they will still be subject to gross profit margin control. On top of this, they will have to absorb the national insurance contributions increases ad infinitum which they were told they would have to absorb only until July. This inevitably will mean labour shedding in a sector of industry which employs a high proportion of school leavers, while administrative burdens in the case of these industries will not have been lightened at all. On top of this, distributors are having to absorb high cost increases in rents, rates and public sector prices.

So convoluted are some of the information requirements under the present code that one whole distributive industry for which the rules will not be changed has been waiting for six months for the Price Commission to tell it what information is required of it. So far the Price Commission has been unable to provide the information. It does not know, either. There is no evidence that there will be any simplification of these requirements. In any event, percentage profit margins. Whatever they may be, do not render any meaningful measurement of economic viability in any company as long as the return on capital investment throughout British industry is as low on average as below 4 per cent. It is ludicrously low, and there can be no return of confidence while such a situation exists.

The continuation of the Price Code for an indefinite period indicates a fundamental lack of understanding on the part of the Secretary of State of the extent to which profitability in this country has been eroded over the past three years and of the urgent need to allow a recovery of profit if there is to be a sustained upturn in investment and job creation.

Companies cannot be made to invest when the right hon. Gentleman or anyone else cracks his whip so long as it does not pay them to do so, and, naturally, there is a direct relationship between lack of investment and jobs. In an article in The Sunday Times on 13th March Malcolm Crawford equated a 1 per cent. increase in profitability with a 2 per cent. fall in unemployment. So the reverse is obviously true.

Mr. Eric S. Heffer (Liverpool, Walton)

The hon. Lady talked about the profitability of companies and said that they could not be made to invest unless it was profitable to do so. What precise conclusion does she draw from that? Does she draw the conclusion that we draw—that it is clear that private enterprise has failed and that we need investment policies based upon the NEB, and so on, or is she now saying—I suspect that she is—that there should be totally uninhibited free enterprise, that we should leave it entirely to the market economy and just hope for the best?

Mrs. Oppenheim

I am saying that there should be flourishing free enterprise and fair competition. That is the only thing that will protect consumers in the long term. Over and over again it has been proved that it is market forces—fair competition, so long as it is fair competition—and not controls that regulate prices most of all.

The right hon. Gentleman is somewhat ambivalent on this subject. He claims in one breath that this is not the case and in another that it is the purpose of this policy to heighten competition, when in fact it is the purpose of this measure to distort competition heavily. That is what will happen as a result of this Bill. The right hon. Gentleman said that when one sector of industry or when one company had its prices frozen, others would have to keep down prices or they would not be able to compete. That is distorting fair competition.

I turn now to the second string of the prices policy embodied in the Bill—the Price Commission's new, permanent, sweeping, arbitrary investigatory powers and its equally arbitrary powers to recommend a freeze in prices. Quite apart from one's objections to the dictatorial principles involved, I understand that there was even greater objection to the grand inquisitor in the person of the Secretary of State himself, so much so that he had to give an undertaking during his consultation period that it would be not he but the Price Commission who instigated investigations in the first place.

That was not surprising, because there was hardly a newspaper reviewing the policy when it was first introduced that did not express some reservation about such powers in the right hon. Gentleman's hands, since he had shown himself to be meddlesome and unprincipled. No doubt under his regime we should have by-election freezes, General Election standstills and levels of profitability deter mined by value judgments. Above all, since his bread prices debacle, Mr.8½p, as he has become known, is no longer trusted.

In the unlikely event that any hon. Member thinks that these criticisms of the Secretary of State originate with me, let me hasten to assure the House that it was not I who first suggested that one ought not to buy second-hand Yorkshire pudding from the right hon. Gentleman or who suggested that he was unprincipled or untrustworthy. I have before me a whole dossier of newspaper comments to this effect of which I propose to read only three. Colin Welch, in the Daily Telegraph of 14th March, wrote of the right hon. Gentleman: He is also said to be a man without any principles whatever William Phillips, in the Investors Chronicle on 25th February, wrote: Mr. Hattersley's brief record bodes worse for business than his philosophical taste for a mixed economy. In the Commons sketch in the Daily Telegraph of 15th March, Frank John son wrote: We can repose in this man our complete distrust, knowing that he will not let us down. It is very good that the right hon. Gentleman will not be instigating investigations. But he will be instigating examinations and he will be freezing prices, so that, quite apart from any reservations we might have or which might have been engendered by his past record, we are entitled to ask what are his qualifications for the massive intervention in business and industry that he is proposing.

Apart from the fact that the right hon. Gentleman has an economics degree, which some people would rate as an automatic disqualification, he has no personal experience of business or industry. No doubt to cover his lack of expertise and knowledge and in the total absence of any relevant criteria in the Bill, he has dredged up a whole lot of trendy, ambiguous phraseology.

We hear that profits are to be socially accountable, whatever that means. Like the social contract, "social accountability" is not even an original phrase. It was used first by Lyndon Johnson several years ago, and it did not refer to profits. But, apparently, social accepta- bility is to be the yardstick by which the arbitrary sweeping investigators of the Price Commission are to judge profits, and, according to the right hon. Gentleman at his Press conference on 22nd February, socially accountable profits are those which are used for investment and job creation only and if they are not used for this purpose they will become what he describes as "socially unacceptable".

The result is that companies are no longer to be allowed to make investment decisions that only their directors have the authority to make under the Companies Act. Many important factors in investment decisions are to be ignored. For example, many companies need to reserve resources from profitability for future research and development—not when the Price Commission thinks so, but as and when they think so. There is no provision for such eventualities in the blancmange-like criteria that we find in Clause 2.

The new elite are to be companies that invest in the way that the right hon. Gentleman wants them to invest. That form of investment does not need to be in the interests of shareholders. It does not necessarily need to be in the interests of the work force or the interests of consumers. Worst of all, the sole arbiters of this new so-called social accountability are to be none other than the Secretary of State and the Price Commission.

There was no doubt what was in the right hon. Gentleman's mind when he spoke to an interviewer from the News of the World on 27th February with engaging frankness and some relish. He said: I can encourage profits when they are being used for the right purposes. And I can hold prices down when profits are not being used properly. No doubt the right hon. Gentleman sees himself as the new Judge Jefferies of prices and profits. The mind boggles at the thought of any member of this Government making investment decisions as any such decisions they have made have usually ended up in disaster. The likely scenario that springs to mind immediately is one in which the whole of British industry becomes one great disaster area.

One of the Bill's features that has alarmed business and industry most of all, and to which the right hon. Gentleman has paid little attention, is the total lack of any rational or specific criteria in the Bill in respect of the instigation of investigations, or in respect of price freezes themselves. Such criteria as there are in the Bill are so hopelessly ambiguous that they provide no guidelines. As a result, there will be uncertainty, business confidence will be undermined, and for some companies forward planning will be impossible.

To make matters worse, there is to be no explanation and no justification of the Price Commission's reasoning for initiating an investigation in the first place. It seems that the investigations will automatically assume all the characteristics of the Star Chamber. Nor are the investigations to be anything in the way of occasional—

Mr. John Mendelson (Penistone)

It seems from the hon. Lady's references that she had a bad history tutor.

Mrs. Oppenheim

Judge Jefferies presided over the Bloody Assize and not the Star Chamber. If the hon. Gentleman prefers the reference to be to the Bloody Assize, I shall use that term.

The investigations are not to be occasional. The right hon. Gentleman has confirmed that there are to be about 50 investigations a year. That is nearly one investigation a week. The outcome is not to be subject to any appeals procedure. Decisions to recommend a freeze of prices can be made by a minority of the Price Commission itself.

The only criteria in the Bill to which the Commission has to refer are that which seem relevant to the Commission. In practice, the Commission does not need to refer to any criteria. The length of the freeze, which is up to a year, could bankrupt some companies in the not-too-distant future if not immediately. Worst of all will be the sense of frustration and unfairness that will pervade business and industry, because everything has to be done in secret. A number of technical questions are still unanswered. What is to happen—

Mr. Hattersley

I told my hon. Friend the Minister of State that when the hon. Lady made her tenth error of fact, I would correct her. She has made that error. Investigations will not be held in secrecy. The Bill provides that if com- panies so require it, publicity will be available to them. I shall not correct any more of the hon. Lady's errors.

Mrs. Oppenheim

The right hon. Gentleman should listen before he seeks to correct me. I did not say "held in secrecy". I said that the Commission is not required to justify or explain why it instigated an investigation. That is much more important and a matter that has bothered industry and business a great deal.

In Clause 4 provision is made for the Price Commission to award interim increases during an investigation and for the Secretary of State to discontinue an investigation, presumably if profit mar gins have fallen below safeguard levels. But if that happens, or if margins fall anywhere near safeguard levels, what on earth is the Commission's purpose in investigating them in the first place? How much is an investigation going to cost a company by the time it is finished? There are those questions and many more on the subject of safeguards that are likely to remain unanswered until the regulations are made, and by then it will be much too late for many companies.

Profit levels have been so depressed over the past three years that the only outcome of the sort of pricing freeze envisaged in the Bill is that the goods will disappear from the shelves to be replaced by more expensive imports or, in the case of multi-product companies, the price freeze in the instance of one item will be off-loaded on to another item, or at the end of the freeze there will be a fresh surge of even higher prices, as happened at the end of the price check scheme. Once again we see that the only outcome of the type of freeze envisaged in the Bill will be a temporary distortion of the price of some items for which a realistic price will have to be paid in the end.

Not today but in previous statements the right hon. Gentleman has strongly implied that the Price Commission's investigations in the past have not been sufficient and that the Price Code itself has not prevented unjustified profits. He feels that such profits will be prevented under the new policy. Perhaps he will tell us this afternoon in how many of the investigations undertaken by the Commission in the past excessive profits have been reported and how many and which cases would he have liked further intervention on his part. If he cannot answer those questions, he has no raison d'être for his policy.

Mr. Hattersley

Television rentals, for example.

Mrs. Oppenheim

What would the right hon. Gentleman have liked to do by way of further intervention? There was an independent voluntary agreement in respect of television rentals. He did not need the Bill for that purpose. It is insulting to the House for him to continue a sotto voce conversation with the right hon. Gentleman when he is seated.

Mrs. Wise

Is the hon. Lady in favour of any price control? If so, what kind and when?

Mrs. Oppenheim

As I am dealing with the Bill, I tell the hon. Lady that I am not in favour of the price controls in the Bill. She can have that clearly and unequivocally.

I move on to a matter that may interest those on the Labour Benches particularly. Labour Members can always vote for the Opposition amendment if they are not satisfied with the Bill. That would seem to be the case from the amendment that has been tabled by some Labour Members.

There is one new point in the Bill that is of particular interest and that I draw to the attention of the House. I congratulate the right hon. Gentleman, because for the first time the cost-effective use of resources and efficiency will be considered in relation to profits and prices. The consumer interest could be very well served if that criterion is the subject of searching investigations in the nationalised industries. The Price Commission could happily engage in nothing else for some considerable time to come, but we know that that will not be the case as it is clear that the Government already do not mind breaking the Price Code, as they have in the case of the nationalised industries with the acquiescence of the Secretary of State for Prices and Consumer Affairs. Gas prices have been increased. We know that the Government have one prices policy for the public sector and another policy for the private sector.

The irony of it is that it is not the private sector but the public sector that has been the main source of price inflation over the past three years. The right hon. Gentleman could well busy himself with the public sector, but no doubt he will be charging round the country with the Price Commission to meddle in the affairs of the private sector. He will be telling companies how to run their own businesses. Already the whole climate of business and industrial opinion has been soured by the crippling amount of anti-business legislation that we have had from this Government. This is another anti-business measure that completely fails to understand the rôle of profits not only in companies but in the context of the whole economy.

It is profits that help a company to become more efficient and to charge lower prices. It is the profits of the private sector that pay for health, education and welfare. It is profits not losses that are socially acceptable.

But, because this Government, having failed hopelessly to overcome inflation themselves—[Laughter.] The right hon. Gentleman laughs, but that is why the people of Grimsby will not vote for the Labour candidate tomorrow. The Government, having failed hopelessly to overcome inflation themselves, are now trying to make a scapegoat of business and industry, and in doing so they will destroy the seed corn of future prosperity It is no longer a question of killing the goose that lays the golden egg—that gosling could never even get hatched in the economic climate of today.

Quite apart from our dislike of some of the proposals in the Bill, we are also very anxious about the cost. It will cost at least £5 million a year for the administration of the Price Commission alone. The cost to industry itself will be incalculable, and therefore the cost to the consumers in the higher prices which will result. On top of that, the Government are proposing to spend another £3½ million a year on price information—the same price comparison schemes described in The Guardian on 1st January following a survey as unwanted by two-thirds of the housewives and as the biggest flop of all time.

How can the Government justify expenditure of this nature at a time when there is having to be so much painful retrenchment in other areas of Government spending? For this sum they could have provided 625 extra beds a year for the National Health Service, or 600 additional kidney machines a year. So much for the social accountability of this Government! But, then, the Labour Party did not invent compassion, or caring, or the concept of social obligation. Nor has it the monopoly in them. They are concepts and ideals upheld sincerely on both sides of the House. The difference is that Conservative Governments pay more than lip-service to them.

The Government's record on prices has disqualified them from any claim of compassion or caring, because they have inflicted more hardship on the people in this respect than any Government before them. There cannot be an hon. Member on either side of the House who is not desperately concerned and appalled by what inflation has done to the people over the past three years. This Bill is not going, to overcome inflation, but it has the potential to do very great damage.

Surely the Labour Party realises that the people are sick and tired of deception, subterfuge and cosmetic gimmickry. What they want more than anything else and are yearning for is a return to long term price stability, and the only way they can have that is by good economic management and by allowing the private sector, free enterprise and fair competition to flourish.

But consumers need to be assured that the competition is going to be fair. Tinkering about on the edge of such policies is a dangerous diversion. The Government are once again introducing a political measure that will lead to the decline of many companies and the failure of some.

Above all, it will not help consumers. Its main purpose is the delusion of consumers and the temporary placation of the TUC, and I shall not hesitate to ask my right hon. and hon. Friends to vote for our amendment declining to give the Bill a Second Reading.

Several Hon. Members


Mrs. Wise

On a point of order, Mr. Deputy Speaker. The second amendment on the Order Paper is not being called, and I ask for your help in doing some- thing about a situation in which the House behaves as though there can be only two points of view on any question—that of the Government and that of the official Opposition.

Mr. Deputy Speaker (Mr. Oscar Murton)

The question of which amendments are selected is entirely a matter for Mr. Speaker's discretion.

5.45 p.m.

Mr. Sydney Tierney (Birmingham, Yardley)

I cannot follow my right hon. Friend the Secretary of State as enthusiastically as perhaps he would like, but I certainly do not want to follow the line of total destructiveness adopted by the hon. Member for Gloucester (Mrs. Oppenheim). With the present powers expiring on 31st July, I am pleased that my right hon. Friend has taken the opportunity to review the prices situation. We had a consultative document, and now we have the Bill.

Anyone with knowledge of price fixing manipulations understands the enormous difficulties of any Minister in reviewing adequately and investigating fully price movements. Consequently, there are many different and opposing attitudes as to what should be done. Irrespective of the election tomorrow, I welcome the greater powers contained in this Bill, for there is dire need to do something about the prices situation. I ask my right hon. Friend not to hesitate to make these powers more stringent if he sees the necessity to do so.

No doubt my right hon. Friend has been advised from many quarters to do nothing, while from others he will have been advised to leave it all to competitive forces to find their own price levels. Perhaps the latter course would be acceptable if competitive forces were always duly competitive. But the reality is that there are manufacturing and service industries which have freed themselves from genuine competition by buying it off. Many of them are big and powerful enough to wield great influence in price-level fixing in their own industries. It is natural that they should want to reward themselves in a generous way for the efficiency and first-class service that they claim to supply.

I am glad to note that one of the aims of the Bill is to make competition as effective as possible. Because of inflation generally—the hitherto unknown high level of increases in food prices in particular—there has been an understandable and justifiable outcry for a general price freeze. If it were conceivably possible to have one, it would be a tremendous contribution to solving the inflation problem, but it cannot be done for a number of practical reasons, mainly factors outside our control, such as world prices and our commitment to the Common Market, which the Conservative Party ordained for us. I believe that subsidies on basic food commodities should have been continued for some time to come in order to alleviate some of the worst effects of spiralling prices.

Because the impression is given that some price rises are inevitable, or are accepted as such, and housewives no longer gasp in amazement when something goes up by more than 3 per cent. or 4 per cent., there is need to be more vigilant than ever. We can all remember the shock of housewives at much smaller price increases only a few years ago. When price increases are inevitable because of higher world raw material prices, for example, particularly when they are presented in overall percentage terms, it is not always possible to assess exactly the total increases on, say, a manufactured commodity weighing only seven or eight ounces. When this difficulty arises, there is often a "rounding off" exercise, and we know from experience that this usually means a rounding up of the price, a decrease in the weight, or both. This is an area in which there should be special vigilance. I am pleased to note there are powers in the Bill to ensure that cost increases are not always regarded as inevitable and that the sort of circumstances that I have decribed will be investigated by the Commission.

My right hon. Friend the Secretary of State found that the discount buying and price-cutting operations of the bread and flour industry were not all they appeared, but I congratulate him on making his own investigation. He at least brought the operations into the public gaze and threw some light on systems that confuse and bewilder shoppers every day.

The most difficult thing to establish nowadays is the true retail price of many commodities. Housewives come across contradictions and inconsistencies over a vast range and increasing number of commodities every day. The price paid sometimes depends on whether the shopper lives in the country or in a town and often bears no relation to the cost of preparation or distribution, which have been the usual criteria for prices. Often prices depend on the size of the store and goods are cheaper in larger garages and discount warehouses than in corner shops and other small outlets. Much depends on the bulk-buying capacity of an outlet and its ability to translate its discounts into so-called cut prices.

I note that the Bill includes powers for dealing with the practice of recommended prices if necessary. I hope that my right hon. Friend will look at particular sections of retailing and wholesaling, especially the electrical goods discount houses, which operate a system of recommended price lists. We have them thrust before us day after day and their lists need investigation. In the durables industry, as opposed to the food industry, there are often three, four or even five recommended price lists, with their use depending on whether the goods are being sold in a sale, a mini-sale, or in some other way.

A report in The Guardian yesterday said that, following the recent price increases, most grades of petrol would go up by 2.1p, excluding VAT, but that the rounded-off increase, including VAT, was likely to be 2.5p a gallon on pump prices. This rounding up of increases plus VAT is another problem that should be investigated.

The report said that some garages would charge 95p per gallon on top-grade petrol, but the Motor Agents' Association stated that, through discounting, fierce retail competition would keep the national average price down to 86p a gallon. This is the sort of world we are living in when we try to determine the true retail price for a gallon of petrol. Is it 86p or 95p?

Does this 10 per cent. variation in price tell us anything about the retail price of a gallon of petrol? Is not such a wide variation a licence for inefficient petrol stations to flourish alongside efficient ones? What does it do for the stability of the price of petrol and its true cost? It certainly gives rise to misleading advertisements, such as those that offer cut prices, petrol with stamps, and other gimmicks to get the motorist on to the fore court. I have raised this matter with my right hon. Friend on a number of occasions. When the motorist leaves the forecourt, he is not able in most instances to establish the true retail price per gallon that he has paid. The last thing displayed at any petrol station is the true retail price of petrol. I know that there has been a voluntary experiment by the Department and those involved to work out a system to reduce these gimmicks and misleading advertisements. I wish that my right hon. Friend had said something about them, and I hope that he will take action if the situation does not improve.

Clause 16 extends the power of the Secretary of State over the display of retail prices. I have written to him about the practice of petrol being advertised at 80.9p or 85.9p a gallon. I understand that this is a contravention of the Trade Descriptions Act and it is a mystery to me how one can buy four gallons of petrol at 80.9p a gallon and have it properly recorded and receive one's change in legal tender. The only way that this can be done properly is for a motorist to buy 10 gallons of petrol, and who buys 10 gallons on every trip to the gar age? I implore my right hon. Friend to look at this aspect again and to act upon it.

Clause 18 gives permanent statutory backing to they payment of grants to local authorities for the carrying out of price surveys and the provision of advice to consumers. I know that many authorities provide excellent consumer protection services, and I should like to mention in particular the West Midlands Consumer Protection Service. It has done an excellent job, particularly in its surveys of petrol and pub prices. Such surveys have been conducted in other parts of the country and much has been done by these organisations to aid the consumer. I welcome the further assistance that the Bill provides for them.

The White Paper says that the Price Commission will be required to follow criteria to encourage initiative and growth and to ensure adequate reward to efficient manufacturers, distributors and providers of services. My right hon. Friend referred to these points in his speech. I wish to comment on what is said about ensuring adequate rewards for those in these industries, particularly those who provide services in the distributive and retail trades.

Employers in these trades will claim that they have been faced with an erosion of profitability since the introduction of price controls in 1972. I leave them to pursue that case and I am sure that they will pursue it well. The majority of employers, particularly those involved with food, will say with some justification that the cheap food policies of successive Governments have kept their margins narrow and created difficulties for the trade.

Workers will say that these narrow margins have made jobs in food and distributive trades, along with some other industries, low-paid occupations. It ought to be said—and if they had the opportunity, they would say it—that the retail and distributive trades ought to be recognised as a more important industry within the British economy. Because this industry has suffered in the way in which it has over the years, it seems to have lost any chance in that respect.

