BREAD PRICES

HC Deb 10 January 1977 vol 923 cc1196-219

10.25 p.m.

Mrs. Sally Oppenheim (Gloucester)

I beg to move, That an humble Address be presented to Her Majesty, praying that the Bread Prices (No. 2) Order 1976 (S.I., 1976, No. 2128), dated 13th December 1976, a copy of which was laid before this House on 13th December, be annulled. I make it clear at once that our purpose is not to vote against the order but to give an opportunity to debate it and the Secretary of State's handling of the whole matter, and also to refer to the previous order which this one revokes. Our overwhelming concern is the price of bread to consumers immediately, in the medium term and in the longer term, the health and viability of the industry that must serve them, and the jobs within that industry, and unreservedly to condemn the action of the trade union which is now carrying out what I understand, as far as I am able to make out, to be an unofficial strike which is driving bread prices higher than they otherwise would be.

I am most concerned that the Secretary of State did not condemn that action in stronger terms in his statement today. Perhaps he will do so in this debate. Two unions are involved, one of which is striking and one of which is not.

Mr. Dennis Skinner (Bolsover)

Whose side is the hon. Lady on?

Mrs. Oppenheim

If the hon. Gentleman wants to intervene, I give him the opportunity.

Mr. Skinner

I have been watching developments closely in this matter during the recess. I noticed, as the hon. Lady probably did, the editorial in one of the Tory newspapers which condemned to some extent the attempts which she had been making on the matter. I wonder at what point in the recess she changed her mind, and which union she supports and which one she does not.

Mrs. Oppenheim

I do not support the action of the union which is striking. I shall return to the question of the other union, the Bakers Union, which is not striking, when I deal with the representations that it has made to the Secretary of State. Then I hope that I shall be able to answer the hon. Gentleman.

One of the aspects of the Secretary of State's handling of the matter which we condemn is that he appears to have blundered into an industry which is delicately balanced, for a number of reasons which he appreciates, rather like a bull in a china shop. In many respects the baking industry has unique problems. It is a high-turnover, low-profit industry in which the profit on a single loaf is minimal and the profit on the sale of a standard loaf is minimal. The industry has been subjected to the rigours of the Price Code perhaps more than any other industry, so much so that three of the main category I companies now need to be in the safety net becaus their profitability has been eroded to such an extent. But they are still subject to the rigours of maximum price regulation and to the distortion of competition which will continue as long as the factors of intervention and distortion exist.

However, the Secretary of State, nothing daunted and no doubt desperate to appear to be doing something about prices, froze bread prices about a month before Christmas. That was an unprecedented action for the baking industry. It had negotiated a pay increase in good faith and the Price Commission had granted it a price increase. For the first time, however, the Secretary of State froze a price increase which had been granted by the Price Commission. The Minister then said to the bread industry, somewhat disingenuously, "You do not need to freeze your prices, but the retailers do." That was the start of the trouble. That was another counter-distortion on top of the distortions I have already mentioned.

As a result of that action, the Secretary of State was faced after Christmas with the task of unfreezing the price that he had frozen for a month, with the effect not only of unfreezing the price but of removing part of the bread subsidy.

How was our hero going to explain away this tight corner and the fact that, having frozen the price, he had to unfreeze it a month later? Then he discovered, as if by a flashing revelation of some sort, the benefits of competition and free enterprise. I am certainly not opposed to the principle of competition and free enterprise. I wholeheartedly congratulate the Secretary of State on his conversion, if it is a genuine one, even if his new-found faith does not extend to the abolition of the Price Code and the maximum price regulations themselves.

I only wish that that blinding revelation had been accompanied by an attitude of honesty which one wished would have ensued. But the Secretary of State did not take advantage of his conversion to the principles of free enterprise and competition to tell people honestly what this would mean in the short term because of the situation in which the bread industry found itself.

The right hon. Gentleman did not say that 70 per cent. of consumers in the short term, because the industry was short on capacity for discounting, would actually be paying higher prices because the discounts given to the 30 per cent. of bread sales which take place in supermarkets would be given only at the expense of higher prices in medium-size and smaller shops. He did not say that all this would sort itself out when the industry returned to full profitability and when control or concessions through the free competition that he had suddenly recognised could do the work that they were supposed to do.