The Union of Shop, Distributive and Allied Workers, in which I have to state an interest, would accept that Government policy on prices has always affected its ability to negotiate higher wage rates over the past 30 years—not merely over the past six years, but for 30 years. While any action proposed by the Bill to control prices is to be welcomed, it must be made clear that profits in the distributive and retail trades must be sufficient to enable shop and distributive workers to take full advantage of a more flexible pay policy, if that is what we are to have.

Many workers in these industries really believe that their low wages are the only subsidy left on food. Their wages must not be held at a low percentage figure in order to maintain Government policy, whichever Government that might be. I hope that my right hon. Friend will agree that the Price Commission will ensure that the wage element of cost increases found in any investigation will be passed on to where it belongs, and that workers in the trades that I have mentioned will maintain parity with workers generally in British industry.

In the interests of work people generally, I say that I welcome the introduction of the principle in the Bill that all nationalised industries will be liable to investigation by the Price Commission in the same manner as private enterprise. I am glad that this is contained in the Bill. I say that because it has been our experience—this must be said—that wage increases must not be held at a relatively low percentage figure and outstripped by much higher percentage increases in public sector prices, such as those for fuel, light, gas, transport and so on. This certainly places a great burden on people in low-paid industries, such as those I have mentioned.

There is much in the Bill that I can support. I hope that my right hon. Friend will be able to strengthen and improve other measures should the need arise. Any legislation that seeks to protect consumers from unfair price increases should have the support of the whole House.

6.2 p.m.

Mr. Michael Neubert (Romford)

Although the Secretary of State did not present the Bill as such, as we all know to our cost, the Price Commission Bill is another chapter in the sorry story of the present Government's social contract. With record inflation, with record unemployment, with us up to our eyes in foreign debt and with the pound depreciated to new low levels, it has been a poor bargain by any standards, certainly for the country as a whole and, above all, for the trade unionists, those in whose name this compact has been agreed.

They have seen both their job security and their standard of living seriously undermined during the term of the social contract, and yet this was the means by which the Labour Government secured office, precariously, on two occasions in 1974, and it has been the basis of their policy ever since. It is small wonder that trade unionists and their wives are leaving the Labour ranks in droves day by day and at each by-election: they have had enough of it.

But, of course, this so-called social contract has an inherent flaw that belies its name. The original author of the phrase "social contract", Jean-Jacques Rousseau, wrote in 1762: Society should be based on a social contract between equal and free individuals so that power cannot be exercised by one individual or group over another. It is clear from the dominance of the trade unions in this particular compact between themselves and a Labour Government just how that original concept has been corrupted, and clear how the phrase "social contract" is nothing but a couple of empty words.

If one wants to see just exactly what price is exacted from the Government with each successive stage of this social contract, now entering its third year, one has only to look at the reported utterances of trade union leaders. I intend to do so, but I shall not cite the evidence of the ever-popular General Secretary of the Transport and General Workers' Union. As he will be retiring in March 1978, we have to learn to live without Jack Jones—so sooner rather than later. I shall take as an example the chairman of the TUC's Economic Committee, Lord Allen, the General Secretary of USDAW, the union to which the hon. Member for Birmingham, Yardley (Mr. Tierney) belongs.

This is Lord Allen's price for a continuation of pay restraint for a third year. He would like to see a permanent system of selective price controls, abolition of all or most income tax for more of the lowest paid, reintroduction of subsidies on basic foods, reform of the EEC's common agricultural policy, provision of another £1,000 million a year for the National Enterprise Board, a Government veto on redundancies while grant-aid schemes are expanded, and finally, stopping the City hindering the pound from rising on foreign exchanges.

Without commentary from me, that Cook's tour around Cloud-cuckoo-land is ample evidence enough of the total unreality of the world in which trade union leaders live. For a Government of this country to allow their policy to be determined by such advisers is a grave abandonment of responsibility.

My hon. Friend the Member for Gloucester (Mrs. Oppenheim) has outlined the main principles of our opposition to the Bill. The first is the permanence of powers of price control without any corresponding assurance of permanent pay restraint. Then there is the arbitrary character that is likely to be the nature of the investigations that are conducted under these powers. Then there is the lack of defined safeguards for profitability and, therefore, for jobs in industry and the waste of scarce resources of skill and enterprise in dealing with the bureaucratic requirements of the Price Code and the investigations.

In the time available to me I wish to draw attention to four issues that give rise to considerable disquiet. First, we have to reckon with the vagueness of the Bill on criteria. It is not that the Bill lacks criteria, but they are not defined in any terms that can give assurances to industry, and certainly not the kind of assurances that industrialists need in order to plan ahead and, in particular, to embark on major investment projects.

In the absence of any close precise definitions in the Bill, we have to anticipate how the Bill might be implemented, and in particular we must test it by experience. Here I shall take the classic case, as it is now appearing to be, of television rental charges. Here we have an industry that had offered a service to the British people that generally met with great satisfaction and was the subject of very little complaint. The major complaints made against it, which undoubtedly gave rise to the investigation, arose as a result of the Government themselves increasing VAT on such charges—something that affected established contracts. It was as a result of that uproar, as well as the odd com plaint here or there about the level of charges, that the Government were prompted to get up an inquiry by the Price Commission.

The Price Commission reported very fairly with the statement that, summing it up, in 1976 the specialist providers of television sets on rental made a profit of 15.6 per cent. If it is to be held that 15.6 per cent. net profit on an enterprise which has, altogether, invested more than £1,000 million in television sets is excessive, what hope does industry in this country have? What chance is there of there being sufficient profits to generate new jobs?

It cannot be entirely irrelevant that this is a sector in which we have had calls to place controls on the importation of television sets. It might have stimulated the home market if such an attitude had not been displayed. Therefore, on that one test, industry has cause for apprehension.

Then there is the question—already referred to in passing by my hon. Friend—of what happens when the Government seek to secure their economic strategy at the expense of the consumer. The increase of 10 per cent. in the price of gas at the beginning of this month, which has yet to come through to consumers' bills—the Government have yet to meet the full hostility of public reaction to this measure—was prompted not by any wish of the British Gas Corporation itself and not by allowable costs coming within the Price Code's requirements, but solely because the Government needed to secure a reduction in their borrowing requirement which they could have secured by reducing their own profligate spending. Instead they chose to take it out of the consumer, they chose to put a quite arbitrary tax on the captive consumers of gas. They will live to rue that day. With those two examples, industry and the consumer can have little confidence in the exercise of these powers by either the Commission or, subsequently, the Minister.

There is a question of the inequity of wage drift. It is known that the whole principle of Government policy is that we have exchanged compulsory price control for voluntary pay restraint. Anybody can see the injustice in that, and injustice is at the rotten core of Government policy, which is why they are failing to secure support.

Taking this at face value, we see that the Chancellor proposed last year a 3 per cent. increase in wages. Eventually a 4½ per cent. increase was negotiated—an increase of 50 per cent. over what the Chancellor had suggested. We now see the wage drift in the fact that earnings this year are running at 9 per cent., which is double what was agreed and three times the original amount proposed by the Chancellor. Just imagine if prices had been allowed to drift in that way! Prices have been rigidly controlled, and in some cases they have not been allowed to go up to their market level. Yet, despite this, the wage drift has been allowed to carry on.

We all know how this has worked. We know that a lot of overtime is worked and people slow down on jobs. Wage restraint is not controlled at all, while prices are controlled by the Price Commission. These devious measures giving rise to the wage drift cause considerable anxiety all round.

Mr. Ron Thomas

When the hon. Member talks about the earnings drift, does he agree that a good deal of this is due to increased productivity and bonus systems, which reduce unit costs and therefore should contribute to reducing prices?

Mr. Neubert

I would not entirely agree with the hon. Member. In 1976 the major increase was in overtime earnings and there have been no striking productivity successes that would persuade me to alter my view. This is the way that people are getting around the wage restraint policy.

There is a very important omission from this Bill. Although the Secretary of State claims that he can deal with all prices, he makes two significant exceptions—the prices of coal and steel, which are governed by the Treaty of Paris. I do not blame the Minister for this, naturally, but he cannot come to the House and blandly assure consumers that all prices, bar a few, can be controlled by his policy when the very important items of coal and steel have to be omitted.

These commodities are important, not just as raw materials, but in the way in which they translate into retail costs in lines of particular interest to the politically sensitive Price Commission, because they will affect the consumer at his most tender point. The cost of coal has been increased already and will be again. Talking of productivity, the miners have failed the nation by producing 6 million tons less last year than in the previous year. As a result, the consumer has to pay higher prices not just for coal, but for electricity.

Last week we saw what happened when Government and trade union interests took priority over those of the consumer. We had the ordering of a power station in advance, which will require a surcharge, estimated by the Eastern Electricity Board at £9 a month for the average consumer. This surcharge will be imposed in order to sustain the power plant industry and support the miners. When it comes to the crunch, it is the consumer who goes to the wall, despite all the brave words of the Secretary of State.

Mr. David Penhaligon (Truro)

Does not the hon. Member want the power plant industry to survive? Does he want it to go to the wall?

Mr. Neubert

Of course I want the industry to thrive, but not at the expense of the consumer. These arrangements were not reached after consultations with the consumers. The Secretary of State has not asked the consumers whether they want to pay higher prices in order to sustain the industry and support the miners. The consumers are simply sent their bills and they have to like them or lump them.

The Minister of State, Department of Prices and Consumer Protection (Mr. John Fraser)

How many private industrialists consult consumers before investment?

Mr. Neubert

Industrialists, by day-to-day work, consult consumers by way of market research. Unless they are sure that there will be public support for the end-product, they would be foolish to invest and would not embark on it in the first place. We are expected to accept higher electricity prices when it suits the Government, and there is no protection for the consumer at all.

In the case of steel, this translates into tinplate, which went up by 25 per cent. last year, and has doubled in price during the past few years. This means that perhaps as much as one quarter of the cost of a canned product is the cost of the tinplate. Because British Steel suffers from chronic overmanning and restrictive labour practices in sustaining jobs which do not really exist, the consumer has to foot the bill. This is particularly bad because canned products are usually the preferred choice of poorer consumers, and therefore they will be the hardest hit.

If we are to judge by the statements made by the Secretary of State, he has already prejudged the issue of investigations in that he has stated that he expects there will be 40 inquiries a year—40 specific inquiries and 10 sectors of industry. Yet he claims that the Price Commission can only move on a case on its merits. It can only take the initiative when it is presented with an abuse. But the Secretary of State has already planned a regular routine of such investigations, without considering the merits at all.

He has to keep all those people at the Price Commission thoroughly employed year by year. It would be a serious matter if these people were made redundant, and therefore he must rely on making available to them a sufficient number of cases. He could not respond when provoked by my hon. Friend on 40 cases of abuse or 10 sectors which would need full-scale treatment. He has anticipated the ability to keep a smoke screen of activity going throughout the year to cover up his inability to influence prices because of other decisions taken by the Cabinet of which he is a member.

It is easy to promote such investigations. Recently the Secretary of State revealed in a Written Answer that funeral charges had been investigated because of complaints from seven hon. Members and 10 members of the public, a total of 17. The inquiry into intruder alarms—burglar alarms to most of us—was promoted by a dozen people. We have a situation in which half the membership of the General Management Committee of the Birmingham, Sparkbrook Constituency Labour Party, or indeed, the entire membership of the Parliamentary Liberal Party could trigger off a time-wasting, expensive and ultimately damaging investigation into prices charged or into a particular sector of industry.

For these reasons we regret the introduction of this Bill. Not everything in it is bad. One particular merit is that perhaps it can create an educative rôle for the Price Commission in promoting greater public understanding of prices and the importance of profits in lubricating our economic engine. There must be a danger in interfering too much with a highly competitive mechanism which is clearly working to the consumers' benefit. Those are not my words; nor are they the words of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph); nor even of the Nobel prize winner Milton Friedman. They came from a speech given last month by Mr. Arthur Sugden, Chief Executive Officer of the Co-operative Wholesale Society. The Secretary of State would do well to take account of the bluff, sound sense in those words before he gives more encouragement to the further dangerous delusions that there are benefits for the consumer in bureaucratic price control.

6.30 p.m.

Mr. Ron Thomas (Bristol, North-West)

One thing is clear above all else if we look at the amendment on the Order Paper in the name of myself and others of my hon. Friends. From what the hon. Member for Gloucester (Mrs. Oppenheim) and the hon. Member for Romford (Mr. Neubert) said, it is quite clear that those who have signed the amendment to which I have just referred are at one end of the spectrum and the Tories, it seems, are at the other end of the spectrum.

The hon. Lady described the measures that we have before us as Draconian, and so on. When I hear a comment of that sort I say to myself "If only this were the case." Indeed, the same comment applies to some of the statements made by the hon. Member for Romford about these measures.

I was waiting for the hon. Lady to tell us what is the Tory Party policy on prices. All we had was that she was completely opposed to any kind of control over prices, believing that with free competition prices would be stabilised. I can only suppose that she imagines that prices are fixed through some kind of auction in that very pleasant city of Gloucester on a Sunday afternoon, as they may have been 300 or 400 years ago. She surely knows that even since the writings of Adam Smith we have not had free com petition in this country. We have about 100 monopolies or quasi-monopolies and oligopolies which absolutely control the British economy in regard to capital investment, export prices and all the rest of it.

It will not do, in my judgment, simply to sit back and say that all we need is competition, because we have not got it. We are controlled by 100 quasi-monopolies or oligopolies, and we are certainly not likely to have competition under any kind of legislation from the Tories.

Then we are told by the hon. Lady and by the hon. Gentleman that if we can only get profits up we shall get capital investment. Yet if we look at the period of office of the last Tory Government, we find that British capitalists were given everything they asked for. They had the profits. They had large tax handouts. They had the Industrial Relations Act which clobbered the trade unions. They had a wages freeze and goodness knows what else. But we did not get the capital investment. Capital investment in Britain has continued to decline since 1970, if not before, so it has nothing to do with those factors.

There are many definitions of the cause of inflation. The hon. Lady picked a couple of simple axioms—public expenditure and the wages explosion. I do not accept that there has been a wages explosion during the period of office of this Government. What I say is that the trade unions have been trying to restore living standards which had been cut by the previous Tory Government, under a pay policy which I assume the hon. Lady supported. I do not know whether she did. But it was a Tory Government pay policy and we should all be familiar with it.

The idea seems to be put about—some of the leaders of my own party are putting it about as well—that there is what is called confetti money, as though all a trade union negotiator has to do is to go to management and say that he wants another 50 per cent. and that he is then given the money in sacks. That is not the way in which things are done. A wage claim is put in on the basis of what has happened in the past. A union putting in a wage claim has to justify his statement that prices have gone up and that the members' standard of living has been eroded.

We are told that wage increases and bargains are creating inflation. How are trade unions creating inflation?

I noticed, when the hon. Lady was talking about this perfect laissez-faire competition that we lost way back in the nineteenth century—if we ever had it—that she quietly slipped in the comment that there ought to be wage restraint. No price control, but there has to be wage restraint. Why must there be control over the price of labour? All the shop steward is doing is selling the labour power of the group he represents. This is presumably why the Tories say they want wage restrain but no price controls.

Those who suggest that there is some simple explanation for the levels of inflation in Britain are doing a disservice to all of us. There is a whole list of things which are involved, and in my judgment it is completely wrong to put wage and salary increases in the forefront or the centre of the stage. We need to look at the continual lack of capital investment in British industry over a long period of time and at the spiral of contraction and decline which, of course, affects prices.

I agree that devaluation comes into it, but I put the main blame on membership of the Common Market. That is one of the major reasons for our present position. We have moved from a position of surplus of about £20 million or 30 million with the EEC countries into a position of deficit of nearly £2,500 million. That is bound to have a considerable impact on the value of the pound. There are also the penal rates of interest and the low level of demand and, therefore, of effective utilisation of capacity, which have certainly pushed up prices considerably.

We have a level of unemployment of 1½ million, a lack of effective demand, and cuts in living standards. If consumer demand were increased, many firms could meet it, because some of them are running at only 30 or 40 per cent. capacity. If demand were increased they would be able to cut their unit costs of production and should be able to cut prices quite considerably.

Both Front Benches talk about inflation and unemployment. They say that wage claims lead to inflation and that inflation ipso facto leads to unemployment. Countries such as West Germany may have low levels of inflation, but that is after at least a million unemployed migrant workers have been sent back to Turkey and other countries. They may have a low level of inflation but they have not cured their unemployment. Policies of the kind advocated by the hon. Lady—a free market and non interference by the Government—do not work in terms of employment. This applies to West Germany and to other European countries.

Mrs. Sally Oppenheim

Will the hon. Gentleman tell the House exactly what has worked under this Government over the last three years?

Mr. Thomas

It would be very difficult for me to make a list of the things that this Government have done which have not had the tacit support of the hon. Lady's party. We have had a lot of shadow boxing and all the rest of it, but when the Shadow Chancellor of the Exchequer in terms of public expenditure, can say to the Chancellor of the Exchequer that it took him three bites of the cherry to do what the Conservatives advised him to do in one bite, if that is not collusion on the part of Front Benches, I do not know what is.

The failures of this Government are not because they have even begun to think of bringing in Socialist measures. They are because the Government have followed the same orthodox Treasury policies as have had the support of the Tories, despite all the shadow boxing, the threats to vote against the Government, and so on.

Having said that, I feel rather sorry for my right hon. Friend the Secretary of State for Prices and Consumer Protection, because a few months ago he had to stand up and defend the Code. He did it in a gentlemanly fashion, but he was having to stand up to critics such as myself and to say that this Code was quite right, even though we said that it meant that capital investment relief was going up from 20 to 35 per cent. and on to 50 per cent., and questioned whether this would mean increased investment overseas. We also felt that there would be all kinds of leaks from the system. Under that Code, companies could move from a basis of historic cost to 30 per cent. of current costs of their assets.

I can remember mentioning that a company such as ICI, with assets of over £1,000 million, was allowed this 30 per cent. increase in depreciation alongside 35 per cent. as investment allowances, and that with this companies could also disregard at the same time 70 per cent. of stock appreciation. Under that Code, if a company's unit costs fell because of increased demand, it could even pocket half of that.

I see from the consultative document that we are now told that many companies came to regard what was laid down in the Code as an entitlement to price increases. That is exactly what we were saying at the time. I feel sorry for my right hon. Friend because he was then having to tell us that the Price Code was first-rate. There were those of us who pointed out that it meant that £1,000 million would be going from the consumers and working people to the corporate sector and that this switch meant a cut in living standards. My right hon. Friend then said that it would be 1 per cent. on the retail price index. I do not know whether he has any further information on that, but I suspect that the figure is nearer 3 per cent., 4 per cent. or even 5 per cent.

As I said at the time, we then had to ask ourselves whether the Government had any effective price controls. Many of us believe that up to now they do not. We also said that it was one thing to have a code but another to have all kinds of gateways in it which employers could go through and make it ineffective. We then have to ask our selves whether the proposals in the Bill are any better.

Frankly, looking at the philosophy contained in Clause 2, I do not think that the proposals will help any more than the previous situation. Apart from a brief, rather vague and nebulous statement about making "adequate profits" it talks about the desirability of encouraging reductions in costs by improvements in the use of resources". It also wants to defray the cost of the capital (including compensation for the risk involved in producing the profits)". I should like to know exactly what that means. I should have thought that one could put any sum of money on it.

I do not think that there is much difference between the philosophy in Clause 2 and what we had in the previous code. Again, we have the need to take account of changes in prices in determining the value of asset". This presumably comes from the Sandilands Report. I see that my right hon. Friend is nodding in agreement. It is a dangerous philosophy that companies should be allowed to charge enough to replace all their assets over a period at current prices. Does that mean that the Stock Exchange at last is completely redundant? Does it mean that the whole idea that the capitalist system works on capitalists borrowing money to buy new assets is dead? The consumer has to pay for them, it seems. The next step is that the consumer ought to own those industries, because he has to pay for them. I do not see any justification for his not owning them.

The raison d'etre of the capitalist system was all the business about some people saving and entrepreneurs borrowing those savings to expand their businesses either through the Stock Exchange or something else. All that presumably is dead. Some of us have known for a long time that it was dying, but it is now dead. The consumers will have to pay for all the new capital assets, but they will not get the capital appreciation that comes from them.

My right hon. Friend spoke about dividend control. I am convinced that most companies, by scrip issues and other dodges, completely get round any kind of dividend control that we have ever attempted. I could go on about that, but I wish to make two other points.

Clause 2(2)(h) talks about the need to avoid detriment, from restraints on prices and charges, to the United Kingdom's balance of payments". I wonder whether that includes the companies which have completely refused to cut their prices and expand demand for British exports, which they could have done under devaluation. The argument for devaluation—if there is one—is that it makes one's goods cheaper overseas and one can sell more. Most companies have not reduced their prices overseas because they prefer to have higher profits and are not concerned with Britain's balance of payments or our economic survival. They are concerned with one thing only, and that is more profits. They have not cut their prices and we have not had the increased demand for our exports which we should have liked to see.

Mention has been made of the veto, a question to which my right hon. Friend has already responded. I would remind him of what the TUC said in its Economic Review. It does not see why the Government should not have kept the Code and tightened it and had additional powers of investigation. That seems to be the TUC's line.

I should like to return to Clause 17. I do not accept that the amendment of the Remuneration, Charges and Grants Act should be in this legislation. This Bill is concerned with prices. On the previous occasion when we had the opportunity of debating this matter, many of us, rightly or wrongly, kept the House well into the early hours. Many of us were opposed to much of the policy laid down in that Act. I still insist that the clause suggests that we shall have some kind of restraint or control over wage and salary increases right through to 1980. I am completely opposed to that, as I was completely opposed, rightly or wrongly, to wage restraint and wage control policies, whether Tory or Labour, which we have had in the past. I appeal to my right hon. Friend to give us an opportunity to debate Clause 17 in much more detail. The only way is for him to make arrangements for us to debate it in a Committee of the whole House.

Finally, I ask my right hon. Friend to comment on Clause 22(2), which says: The Secretary of State may by order— (a) provide that such of the provisions of this Act as are specified in the order shall not apply in such cases as are so specified Many of us feel that that gives wide powers. We are not satisfied that the Commission has any teeth. In any case, it seems to me that a Tory Secretary of State for Prices would soon withdraw such teeth as it had, under that clause, if not under others.

6.37 p.m.

Mr. Joseph Godber (Grantham)

I apologise to the House and to you, Mr. Speaker, for being unable to be present at the start of the debate, with the result that I did not hear the speeches of the Secretary of State or my hon. Friend the Member for Gloucester (Mrs. Oppenheim). I am grateful for the opportunity to take part in this debate.

I must first declare an interest, in that I am a director of one or two companies engaged in manufacturing and distribution. I also have people in my constituency involved in both these activities. I should like to speak mainly in my capacity as Chairman of the Retail Consortium and to address my remarks specifically to the terms, as I see them, affecting retailers under the Secretary of State's proposals.

The Bill has to be seen against our economic and political background. It is relevant to remind the House that the present Prime Minister, when he took over his office, talked a good deal about the need for profits and investment. I was present at the CBI dinner last year and can well remember the fine speech he made there. I am still waiting for him to implement a number of the matters he mentioned in his speech. I applauded that speech and I applauded the intention. We should remember that the Prime Minister stressed the need for profit and investment.

It is equally true to say that some limited move was made for the distributor last year, with certain amendments in the Price Code introduced by the right hon. Gentleman's predecessor. In particular, the amendment on stock appreciation was of help to retailers, and the raising of the threshold was a direct help to small retailers. I express thanks for these improvements.

Originally it was expected that when the existing powers ran out at the end of this July there would be a substantial further relaxation. Whatever our views about the present Government, we have to recognise the economic limitations on them. There is the continuing rise in prices, which is accentuated by the fall in the value of the pound. The hon. Member for Bristol, North-West (Mr. Thomas) equated this specifically with the Common Market. I cannot agree with him. My view is that it is equated more with the degree of Government over spending over the past three years, though I do not expect the hon. Gentleman to agree. There are also the IMF restrictions imposed on the Government last December and the need for a further stage of wage restraint.

These are limitations on anyone who holds the office of Secretary of State. Therefore, strongly though the retailers were opposed to any continuation of price control, we were very ready to talk with the Secretary of State and the Government on the sort of measures they considered necessary for the immediate future.

In passing, I would make clear that our opposition to continued control does not arise from any desire to exploit the consumer. Retailing is an intensely competitive business, and the consumer's safeguard lies in the competition provided by the vast diversity of retail firms, both large and small. That is a fact, however much the hon. Member for Bristol, North-West repudiates the degree of competition. In retailing there is genuine competition, which the hon. Gentleman can see in the High Streets in his own constituency and elsewhere. There is nothing phoney about it.

The opposition of retailers rests on the physical burden of complying with all the paraphernalia of price controls, the limitations imposed on our freedom of action, and the artificial restrictions of continued gross and net margin control. We under stood that at first it was the Government's intention to provide for only a modified form of control in the new powers which they were proposing to introduce from the beginning of August. It was only when we were told of the contents of the consultative document published in February that we realised we were to be confronted not with less control but with more.

That is the basis of my opposition to the Bill. Not only were we confronted with new powers for both the Secretary of State and the Price Commission, but we learnt that we were to be faced with a continuation of the Price Code and a continuation for retailers of the full extent of both gross and net margin control. That is an extension of control that can not be justified. The distributive industry is now so hamstrung that we shall see a further reduction of investment in it and a further drop in employment. Confidence has been shaken, and the effects of that have yet to be seen.

In fairness to the Secretary of State I must acknowledge that between the publication of the consultative document and the publication of the Bill he has moved to meet us on one aspect. I understand that he has now firmly committed himself by saying that the continuation of gross and net margin control will take place only if the Government publish the terms of a national wage limitation agreement before 1st July. I understand also that the Price Code is to be carried on yearly, with a maximum of three years. This is an improvement, which I acknowledge.

In a labour-intensive industry such as retailing, it would be unthinkable to attempt to continue rigid price control when wages have been let go free. I am glad that the Secretary of State has acknowledged that. I do not think that hon. Members fully realise the extent to which the previous stages of wage control under the so-called social contract had an effect on retailing. The first stage, which imposed a £6-a-week limit, may have been a real restraint on some sections of industry, but in retailing it gave a new ceiling of opportunity to workers. I am not saying that they did not need it and did not deserve it. Retailing has traditionally been a low-wage industry, and I am merely stating the facts. The point is that a £6 pay limit was an additional burden on the cost of distribution at a time when in some other industries there was a degree of restraint.

The Bill spells out the new controls to be imposed on industry and distribution, but till we see the new Price Code for which authority is provided in Clause 15 we shall not know the whole story. I should like to comment briefly on both what is known, in the Bill, and what is vet to come, in the Price Code.

Clause 1 and Schedule 1 deal with the membership of the Commission and empower it to work in groups. That is a change from the working of the present Commission, which has worked as one body. I do not object to the principle, but I would comment that the Secretary of State has rightly laid emphasis on the need for someone with an intimate knowledge of industry to be chairman of the Commission, but if it is to work in groups he will need a number of deputy chairmen with similar and equal experience. I hope that the Minister of State will address himself to that point when he winds up the debate. We should very much welcome reassurance on it.

I must deplore the proposal to delete the Minister of Agriculture, Fisheries and Food from the provisions of Clause 1. Perhaps I have a personal feeling, be cause I was the Minister of Agriculture, Fisheries and Food originally involved when the first Price Code was introduced. I am sure that the Secretary of State is aware that food is the most sensitive of all items, and it seems to me, with my knowledge of the matter, that it would be sensible to maintain the Minister of Agriculture, Fisheries and Food and his Ministry closely tied in with these provisions. There is an enormous amount of expertise in the Ministry, and the Ministry has a direct responsibility. It would be a great pity to leave him out. I hope that in Committee the Secretary of State will reconsider this aspect.

The criteria in Clause 2 mark a new departure in legislation on price control. What I am saying does not necessarily mean that it is a bad departure, but there is always a danger in including such criteria, because one is liable to appear to exclude by implication any aspects which are not specifically stated. I have heard this argument many times in the House over a number of years, and I think that it is relevant here.

In any case, some of the criteria will benefit from rewording, and I hope that the Minister will be flexible in Committee. Some of the criteria can be said to be helpful, some to be ambiguous, and some to be definitely unhelpful. I hope that the matter will be closely examined.

The new powers in Clauses 4 to 14 worry me very much. It would have been one thing if they had been introduced as a substitute for existing controls, but it is another to have them as additions. That is excessive. Retailers strongly object to the power to investigate individual companies. The existing gross and net margin control gives a complete check on a retailer's prices and profits, and he can be ordered to reduce both. Therefore, what possible justification can there be for this additional power? I ask the Government to reconsider the matter. I have already stressed it to the Secretary of State, but I repeat it because it is a fundamental objection that we have. With the continuation of gross and net margin control there is total control over the way in which a retailer runs his business. To give additional powers to investigate a specific company, powers related to distribution and not to manufacture, because in manufacture the powers will be related to specific products, is unnecessary and discriminatory. I very much hope that the Government will have second thoughts about this.

This brings me to Clause 15, which brings in the new Price Code. We do not know what will be in the code, nor will the House be able to amend it when it is brought before us. Therefore, if we have any comments we must make them now.

I have already represented strongly to the Secretary of State the need to restore the cut of 10 per cent. in the gross margin imposed by the Government in 1974. Even if that cut was justified when it was introduced, it cannot be so now, when costs have risen so astronomically. The effect of a cut, as I have reminded Ministers more than once, is to force all retailers to operate under the safeguard clause, under which, as long as the net margin is below 80 per cent. of reference levels, the gross mar gin can rise to 110 per cent. As the Price Commission reports show very clearly, gross margins since the end of 1973 have ranged on average between 91 and 97 per cent. Thus, as they are over 90 per cent., this means that all those affected have to apply the safe guard clause. They cannot maintain gross margins without reference to the safeguard clause. That automatically limits their net margin to 80 per cent. It must be wrong for a safeguard clause that was introduced to deal with special problems to have to be applied to the whole range of retailing.

I beg the Secretary of State to recognise the need—at the very minimum—to restore the 10 per cent. cut on gross margins and thus allow all retailers to operate on 100 per cent. of both their gross and net margins. It is time now to operate on the same basis as when the Price Code was first introduced. Retailers have had large increases in costs since then and it seems that there is an entitlement to greater gross mar gins. The restoration of the 10 per cent. cut would be a recognition of the fairness of that.

I also urge the Secretary of State to raise the thresholds for category 2 and category 3 retailers. Consumers are not helped by keeping these low limits. I acknowledge that something was done for the lowest category last year, but it would be sensible and administratively wise to make some further amendments here.

The present system must impose an enormous burden on the Secretary of State's own Department and on the Price Commission, when they now have to deal with this mass of small retailers under the code. There is very seldom a need to intervene. Competition is so keen that there is no need to intervene. But this mass of documentation still has to be provided. It would be sensible to raise the thresholds very substantially here.

There is a great deal more that I would like to say, but it would be unfair to detain the House for long because I know how many hon. Members wish to speak. I conclude by drawing the attention of the House to the Government's own figures showing the true state of retailing in this country at present. The Department of Industry's figures snow that capital investment by retailers has been dropping steadily since 1973. Even inflation has not been able to mask this, for the actual figures have dropped.

When one takes account of the effect of inflation, the story is a sorry one indeed. The amount of capital investment by retailers at present cannot be much more than half, by value, what it was in 1973. The Bill will cause it to drop still further. This is a point on which the Secretary of State, if he studies the Department of Industry's figures, will see the strength of the arguments that I have advanced.

We know that the Government wish to maintain employment, and they are aware that retailing provides a large outlet for school leavers. Therefore they should be anxious to maintain employment in retailing, but over the last two years the number of jobs lost in retailing has approached 50,000. This will continue under these proposals. There will be no alternative. It will be a question not of dismissing those who are already employed but of not employing school leavers when they become available, and that will be a great pity.

The trend in bankruptcies is depressingly and significantly upwards, according to the Government's own figures. There can be no doubt in the minds of those who study these matters that I am not overstating my case. That is the last thing I wish to do. Of course, there are many successful firms of retailers, both large and small, in this country, but there is no easy time for retailers today.

The consumer is not helped by an excessive control of retailing. Efficiency brought about by competition is the key note of the High Street, and, whatever the political reasons, there is no economic justification for the additional powers over retailers outlined in the Bill. That is why I am opposed to the Bill.

It is not that I do not recognise some need for continuing control as long as we need continuing controls on wages, but the Bill takes it further at a time when there is no guarantee that the same thing will be applied to the salary and wage structure. The Secretary of State is going too far in his effort to placate the TUC, which is what this Bill seems designed to do. These measures will not help the housewife but could damage her long-term interests. When there is a fall in investment and employment, the standards which retailers are able to give the housewife are bound to suffer.

I must express my opposition to the Bill and I hope that the Secretary of State, when the Bill is in Committee, will take note of the points that I have outlined.

6.57 p.m.

Mr. David Penhaligon (Truro)

After listening to the Opposition spokesman today, the hon. Lady the Member for Gloucester (Mrs. Oppenheim), I came to the conclusion that there was little or no hope for this country. Her implication was clear. Anybody who heard her speech who is not used to listening to speeches in the House would have come away with the impression that we could scrap all income and price controls, and inflation would disappear at the drop of a hat.

One could argue for a very long time about the causes of our economic difficulties, but at least one of the problems is that the Labour Party made promises in February and October 1974 which even some Labour Members now admit it had no hope of keeping. It made those promises on the principle of what I call "lollipop democracy" under which a party says, "If we offer one more lick to the electorate than the other parties they will vote for us".

The electorate, or at least some of them, now know that these offers could not have been met. What disturbs me and makes me wonder whether there is any hope for the economic and political future of this country is that the Opposition are now doing precisely the same. They are offering two extra licks in addition to the one extra lick which was offered before but which was never delivered.

If the House takes off all controls on prices and incomes we shall certainly have 50 per cent. inflation within 12 months The House must decide whether we really want to stop inflation. I must admit that inflation has not done me much harm. I own a portion of my house and most of that was bought for me by inflation. For a large part of the British population, inflation at a reasonable rate over a significant period does very little harm. People can always change their job and avoid wage controls if they have any real skill to offer.

The House must be honest and tell the people that the only way to stop inflation is to reduce living standards. My party was foolish enough to tell this to people in October 1974 and perhaps that is why there are only 13 Liberal Members. The only way to stop inflation is to reduce the living standards of the people of this country, and that is the process that we are going through now.

If there is inflation at the rate of 30 per cent. until I retire, the average wage in this country will then be about £40,000 a week. A loaf of bread will be about £150. The house I was talking about, if I still own it, will be worth just over £1 million. But I cannot believe that our democracy could possibly survive the strains that that sort of inflation would create.

The choice before the House is this. One way or another we shall have to reduce the living standards of the people in this country, and there are two ways of approaching that. We can leave it to market forces, which is what appears to be the Conservative approach. We can, alternatively, leave it to the Government to find the courage to try to share the pain—and that is all one can call it—throughout the electorate.

I prefer the latter approach, and that is one of the reasons I shall certainly support the Bill tonight. It is a major fallacy to believe that we can abandon all the controls on our economy without the situation getting even worse, and I am not claiming that it is particularly good now.

For my party one of the least appealing aspects of the Bill is that the powers which exist to investigate monopolies are divided up between three bodies. It appears that the Price Commission, the Office of Fair Trading and the Monopolies Commission will all have the power to investigate monopolies. I believe that the mono- poly laws in this country are too weak anyway. I wish that some of the trips that our politicians make to the United States were to study the anti-trust laws there. There is a great deal to be said for them.

I cannot believe that we shall make much progress in tackling some of the monopolies or near-monopolies that exist in this country when the powers that exist are divided between the three bodies. I cannot believe that those bodies will have any real effect. Many of us know that in food retailing any further amalgamations will destroy in many towns the competition which now exists. I think particularly of constituencies such as my own which have small populations and where there is precious little competition anyway.

I believe that the Bill should last for one year only, and I shall support amendments to that effect if I am able to do so. I am not convinced that the case has been made for a full three-year term. I am not saying that we would not sup port the renewal of the powers after a year.

I welcome the powers of investigation. Without such powers this Bill would probably be as big a waste of time as some of the Conservatives are saying it will be anyway. The powers of investigation are a necessity, but there is a problem about their arbitrary nature. No criteria appear to be laid down in the Bill. If the Commission enjoys the confidence of the people involved that will probably help a great deal, but I shall certainly consider amendments setting out some reasonable criteria if I am appointed to the Committee.

There are one or two companies in this country—and one has only to visit one's bank to see what I mean—which are embarrassed by the profits that they have made in the past few years. Those companies have spent the profits on anything they could think of in an attempt to get rid of them.

Another point worth considering is the three-month freeze on prices. I can conceive at least of the possibility of that being unfair to an individual company. What happens if at the end of the three months the company is found "not guilty"—because that is how the public will see the investigation? Will the Government send that company a cheque to cover the money it would have raised if the price increase had been allowed? They would not get my support if they sought to do so. Three months is too long a period, and the Government should make efforts to reduce it to a more sensible term. There is a reasonable argument for fining a company afterwards if found guilty, but I support the idea of a price freeze in some circumstances.

We shall be supporting the Bill on Second Reading. I am staggered at the Conservative Party trying to build up a pretence that we can scrap all controls and that the problem will then go away.

I should like to point out to some Labour Members that investment is a long-term problem. I ask them to question whether investment in industry which is operating at vastly below its capacity will make any contribution to our economy. It could be investment in unemployment, not in new opportunities.

This country desperately needs investment, but in the technologies of the 1970s. I do not know how we get that under way, but the root cause of our un employment is that the technologies developed in the late 1960s and the 1970s have totally passed this country by. I think, for example, of electronics in which we are pathetically weak.

I wish now to pursue a pet idea which I have taken up with various people. I can see nothing basically wrong with it. It is to force the manufacturers of packaged food articles to stamp the recommended price on them when they are made. I am not arguing for resale price maintenance, but I am aware of the confusion that exists in the shops in my constituency, and no doubt elsewhere, where the recommended price is not marked on the goods.

The shop puts the price on the article and advertises any reduction. However if one adds the charged price to the special offer reduction one rarely finds two shops in a town which agree on the original price. The confusion that that causes is understandable, and it makes price control more difficult because the consumer cannot discover the original recommended price. Manufacturers of packaged food items have no difficulty printing on the packages when the items are made. They can print "3p off" in bold lettering, so why can they not be forced to stamp on the packet the recommended price at the time of manufacture?

7.8 p.m.

Dr. Oonagh McDonald (Thurrock)

The Bill seems to me to be part of a continuing process to weaken price control. The important stage in this development occurred last August when a code was introduced making rules concerning allowable costs, rules which were so complex that they made the Price Commission's task very difficult.

The effects of those provisions under the code were to allow profit margins to double over their previous level, and now the allowable cost system has been dropped altogether. It is true that, especialliy after August 1976, that system was not particularly effective, but at least it had possibilities, and, used properly, those possibilities could have been advantageous to the consumer.

That system had the potential of development as part of a scheme for increased planning of the economy. The Government should refuse to allow price increases unless the company concerned had reached a planning agreement. The scheme should be used as a sanction to enforce better planning by the company and therefore of the economy overall.

The dropping of the allowable cost provisions is a further step away from th original idea of a Price Commission and price control. In August 1973 the Price Commission referred to the perfectly legitimate feeling that the consumer ought not to be expected to pay each and every increase in costs. Now we are moving rapidly into the position in which companies are protected from the effect of inflation while consumers are not. It is not surprising that when we go back to our constituencies we find that great pressure is put upon wages and salaries and that people are becoming increasingly restive as they face one price increase after another.

Further, in this Bill the Government have made no change to investment incentives. These incentives, rather than being handed out in a general way, should be allowed to those companies who can actually give evidence of new productive investment which is to the advantage of both employee and consumer alike. The general handout in the hope that the companies will improve their investments is not on any more. Let us have the evidence of better investment and then let us give out the concessions.

These are the things that are left out of the Bill, but there is one element to which I particularly wish to refer, and which I ask the Minister to confirm. I refer to a report in The Times of 28th February 1977. It says: It is unfortunate that Mr. Hattersley has accepted that his new Commission will not be able to investigate price rises imposed by the EEC farm policy. It will not, for example, be able to investigate a protective tax put upon tinned fruit where that same fruit is not produced anywhere in the Common Market. I should like the Minister to confirm the truth of this report and to add an explanation because, after all, as we have heard today already, the increase in food prices from which we suffer by our membership of the EEC is one of the great sources of difficulties for the consumers and shoppers week by week.

Now I want to look at the Price Code. There is control on prices through net profit margins. The reference levels were increased by various concessions in 1976 to such an extent that the Price Commission has said that the figures for periods after 1st August 1976 cannot be taken as indicating a true level of profit.

The difference made by the introduction of the Price Code last year was quite dramatic. In the last quarter, under the old system, the net profit margins were about 59 per cent. of reference levels for category one firms. The first results published under the 1976 code dropped to 39 per cent. As it is—with the net profits margins at present allowed in the Price Commission Bill—these have to reach 100 per cent. before resulting in action to reduce prices. In other words, the effect on profit margin control is, on average, likely to be nil. It is likely to be totally ineffective for many years to come.

There is no evidence that this average means that some companies will be effected by such control. In the first three-month period after the start of the 1976 code not one of the 2,447 reporting units providing goods and services extended its net profit margins to the reference level. The net profit margins may be only one third of the allowable reference levels. Profits could at least double before these levels acted as a restraint.

We could, of course, be wrong about that and if we are, the Minister should say so. We should like an estimate of the current relationship between net profit margins and the Price Code's profit margin reference level. Then we shall have some idea how effective that part will be.

Mr. Giles Shaw (Pudsey)

In dealing with profit margins under the code, I trust that the hon. Member for Thurrock (Dr. McDonald) will recall that these are based upon the years 1969–72 which formed the base reference level. Does the hon. Lady say that, if profit margins creep back up to that level, that is too great a rate of profit? Would she like to see a return to the rate of unemployment that existed in 1969–72?

Dr. McDonald

I want to deal with the general question of profits and investment later in my speech, so perhaps that would be the most effective way of replying to that point.

I have talked so far about what is in the Bill but I also want to talk about the investigatory powers. There are some improvements here. Power is given to the Secretary of State to enforce recommendations made by the Price Commission following a report on a sector of industry, but there is room for further improvement here. It would be better still to single out monopolies in the investigatory powers allowed. There are, of course, powers for the Secretary of State to which reference has already been made. He can veto an investigation and set it aside.

I wonder where the pressure will come from that will be imposed on the Secretary of State to stop an investigation taking place and when he will think that it would be reasonable for him to do so. Pressure could take different forms. It could come from the company concerned or from companies involved in a sectoral investigation. There may be some kind of outcry to which the Secretary of State might feel that he must give way.