The right hon. Gentleman did not do that. He told himself, by implications that were rash and misleading—both in his original statement and in statements that ensued—that a return to free competition in the bread industry would immediately result in significant reductions in the price of bread on a widespread basis. Clearly, this was not to be the case.

The right hon. Gentleman modified his original statement a few days later. Now he talks about the need for the industry to settle down before competition can operate effectively. That was in his Press statement today. At the end of that statement the right hon. Gentleman said: In my initial statement I said it would take some time for the scheme to settle down. I have searched his initial statement, and I can see no reference or quotation to that effect. No doubt the right hon. Gentleman will want to clarify that point. He may not have used those exact words.

Following the bungling and blustering of his first statement, and his replies at Question Time, the right hon. Gentleman seems to have toned down his attitude, and this is to be welcomed. It is true that he denied that he was responsible for the statement which went out on most of the news media that the price of bread was likely to be reduced by about 8½p. The right hon. Gentleman said: I do not believe that it is my job to deny something I have never said."—[Official Report, 20th December 1976; Vol. 923, c. 17.] That is correct. But would the Minister have said that if all the newspapers had been saying that the price of bread would go up by 8½p? I doubt it very much.

Why did not the right hon. Gentleman make clear in his statement, or in subsequent statements, that the reduction in bread prices could not be more than 1p. and this would not reduce the price of bread but would merely prevent an increase? Nor did the right hon. Gentleman make clear that this would apply to only a minority of consumers in the short term.

Again, in his statement the right hon. Gentleman said that bread prices in some instances were lower than they were before Christmas. No doubt the Secretary of State has the benefit of Civil Service advice and information. He has already been reported as saying that he is not very keen on being associated with the shopping basket, and, therefore, it is quite clear that he does not obtain this evidence for himself. So I thougt that I would do the job for him, and I went out. I went out in London and in Gloucester, and I studied the price of bread not only in the big supermarkets but in smaller supermarkets and in small corner shops.

There is no doubt that the right hon. Gentleman is right in saying that the union's action is artificially keeping up some bread prices. That is undoubtedly true. But in no instance did I find that bread prices were lower than they were before Christmas. What I found was an enormous spread of prices. In some cases the price was 3p or 4p more in shops which were not being affected by the strike at all. This was obviously the result of the lack of capacity in the industry to give the kind of discounts that the right hon. Gentleman suggested would be given.

The right hon. Gentlemans' handling of the issue has been deplorable from start to finish. We know that he likes to specialise in this kind of gimmickry, and we know that he was desperate to find a solution and to appear to be doing some- thing about prices. But it does not explain away the misleading impression that he allowed to endure right up to Christmas and after that. As a result of his action, consumers have been confused, deceived and disappointed at a time when they have to wrestle with higher and higher prices and cannot withstand this kind of deception.

The ham-handed and arrogant way in which the right hon. Gentleman has carried out the consultations with the industries concerned and with the two major unions concerned has not done his reputation any good and certainly has added to the confusion which resulted from his original statement.

I am not sure whether, out of all this, the Secretary of State would like us to think that perhaps he is naive, that perhaps he is not at all concerned or interested or did not know about the representations which were being made, or that he did not realise that the price of bread would not come down to the extent that he had allowed to be bruited about by the news media without contradiction. I therefore refer to the representation made by the Bakers Union, and I emphasise that that is not the union which is taking strike action. That must be made clear. Therefore, it cannot be condemned merely for making a representation to the Secretary of State.

The representation was not an unreason able one. The bakers expressed their concern that, as a result of the situation in the bread industry today and the lack of profitability in the industry today, the action which the Secretary of State had taken could result in smaller shops and some medium-sized supermarkets not selling bread any more.