We can get some idea of the relevance and of the number of investigations—the total will be about 50, which is probably all that the Commission can handle—if we take for an example the third quarter of 1976. There were 1,900 notifications of price increases received in that quarter by the Price Commission and that, of course, was for only three months out of a whole year. We can thus obtain some idea of the small number of price increases that could theoretically be investigated by the Price Commission.

The point is that the Bill is a weak Bill. This is a Weak method, of attempting to control prices and it does not get to the nub of the problem. It is the wrong approach altogether. There is only one way in which we can begin to deal with the whole problem of prices, bearing in mind that 100 manufacturing companies control at least 50 per cent. of production, 50 per cent. of exports and so on. The only way in which we can talk about prices in a sensible and effective way is in the context of a planning agreement where the trade unions are involved in the negotiations. We can then begin to talk about the pricing policy of the company, not only as regards one particular product but regarding a whole range of products. We can look at such aspects as cross-subsidisation of products and so on.

That is the context in which we can begin to talk about a proper pricing policy and that is also the context in which we should talk about profits. We hear a lot, especially from hon. Members opposite, about profits, how they are necessary for investment and that, any way, profits have been declining, that they are only paper profits and that one must not be misled by the figures that one reads in the Financial Times that show massive percentage increases. We are told that we must not be misled because these are paper profits and they are not real.

Then one looks at the increases in dividends and sees that the Treasury allowed 315 dividend increases above 10 per cent. in one year—and that is 315 out of 3,000 companies—and one begins to wonder what shareholders are getting. Are they just receiving bits of confetti through their letterboxes and bank accounts or real money that they can go out and spend? Incidentally, the allowance of 315 increases in the last year sounds a much more flexible policy than last year's pay policy. I did not notice any groups of workers receiving increases above the pay norm—and certainly not 315 groups.

Mr. Michael Shersby (Uxbridge)

Will the hon. Lady tell the House how pensions funds are supposed to protect the interests of their pensioners if dividends are not at a satisfactory level?

Dr. McDonald

I am sure that pensioners who support the Opposition will be pleased with the crocodile tears that he weeps on their behalf.

Mr. Shersby

Answer the hon. Member.

Dr. McDonald

It is an irrelevancy. Those who have shares and receive dividends should remain within the norm just the same as anybody else. They should not receive increases above the 10 per cent. level which is supposed to be part of the restrictions on prices and dividends as well as on pay. If companies cannot get round dividend restraint by applying to the Treasury for an increase and having it allowed, they can do what GEC does—that is, invent or make use of capital notes and in that way hand out £178 million to their shareholders. That means an increase not only in income for them but in assets, since capital notes can be used in that way. It is not enough to sit back and allow profits to rise and to have inadequate controls on dividends.

Again, we come back to the notion of planning agreements in which profits, prices, manpower policy, and so on, are all agreed between the Government and the trade unions. In that way the Government are able to ensure that investment takes place in this country, as opposed to abroad, and provides jobs for people in those parts of the country where the Government feel that it is necessary for jobs to be provided. That is the only way to ensure that investment takes place in a rational manner to the benefit of the whole country rather than to the benefit of a few people who can find ways to get round the restrictions imposed on working-class people who meanwhile have to suffer the effects of continually rising prices to increase profits, and dividend pay-outs to shareholders.

We shall pass the Bill, but the Government should look again at their industrial and economic strategy and see that price control makes sense only as part of a proper industrial and economic strategy.

7.23 p.m.

Mr. Kenneth Baker (St. Marylebone)

The hon. Member for Thurrock (Dr. McDonald) has argued eloquently and well for a different economic policy. I am sure that she would not expect me or the Government to agree with her views.

Those who have attended many debates on prices and incomes legislation could not help but feel, as the debate progressed, that we have been here many times before. When the Bill was introduced by the Secretary of State I recalled a similar incident in a similar debate in 1968 when he was then a junior Minister. At that time he was trying to sell to the House and the country phase 3 of the previous Labour Government's prices and incomes policy, which was a wage and price norm. The speech made by the Minister today could have been made in 1968, and the speech that he made then was made today because he said that he had all the weapons in the wage and price norm which would lead to the promised land if only we could grit our teeth and follow him like the boy carrying the banner to Excelsior. But the right hon. Gentleman has hopelessly exaggerated his powers.

Mr. Skinner

My right hon. Friend has always done that.

Mr. Baker

The hon. Member for Bolsover (Mr. Skinner) is right. It has become fashionable to say that the Chancellor of the Exchequer is a political thug because he throws his weight around. The Chancellor does that because he has the powers. The Secretary of State for Prices and Consumer Protection would like to be cast in the same mould. I believe that he would like to speak boldly and to throw his weight around. The trouble is that he is a sort of rubber thug, because the weapons at his disposal, as he knows, are not really strong enough.

Mr. Skinner

That sounds dirty.

Mr. Baker

The hon. Member for Bolsover must take that up with his right hon. Friend.

Mr. Skinner

The hon. Gentleman said it, not I. I am not here to worry about him.

Mr. Baker

Anybody who speaks in a debate on a Prices Bill should not exaggerate the claimed effectiveness of any prices policy. The powers that a Minister can exercise over prices, as has been proved over the last eight years, are marginal.

There are two factors which blow up and through any price code or prices policy. The first is a falling exchange rate, which is the result in turn of economic mismanagement, and that must destroy any kind of price control operated through a price code or prices policy. The second factor which destroys a price code is rising raw material costs which are outside our national control. There should be greater frankness on both sides about what any Minister can do about prices under any Administration.

There must also be a greater aware ness of the damage that can be done by advocating extremely simple solutions. It has recently been advocated that the way to combat inflation is to have a price freeze. There is now a growing awareness throughout the country, and certainly throughout the trade union movement, that a total price freeze leads to less investment and more unemployment. They are the two ends of the same see-saw. I see indications of dissent on the Government Benches, but that is what the Secretary of State said only a week ago. The right hon. Gentleman rejected the idea of a complete price freeze, and I was supporting what he said.

Mr. Martin Flannery (Sheffield, Hillsborough)

The hon. Gentleman always does.

Mr. Baker

I do not entirely agree with everything said by the Secretary of State. However, I do not want to exacerbate feelings between Labour Members below the Gangway and their own Front Bench. That is not my way.

Mr. Skinner

The hon. Gentleman would have a job to do that.

Mr. Baker

There are good and bad elements in the Bill. One good element is that the Bill marks the abandonment of the attempt to conrol prices through costs. The 1973 Price Code, introduced by the Conservative Government, was the first attempt to try to control prices through the level of costs in a particular company or industry. The Government have now accepted that that is not feasible. Indeed, they accept that costs establish only the level below which goods cannot be sold without a company going bankrupt. Rarely do they establish the level at which goods are sold. The prices at which goods are sold are determined by many factors other than the cost of the raw materials and labour which go into their production. The costs path which has been followed since 1973 has now been abandoned. Indeed, I suspect that the Government will fairly soon abandon the margin controls which have been retained in Clauses 9 and 15.

Competition is by far the most effective way of keeping prices down. For example, last weekend I bought a pair of garden shears. The choice open to the consumer who wishes to purchase an item of that kind is enormous. He can go to Woolworth's, a garden shop or centre, or an ironmonger's shop. The fact that there is such a wide choice available means that prices for such implements are kept down. That is true of a great variety of goods in this country.

Mrs. Wise

I am sure that the hon. Gentleman will agree that he does not buy garden shears very often, but, presumably, he often buys detergents and soaps. Is he aware that only two companies control 90 per cent. of the market in detergents and soaps, and that that can be matched for most of the other key foods and household goods?

Mr. Baker

I hope that the hon. Lady will contain herself, because I intend to speak about imperfect competition and the monopoly situation of certain companies.

A further example, if an example is needed, can be taken from the work of the Price Commission. It recently produced a report on the charges of under takers. An investigation into those charges was not necessary, because if one picks up any local paper on any day one will find advertisements from between 12 and 20 different undertakers. After a lengthy study the Commission decided that competition worked in that industry and that the consumers—or the relatives of the consumers—benefited considerably.

The market is the best determinant of price for the majority of goods and services. Indeed, the Government accept that, because Clause 2 of the Bill states the need to safeguard the interests of users of goods and services by promoting competition between suppliers". That is one of the criteria that the Government are putting into their legislation. They are providing it not only for the private sector but for the public sector, and I welcome that.

The clause goes on to state that where competition is restricted or cannot be promoted, the Commission must restrict prices and charges.

That brings me to monopolies and imperfect competition. The rôle of the Commission is investigatory, like that of the Monopolies Commission. It is regulatory like the Monopolies Commission. It has powers of investigation as does the Monopolies Commission. The Price Commission should become part of the Monopolies Commission, and the Office of Fair Trading should also be combined with that larger Commission, because the function of those three bodies is to deal with similar matters. They must deal with the state of imperfect competition when the market is dominated by a handful of companies. The duty of the Office of Fair Trading is to control and examine services and the level of services. I hope that those three bodies will be combined and that the Price Commission will become part of the Monopolies Commission.

The Price Commission should be concerned with the 200 or 300 companies which represent between 60 per cent. and 70 per cent. of the country's output. It should not concern itself with the manufacturers of goods such as garden shears and services such as those provided by undertakers.

I accept that there is a rôle for the Price Commission in examining the trading activities and prices of certain companies. The Monopolies Commission has that power. If the Price Commission operated with the Monopolies Commission it would operate in an established framework which has clear criteria.

Many hon. Members have said that the criteria in the Bill for investigating price increases are too lax. I agree with that. One of the criteria to be established is that the Price Commission should not have the power to investigate a price increase in a company unless that company has 5 per cent. of the market. I advocate clearer criteria.

I was a little puzzled by the statement of the Secretary of State. He said that under existing proposals in the Bill the Price Commission would probably undertake about 40 inquiries a year. That means that perhaps 10 inquiries would be conducted at any time—20 at the most. There will be 660 civil servants to conduct those inquiries. I cannot believe that each inquiry will require the services of 60 civil servants. Even if one doubles the workload, 30 civil servants conducting one inquiry would be over-manning on a massive scale. I hope that in Committee we shall be able to probe the Secretary of State further on that issue. The present staffing of the Price Commission cannot measure up to the responsibilities imposed by the Bill.

Mrs. Sally Oppenheim

Is my hon. Friend aware that under the Swiss system of price controls there have been about 30,000 investigations in three years and that only 15 people were employed in the price investigation department?

Mr. Baker

All I can say is that they must have been very busy. Earlier today I saw nine civil servants in the Official Box. I do not remember seeing so many there before. They cannot have been very busy preparing their investigations.

The criteria in Clause 2 are broad and vague. Many of them are value judgments. They deal with promotion, competition, fair trading and defraying the cost of capital. Will current cost accounting be taken into account? That is critical to the rate of return on investment.

Clause 9, which has the engaging title of "Safeguard for basic profits"—what ever that means—is also vague. There are to be safeguards which companies under investigation will enjoy if basic profits—whatever they may be—are eroded. The method of investigation during an inquiry is totally unsatisfactory. If a company puts up a price, whether it informs the Price Commission or not, it is subject to investigation. If that happens a price freeze is imposed for four or five months. That is unacceptable. The 660 .

civil servants involved could decide within a week or two. Why should a price freeze hang over a company for that length of time? I suspect that it is likely that when a company informs the Price Commission of a 10 per cent. increase there will be a haggle about whether there should be an inquiry. I suspect that there will be an inquiry if the price increase is 10 per cent. but not if it is 5 per cent. That would mean that we should need fewer civil servants.

I turn to the nature of the Price Commission. Under the Bill it is given an almost semi-judicial rôle. It must examine the case for price increases in an impartial manner in the same way that the Monopolies Commission must decide whether a monopoly exists. The Price Commission should not, therefore, be representative of interests such as the CBI, the TUC or the consumer. Members of the CBI and the TUC and consumers should be price commissioners but they should not be on the Commission because of their representational rôle. I understand that the Secretary of State is looking for a Price Commissioner who is representative of the ordinary consumer. I should like to know when he finds that paragon. Will it be male or female, elderly or young? I hope that it will be one of my constituents. It shows the absurdity of trying to find representatives for bodies of this kind who allegedly represent interests. The function of the Price Commission is judicial, and its members should be detached from interests and should examine each case impartially.

I have suggested that the Price Com mission, the Monopolies Commission and the Office of Fair Trading should be rolled into one body. I also believe that the Department of the Secretary of State, which has himself and two other Ministers, should be absorbed into the Department of Trade. I do not see any justification for a separate Department. It falls naturally into the regulatory functions of the Department of Trade, and it is an anomaly that we have a small separate Department dealing with this range of consumer affairs. The amalgamation would be much more sensible.

It would mean that the right hon. Gentleman would cease to be a Cabinet Minister in his present function. I am sure that he would be a Cabinet Minister in some other function. I do not want to dash the cup entirely from his lips, but the function of his Department would be better conducted under the Department of Trade. By that recommendation, Idash the cup from the lips of my hon. Friend the Member for Gloucester (Mrs. Oppenheim). But I am sure that another function in the Shadow Cabinet would be found for her.

In approaching the area of price control, the Government do no service to the awareness of the public if they exaggerate the force that they have. Unless we go in for the sort of economic philosophy and system for which the hon. Member for Thurrock argued, which is a totally planned and controlled economy from be ginning to end, any system of price and wage control that we have must be flexible and must accept the realities of life. The Secretary of State cannot control the weather and cannot control forces which are outside his control. It would be better if we as politicians recognised these facts and said frankly that, what ever powers the Minister has under this Bill, we cannot reduce or control prices. Certainly the right hon. Gentleman can not. There is a rôle for him. It is to investigate companies which act in an area of imperfect competition. That is a legitimate rôle for Government. Be yond that, I thing that there is a very limited rôle for any Government.

Several Hon. Members


Mr. Deputy Speaker (Mr. Bryant God-man Irvine)

I ought to advise the House that the Front Bench speeches are expected to start at 9.15. Nine hon. Members are still trying to catch my eye. A little mathematics will indicate 10 minutes for each of them if everyone is to be happy.

7.43 p.m.

Mr. J. W. Rooker (Birmingham, Perry Barr)

I shall try to comply with your suggestion, Mr. Deputy Speaker. I do not want to deal with the whole range of this Bill. That would be repetition because it has been done already.

I intend to devote most of my remarks to the incomes aspect. However, if I might make just one comment on the prices aspect, it is to point out that this Bill gives very wide discretionary powers to the Minister.

It is all very well for the Government to propose these powers. They are on .

our side, and we are in charge. But simply because my Government are proposing these powers, I do not necessarily accept that that is a good way to govern the country. The powers are much too wide. There is no accountability to this House and to the people's elected representatives. In the short time that I have been a Member of Parliament, I have seen more and more Bills coming forward giving a greater degree of discretion to Ministers. It is a trend which I do not like. I do not like the principle. I know all the problems which would arise from taking another course of action, but I still think that this House should take far more decisions than it does at present.

In Clause 22(2), we find no provision for a report back to Parliament to wipe out a whole industry from the coverage of this Price Commission Bill. I know that my right hon. Friend the Secretary of State would not say it and I suspect that my hon. Friend the Minister of State will not admit it, but the fact is that we distinguish between private and public enterprise in a way which people outside this House do not generally appreciate. It is difficult for Questions to be tabled on matters of detail affecting the nationalised industries. But I want the Price Commission to be involved in investigations into nationalised industries. I do not want a repetition of the fiasco that we have just had about gas.

After this Bill is on the statute book and we have conned the country into thinking that we have toughened up price control, the Treasury may decide to tell the Post Office to put another 1p or 2p on the price of a stamp in order to cut down the borrowing of the Post Office. The Price Commission will not have a chance to conduct an investigation. It will be cut out straight away by the Minister. It will be a Cabinet decision.

Mr. John Fraser

It is because we already have a system of investigating nationalised industries that my hon. Friend has been able to make his com plaint about the gas industry. Without that prices supervision, these matters would not have come out into the open.

Mr. Rooker

But if the conclusion was reached on the evidence that a price increase was not justified, that decision should stand. It should not be over turned by Ministers, be they Labour, Tory or Liberal. The fact is that the public have been conned, and I do not want to be a Member of a House that passes Bills which perpetuate this kind of con trick. No one will be able to deny that the example which I have given of a Post Office price increase cannot arise where the Price Commission may say that it is not justified and where Ministers may say that they will not allow an investigation or, if the Price Commission has started one, that they will not accept its findings, or that they will veto the investigation after it has started. That can all be done under this Bill, and it is not good enough.

The hon. Member for Gloucester (Mrs. Oppenheim) preached hell-fire and dam nation against the Bill. But the Opposition will not vote against the Second Reading. They will be voting for their amendment. However, subject to what is said after 9.30, it may be that some Government supporters will vote against the Bill to try to persuade the Government to bring before the House a measure which is a little more effective.

I come briefly to the aspect concerning incomes. We have heard of the Prices and Incomes Act of the previous Labour Government. We have heard of the Counter-Inflation Act of the Tory Government. The titles of both could reason ably be said to cover prices and incomes. However, I do not think that it is reason able in the Price Commission Bill to deal with incomes policy. I have argued this publicly. I have argued it privately with my right hon. Friend the Secretary of State.

The Government have perpetrated a sleight of hand. I do not wholly blame them. I blame the civil servants for sticking this re-enactment of the Remuneration, Charges and Grants Act in this Bill. It could have been in the Finance Bill. It should have been in a Bill of its own from the Department of Employment, as the 1975 Bill was. In that way, we would have had a chance to discuss what has happened in the two years since July 1975 when we were forced to sit day and night to rush through the previous Bill.

I do not accept that a one-day debate on a White Paper is good enough. I should like to see Clause 17 removed .

from the Bill in Committee and to have the Government bring it back after publishing a White Paper following discussions with the TUC.

It seems that we are in the same situation that we faced in 1975. We then passed the legislation that was required. It is dressed up incomes legislation. We should pass what is required only in the full knowledge of the circumstances of the deal with the TUC. This should be after the White Paper is put before the House and agreed by the House.

I do not accept the TUC statement issued today. There was one hell of a row this morning at the TUC General Council over parts of the Bill. When the Council last sat the Bill had not been published. I know that there was consultation. They had the consultation document but the Bill was not published. In fact, it was published on 1st April. The General Council issued a statement, but I do not accept its statement that the Bill does not pre-empt discussions now taking place with the Government on what should follow the present pay round; Of course it pre-empts what will take place. It is all very well saying that there will be a stage 3 and we might want a stage 4 and even a stage 5, but if we are being fair and open on these matters the time to make a decision is when the policy comes to an end.

I am prepared to help in putting through a special Bill each year. I know that there are problems in taking that course. We do not have to wait until the latter part of the summer sitting and all the problems of the log jam as a result of Bills coming from Committee. I am sure that such a Bill would be accepted at other times of the year. We do not have a rigid statutory pay policy that it is accepted will continue for ever. We have a policy that operates from year to year. It is not good enough to state in the Bill by implication that the policy will continue until July 1980. The clause should be removed until an agreement has been made. If that mechanism helps the Government and the TUC to get together earlier in the year, so be it. That is all to the good.

I am not a free-for-aller. A free-for-all is not a fair-for-all. On the other hand, I do not like the present situation. It is a situation from which we have not gained. The low-paid workers involved with industrial wages councils have not gained. We listen to Opposition Members bleating about those who they claim have suffered under the economic situation in the past few years. They say that take-home pay has been affected. One would imagine that everyone has abided by the terms of the pay limits. We know that they are voluntary and, by and large, accepted by millions of workers through out the country. They apply to all except those who are plant managers at British Leyland who are moved around the country to get fictitious promotion, or company chairmen.

However, by and large the people have accepted the pay limits and work within them. I know that earnings have increased for other reasons, but the increases have been considerably less than those that were gained before the introduction of the pay policy.

What is not fair is to perpetuate a system that cons the workers. It is not fair to suggest that we have a tough and rigorous price control, which we have not and which will not be introduced by the Bill, and a pay policy that the Bill will perpetuate for another three years, a policy that applies equally to all. There is a £4 maximum for everyone this year. It will apply to hon. Members and to yourself, Mr. Deputy Speaker. It will apply to civil servants. It may even apply to those in the Press Gallery. However, there are exceptions. It is the exceptions that totally undermine confidence in the policy. They undermine the confidence of the workers who have gone along with it.

I cannot understand why we do not get more bleating from the TUC, the leaders of which, I must confess, are as much out of touch with their members as are members of the Cabinet. Let it be clear: I do not represent the TUC General Council. A statement has been given to some of those who have expressed disquiet about the Bill. It is stated that the TUC General Council does not want any Member of Parliament to vote against it. It would not like that to happen tonight. But I do not represent the members of the TUC General Council, I represent my constituents.

It is the members of the TUC General Council who, by and large, have let down my constituents, including my trade unionist constituents. It is relevant to point out that 50 per cent. of the workers in my constituency are skilled and semi skilled persons employed in manufacturing industry. They have been let down because in some respects many members of the TUC leadership are out of touch with the members. That is why there was lobbying last week. I refer to the lobbying that took place by the elected representatives of the workers. We do not need 20,000 people outside to tell us that there are problems in industry. Their elected representatives came to the House. That is legitimate representation. Most people do not want to lose a day's pay.

I shall give an example that typifies what I have been saying about breaches of the incomes policy. All industrialists, company chairmen, trade union leaders and Ministers are saying something like this: If there is to be a phase 3 of the incomes policy operating from August, which we believe to be necessary, it is essential to allow adequate flexibility within an overall maximum. When that has been said there is usually also some comment about differentials. Everyone is saying something like that, including company chairmen such as Viscount Caldecote, the Chairman of the Delta Metal Company. I have quoted a passage from the annual report of that company, the report being released three days ago. It is a good company. I have respect for its managers and its workers. A great deal of growth has been generated.

The Delta Metal Company has not paid much corporation tax. It has made large profits but has not paid much corporation tax. The hon. Member for Gloucester says that the corporation tax that is paid by the private sector is funding our social services. I do not have the figures at hand but the total revenue from taxation in this country is about £40,000 million. Corporation tax is estimated to yield £2,500 million. I believe that about £17 million comes from income tax. The rest is made up by VAT, customs and excise duty and minor taxes.

The Delta Metal Company has not paid much corporation tax because like many other companies it has availed itself of the deferred tax arrangements. For example, Lucas Industries has £31 million of deferred tax in the kitty that it is not spending on creating new jobs.

I have referred to the remarks of the Chairman of the Delta Metal Company. I met Viscount Caldecote at a Dinner that the company gives to hon. Members on both sides of the House who have a constituency interest. The Dinner was held shortly before Christmas. Viscount Caldecote made a speech attacking my Government. I interrupted him and I asked him afterwards whether his £70 a week pay increase of the previous year was paid before the introduction of the £6 policy. I asked him that question because it covered the year before we started the policy. The implication of the answer was that it was paid before the £6 policy was introduced. The latest report covers the half-year of £6 and the half-year of £4—namely, the present period. Viscount Caldecote's remuneration from the Delta Metal Company—he has other jobs—has increased by £4 a week. That is more than £6 a week and more than £4 a week.

As I am entitled to do, I have referred the matter to my right hon. Friend the Secretary of State for Employment under Section 3 of the Remuneration, Charges and Grants Act. That measure appears to enable me to question whether remuneration exceeds the limits deter mined by the pay policy and the White Paper. Viscount Caldecote is earning £30,000 a year. After the Budget his net take-home pay increased by £20 a week. That is in addition to his pay increase, his four other directorships and his £16.50 a day for signing on in another place.

It is this situation that makes me bloody livid about the contents of the Bill, the perpetration and perpetuation of a con trick on the workers. We are saying that we shall screw down prices and introduce a pay policy that is fair for all, but unless my hon. Friend can match some of the arguments that I have advanced I might consider voting against the Second Reading of the Bill.

I do not hold my hon. Friend person ally responsible. I know that he is an honourable member of the Administration. Not all members of the Administration are honourable in this respect. Some speak with forked tongues. I exempt my hon. Friend from that charge. I want him to answer the points that I have made. If he does not, I might consider—I do not want to have to do so—voting against Second Reading.

These points on incomes policy have to be brought out. It is no good hiding behind the statement issued today by the TUC General Council. It is irrelevant to introduce statements that were made before Clause 17 became an issue. The members of the General Council did not really know about this. In their statement they made no remark about the three-year extension of the pay policy. They have referred to other aspects of Clause 17 but not about the three years.

In Committee my hon. Friend must go along with the view that the three years must be reduced to a maximum of two years. That would maintain some consistency with the previous two years for which we have legislated. It would keep us from a position in which we might be forced into a General Election with this legislation on the statute book. With its incomes content and prices content being so discriminatory, it would be a godsend to a Tory Government and Tory Ministers. I wish to protect my own Government and party from being in that situation.

8.0 p.m.

Mr. Michael Shersby (Uxbridge)

I have listened with interest to the speech of the hon. Member for Birmingham, Perry Barr (Mr. Rooker) with some of which I am in agreement, but I hope that he will forgive me if I do not follow him in precise detail. The matters upper most in my mind are the need to control inflation, the need to maintain a high level of investment, which in turn means jobs, and the need to ensure that the consumers continue to enjoy a wide range of choice of food products.

With inflation running at a rate approaching 20 per cent., the price of food, the basic necessity of life, is upper most in the minds of most of my constituents, and, I dare say, in the mind of every Member of this House. Any housewife in any High Street will say how difficult it is for her to manage her family budget in the inflationary situation in which Britain is placed. Her prime concern is, therefore, with the price of food.

Consequently, what the housewife wants to see is the Government tackling inflation, but at the same time I do not believe that she wishes to see them commencing the destruction of manufacturers who are her partners and who are providing the food that goes into her shopping basket. Moreover, I do not believe that she wants to see a Bill which threatens investment in food manufacture and the jobs of many people in the British food industry.

Unfortunately, the Bill as drafted will undoubtedly threaten investment and, in my opinion, will lead to fewer jobs. It will create instability and uncertainty amongst the food producers, and it may well affect the choice of goods that will ultimately be available to the consumers in the High Street shops. In my view, the Bill, which is, of course, part of the Government's social contract with the trade unions, is designed mainly to give the appearance that the Secretary of State is doing something to hold down food prices in order to meet anticipated union pressure about increased prices which the Secretary of State and we all know are already in the pipeline, and about which very little can be done. But the price that the country will have to pay for this kind of window dressing may well be too high. The price may be fewer jobs, resulting from less investment, and I want to explain why I believe that to be so.

Clause 4 contains the power, which the Secretary of State today said is to be permanent, whereby the Price Commission can prevent a price increase simply by deciding, without explanation, to investigate it. Moreover, Clause 5 extends that power still further—to freeze a price for which no increase has been proposed and for which no notification is required. I believe that these two clauses represent government by administrative fiat to be exercised by the Secretary of State and his appointed placemen, instead of government subject to the consent of Parliament at regular intervals.

On the Secretary of State's own admission, the Bill is likely to affect some 40 companies a year. This power to freeze prices will be exercised by a group of any three members of the Price Commission appointed by the Chairman. That is an enormous power to place in the hands of three men. At present, we do not even know who they will be. We cannot even be sure that they will be wise men or women. I hope, therefore, that we shall be told what experience of a complicated .

industry like the food industry the people who will serve on the Price Commission will have. I believe that it is just this sort of power, given to an appointed body directly under the personal power of the Secretary of State, which creates uncertainty.

How, for example, can any food manufacturer plan his production and his investment when, at any time, without notice, the price of his goods can be frozen for several months because three members of the Price Commission, who will be subject to considerable pressure not only from the trade unions but from other sections of the community, have decided to recommend an investigation? I believe that there is a very great danger here that, in taking power to penalise what he today called the tiny minority whose conduct he may find unacceptable, the Secretary of State may utterly destroy the confidence of the great majority of reputable food manufacturers.

The Secretary of State has tried to reassure the House that these powers of the Price Commission will not be abused. He has said that the membership of the Commission will be acceptable to industry and the community at large. But the House cannot know that until the members are appointed, and even then, food manufacturers, for example, will not know why one firm has been selected for an investigation and another has not. That is an appalling situation.

The Secretary of State said that the efficient socially responsible company has nothing to fear. He added that he will use his powers to increase a maximum price recommended by the Commission. What precisely does he mean by these statements? Will the Minister tell us precisely in which circumstances the Secretary of State would use his power to increase a maximum price recommended by the Price Commission? Would he perhaps, if some error were made by the Commission, use his power to redress the situation and to allow a manufacturer to recoup the money lost by the freezing of his prices?

The whole essence of the Bill, as I see it, is that it puts this tremendous power into the hands of an appointed Commission without the House of Commons having the power to exercise proper control. It will create very grave concern in industry and will sap its confidence. Does the Secretary of State perhaps not appreciate that the exercise of such power without proper safeguards can deprive food manufacturers of their legitimate profits in such a way as to threaten jobs?

It is intolerable that the Government should try to operate by means of what is little more than a tribunal operating within the Price Commission in such a way that it could have dire and perhaps unforeseen effects on employment. There can be no doubt that the uncertainty that will be created by these measures will result in a reduction or a cancellation of investment programmes. It will not, therefore, be of much consolation to the housewife for the price of a particular range of food to be frozen for several months if perhaps her husband's fellow workers or her own in the food industry lose their job prospects into the bargain.

If there is to be any industrial support for the Bill as an anti-inflation measure, there must be proper safeguards to pre vent a trio of Price Commission members from arbitrarily using their power in such a way that it can threaten the whole fabric of an industry. If satisfactory safeguards cannot be devised in Committee, it would be wiser for the Government to drop the freeze-during investigation power, because it is this which is sapping the confidence of industry. I say this because it may not be realised in the House that the profits of the food industry on an historic cost basis averaged about 4 per cent. in 1976. If the Bill were enacted in its present form, therefore, it is not difficult to see that one year's profit could be lost in one month, and that three years' profit could be lost in three months, if there were delays in implementing unavoidable price increases.

I hope that the House will also realise that many companies in the food and drink industries have made a commitment to future investment in support of the Government's declared industrial policy. This depends upon confidence in the food industry that the necessary cash can be raised for working capital and the expansion of fixed assets.

Let us take some examples of investment. Rowntree Mackintosh plans to .

spend £65 million over the next three years on fixed assets alone. Cadbury Schweppes intends to spend £28.5 million on modernisation of production facilities and Allied Breweries has announced that it intends to spend a massive £164 million on modernisation and expansion of its plant.

We are all keenly aware of the contribution that such companies make to our export drive, but if the Price Com mission, using the powers in the Bill, were to freeze prices for several months during investigation of increases, there can be little doubt that the effect would be to cause many companies to revise their investment plans. They can have no confidence that their cash flow would be adequate if the Bill is passed as it stands.

Only the deletion of the power to freeze prices during investigation or the insertion of safeguards at an acceptable level will ensure that planned investment programmes remain in being, and it is only then that the future of jobs in the food industry can be secure.

The consumer is faced with grave con sequences if the Bill is passed. The housewife looks upon the food manufacturer as her friend and partner. She is in close contact with the manufacturer because of the intensive market research that he carries out and because of the many other ways in which he keeps in touch with his customers. The house wife will not take kindly to the effects of the Bill. It will have little effect on rising prices and I agree with the hon. Member for Birmingham, Perry Barr that it is simply an attempt to con the country.

It is a bad Bill, and if it is given a Second Reading I hope that it will be substantially amended in Committee to take account of the problems to which I and other hon. Members have referred and which the industry has drawn to the attention of the Secretary of State with out getting the impression that he cares much about what it is has to say.

I intend to vote for the amendment.

8.13 p.m.

Mrs. Audrey Wise (Coventry, South-West)

I challenged the hon. Member for Gloucester (Mrs. Oppenheim) during her speech to say whether she was in favour of any price control at all and, if so, what kind and in what circumstances. She declined to indicate that any price control would be acceptable to her or her party, and said that she preferred to put her faith in what she calls fair competition. If we lived in a world where there was fair competition, that would be a more understandable reaction, but I wonder whether the hon. Lady knows that in 20 of the 22 main industrial and service sectors of our economy half the assets of the whole sector are controlled by six firms or fewer. That is a very high degree of monopoly, and one can not speak of fair competition in these circumstances.

These huge empires do not compete on price terms at all In retailing, for instance, they compete through gimmickry promotions. It used to be by plastic roses and although it has become somewhat more sophisticated, it is still that sort of competition and not price competition.

The situation is at its worst in food and key household products. We have heard much about competition in the High Street, but retail distribution is one of the sectors controlled by six giant concerns. When the housewife enters one of the numerous stores that look like small High Street shops she is really getting entangled in the tentacles of one of these six enormous octopuses.

Mr. Giles Shaw

Is not the Co-op one of the six, and should not the hon. Lady be rather proud of that?

Mrs. Wise

That is beside the point. The Co-op is not like the other five. It consists of an association or even autonomous societies, town by town. It is a co-operative owned by its consumers.

When the housewife goes into one of the shops owned by the retail giants the situation gets even more ludicrous. An hon. Member who was earlier speaking about competition mentioned garden shears and when I pointed out that we do not buy garden shears every week he changed his example to talk of under takers and sought, by reference to garden shears and undertakers, to prove that we are living in a truly competitive society. I told that hon. Member about detergents and soaps, in which two giants control 90 per cent. of the market, but there are other examples.

Salt is an everyday commodity and two giants control 90 per cent. of that market. Three giants control 80 per cent. of the margarine market and three giants dominate the condensed and evaporated milk market. In all these sectors there is also considerable overlapping with the same giant often controlling enormous amounts of the food market. One food after another is controlled by the same giant companies.

Mrs. Sally Oppenheim

I share some of the hon. Ladys concern about the concentration of power in monopolies, but if our economic climate were different, and if measures such as this Bill were not introduced, more people would be jumping up to compete with the giants, and more of them would stay in business longer.

Mrs. Wise

If the hon. Lady looks at a bit of economic history she will see that the concentration of power has been a steady progression decade by decade—we shall soon be able to say century by century—whatever kind of Government have been in office. The concentration of power is an inherent characteristic of capitalism and the hon. Lady had better learn that. It has nothing to do with the rather feeble legislation before us. The idea that we can rely on fair competition for the protection of consumers is nonsense. I share this view with my right hon. Friends on the Front Bench. That is why they have brought forward this legislation, and though we differ about how effective the Bill will be, we can have no doubt that the Opposition's attitude means sacrificing the consumer to the unbridled pursuit of private profit.

Turning to the Bill and how effective it will be, I shall not refer to Clause 2, which has already been dealt with in detail by some of my hon. Friends. I regret the presence of the tiny Clause 3, which terminates the present requirement that there should be quarterly reports from the Price Commission. It is a pity to move from quarterly to annual reports and I wish that the clause had not been included.

I wonder whether the change is because of the rather embarrassing disclosures that have been made in the quarterly reports. The report published in January made clear that the Commission could not express a view on the movement in profit margins. Considering that the Price Code depends on these margins, I thought that rather odd, but when I attempted to raise it at Question Time I was not sure whether my right hon. Friend had even read the report. He did not seem to be aware that on page 6 the Commission said: The calculation of profits and profit margins for price control purposes is now highly artificial and bears little resemblence to profits as calculated on accepted accounting principles. This means that there will be a sharp divergence between 'Code' profits and the profits appearing in companies' published accounts, the Code profits in many cases being substantially less than the published profits. If we are to have a Price Code based on profit margins it would be a lot better if they were real profit margins and not what the Price Commission itself calls highly artificial ones. The Price Commission also said that in some circumstances companies will be showing 'losses' for price control purposes while their published accounts will show substantial profits. That entitles us to look with some scepticism at this kind of machinery.

Although that is a matter of history, we are renewing the legislation as well as altering it. Therefore, the matter is very relevant to the Second Reading of the Bill.

The same report tells us: The tables in Appendix 7D therefore simply indicate the extent to which companies have, or have not, kept within their reference levels. They cannot be used as indicating the true level of profits, still less can they be used to indicate the trend of profits over time. What is happening to the trend of profits over time surely has great bearing on whether price increases can be regarded as in order or justified. Therefore, I have been very worried about the present operation of the Price Commission, and I wonder whether these disclosures are why we are moving from quarterly reports to annual reports.

I come to Clauses 4 and 5, which concern the veto on inquiry at any stage. I am not reassured by my right hon. Friend's remarks on this matter. I hope that he will find time to elaborate further why it is necessary for him to be able to prevent investigation. If he reserved the right to reject recommendations, I could understand and accept it, and I should regard it as proper, because I do not believe in government by commissions, whether they are price commissions or commissions of any other kind. I believe in government by elected Ministers in Parliament. Rejecting recommendations would be one thing, but stopping an investigation is quite another thing. There may be companies that would say "Let us have a planning agreement in order to avoid an investigation by the Price Commission." The door would be open to that kind of thing. I see that my right hon. Friend nods his head. I should regard that as a very great move away from the sort of motive that should imbue the signing of planning agreements.

What a funny clause is Clause 8. The Explanatory and Financial Memorandum says that where the Price Commission gives notice of a breach of an undertaking that it has been given by a company the Secretary of State may invoke his order-making power … or accept a further undertaking. Therefore, we can go from undertaking to undertaking. That does not seem to be a very strong provision.

However, Clause 9 is strong, because it lays on the Secretary of State a duty. That is a bit of a change in the Bill, because it is prepared with popwers that may or may not be invoked. I hope that they will be invoked if they are useful, but the word used is "may". However, this clause imposes the duty on the Secretary of State of making regulations laying down minimum levels of profit that companies must not be prevented from earning during the course of an investigation or as a result of recommendations made following an investigation. Therefore, the firmest duty laid on the Secretary of State is the duty to ensure the maintenance of profits. I wonder whether that will be enforced. I rather think that it will be. I am sure that the maintenance of minimum profits is more likely to be firmly enforced than is the maintenance of minimum wages under the Wages Council regulations.

Therefore, up to and including Clause 9 the Bill is not really very good. One of my hon. Friends has talked at length about Clause 17. I shall not repeat what he said, although I agree with it. Clause 22(2) is really a gem, because it enables the Secretary of State to lay to one side all the rest of the Bill when he so chooses. It states, The Secretary of State may by order (a) provide that such of the provisions of this Act as are specified in the order

Hon Members

The 1973 Act.

Mrs. Wise

It says "this Act". Surely "this Act"—I do not understand the Bill otherwise—means just that. If we are referring to some other Act, that should be made clearer and an amendment would be necessary. If we are referring to some other Act, I might be reassured, but as I read the subsection it says The Secretary of State may by order— (a) provide that such of the provisions of this Act as are specified in the order shall not apply in such cases as are so specified". I read it as meaning that the Secretary of State is able to say "I order that the provisions are not applied."

Mr. Rooker

The point is made abundantly clear in the first three words of Clause 22—"In this Act". One then gets the interpretative subsection and, therefore, subsection (2) talking about "this Act", clearly means the Bill when it becomes an Act.

Mrs Wise

That is right. I see no other possible meaning. If my right hon. or any other hon. Members interpret this differently, perhaps it should be looked at again.

Therefore, I regard that as a clause that gravely weakens the whole Bill. It means that in many real ways we do not know whether we are passing a Bill or simply a shadow of a Bill. I am dissatisfied on that matter.

In a situation of very high levels of inflation, in which I and my right hon. Friend would undoubtedly agree that something should be done about that inflation, instead of being faced with provisions that would have an effect on the levels of prices we are faced with quite a long, complicated Bill which, when analysed, is found to be so full of "ifs", "buts" and "maybe's" that I am very doubtful indeed of its value.

We could control prices for a time. We had firmer price control legisltion shortly after we were elected. We can buy useful time by price control. If we buy time we can use it in order to make the basic changes which in our economy, are the only lasting solution. I would agree with hon. Members in all parts of the House who say that the capitalist system cannot be run on the basis of restraining profits indefinitely. That is quite right. That is why when we attempt to restrain profits without making basic changes in the economy we are forced to come forward with even weaker and weaker versions.

My right hon. Friends should look at this again because we are failing to keep down the cost of living for ordinary people, and we must do so. We cannot leave the task to the Conservatives because they are not even in the business of protecting ordinary people. We are, and, therefore, we must make a better job of it. This Bill, as an instrument for enforcing the protection of ordinary people, is totally inadequate. It will not hold down the living costs of ordinary working people in this country.

8.30 p.m.

Mr. Giles Shaw (Pudsey)

About this time in the Second Reading debate one begins to feel very sorry for the Secretary of State. We have not had a single contribution from either side of the House supporting the Bill that he seeks to enact.

There are various criticisms of the Bill, including major criticisms of its philosophy such as that which we have just heard from the hon. Member for Coventry, South-West (Mrs. Wise). Even from the Liberal Bench—and alas it is empty now—we have had only qualified approval. I noted with interest that the hon. Member for Truro (Mr. Penhaligon) thinks that the Bill should be enacted for only one year. I believe that at one time this was a widely canvassed proposition. From all parts of the House we have heard criticism in varying degrees. That is not surprising. In every debate on the subject of prices legislation, or about preventing something from happening, we all tend to express our dislike.

This is fundamentally an enabling Bill, and one of the difficulties in trying to prepare comments for such a debate is that with an enabling measure we cannot discover how it will operate or the significant features that will affect those who have to operate it. Whatever the comments of hon. Members below the Gangway, industry has to operate a Bill which is designed primarily as a part of the Government's policy of intervening in industry's pricing.

We should remember that this is about the fifth year in which there has been continuous influence, to a greater or lesser degree, on the pricing of consumer goods. In the first year there was a 5 per cent. agreement among the top 200 companies—a voluntary arrangement that they would not increase their prices by more than 5 per cent. That lasted extremely well and was honoured totally by the top 200 companies in the CBI.

Since then we have had the various phases of the Conservative Government's counter-inflation policy followed by the various phases of this Government's pay policy. For five consecutive years there has been Government involvement in the pricing process of the major part of British industry—the larger employers and exporters, and, I admit, the larger profit earners. Five years is a very long time. One factor which has made it just about bearable is that in that period it has changed markedly in degree. There have been short sequences during which a certain level of restraint was applied, and then it was altered.

I find it objectionable that the measures proposed in this Bill are permanent. This is causing a great deal of anxiety in industry today. After the longish period of five years in which we have had lower living standards, significantly less investment, more unemployment and more bankruptcy than our major competitors, the Government may well have come to the view, that as this followed all the systems of intervention in pricing for industrial goods and services, there may have been a cause and effect here. They may have taken the view that enough was enough.

I suspect that a discussion of that kind took place. The legislation so far has hardly proved a successful operation for Governments of both parties. There may well have been a chance that the Government might have felt that the time had come to put away the legislative process, and, when the whole panoply of powers had expired in July, to get around the table and discuss something different—something voluntary and based on consent. But clearly that opportunity has been thrown away.