In his statement today, the Secretary of State said, I thought quite reasonably, that the smaller shop provided a special service and was patronised for that special service. He added that it had its own viability niche in that consumers were prepared to pay a little more in such shops because they found them more convenient or because they could not get into town. That is fair enough. But what the right hon. Gentleman had not taken account of in the representation which the union made to him is that smaller shops have already been bludgeoned over and over again by the controls that his Government have introduced and by the interventions which his Department has instigated in the case of smaller shops.

The Under-Secretary will remember all our debates on the maximum price orders and the fact that he sensibly accepted our advice and removed some of the onerous rules and regulations from smaller shop keepers which otherwise they would have had to observe with regard to the display of maximum price notices. But I do not think that the Secretary of State considered this sympathetically enough or handled the representations that were made to him in as reasonable a way as he might have done.

Then we heard the right hon. Gentleman claiming all these great immediate benefits. Of course, long-term benefits will ensue as soon as the industry is allowed to return to full profitability. Benefits will ensue to the consumer because the benefits of competition can then be pursued properly and the consumer can benefit to the full. However, when the right hon. Gentleman said that he thought that bread was being sold cheaper and that discounts could be a penny or even more, was he ignoring the representations that the Federation of Bakers had made to him in memorandum after memorandum? I quote from one, in which it said: The claim that bread can be cheaper by the concession of high discounts is a confidence trick if made in the knowledge of the average level of manufacturers' current profits (½p per 28 oz. unit at August 1976) which are quite incapable of financing any general increase in discounts. The Federation went on to say that, if the Government withdrew the subsidies at the same time as the discount control, they must expect retail prices to increase and not decrease.

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

The hon. Lady has now argued against controls and in favour of controls in the industry. Will she say, in a sentence, whether she believes in more or fewer controls?

Mrs. Oppenheim

I have not argued in favour of controls. I have said that the Secretary of State, in purporting to remove controls, gave people to understand that the immediate effect of this would be far greater than it could be in the circumstances.

Mr. Hattersley

Would the hon. Lady tell us, in a sentence, whether she believes in more or fewer controls?

Mrs. Oppenheim

I believe very much in fewer controls in the interests of lower prices to consumers, and a healthy and more viable industry.

In representations by members of the retail trade—those who would benefit most at the time—they said: Hattersley has got it wrong—large bread price reductions arc not on. In saying that he had got it wrong, they were referring to the pronouncements by the Secretary of State about the likely price reduction taking place, not the removal of controls.

I suggest that the Secretary of State, knowing all the facts, went out of his way, no doubt in order to justify his existence as a Minister, to allow this gimmicky impression to be created. It was an impression which was not sustained by the events which followed. Of course, the fact which he attempts to hide is that he is powerless to prevent price increases, whatever else he may pretend. He has to preside, as Prices Secretary, over a period in which grocery prices are at an all-time high and are likely to go even higher. The Price Code and gimmicks cannot prevent this. The ill-fated Price Check Scheme is another gimmick. I read in the Grocer of 1st January that the prices of processed foods rose by 19 per cent. at the end of the Price Check Scheme.

The Secretary of State is faced with a double irony or phasing out food subsidies at a time when prices are rising faster than when those subsidies were introduced for electoral purposes. At the time I warned the Government that this would happen. The reality of price increases, when it hits the consumer, is all the harder because food subsidies do not cure inflation. All that they do is disguise it in the short term.

If food subsidies had never been introduced and if the Price Code in its present form had been phased out, food prices would almost certainly be lower than they are, industry would have invested, and free enterprise and competition would have benefited consumers to the full. No amount of manipulation, counter-manipulation or rosy forecasts from the right hon. Gentleman can protect consumers from the fact that they have suffered and will continue to suffer from the highest rate of inflation for the longest period of time ever seen in this country. In this respect, and in the light of the record, the Government are ultimately culpable, and no Minister has any right to pretend that he can safeguard consumers or that he cares about the level of prices in the family budget.

10.44 p.m.