I suspect that the TUC would have none of it, and I do not blame it for that. It has to show its members that it is using its muscle power to extract concessions from the Government, and the Government have allowed themselves to be put in a position whereby these tactics can be used by the trade union movement. The argument is that if there is to be further restraint of a voluntary nature on wages there should be greater controls of a statutory kind on prices.

Let us make no bones about it. The first principle upon which the Bill is based is that of appeasement. It is to appease the trade unions in their negotiations that there is something in it which can be waved at their members. It is saying, in effect, that here is a powerful new Statutory Instrument to provide further restraint on prices.

I do not like policies based on appeasement, and it is not to be wondered at that Mr. Jack Jones keeps waving a piece of paper on which, no doubt, are the words "Freeze in our time", because he seems to be keenest of all on trying to extend the nature of price intervention into a total price freeze.

The second principle which follows from appeasement is that of survival. The Government clearly intend to clutch this particular opportunity of negotiating a phase 3—whatever its merits, this is their clear intention—boosted by this Bill, in order to survive just that little longer, despite what the electors of Stechford have said or what the electors of Grimsby no doubt will say tomorrow. Survival is certainly their intention.

It is not the public sector that is involved in buying survival. The price of survival has to be borne by the private sector. As we have seen with gas prices, there is one law for the nationalised industries, when it comes to operating under the Price Commission, and clearly another for the private sector.

This Bill seeks permanent powers and sets up a Commission which can investigate prices at will and freeze them during the period of investigation. Many hon. Members have argued that it is a major deterrent to have price freezing during investigation as opposed to the acceptance—which has been put to the Minister on many occasions—of allowing the price to move through and then rolling it back at the end of an investigatory period if it is found to be not justified. But not only under Clause 5 are category 1 and 2 companies to be so investigated. Any company can be so investigated. Indeed, it can have its prices frozen accordingly. This means that although the Minister can say that there may be only some 40 investigations undertaken, spread over 40 sectors this can effectively stultify the whole market.

A major branded article or the market leader may be investigated, and all other competitors within that market will not be able to increase their price, however justifiable, because no competitor will be willing to raise its price above that of a frozen market leader. Although 40 sounds a small number, it can indeed produce a complete stultification of the normal market pattern, and distortion will be piled upon distortion.

The Bill as drafted does not require reasons to be given for these investigations. Although Clause 2 does indeed speak of matters which the Commission has a duty to regard, it is significant to note that Clause 2(1)(a) states that it must have regard to all matters which appear to the Commission in the particular circumstances to be relevant with a view to restraining prices of goods and charges for services so far as that appears to the Commission to be consistent with the making of adequate profits by efficient suppliers of goods and services". Whatever the safeguards under Clause 9 in regard to profits, these matters can be taken into hand only in so far as the Secretary of State considers them to be relevant to the investigation. There is no question of the safeguard level being available to all. It is only if it is deemed to be relevant.

The consequences of a delay, a price freeze—to which my hon. Friend the Member for Uxbridge (Mr. Shersby) referred—can be quite traumatic. Certainly that is true in those industries, such as the food industry, which depend on relatively low margins and have relatively high costs, especially in regard to commodity prices.

It has been argued that if a tea company had its prices frozen for four years it would lose at least 40 per cent. of its total annual profit. A company might be involved in a seasonal business, such as the Christmas trade. In many cases it might be the total objective of a certain company. If it were subject to an investigation it would lose its entire annual profit, and probably a large share of its perpetual market.

Price-freezing for that length of time must be regarded as a very dangerous power to give the Minister. I know that there are the safeguard clauses, but the right hon. Gentleman has so far failed to convince industry and its representatives that the safeguards to be applied to profits will be fair and sufficient. He has a duty to issue regulations. We must ask the Minister who winds up the debate to give an assurance that the regulations will be produced during the Committee stage, if the Bill reaches Committee, because we must be able to argue whether the profit safeguards and the whole of Clause 9 are an effective part of the Bill. We cannot so argue without knowing what the Secretary of State has in mind with regard to safeguards. Will he guarantee to publish the regulations, so that they can be considered along with various other parts of the Bill in Committee?

Representatives of the industry are now so punch-drunk with codes and regulations that one director of finance to whom I spoke about the Bill shrugged his shoulders and said "Oh well, publish the rules, and I suppose that we shall go on playing the game." That says a great deal for the fact that by and large British industry has co-operated with Governments of both parties to the nth degree in carrying out their part of the bargain. Industry's average profitability has steadily declined, despite the closeness of such co-operation.

We must ask "Whose game are we playing, and under whose rules?" I have no doubt that the Secretary of State views himself as appearing to the TUC representatives as a man of action, as the poor man's Red Adair, manfully plugging the blow-outs on the prices field, where apparently great gushers of illicit profits are there to be tapped underneath, and he will prevent them spurting out.

In another guise, he no doubt views himself as appearing to the housewife as a Rob Roy, the Sheriff of Sparkbrook, helping consumers in distress. No doubt every Esther deserves her Rantzen.

To the industrialists the right hon. Gentleman says "Trust me. It will not be very difficult. There will not be many of these investigations. The powers will be little used. The Commission will be full of friendly people. Can you let me have a name or two on a piece of paper as you leave?" But each price increase turned down will mean a dramatic shift for some company somewhere and put profits and jobs at risk.

Whom are we to believe when we hear explanations of how the Bill will be applied? Is it really to be a cosmetic exercise, as all the Members below the Gangway on the Government Benches seem to believe, or is it for real? Are its provisions to be forcefully applied, with frequency and determination? I shall give the Secretary of State the benefit of the doubt. I believe that he means it, that he means to use the powers in the Bill, and to use them aggressively and frequently. As I read the future in the tea leaves, with the right hon. Gentleman's position in a Cabinet that has undertaken as the other half of the social contract that it will take concerted and effective action in the matter of prices, I think that the right hon. Gentleman has no choice but to use the Bill effectively, hard and with frequency.

Therefore, I believe that we are here seeing a massive increase in the Government's power to influence industry, and that there is a clear opportunity for those powers to be abused. I shall not suggest that they will be used for all kinds of political purposes, but I am certain that they will be used for some political purpoes at some time in the remaining months of this Government's life.

The Bill is clearly a major piece of Socialist legislation, designed further to sap the morale of the private sector and to control profit margins. There seems to have been some debate about whether it should be called the "Price Commission Bill" or the "Profit Commission Bill". The hon. Member for Coventry, South-West does not really believe that the Bill will have controls on profits. I assure her that she is wrong. Controls on profits will indeed be provided by the powers in the Bill. Control of prices is only the outward and visible sign of a regime that has profit control as its objective. If that is the objective of the Bill, is not it time that the kidding stopped? Do the Government really believe that the profits of British industry are high enough to warrant control, despite the comments of Labour Members below the Gangway.

In the food industry, to which my hon. Friend the Member for Uxbridge referred, the figures of the Food and Drink Industries Council show that the top 31 companies have massive turn over totalling £4,500 million, selling their products through so many High Street outlets, and no doubt including the co-operatives. Their average percentage return on sales value in the last two quarters of last year was 0.58 per cent. in the quarer ending 30th September, and 0.09 per cent. in the quarter ending 31st December.

Are we to believe that major restraints on profits are required under these conditions? The correct policy and I believe the only policy is to launch a crusade for the creation of wealth, not the stifling of wealth. The professional management in British industry is about the only contributing part of the economy that thinks about the long-term position. They are professionals, dedicated to their jobs. If there is a case for an orderly return to free collective bargaining—and there is indeed such a case—there should equally be a commitment to a return to free competitive pricing. Without more wealth created there can be no free collective bargainers. We should look at what can be done and what can be released, not at what can be stopped or deterred.

I accept that much of the problem lies in the fact that British industries have been slow to talk about their profits, earnings and wealth-creating capacities in a popular and positive way. They have been far too reticent in replying to attacks claiming that making profits is somehow an unhealthy activity and should be hidden, but at least a number of companies are beginning to reply.

I have here an advertisement containing the company accounts of a food company, United Biscuits, whose chairman is the present president of the Food and Drinks Industries Council. The company has set out its 1976 figures in a leaflet entitled: How we created wealth in 1976 and who benefited. The company set out the total amount of wealth created. The company had sales of £521 million, less £346 million as the cost of materials and services brought from outside, leaving £175 million of wealth created. That represents 33.6 pence in every pound of sales. The shares in that sum included benefits to employees, which took 25.1 pence benefits to the State in taxation, of 3.1 pence, benefits to lenders in interest charges which were 0.5 pence and benefits to shareholders in dividends of 0.8 pence. Benefits to the company in profits ploughed back for investment were 4.1 pence—the next largest figure.

This is what industry is all about, namely the generation of wealth and the use of profits creatively. Bigger profits lead to bigger investments and that leads to better job security and more efficient production. That is what we should be encouraging, and the Bill seeks to undermine it, which is why I object strongly to the Bill.

Mr. Deputy Speaker

I have every sympathy with hon. Members who have sat in the Chamber throughout the debate and are still anxious to take part. There are still four hon. Members who wish to take part. We have roughly 25 minutes. Therefore, if we have four six-minute speeches they can all be accommodated.

8.50 p.m.

Mr. Ivor Clemitson (Luton, East)

There has been a singular failure by politicians and economists to make a convincing analysis of inflation. We are told that rising costs mean rising prices, which is a statement of the obvious of stunning banality. We are told that increases in the money supply mean price rises and so on. I merely note the superficiality of the analysis. I shall not attempt any analysis in depth myself.

But it is no wonder that in the absence of an adequate analysis we have not found a satisfactory answer to the problem of inflation, which is a post-war phenomenon. Simple analogies between the present recession and that of the early 1930s just will not wash because in that period prices in absolute terms were actually falling. That means that we cannot provide the simple accelerator-brake techniques for regulating the economy, and what may appear with hindsight to have been perfectly reasonable policies to pursue in the early 1930s are not so in the late 1970s.

I would be the first to argue that the Government have done a number of useful things over the past three years in somewhat difficult circumstances. It is perfectly legitimate to argue that we went into the present recession in a far weaker position than almost any of our competitors. In spite of what the hon. Member for Pudsey (Mr. Shaw) says, not all international comparisons show us up in a bad light. In the six years leading up to 1976 there was an increase in employment in the United Kingdom of about 30,000, whereas Germany suffered a loss of 1,600,000.

We have done badly on international comparisons in prices. It can be argued that there have been a number of mitigating circumstances. We know all about the monetary explosion of the early 1970s. We know, too, of the rises in commodity prices and the price of oil. We have heard about the vulnerability of our currency. It is fair to point out that membership of the EEC has had an inflationary effect which even protagonists of the EEC cannot deny. Of course, all these factors have served in one way or another to push up retail prices.

Must we therefore adopt a defeatist attitude towards inflation? Must we say that little or nothing can be done about it? There is no doubt that the first two phases of the pay policy have been adhered to by the vast majority of the workers with a great deal of restraint. But we shall not have much chance of getting a phase 3 agreement, or one that will stick, unless something pretty dramatic is done about prices. I am sure that the majority of workers do not want a free-for-all if by that is meant roaring inflation and the devil take the hindmost.

The workers are saying loud and clear, however, that something dramatic must be done about restraining price increases, particularly on essential goods. It is a sad fact that the percentage rise in the costs of food and fuel and light have been greater over the last three years than the percentage rise in the retail price index as a whole. If something is not done about prices either we shall not get a phase 3 agreement or we shall get one at the top level which will not stick at the grass roots. In many ways that would be he worst possible outcome. The consequences would be very bad for the country, and particularly bad for the trade union movement.

My right hon. Friend the Secretary of State said that the nub of this Bill was concerned with investigating and freezing particular prices. Clearly, the Opposition do not like freezing at all. My Front Bench may like a bit of freezing, but is opposed to anything like an overall freeze. I merely ask my right hon. Friend to look again at the possibility of a wider, more general freeze. I know the arguments that are deployed against the idea—that profits would be squeezed, firms forced into liquidation and unemployment increased. However, one cannot have the argument both ways. If one is saying to the trade unions that a free-for-all would mean rocketing inflation which would mean that our goods would become more uncompetitive and more people would be out of work, surely it is just as arguable that to hold prices down would be to make our goods more competitive, particularly when we have a great deal of spare capacity. Two totally conflicting arguments are being deployed.

Of course, a fairly general price freeze would be rough justice but so is pay restraint rough justice. It is perfectly legitimate for the man on the shop floor to ask why prices have been allowed to rise every three months when he can have a wage rise himself only every 12 months. This is particularly true in the case of beer, which is dear to the hearts of many of my constituents. They see the Price Commission as having been almost an open invitation to the brewery companies to put up prices every three months.

Whether this Bill is the sort of dramatic initiative against inflation for which people are looking is, I am afraid, and as my hon. Friends have said, open to serious doubt. What is not open to doubt is that the Opposition have no consistent and agreed policy on inflation at all. Clearly, they do not like price control, and hence their criticisms about it having any kind of permanence. They are not sure about wage control. They have virtually every possible shade of opinion on this subject. Monetarism is now in fashion, even among those who were members of a Government who hardly bowed the knee to that economic idol. A devotion to economic competition lingers on, and that would be all right if it were not linked to a delusion that competition is still the norm in our economy instead of being the exception. Altogether, there is such a mishmash of conflicting doctrines and opinions about what to do that it would take a genius to sort it out—and I do not see many geniuses on the Opposition Front Bench. I amend that; I do not see any, and any who were approaching being a genius have departed to the Back Benches.

Should the Opposition Front Bench unfortunately find itself on this side of the Chamber, the tiger of inflation would have long escaped from the cage before they had decided how to bolt the door.

The Bill will, of course, receive my support. However, far from the Bill being weakened in the face of attacks from the Opposition—aided and abetted by commercial interests—I hope to see the Bill strengthened during the course of its progress.

8.58 p.m.

Mr. Geoffrey Dodsworth (Hertford shire, South-West)

The heart of the Bill lies in its new investigatory powers, and, in particular, the heart of the matter lies in the relationship with the nationalised industries. This is an area of public responsibility and authority in which the Government have a duty to act.

I am concerned to demonstrate, briefly, the relationship that exists between Ministers and Parliament and, in turn, between Ministers and the nationalised industries. The Price Commission's report in the latter part of last year told us that the power to control nationalised industry prices, both initially and subsequently, is firmly vested, subject to special conditions, in the Minister responsible and not in the Price Commission. The Price Commission's powers are limited and likely to be of little practical application. I know that it may be said that we shall have a new investigatory operation and opportunity, but there is a power of exclusion referred to in the consultative document, which points out that coal and steel might be excluded. We have there a sign of things to come.

I am concerned that Parliament should accept its responsibilities regarding the voting of funds and that Ministers who dictate to industries should report to Parliament. There is provision for the utilisation of the veto on investigatory powers by the use of the negative procedure. I think that it would be better to use the affirmative procedure. I should like to be sure that any nationalised industry which is to be excluded from investigation is made the subject of the affirmative procedure. That is in the interests of both Parliament and the nationalised industries. They are the victims of the present procedure. They are the shuttlecock between Parliament, Ministers and the heads of those organisations. Not so long ago the head of one nationalised industry referred to it as being a nightmare for management. I can well understand that.

Let us consider the catalogue of possible price increases on British Rail, gas, electricity and postal charges. Those are areas which lie at the heart of our economic policies. It seems wrong to have a Minister with dictatorial powers to exclude them from consideration.

The Select Committee on Nationalised Industries provides a good illustration of the difficulties facing it. In a recent report it referred to being seriously hampered by the lack of yardsticks against which to assess performance, lack of staff resources, and difficulties of identifying the crucial issues underlying the partial information contained in public accounts.

The Gas Corporation is a classic illustration of giving partial information. In its 1975 accounts the deficiency payment was incorrectly calculated. We have now seen the recalculation providing for depreciation and it looks as though the corporation is not making as much money as was first forecast.

The appalling behaviour of the Secretary of State for Energy has been rightly demonstrated by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). Looking at the reasons given by the Minister, we find that he overrode the Price Commission. I understand that Schedule 2 of the Counter-Inflation Act will still be in operation. Therefore, we shall have one Minister saying "There shall be no investigation" and another Minister saying "There shall be no price increase." What kind of control is that?

The gas price increase was for purely political reasons. Incidentally, the reasons were published after the increase had been approved. The announcement was made in the London Gazette on 5th April, and only after I pressed the Minister why he failed to observe the proper terms of the original Counter-Inflation Act. That is an example of the Minister failing to carry out his responsibilities. That action was taken for political reasons. The Gas Corporation was told that it had to respond to the Government's intention to reduce capital indebtedness and that had to be done by increasing gas prices. It meant that the consumer was taxed. That was an irresponsible way for the Minister to act. It was a tax without redress.

We must ensure, in considering the Bill, that consumers dealing with nationalised industries are fully represented and that any price increases are subject to the fullest possible scrutiny. I suggest that the Select Committee should have more searching powers to examine price increaess. That mechanism would commend itself to Parliament.

Mr. Deputy Speaker

There are 10 minutes left for two speakers.

9.4 p.m.

Mr. Eddie Loyden (Liverpool, Garston)

Labour Members have clearly indicated that the question of prices is the key to the whole future of the social contract. I want to deal with that aspect in this brief contribution.

The demonstrations that are taking place in the country, including that which took place at the House last week, are clear indications, not of the rumblings of the rank and file of the trade union movement, but of their anger about prices. Prices have become at least as important a factor as unemployment. Price increases hit all groups, including the unemployed, the employed, the sick, the aged, and the single parent families—all those people whom this Government allegedly intend to protect. Prices are the key issue. It follows that if there is any system of controlling prices—which I doubt—it will be that upon which the future of the Government will depend.

The Bill must be seen as an effective way of dealing with prices. It is evident to those of us who have had any dealings with the Price Commission that the present arrangements are weak and, in many cases, non-existent. There is evidence, from questions about certain commodities, that constituents often do not understand that a particular price increase is not covered by the responsibilities of the Commission.

I was startled to discover from the Department of Trade that the Commission has no control over the surcharges imposed at ports by the various bodies that operate on behalf of shipowners. Everyone knows that surcharges on goods that are landed at ports increase a whole range of prices. There are many instances which show that the present activities of the Price Commission are inadequate.

The situation is linked to the future of the social contract. Members of the TUC have either not read the Bill, or, if they have, they have failed to understand it. That is the kindest way of explaining the TUC's position. If members of the TUC have read the Bill and understand it they are pulling a "con" trick on the workers by arguing that the Bill will protect their standards of living and form part of a future deal.

With my hon. Friends I am concerned that the Bill will contain provisions which should be in a different Bill. That happened with the Housing Finance Act in which counter-inflation measures were included. This Bill contains an extension until 1980 of the pay policy. That should concern us all. If there is no evidence that attempts will be made to take out that clause in Committee I shall not support the Second Reading of the Bill.

The Government must recognise that the working class, which has supported them for a long time, is suffering from lowered living standards. Unless the Government gain control over prices the social contract will not survive.

9.9. p.m.

Mr. John Wakeham (Maldon)

By listening to the debate, as I have, one can tick off the points one intended to make. I find that I have four short sentences of my speech left and I propose to deliver them.

First, I am concerned that the treatment of distributors in this legislation is both unfair and illogical. A rule covering both gross and net margins for distributors represents a control of cost increases which may be reflected in prices. It is illogical that these rules should continue to be applied when allowable cost provisions for manufacturers and services are being dispensed with.

Secondly, I re-emphasise one of the arguments of my right hon. Friend the Member for Grantham (Mr. Godber). The Government should not forget that in May 1974 the gross margins for wholesalers and retailers were reduced by 10 per cent. If we are to have this legislation enacted, the continuing need for this reduction should be considered.

My third point relates to the new powers of investigation. There is no justification for investigations into a firm unless the firm's reference level has been or is likely to be exceeded, and no prenotification of a price increase should be required if the proposed increase does not itself raise the firm's profit level above its reference level.

Fourth, I believe that a number of the investigations may be extremely complex and may be the subject of different interpretations, depending upon the accounting conventions. Therefore, it would be much more preferable for draft reports and recommendations to be discussed with the firms concerned so that any errors of fact or omission might be cleared up at the time and also so that the companies concerned might make written submissions to the Secretary of State with his report from the Price Commission before any action were to be taken affecting the profitability of those enterprises. This is especially important in terms of current cost accounting. If the proposed suggestion were that this standard should be introduced for large firms before small firms, it would result in two different systems of accounting, and this might be extremely relevant to the question in hand. Therefore, I believe that firms should be given the opportunity to make representations on draft reports before they are finalised.

These proposals clearly constitute a dramatic change in the mechanism of price and profit controls and the philosophy of their application. The switch is one from an arithmetical calculation to one where there are many subjective judgments involved. If the subjective judgments are made correctly many business people will accept them, albeit reluctantly. A great deal will depend on the revised constitution of the Price Commis- sion and on the importance of getting people who have the right background and experience to carry out this job.

I do not like this Bill, but, if we have to have it, it will be made much more acceptable on the basis of people who are generally acceptable to all sides of industry for their knowledge and experience of the commercial considerations concerned.

9.13 p.m.

Mr. John Nott (St. Ives)

Today's debate on the Second Reading of the Price Commission Bill concludes another parliamentary stage—and, I believe, largely an irrelevant one—in this country's long and so far unsuccessful fight against inflation. Although to the superficial observer it might seem that any measure with the evocative name of the Price Commission Bill would be at the heart of the fight against inflation, I do not believe that this is so. Rising prices are a symptom of inflation and not its cause. The House would be in error if it thought that any administrative control over prices generally could be effective for anything other than a very limited period of time.

That is what the author of this rather peculiar Bill meant when he said at the very outset of his speech that inflation could not be abolished by an Act of Parliament. If I may say so, that was the best sentence in his speech.

We have now had a Price Code for a little more than four years, and inflation is still running at nearly record levels. When the Price Code was first introduced in 1973, I do not think that it was claimed, any more than it can be claimed today, that administrative controls on prices in a country which imported nearly half its food and nearly all its raw materials and which was still at the centre of an international financial system could be anything other than short term in their effects. In so far as price controls can have, or ever have had, a short-term effect on prices, they can only have that effect at the expense of resources that would otherwise be deployed in new investment and new jobs. The history of the past few years surely illustrates the truth of that assertion. In spite of genuine attempts, well-meaning though many of them have been even if they have been misguided, to stem the rise in prices though price controls, inflation today, if measured on a three-month annualised basis, is running at 19.9 per cent. against 8.4 per cent. in October 1974. I do not believe that these controls have worked effectively in the past, nor do I believe that they will work effectively in the future.

As well as failing—surely the record of inflation after many years of price controls of the sort that we have had must show that they have failed—they have had a significant adverse impact on the resources of the company sector. Although this is not a quantifiable aspect, my right hon. Friend the Member for Grantham (Mr. Godber), my hon. Friend the Member for Uxbridge (Mr. Shersby) and many others have given illustrations of how profitability in industry—namely, the amount of money retained by companies to plough back into investment and new jobs—has fallen since 1973. As I have to make a shortened speech, I shall not give a host of examples. I shall refrain from doing so, as many of them are well known.

The food industry is a prime example. I have statistics provided by a panel of 31 food companies with sales amounting to about £4½ billion in 1975. The statistics were collated by the Institue of Grocery Distribution. They show that after taking into account inflation—my hon. Friend the Member for St. Marylebone (Mr. Baker) made the same point about inflation—pre-tax profits as a percentage of sales for the year ending 31st December 1976 were running at less than 0.01 per cent.

The CBI's view was summed up in one paragraph of its representation, in which it stated: Industry's profitability is already dangerously low … around 3½ per cent. was the real rate of return on capital of industrial and commercial companies … in 1975 and 1976 with a return of 13 per cent. in 1960 and … 10 per cent. in the 10 years to 1972. I do not think that there is any dispute about the manner in which profit margins and the capacity of companies to plough back their resources into investment and new jobs has been seriously eroded by a succession of measures. But the impact of price control, especially margin controls, is ever more damaging even than the medium-term impact on jobs and living standards implies.

Even in a fully-fledged Socialist economy, where profits as we define them in a capitalist State do not exist, the allocation of resources to meet changed patterns of demand and changes such as poor harvests, droughts, frosts and natural calamity can be achieved only through the price mechanism. That applies to a fully-fledged Socialist economy or a capitalist economy.

I have listened to several speeches made by Labour Members, not least those from the hon. Members for Thurrock (Dr. McDonald) and Coventry, South-West (Mrs. Wise). If they made such speeches in a centralised bureaucracy in Eastern European countries, they would be branded as Right-wing deviationists, not Left-wing Socialists as they are here. They seem to show a total incapacity to understand the function of the price mechanism in adjusting supply to varying demand. If we look at the history of price control since the early part of the 1970s—surely this could not happen in a centralised bureaucracy for reasons different from those that would be advanced by Labour Members below the Gangway—we see that the whole allocation of our resources in the company sector has been largely frozen to reference levels that were fixed in the early 1970s. So there has been virtually no redistribution of resources in our economy to meet international and domestic demand. That is a recipe for a stagnant economy in which the creation of wealth will stop completely.

Mr. Hattersley

indicated assent.

Mr. Nott

I am glad that the Secretary of State nods in agreement. Indeed, that is precisely what he and other members of the Government have been saying. Today he quoted precisely the words he used when he spoke to the Industrial Society on 22nd February. He said then, and repeated today: There is only one way in which that objective"— the objective of overcoming inflation— can be achieved—the creation of an economy in which the sterling rate is stabilised, domestic credit expansion restrained, and the progress towards increasing exports and expanding production is accelerated. There is no alternative easy path. He went on to say: … had there been no depreciation and none of the measures needed to support the pound, inflation would now be close to single figures. That is not an excuse. That is an explanation. More important, it is irrefutable evidence that the best prices policy we can have is an economic strategy that eventually creates a stable pound and an expanding economy.' Of course the right hon. Gentleman is right.

Mr. Heffer

Many of us have been arguing the need for a different economic strategy for a long time, and have pointed out that if we have price controls under the capitalist system we shall, of course, have a position in which capitalists will not invest. We have explained that time and again. In that sense, there has been total agreement. The logical conclusion is not to do the half-hearted business in which one gets the worst of both worlds but either totally to accept the Opposition's point of view of complete unfettered free enterprise or begin to plan resources in the way that some of my colleagues have suggested.

Mr. Nott

I will come later to the hon. Gentleman's expression "unfettered free enterprise". I agree with him on his main point. I find his position and the position of the Tribune Group and, for all I know, that of Mr. Jack Jones infinitely more logical than the position of the Social Democrats who go on moaning about wanting a mixed economy but do their utmost to destroy it—and I suppose that Social Democrats still comprise about two-thirds of the Cabinet. At least the hon. Member for Liverpool, Walton (Mr. Heffer) and his friends want to destroy the price mechanism—I accept that—because it would be the quickest and best way of ending the capitalist system and the mixed economy and bringing us to the situation where the Government can direct labour, capital and goods. That position is more understandable than the position of the Social Democrats who form today's Government.

We had a contribution from the Liberal Party—interesting as always. I hope that I shall not be misquoting the hon. Member for Truro (Mr. Penhaligon) when I put his argument as follows: "We Liberals are the only party in the House which actually wants to reduce the standard of living of the British people, and we have only 13 seats because we are honest about it. There are two ways of reducing living standards. Either one leaves it to market forces or one shares out the pain all round, and, because I believe that it is better to have the pain shared out all round rather than leave it to the market economy, I shall advise my right hon. and hon. Friends to vote with the Government tonight." That is almost, if not precisely, a correct version of what the hon. Gentleman said.

Mr. Penhaligon

The hon. Gentleman puts is amusingly, but does he not accept that in a world economy that is not exactly buoyant, a reduction in the average living standards of the British people will be the result if we wish to reduce inflation in this country over the next 12 to 18 months?

Mr. Nott

I do not accept that that is necessary. I fear that living standards will fall sharply in the next two or three years, but I do not accept that it should be an objective of policy. Indeed, the objective should be precisely the opposite, but I cannot debate that now.

I do not think that there is any public clamour or demand in this country for an intensification of price controls as the Secretary of State was asserting in Grimsby. For all I know, that was also asserted by those wet slabs of cod and filleted haddock that call themselves Liberals. We know what sort of sign the Grimsby fish fingers will give to Liberals tomorrow.

There is complete public scepticism about the Government's ability to control prices. There is no doubt about that, and because there is such disbelief and scepticism by the public, there has never been a better opportunity to make a change of policy and direction. I shall be saying a few words at the conclusion of my speech about what we should like to see happen. Our people are not children. They know the score—and especially that no short cuts, no gimmicks, no six-month miracles will cure our difficulties Those are not my words. They are the words of our great navigator the Prime Minister who, in his best general practitioner style, wrote them for his friend Mr. Rupert Murdoch in the News of the World. How right those words were!

One of the few benefits of the rosetinted-dawn style of politics practised by the Chancellor of the Exchequer—with its references to miracles appearing next year or the year after and his "by the end of the year we really shall be on our way to the so-called economic miracle that we need" is that it has made the people of this country completely sceptical about the efficacy of price controls and thoroughly realistic about the capacity of politicians to play God in the market place. This is a healthy situation and one on which we can build.

When the right hon. Member for Huyton (Sir H. Wilson) was our chief navigator, people were taught to believe, and did believe, that he could make fish swim and crops grow. For all I know, the right hon. Gentleman still believes that. We do not have the benefit of his advice in our debates nowadays.

Clearly, the public are utterly sceptical about the efficacy of price controls of the kind contained in the Bill, and that provides politicians of both parties with the opportunity to make the necessary changes.

I should like to deal for a moment with what are known as the "consumer interests" These are a few people whom politicians appoint to jobs and meet at cocktail parties in London and the South-East but of whose activities—and this is no criticism of them, as I shall explain later—the general public seems almost blissfully unaware.

We must not exaggerate the views of what I call the statutory female aggravator. [HON. MEMBERS: "The hon. Gentleman should look beside him."] I realised that there was a possibility that some hon. Members might point in the direction of my right hon. Friend the Leader of the Opposition, but she is one of the boys and, in so far as she is an aggravator, it is as an aggravator only of hon. Members opposite. These aggravators who nest in the pages of The Guardian are every so often offered by successive Secretaries of State a tasty morsel, such as the price check scheme or the shopping basket scheme, and red triangles are offered to them. However, nothing ever comes of it.

In the recent consumer protection study a scientific sample of 1,000 housewives—if one can imagine quite what that would look like—was questioned. Only 2 per cent, claimed any knowledge of the Department of Prices and Consumer Protection. Over 60 per cent. said that they had never heard of it, or that they knew nothing about it of any consequence whatsoever.

It was considerate of my hon. Friend the Member for St. Marylebone to propose a merger of the Departments that are now shadowed by myself and by my hon. Friend. However, I must tell him that I would not wish the Department of Prices and Consumer Protection on my worst enemy. Nevertheless, I appreciate his friendship.

It must be very galling for the Secretary of State. He is always bouncing up and down, popping up quite by chance in front of television cameras or in the pages of the Sunday Press.

Mr. Hattersley


Mr. Nott

I always admire the ebullience of the right hon. Gentleman. Unfortunately, the ambitions that well up inside him lead to frequent blow-outs. Also, unfortunately, there is no Red Adair around. There are only the Reds below the Gangway. What they do is to come along and cap the blow-out by igniting it with a match.

I now come quickly to the Bill itself. The best source of information on the Bill is the interview that the Secretary of State gave to Mr. Gordon Leak the other day. Mr. Leak asked the Secretary of State: Would the price of any product be lower today if these controls had been introduced three years ago? The Secretary of State answered, Some prices certainly would. But not overall. Precisely. That was just the point that the Secretary of State was nodding about. In other words, inflation would not have been affected at all—that is what he said—but some prices might be different from what they are now. What is the purpose of a policy which creates the distortions of price controls but which, by the right hon. Gentleman's own admission, has no ultimate effect upon inflation at all?

Then Mr. Leak says, I asked the Minister to give some examples of price rises that might have been blocked had his policy been in operation last year. The Secretary of State answered, No, I can't … But, clearly, I have very many examples in my mind. … Certainly there were some price increases which were allowable under the old Price Code but which … by my standards were unjustifiable. What does that mean?

Mr. Leak went on to say that now, under the new arrangements, claims will also have to be what Mr. Hattersley calls socially accountable. We had the phrase "socially accountable" today. What is a socially acceptable or socially accountable profit? What does it mean? Presumably, if the hon. Member for Bristol, North-West (Mr. Thomas), who is a Socialist Back Bencher, sells his council house for a large profit—he bought one the other day—that will not be a socially acceptable profit. However, if the Chancellor of the Duchy of Lancaster—the right hon. Member for Manchester, Central (Mr. Lever)—who is rich and socially acceptable in every way, makes a profit, that will be all right. What does a "socially acceptable profit" actually mean?

The Secretary of State then said, An efficient socially responsible company has nothing to fear. What is a socially efficient company? What can that mean?

Dr. McDonald

I have been most entertained by the hon. Gentleman's buffoonery this evening. However, perhaps he could take the last 30 seconds or so of his speech to tell us what Tory policy on prices is.

Mr. Nott

Furthermore, many of my hon. Friends touched on other points in the Bill. They said that immense uncertainty and delays would be created by it. My hon. Friend the Member for Pudsey (Mr. Shaw), who has worked very hard in this area of our affairs, makes that point, and points have been made about the complete lack of knowledge about safeguards. Here we have the Bill in front of us now but the safeguards are not given until later.

We do not know the membership of the Commission. We know that the Secretary of State will appoint members of the Commission and that he intends to have more representatives of other interests apart from industry on it. Who will be on it? We have no idea. I suppose that Mr. Len Murray and Mr. Clive Jenkins will be on it, and no doubt there will be a statutory female aggravator as well. Maybe Lord Short and Lord Beswick will be on it as well—the normal collection of people appointed by a Labour Government. How shall we know how the whole policy for companies is to be organised until we know the members of the Commission?

The Commission will have unprecedented powers, and so will the Secretary of State. In Clause 10 the Secretary of State may direct the Commission to examine the profits, costs, efficiency and plans for activities or use of resources. Those are extremely broad powers. The hon. Member for Coventry, South-West drew attention to Clause 22(2)(a), under which the Secretary of State may by order provide that such of the provisions of this Act as are specified in the order shall not apply in such cases as are so specified". What is the Bill for? Why do we have the Bill at all if the Secretary of State can vary it by order and change it when he feels like doing so? I hope that the Minister of State will answer these questions when he winds up.

Mr. John Fraser

If I get a chance to do so.

Mr. Nott

I thought that we were taking 20 minutes each.

Mr. Fraser

I was to have 25.

Mr. Nott

I am sorry; there has been a genuine misunderstanding here. I hope that the Minister will give me another few minutes.

I have been challenged to say what we would do. We accept that Governments have to be equipped, either directly or through their agencies, with powers to prevent the abuse of market power. We accept that. Firms that can raise their prices with impunity either as members of a price ring or through restrictive practices cannot be permitted to do so and must be prevented from doing so under a defined statutory procedure.

At present the Office of Fair Trading is not given any real assistance by the Government in investigating complaints that it wishes to investigate. It does not have the powers to investigate many complaints. The Monopolies Commission is often not allowed to investigate many things that the Office of Fair Trading wants investigated. There is conflict between industrial strategy and competition policy, but competition policy is not being undertaken by the Government at all.

The sensible answer is to fold up the Price Commission into the Office of Fair Trading so that price investigations would be concerned with and embrace competition policy. That is what we propose, not the whole panoply of controls and long-term investigatory procedures proposed through the Price Commission in this Bill. We cannot have three bodies all falling over each other and all broadly concerned with the maintenance of fair trading in one way or another. This places an impossible burden on industry and creates a bureaucratic machine totally without relevance to its effectiveness.

The Government's record on prices is staggeringly bad. Not only have they created 1½ million unemployed by squeezing margins through price control and heavy taxation but they have, as a result of their profligate expenditure, driven down the price of sterling so that internal price levels have got totally out of hand.

In order to meet the social contract, the Government have raised taxation to unprecedented levels, with war widows being taxed for the first time. They have raised the relevant margins of those out of work as against those in a job, and the two flat-rate increases in stages 1 and 2 of their pay policy have eroded differentials and created an impossible situation for a further stage of an incomes policy.

When Mr. Gordon Leak asked the Secretary of State what was in the Bill for the housewife, the right hon. Gentleman claimed: It will prevent some price increases. But it is not a policy which is expected in itself to bring down the inflation rate. The way to get the inflation rate down is by running a successful economy. That we can endorse, but we cannot endorse the Bill.

9.40 p.m.

The Minister of State, Department of Prices and Consumer Protection (Mr. John Fraser)

One thing is remarkable about the two speeches we have had from the Opposition Front Bench. With the exception of about 40 seconds' passing reference to the Director General of Fair Trading, we have had not one prescription, not one constructive suggestion from the Opposition specifically dealing with the question of prices. I hope that the House and country will note that.

What the hon. Member for Gloucester (Mrs. Oppenheim) had to do, as did some of her Back Benchers, was to resort to a paranoiac fantasy about the operations of the Price Commission and the criteria in the Bill. The hon. Member for St. Ives (Mr. Nott) fell into the same trap. He talked about uncertainty and delay. Other hon. Members talked about goods being off the shelf. They said that the Bill would be damaging and dislocating, that it would bring about bankruptcy.

All those arguments are a ludicrous hypothesis. We have already had a considerable period of experience in the operation of monopolies and mergers legislation by this Government and a Conservative Government. The criteria in the Fair Trading Act are not dissimilar in nature from the criteria in the Bill. The scale of responsibility of the two bodies is not substantially different. The scale of responsibility of the Price Commission and the Director General of Fair Trading is not substantially different. The Monopolies Commission has dealt with such wide-ranging matters as oil companies, as mergers between the banks, as the brewers, the bakers, and single firms such as Xerox and Birds Eye. It has not acted capriciously. It has not been arbitrary. It has not tried to wreck a company. To invent this fantasy about the way in which the Price Commission, my right hon. Friend the Secretary of State or the servants of the Commission would act, to suggest that they would try to wreck and dislocate industry, is utterly wrong-minded. It is perhaps the only way that Opposition Members can find by which to oppose the Bill.

We can have a good-quality Price Commission, as we have had in the past, which represents and has at heart the interests of industry, the consumer and the nation. I do not believe that those interests are contradictory. All the experience of operating other areas of competition policy shows that the suggestion that the Commission will be out to wreck or that the criteria are not sufficiently tight is untrue.

The second strand of the debate was about competition. The hon. Member for Romford (Mr. Neubert) thinks that we have plenty of competition. The hon. Member for Gloucester says that market forces are enough to decide adequate prices. But my hon. Friend the Member for Bristol, North-West (Mr. Thomas) thought that we were frozen by monopoly, and my hon. Friends the Members for Birmingham, Yardley (Mr. Tierney) and Thurrock (Dr. McDonald) I think agree that there is a huge concentration of power that needs to be accountable to the general public and the consumer.

The hon. Member for St. Marylebone (Mr. Baker) was rather more thoughtful about these matters. He said that perhaps there should be a merger between the Price Commission and the Monopolies Commission. I do not think that I need emphasise the close relationship between the new prices policy and competition policy. It has been argued, as the hon. Gentleman argued, that the two should be merged or, with less justification, that competition policy makes prices policy unnecessary.

It is unrealistic to argue that prices policy is unnecessary in a complex and imperfectly competitive society. The concentration of a large proportion of industrial production in a relatively small number of firms is a fact of life. Some larger manufacturing units may produce economies of scale which benefit the community as a whole. In other cases the resources are so large that it is necessary to have large investment projects to complete on equal terms with overseas rivals, and the investment can be found only by large enterprises.

As a result—and these are the facts of life—roughly 40 per cent. of net manufacturing out put is concentrated in the top 100 firms. In 1972, about a quarter of all manufacturing sectors were concentrated to the extent that five firms accounted for more than 70 per cent. of gross out put in each sector. Even in the food and drink manufacturing sector, which is fiercely competitive in many respects, there are some 50 well-known products in which a single firm holds more than 40 per cent. of the market.

In these circumstances there are many opportunities for firms to limit competition and exploit their market power. Even where there is no clear monopoly in an industry, sophisticated technology gives considerable scope for product differentiation within the industry; many sophisticated consumer products can be serviced, or have spare parts supplied, only by the firms which manufactured them; heavy advertising can be used to keep competitors out of the market; and nationally based firms can adjust their marketing strategies in different regions to limit the growth of local competitors.

As regards pricing itself, uncompetitive pricing is not confined to monopolies as defined in the legislation. Where a market is dominated by a small number of firms, oligopolistic practices such as parallel pricing and price leadership are likely to occur. The Monopolies Commission report on parallel pricing in 1973 mentioned over 50 industries in respect of which complaints about parallel pricing were received.

In its monopoly investigations the Monopolies Commission has on many occasions concluded that the appropriate course for dealing with a monopoly situation is not to break up the monopoly but to maintain long-term surveillance over prices or profits. Examples of industries on which such action has been taken are detergents, breakfast cereals, colour films, contraceptive sheaths, chemical fertilisers and clutch mechanisms. [Interruption.] Some ex-public schoolboys will always giggle at the mention of contraceptive sheaths.

There is a clear rôle for prices policy, therefore, not only in examining firms or sectors where there are uncompetitive pricing practices which do not fall within the technical definition of a monopoly but also in supervising pricing in sectors where the promotion of competition is impracticable and where it may be necessary to intervene to prevent the abuse of market power.

A great deal of the Bill is about the powers of monopoly and the control of the market and the figures are convincing enough to show that we need price intervention as well as the supervision of the Monopolies Commission.

I wish to turn to some of the points made by my hon. Friends, particularly about Clause 17. The clause is included in order to continue where appropriate, and to keep in parallel the duration of the provisions on profit margin controls, dividends and the back-up powers on pay. The TUC raised no objection to this and agree that these existing provisions should be continued.

Of course the House will realise that this is only an enabling provision and that the continuation of the back-up powers on pay beyond 31st July would be entirely dependent on the laying of a White Paper which would have to be approved by affirmative resolution of each House. The White Paper will of course be dependent on the outcome of discussions which the Government are now starting with the TUC about arrangements for pay after July.

Perhaps I may put to my hon. Friends in this way. Unless there is voluntary agreement Clause 17 cannot operate. It does not operate automatically for a period of three years, and is subject to the most stringent parliamentary procedure for the annual renewal of the provisions after the first year. To my hon. Friends who have doubts about these matters I direct their attention to a Press release given out by the TUC this afternoon on this matter.