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

This debate provides me with a welcome opportunity to discuss the Government's decision to relax the rules which we had previously imposed on the baking industry, and the bread distributing industry. I make it absolutely clear to the uninitiated Members of this House whose only information about this industry is derived from what the hon. Member for Gloucester (Mrs. Oppenheim) has said that what the Government did six weeks ago was to relax the level of controls which had been previously imposed. The records I have been able to examine show that they were imposed without a word of criticism or complaint by the hon. Lady.

I begin by putting into perspective not only the hon. Lady's speech but other wild speeches by uninformed sources, and by making it clear that some of the predictions that were made before Christmas have been proved wrong.

There has not been a price war in the baking industry, nor will there be. There has not been a bread famine, nor is there likely to be. While I am denying the more preposterous suggestions let me deal with the claim that there was a freeze for a month, that the Government, as represented by me, then had to find a way of extricating themselves from it, and therefore invented the scheme that we are discussing tonight. That claim is demonstrably wrong by the most superficial reading of the evidence.

I announced both schemes—the initial month-long freeze, and tonight's scheme—simultaneously. If the hon. Lady had read any Press cuttings other than her own she would have been bound to know that.

The Government no longer control the wholesale price of bread. There is no longer a legal maximum above which retailers cannot negotiate discounts on their purchases from bakers. The Government are no longer keeping the price of bread at the wholesale stage artificially high. Anybody who believes that my decisions on these three particulars are wrong ought to say so, and to say so now.

The hon. Lady announced in the Daily Telegraph that while she was moving the Prayer she would not ask her Friends to vote for it. Anyone who votes for it tonight is voting for more restrictions on the industry. That, I gather from the answer I got from the hon. Lady, is something that she is anxious to avoid.

I believe that we have created a freer market in bread, and I have no doubt that the freer market that we have created will benefit the industry and the consumer. I have no doubt that in spite of the difficulties which I shall go on to describe, it has already created benefits.

The hon. Lady has assiduously searched London and Gloucester for examples of bread being sold below the price at which it was sold before Christmas. I do not know how many branches of Sainsburys there are in the city she represents, but there are a large number in the capital. Sainsbury announced this evening that at 17p the standard loaf is 1 p below the price it would have been under the scheme in operation before Christmas. The hon. Lady must understand these things. I can give her some other examples if she wants them. The Financial Times of 7th January gave a long list of examples, and if the hon. Lady's examination of the Press had gone a little wider she might have found some of these examples for herself.

Some of the benefits that the new system might have provided have been denied the consumer by the action of the United Road Transport Union. I have been critical of that union publicly today and I am glad that the hon. Lady now joins me in my criticism. She may recall the last Question Time before Christmas, when she was overt and positive in support of the action the union took. Like my hon. Friend the Member for Bolsover (Mr. Skinner) I at least welcome her conversion in that respect.

Mrs. Sally Oppenheim

Will the right hon. Gentleman give examples of the way in which I was overt and positive at Question Time in support of strike action? He has made the allegation; let him now produce the evidence.

Mr. Hattersley

What I said, and I now repeat it, is that before Christmas the hon. Lady gave her support to the union and the action that it was taking. Before the debate is over I shall bring to her attention exactly what she said on that occasion.

I agree that because of the action taken by the union the price of bread in some shops is higher than it should be and higher than it need be. I propose to turn to the union and its decision in a moment.

There is, however, much evidence, again fully reported in a number of newspapers, that despite a reduction in the bread subsidy and the other ½p which has been allowed under the Price Code as an addition to the maximum price of bread, bread is cheaper in some shops than it was before Christmas. If the hon. Lady wants evidence I urge her to look at the more serious newspapers, particuularly the Financial Times of 7th January. There is still scope for reduction in many shops. But the actual price that is to be charged by specific retailers in specific shops next week, next month or next year is something that I cannot predict and and something that I never attempted to predict. The actual price charged in specific shops will depend on how far the competitive conditions which I have created are allowed to work. My hope is that the most efficient retailers will insist on striking the best possible bargain they can for their customers.

These are early days. I said on 14th December that the new scheme would take some time to settle down. I have no doubt that when it has settled down it will be clear to almost everybody that it has done so to the benefit of the industry and particularly| to the benefit of the consumers whom the industry serves.

The hon. Lady dealt at length with the processes that went into the making of the order which now governs the price of bread and the Government regulation thereof. I must, therefore, spend two moments giving the history and pointing out some of the things which the House may not know. Between 1974 and last December the Government limited the size of discounts negotiated between bakers and retailers. We did so to ensure that the bread subsidy passed from the baker through the retailer to the consumer. I have no doubt that that policy was right at the time. But there is equally no doubt that by December 1976 the net effect of that policy was to prevent some retailers from negotiating wholesale discounts as large as their competitive strength would have allowed them to obtain. In fact and in effect, the Government's action was keeping the retail price high.

Conservative Members who believe that we should have continued to keep to that policy ought to say so, and positively. The whole matter came to a head in the autumn of 1976, when some retailers actually challenged the Government's legal right to stipulate a maximum discount on certain types of bread. The Federation of Bakers asked to see me to consider the ambiguity of its position, and offered an ingenious solution. It said that I should propose to the House of Commons a new Bill which stipulated by law the maximum possible wholesale discount that retailers were allowed to obtain when negotiating with bakers—something which I am sure many hon. Members would call wholesale price maintenance. I was not prepared to propose that law to the House and I very much doubt whether the House would have supported me if I had done so.

If anyone thinks that that is what I should have done—those who are rallying to the support of the Federation of Bakers—they had better make it clear that their solution is a law limiting the discount which can be obtained on the wholesale price of bread. That was not a policy which I or the Government as a whole supported.

My policy did two things. I knew that it would always be criticised by various vested interests in the industry. My task was to attempt to balance the interests of the baker, the retailer and the consumer. My task, in my judgment, was also to open the way for a complete relaxation of all Government control over the baking industry. Let me make my position clear. It seems that there are some industries which benefit from Government intervention, some which positively ask for it, and some which need it although they do not realise that fact. They ought to be provided with Government aid and there ought to be occasional Government intervention. But there are other industries which prosper best when the Government do not interfere with what they do. That is what I hope can soon be the situation in the baking, industry.

What I did had three main elements. First, I established, as a safeguard, a statutory maximum price system for bread which could be applied irrespective of whether there was a subsidy. Secondly, I removed the limit on the discounts which had previously inhibited the negotiating position between the bakers and the retailers. Thirdly, I insisted that during this interim phase any larger discount negotiated by retailers must in some way be reflected in lower prices and therefore a greater benefit for the consumer.

The relationship which I sought between the size of the discount and the retail price had two main purposes—to ensure that the market forces which I wanted to bring into the industry operated on behalf of the consumers and, to a degree, to restrain the fears of the negotiating strength of the supermarkets.

Since it is necessary to talk about these matters frankly, would the hon. Member for Gloucester like me to give way so that she can describe what she is laughing at?

The bakers were obsessed by the negotiating strength of the supermarkets. As I have said before, my initial instinct was to remove discount control completely, leaving competitive forces within the industry as the sole determinant, with different prices at different shops controlled only by the overall maximum price which is, in general, higher than the price generally charged.

The plant bakers, as they are called—the Federation of Bakers—insisted that if I removed all controls, the result would be massive closures and extensive redundancies. It is on the record that the Scottish bakers predicted that even with my limited scheme of modified relaxation, many supermarkets would give away bread as a loss leader. These were exaggerated fears, but for all their exaggeration, it would not have been right to sweep them aside.

Had we abandoned all forms of control at a stroke—if I may borrow that phrase—the concern of the small shopkeepers and the agitation of the union would have been no less. Indeed, on a rational examination of the evidence, we may conclude that fears about the future of small shops and the aggressive response of the union would have been greater than it has been over the partial removal. If present evidence is anything to go by, many retailers would have flinched from the consequences of competition as soon as the going got rough.

It was my duty to steer a course between the claim of the bakers and the union that the total abandonment of controls would bring bankruptcies and redundancies and the suggestion of the retailers that the present level of intervention was keeping up the price of bread. We therefore introduced a policy of relaxing controls, and we must try to keep the results in proper perspective.