Secondly, my hon. Friends have expressed concern about the veto power of Price Commission investigations. I reassure them that the power is for use only in exceptional circumstances where the Secretary of State may be aware of an important factor that escaped the Price Commission's attention or on which the Price Commission would not have access to information. I find it extremely difficult to give an example, but that perhaps is proof of the exceptional nature of the veto provision. I can tell my hon. Friends only that my right hon. Friend would be just plain "nutty" to veto an investigation by the Commission without patent justification and in the most exceptional circumstances.

Mr. Hooley


Mr. Fraser

I am extremely short of time, and I am unable to give way to my hon. Friend.

I turn now to the exemption provisions. The power to grant exemptions must be wide, although its exercise will not be wide. It is difficult to write a list of specific exemptions into the Bill partly because if one did that one might wish to withdraw it later and that would require further legislation. The number of exemptions will be kept strictly to a minimum.

Let me give one or two examples of what they would be. They would be the control of coal and steel prices on which we are circumscribed by international treaty. Second, they would be prices which are not determined in a way which is susceptible to statutory restriction. An auction would be one example. Thirdly it would be prices controlled by other bodies. That would include bus fares which are fixed by the traffic commissioners or taxi fares which are fixed by my right hon. Friend the Home Secretary. I hope therefore that our intention to bring every price or charge within the scope of investigations wherever practicable is perfectly clear.

Some of my hon. Friends think that the Bill is not tough enough, while some Conservatives think that it is too tough. My hon. Friends underestimate in some ways the powers in the Bill because they equate one investigation or examination with one price, and that is a mistake. That belief underestimates the side effects of an inquiry. Every examination and investigation will have a ripple effect. Investigations of prices of end products will feed back into the prices of the suppliers of the companies directly concerned. Conversely, investigations into the suppliers of basic chemicals and other similar intermediate products would if price restrictions resulted have a moderating effect on a wide range of consumer prices.

I could give many examples on this score. To draw a geological analogy, an investigation or inquiry will be an epicentre and there will be inquiries and investigations from which the reverberations could measure eight or nine on the Richter scale. The effect will not be limited absolutely to the price being investigated but will extend to many other areas.

I invite hon. Members to look at the subjects which have already been investigated and which show that the inquiries do not equate simply with one price. Take, for instance, the investigation of bread prices. This is not one price, but the prices of a range of activities by a number of food producers. Television rental charges were not one price, but the activities of a large number of people quoting a large number of prices. Therefore the examination affected not just one single area of product activity, but the practices of manufacturers, distributors and wholesalers right across the board.

In the past references have not been capable of leading to orders, but if the House looks at the recent list of references it will see that each inquiry potentially affects many prices directly and probably far more indirectly. One rocket, if one could describe an inquiry or examination like that, could light up the entire sky.

I turn now to some of the consumer protection measures in the Bill. Clause 12 gives the power after examination to prohibit firms from recommending resale prices. The reason for that lies in many shops and in many advertisements which make ludicrous claims concerning recommended retail prices. The reductions which are offered are made on entirely artificial recommended prices.

The Conservatives believe in competition, and I believe that they believe in fair competition. But many recommended prices are artificially inflated to give an illusion of competition where no competition exists. We have recently had an example of a Price Commission recommendation being totally disregarded by one firm. Following an inquiry into the prices of small electrical goods, one appliance manufacturer—Hot point—promptly started and heavily advertised a new discount on its own retail recommended price.

That is simply fooling the public. The Price Commission has already come to the conclusion that recommended prices can be misleading and we are right to do something permanent about them now.

Clause 16 allows the Secretary of State to require the display of prices for retail services as much as for goods. Again, it is right if we are to have an open, fair and competitive commercial situation that people should know the price of a service, item or goods before they make their purchase decisions. There is a rather old-fashioned idea that in some areas it is somewhat impolite to ask the price and that there is something not quite nice in asking how much something costs.

We take a much more down to earth attitude than some hon. Members opposite and believe that the Government should take powers to require the display of prices of services as well as of products. If it is right to require the display of the price of petrol, then why not the price of car hire, hairdressing, minicabs, funerals and other such services. Hon. Members may giggle about these things, but these are important consumer purchases—some of them taking place only once in a lifetime—and they are of considerable significance.

Clause 18 authorises, on a permanent basis, a grant of £3.5 million for consumer advice centres and price surveys. I believe that the House and the country as a whole supports the idea of being able to give consumers information, guidance and assistance before they make their purchases and in giving the ordinary consumer a powerful friend in the high street when he wants to complain about an inadequate purchase.

The hon. Member for Gloucester said nothing about her prices policy. Perhaps she will tell us when she has a chance—not now because I do not wish to be interrupted and because, earlier, she took a longer time than I shall take—whether, in the light of her remarks on Clause 18, she is now totally opposed to consumer advice centres and price surveys.

The main feature of the Bill is that it puts—to the chagrin of the Conservative Party—the prices policy on a permanent basis. For the last 11 years, excepting one complete year, there have been statutory prices powers. There was only one complete calendar year, 1971, when the Conservatives were in office, when there were no such powers. They were talking about the "dash for growth". In 1971 they had a dash for nudity and for nakedness. There were no statutory intervention powers and part of the disaster that resulted was the inflation that has taken place since then. The Conservatives were rapidly converted and came back to the House with prices Bills in 1972 and 1973. They produce the sort of inflexible code that we now must operate.

We have now come to the end of the debate. As I said at the beginning, I remain mystified about Conservatives' policy on prices—unless their policy is no policy at all. Tonight Conservatives can choose to support a Bill that contains flexible and permanent powers, which the country demands. They can choose to do that, but I doubt that they can make up their minds. Mendes-France said

"To govern is to choose". The Conservative Party is capable of neither.

Question put, That the amendment be made:—

The House divided: Ayes 267, Noes 279.

Division No. 113] AYES [9.59 p.m.
Adley, Robert Fox, Marcus Marshall, Michael (Arundel)
Aitken, Jonathan Fry, Peter Mates, Michael
Alison, Michael Galbraith, Hon T. G. D. Mather, Carol
Amery, Rt Hon Julian Gardiner, George (Reigate) Maude, Angus
Arnold, Tom Gardner, Edward (S Fylde) Maudling, Rt Hon Reginald
Atkins, Rt Hon H. (Spelthorne) Gilmour, Rt Hon Sir Ian (Chesham) Mawby, Ray
Awdry, Daniel Glyn, Dr Alan Maxwell-Hyslop, Robin
Bain, Mrs Margaret Godber, Rt Hon Joseph Mayhew, Patrick
Baker, Kenneth Goodhart, Philip Meyer, Sir Anthony
Bell, Ronald Goodhew, Victor Miller, Hal (Bromsgrove)
Bennett, Dr Reginald (Fareham) Goodlad, Alastair Mills, Peter
Benyon, W. Gorst, John Miscampbell, Norman
Berry, Hon Anthony Gow, Ian (Eastbourne) Mitchell, David (Basingstoke)
Biffen, John Gower, Sir Raymond (Barry) Moate, Roger
Biggs-Davison, John Gray, Hamish Molyneaux, James
Blaker, Peter Griffiths, Eldon Monro, Hector
Body, Richard Grist, Ian Montgomery, Fergus
Boscawan, Hon Robert Grylls, Michael Moore, John (Croydon C)
Bottomley, Peter Hall, Sir John More, Jasper (Ludlow)
Bowden, A. (Brighton, Kemptown) Hall-Davis, A. G. F. Morgan, Geraint
Boyson, Dr Rhodes (Brent) Hamilton, Michael (Salisbury) Morgan-Giles, Rear-Admiral
Bradford, Rev Robert Hampson, Dr Keith Morris, Michael (Northampton S)
Braine, Sir Bernard Hannam, John Morrison, Charles (Devizes)
Brittan, Leon Harrison, Col Sir Harwood (Eye) Morrison, Hon Peter (Chester)
Brocklebank-Fowler, C. Harvie Anderson, Rt Hon Miss Mudd, David
Brooke, Peter Hastings, Stephen Neave, Alrey
Brotherton, Michael Havers, Sir Michael Nelson, Anthony
Brown, Sir Edward (Bath) Hayhoe, Barney Neubert, Michael
Bryan, Sir Paul Heath, Rt Hon Edward Newton, Tony
Buchanan-Smith, Alick Hicks, Robert Nott, John
Buck, Antony Higgins, Terence L. Onslow, Cranley
Budgen, Nick Hodgson, Robin Oppenheim, Mrs Sally
Bulmer, Esmond Holland Philip Page, Rt Hon R. Graham (Crosby)
Butler, Adam (Bosworth) Hordern, Peter Page, Richard (Workington)
Carlisle, Mark Howe, Rt Hon Sir Geoffrey Parkinson, Cecil
Carson, John Howell, David (Guildford) Pattie, Geoffrey
Chalker, Mrs Lynda Hunt, David (Wirral) Percival, Ian
Churchill, W. S. Hunt, John (Bromley) Peyton, Rt Hon John
Clark, Alan (Plymouth, Sutton) Hurd, Douglas Pink, R. Bonner
Clark, William (Croydon S) Hutchison, Michael Clark Powell, Rt Hon J. Enoch
Clarke, Kenneth (Rushcliffe) Irving, Charles (Cheltenham) Price, David (Eastleigh)
Clegg, Walter James, David Prior, Rt Hon James
Cockcroft, John Jenkin, Rt Hon P. (Wanst'd & W'df'd) Pym, Rt Hon Francis
Cooke, Robert (Bristol W) Johnson Smith, G. (E Grinstead) Raison, Timothy
Cope, John Jones, Arthur (Daventry) Rathbone, Tim
Costain, A. P. Jopling, Michael Rees, Peter (Dover & Deal)
Crawford, Douglas Joseph, Rt Hon Sir Keith Rees-Davies, W. R.
Crouch, David Kaberry, Sir Donald Renton, Rt Hon Sir, D. (Hunts)
Crowder, F. P. Kershaw, Anthony Renton, Tim (Mid-Sussex)
Davies, Rt Hon J. (Knutsford) Kimball, Marcus Rhodes James, R.
Dean, Paul (N Somerset) King, Evelyn (South Dorset) Ridley, Hon Nicholas
Dodsworth, Geoffrey King, Tom (Bridgwater) Ridsdale, Julian
Douglas-Hamilton, Lord James Kitson, Sir Timothy Rifkind, Malcolm
Drayson, Burnaby Knox, David Rippon, Rt Hon Geoffrey
du Cann, Rt Hon Edward Lamont, Norman Roberts, Wyn (Conway)
Durant, Tony Langford-Holt, Sir John Ross, William (Londonderry)
Dykes, Hugh Latham, Michael (Melton) Rost, Peter (SE Derbyshire)
Eden, Rt Hon Sir John Lawrence, Ivan Royle, Sir Anthony
Edwards, Nicholas (Pembroke) Lawson, Nigei Sainsbury, Tim
Elliott, Sir William Lester, Jim (Beeston) St. John-Stevas, Norman
Emery, Peter Lewis, Kenneth (Rutland) Scott, Nicholas
Ewing, Mrs Winifred (Moray) Lloyd, Ian Shaw, Giles (Pudsey)
Eyre, Reginald Loveridge, John Shelton, William (Streatham)
Fairbairn, Nicholas Luce, Richard Shepherd, Colin
Fairgrieve, Russell McAdden, Sir Stephen Shersby, Michael
Fell, Anthony MacCormick, Iain Silvester, Fred
Finsberg, Geoffrey McCrindle, Robert Sims, Roger
Fisher, Sir Nigel McCusker, H. Sinclair, Sir George
Fletcher, Alex (Edinburgh N) Macfarlane, Neil Skeet, T. H. H.
Fletcher-Cooke, Charles MacGregor, John Smith, Dudley (Warwick)
Fookes, Miss Janet MacKay, Andrew James Speed, Keith
Forman, Nigel Macmillan, Rt Hon M. (Fainham) Spence, John
Fowler, Norman (Sutton C'f'd) Madel, David Spicer, Michael (S Worcester)
Sproat, Iain Thomas, Rt Hon P. (Hendon S) Wells, John
Stainton, Keith Thompson, George Welsh, Andrew
Stanbrook, Ivor Townsend, Cyril D. Whitelaw, Rt Hon William
Stanley, John Trotter, Neville Wiggin, Jerry
Steen, Anthony (Wavertree) van Straubenzee, W. R. Wilson, Gordon (Dundee E)
Stewart, Rt Hon Donald Vaughan, Dr Gerard Winterton, Nicholas
Stewart, Ian (Hitchin) Viggers, Peter Wood, Rt Hon Richard
Stokes, John Wakeham, John Young, Sir G. (Ealing, Acton)
Tapsell, Peter Walder, David (Clitheroe) Younger, Hon George
Taylor, R. (Croydon NW) Walker, Rt Hon P. (Worcester)
Taylor, Teddy (Cathcart) Walker-Smith, Rt Hon Sir Derek TELLERS FOR THE AYES:
Tebbit, Norman Walters, Dennis Mr. Spencer Le Marchant and
Temple-Morris, Peter Watt, Hamish Mr. Michael Roberts.
Thatcher, Rt Hon Margaret Weatherill, Bernard
Abse, Leo Ellis, John (Brigg & Scun) Latham, Arthur (Paddington)
Allaun, Frank Ennals, David Leadbitter, Ted
Anderson, Donald Evans, Fred (Caerphilly) Lee, John
Archer, Peter Evans, Ioan (Aberdare) Lestor, Miss Joan (Eton and Slough)
Ashley, Jack Ewing, Harry (Stirling) Lever, Rt Hon Harold
Ashton, Joe Fernyhough, Rt Hon E. Lewis, Ron (Carlisle)
Atkins, Ronald (Preston N) Fitch, Alan (Wigan) Lipton, Marcus
Atkinson, Norman Flannery, Martin Lomas, Kenneth
Barnett, Guy (Greenwich) Fletcher, Ted (Darlington) Loyden, Eddie
Barnett, Rt Hon Joel (Heywood) Foot, Rt Hon Michael Luard, Evan
Bates, Alf Forrester, John Lyon, Alexander (York)
Bean, R. E. Fowler, Gerald (The Wrekin) Lyons, Edward (Bradford W)
Beith, A. J. Fraser, John (Lambeth, N'w'd) Mabon Rt Hon Dr J. Dickson
Benn, Rt Hon Anthony Wedgwood Freeson, Reginald McCartney, Hugh
Bennett, Andrew (Stockport N) Freud, Clement McDonald, Dr Oonagh
Bidwell, Sydney Garrett, John (Norwich S) McElhone, Frank
Bishop, E. S. Garrett, W. E. (Wallsend) MacFarquhar, Roderick
Blenkinsop, Arthur George, Bruce McGuire, Michael (Ince)
Boardman, H. Gilbert, Dr John MacKenzie, Gregor
Booth, Rt Hon Albert Ginsburg, David Mackintosh, John P.
Boothroyd, Miss Betty Golding, John McMillan, Tom (Glasgow C)
Bottomley, Rt Hon Arthur Gould, Bryan Madden, Max
Boyden, James (Bish Auck) Gourlay, Harry Magee, Bryan
Bradley, Tom Graham Ted Mahon, Simon
Bray, Dr Jeremy Grant, George (Morpeth) Mallalieu, J. P. W.
Brown, Hugh D. (Provan) Grant, John (Islington C) Marks, Kenneth
Brown, Robert C. (Newcastle W) Grimond, Rt Hon J. Marshall, Dr Edmund (Goole)
Buchan, Norman Hamilton, James (Bothwell) Marshall, Jim (Leicester S)
Buchanan, Richard Harper, Joseph Mason, Rt Hon Roy
Butler, Mrs Joyce (Wood Green) Harrison, Walter (Wakefield) Maynard, Miss Joan
Callaghan Rt Hon J. (Cardiff SE) Hart, Rt Hon Judith Meacher, Michael
Callaghan Jim (Middleton & P) Hattersley, Rt Hon Roy Mellish, Rt Hon Robert
Campbell, Ian Hatton, Frank Mendelson, John
Cant, R. B. Hayman, Mrs Helene Mikardo, Ian
Carmichael, Neil Heffer, Eric S. Millan, Rt Hon Bruce
Carter, Ray Hooley, Frank Miller, Dr M. S. (E Kilbride)
Carter-Jones, Lewis Hooson, Emlyn Miller, Mrs Millie (Ilford N)
Cartwright, John Horam, John Molloy, William
Castle, Rt Hon Barbara Howell, Rt Hon Denis (B'ham, Sm H) Moonman, Eric
Clemitson, Ivor Howells, Geraint (Cardigan) Morris, Alfred (Wythenshawe)
Cocks, Rt Hon Michael Hoyle, Doug (Nelson) Morris, Charles R. (Openshaw)
Cohen, Stanley Huckfield, Les Morris, Rt Hon J. (Aberavon)
Coleman, Donald Hughes, Rt Hon C. (Anglesey) Moyle, Roland
Colquhoun, Ms Maureen Hughes, Robert (Aberdeen N) Mulley, Rt Hon Frederick
Conlan, Bernard Hughes, Roy (Newport) Murray, Rt Hon Ronald King
Corbett, Robin Hunter, Adam Newens, Stanley
Cowans, Harry Irvine, Rt Hon Sir A. (Edge Hill) Noble, Mike
Cox, Thomas (Tooting) Irving, Rt Hon S. (Dartford) Oakes, Gordon
Crawshaw, Richard Jackson, Colin (Brighouse) Ogden, Eric
Cronin, John Jackson, Miss Margaret (Lincoln) O'Halloran, Michael
Crowther, Stan (Rotherham) Janner, Greville Orbach, Maurice
Cryer, Bob Jay, Rt Hon Douglas Orme, Rt Hon Stanley
Cunningham, G. (Islington S) Jeger, Mrs Lena Ovenden, John
Cunningham, Dr J. (Whiteh) Jenkins, Hugh (Putney) Padley, Walter
Davidson, Arthur John, Brynmor Palmer, Arthur
Davies, Bryan (Enfield N) Johnson, James (Hull West) Pardoe, John
Davies, Denzil (Llanelli) Johnson, Walter (Derby S) Park, George
Davies, Ifor (Gower) Johnston, Russell (Inverness) Parker, John
Davies, Clinton (Hackney C) Jones, Alec (Rhondda) Parry, Robert
Deakins, Eric Jones, Barry (East Flint) Pavitt, Laurie
Dean, Joseph (Leeds West) Jones, Dan (Burnley) Pendry, Tom
de Freitas, Rt Hon Sir Geoffrey Kaufman, Gerald Penhaligon, David
Dempsey, James Kelley, Richard Perry, Ernest
Doig, Peter Kerr, Russell Prentice, Rt Hon Reg
Dorman, J. D. Kilroy-Silk, Robert Price, William (Rugby)
Douglas-Mann, Bruce Kinnock, Neil Radice, Giles
Dunnett, Jack Lambie, David Rees, Rt Hon Merlyn (Leeds S)
Eadie, Alex Lamborn, Harry Richardson, Miss Jo
Edge, Geoff Lamond, James Roberts, Albert (Normanton)
Roberts, Gwilyn (Cannock) Spearing, Nigel Walker, Harold (Doncaster)
Robinson, Geoffrey Spriggs, Leslie Walker, Terry (Kingswood)
Roderick, Caerwyn Stallard, A. W. Ward, Michael
Rodgers, George (Chorley) Steel, Rt Hon David Watkins, David
Rodgers, Rt Hon William (Stockton) Stewart, Rt Hon M. (Fulham) Weetch, Ken
Rooker, J. W. Stoddart, David Weitzman, David
Rose, Paul B. Stott, Roger Wellbeloved, James
Ross, Stephen (Isle of Wight) Strang, Gavin White, James (Pollok)
Ross, Rt Hon W. (Kilmarnock) Strauss, Rt Hon G. R. Whitlock, William
Rowlands, Ted Summerskill, Hon Dr Shirley Willey, Rt Hon Frederick
Ryman, John Swain, Thomas Williams, Rt Hon Alan (Swansea w)
Sandelson, Neville Taylor, Mrs Ann (Bolton W) Williams, Alan Lee (Hornch'ch)
Sedgemore, Brian Thomas, Jeffrey (Abertiller) Williams, Rt Hon Shirley (Hertford)
Selby, Harry Thomas, Mike (Newcastle E) Williams, Sir Thomas (Warrington)
Shaw, Arnold (Ilford South) Thomas, Ron (Bristol NW) Wilson, Alexander (Hamilton)
Sheldon, Rt Hon Robert Thorne, Stan (Preston South) Wilson, William (Coventry SE)
Shore, Rt Hon Peter Thorpe, Rt Hon Jeremy (N Devon) Wise, Mrs Audrey)
Short, Mrs Renée (Wolv NE) Tierney, Sydney Woodall, Alec
Silkin, Rt Hon John (Deptford) Tomlinson, John Woof, Robert
Silkin, Rt Hon S. C. (Dulwich) Torney, Tom Wrigglesworth, Ian
Sillars, James Tuck, Raphael Young, David (Bolton E)
Silverman, Julius Valey, Rt. Hon Eric G.
Skinner, Dennis Wainwright, Edwin (Dearne V) TELLERS FOR THE NOES:
Small, William Wainwright, Richard (Colne V) Mr. James Tinn and
Smith, John (N Lanarkshire) Walden, Brian (B'ham, L'dyw'd) Mr. Frank R. White.
Snape, Peter

Question accordingly negatived.

Main Question put forthwith pursuant to Standing Order No. 39 (Amendment on Second or Third Reading), and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).