The hon. Member for Gloucester continues to insist that my Department, another Minister, or I suggested that a massive reduction in the price of bread would be the certain outcome of the new scheme. I have told the hon. Lady before that when I appeared on radio in the afternoon of the day on which the initial announcement was made, I made clear that the idea being floated by some newspapers of an 8p or 10p reduction in the price of a loaf was nonsense.

We aimed for a little reduction—some mitigation of the increase in prices—and this is what we have, to a degree, got and what we would have got to a larger extent but for the opposition of the union.

The policy has been in operation for six days. I repeat that in many shops, after those six days, the price of bread is higher than it need or ought to be. Further reductions are now being prevented by the action of the distribution union. The union has acted in that way because of what I believe to be a misunderstanding of the real interests of the industry. But, whatever else the United Road Transport Union has done, it has demonstrated my original contention that under my scheme, if competition is allowed to work, the price of bread will go down.

It is also clear that the interests of the industry as a whole—the owners, the workers, and all who are involved in it—are best served in the long term by producing bread at maximum efficiency and at minimum price.

All over Britain there are examples of retailing companies which are anxious to sell cheaper bread. Many shops will either absorb the subsidy reduction or cut the price from the pre-Christmas level despite the subsidy reduction. There is no doubt that the long-term interests of the industry—that includes particularly those who bake and those who distribute bread—are best served by allowing that process to continue.

I also believe that the best interests of the small shops are similarly served. Certainly my scheme places some price competition on some small shops; but small shops, by their nature, have other advantages. They benefit from the personal service that they provide. They often have the added attraction of convenience, avoiding the trip to the town that the supermarket involves.

Small shops have that kind of important role to perform within the community. They will be damaged and their reputation will be damaged only if anyone—the union which claims to represent their interests, or the hon. Member for Gloucester—talks as if small shops can succeed only if their prices are kept artificially high and the consumer is prevented from enjoying the benefit of the competition which the larger shops can provide.

My scheme seeks to offer the consumer a choice between service and convenience on the one hand, and price and negotiating power, on the other. My scheme provides for a clear relaxation of the level of Government intervention in the baking industry. That is something that the hon. Member for Gloucester has either not understood or not thought it right to point out.

Mrs. Sally Oppenheim

What the tight hon. Gentleman keeps describing as his scheme was already in existence before his right hon. Friend imposed the limit on discounts.

Mr. Hattersley

The hon. Lady's misunderstanding is even more profound than I had imagined. The scheme which will be operated, if the hon. Lady has neither the courage to vote on the Prayer tonight nor the troops with which to carry it, will be the scheme which I announced and about which I have been the subject of a good deal of personal attack by the hon. Lady. After the extraordinary personal speech made by the hon. Lady 20 minutes ago, that she should say that the entire thing is nothing to do with me or was invented somewhere else is a volte-face almost as great as the movement from support of the union when the going was easy to opposition to the union when the public obviously turned against it.

Mr. Skinner

Before we get the roles mixed up and intertwined too much, may I ask my right hon. Friend whether, as a member of a party which believes in control as against competition, he appreciates that what concerns some of the people involved in the baking industry, the small shopkeepers, and some of the consumers who have not got the kind of choice which he described earlier in his rather sweeping statement is that, if the supermarkets were to collar the market almost completely, many small shops would be driven out of the business of selling bread and many people involved in delivering bread for sale to consumers in rural areas, some of whom are housebound and do not have any choice, would be thrown out of work? Would it not be as well if he made a statement now indicating that, if an attempt were being made along those lines, the supermarkets would not be allowed to increase their prices above a certain limit?

Mr. Hattersley

There are two points to be made in relation to what my hon. Friend says. First, he makes a point with which I am in general agreement. Certainly, the small shop, as such, has an important role to play. But I do not think that the small shop ought to pretend that its role is simply a matter of price competition. It is a matter of providing a service which the supermarkets cannot and do not provide. But if the supermarkets behave in such a way as intentionally and successfully to squeeze the small shop out of business, I have, as I made clear earlier, retained the maximum price power, which I should not hesitate to apply.

As my hon. Friend knows—which is why he asked the question—it is not I but the Conservative Party which objects to maximum price orders and resents my willingness as well as my ability sometimes to say that the price may not exceed a certain figure. Were supermarkets to behave in the way that my hon. Friend describes, I should not hesitate to use my maximum price powers.

What we have done up to now, which I think is generally regarded as the right thing to do, is to provide more choice and provide the prospect of a reduction in the price of bread in some shops within the community. I have had a great deal of criticism from the hon. Lady for what I have done, but I have heard neither from her nor from anyone else an alternative scheme which meets the needs of the community or, for that matter, the needs of the industry any better. I have no doubt that when my scheme has had some opportunity to shake itself down and work its way through, the advantages will be very considerable. I do not urge the House to vote against the hon. Lady's motion, since I understand that she does not intend to vote for its herself. I simply ask the House to note the irresponsibility which which she has conducted this entire debate.

11.8 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

The House has had some fascinating material put before it tonight. I shall start with two questions on the order itself—the order which the right hon. Gentleman has christened "my scheme". I think that we should continue to use those immortal words, and I shall devote my remarks to analysing what he calls "my scheme".

First, I have a question about Areas 1, 2, 3, 4 and 5. Area 4 includes the islands of Canna, Eigg, Muck, Rhum and Skye, and I note that the loaf tends to be about 3p more expensive in maximum price in Area 4 than it is in Area 1. Do the Government intend to introduce a Bread Charges Equalisation Bill in line with the Water Charges Equalisation Act, to afford the deprived citizens in Eigg, Muck, Canna and Rhum the same maxi- mum price for bread as is afforded to inner London?

Secondly, why is it necessary to have Table 2 giving the maximum discount that may be made? All the Minister need do is say what the maximum price is, and, if anyone wants to undercut the maximum, he may sell bread at any price he likes. It is a nonsense of bureaucratic bumbledom to say tht if someone offers a discount of 100 per cent. on the price of a loaf he may reduce the maximum price from 21p by 20p, which means that he can sell it for 1p. If the reduction is 100 per cent., it would be ridiculous to charge 1p, because 100 per cent. means the whole lot, not just 20p. Why is it necessary to have maximum prices in relation to discounts which people may voluntarily offer? Those are just two small questions.

Now I come to "my scheme". "My scheme" is competition. It is that the bakers and the wholesalers and retailers should pitch the price of bread at that level which is determined by supply and demand, according to the scale of the operations in big shops or little shops, supermarkets or corner shops. "My scheme" in fact existed in this country for about 1,000 years before the right hon. Gentleman ever assumed his office.

It is the most extraordinary revelation that the right hon. Gentleman's predecessor's scheme of price control has been shown to be keeping the price of bread way up, causing excess profits, excess returns to delivery drivers and no doubt excessive livings for bureaucrats who thrive on this situation. All the right hon. Gentleman has done is realise that controls are a farce and try to take credit for the fact that the market at this time has turned down and supermarkets are prepared to sell bread at 17p for a 28 oz. loaf, or conceivably even less.

It was a wonderful revelation to me, driving along in my car, to hear the right hon. Gentleman say on the radio at 1 o'clock: "My conviction is that the price of bread will be determined by market forces and competition." That is what he said, is it not?

Mr. Hattersley

indicated assent.

Mr. Ridley

Then what is he doing in his job? He is redundant. He does not believe in price control, and his job is price control. He would do very well to follow Mr. Roy Jenkins and the hon. Member for Ashfield (Mr. Marquand) and others of his friend's persuasion, who have realised that the Government are a farce and price control is a farce, and get out. The right hon. Gentleman has no further point. He has admitted that the job he is doing is totally futile, pointless and unnecessary.

His hon. Friend the Member for Bolsover (Mr. Skinner) asked just now: "Don't you believe in price control any more?". The right hon. Gentleman did not give him a straight answer, but I will tell him. No, he does not. The right hon. Gentleman has abandoned it in relation to bread, because he has allowed the market to take the price down.

Then there is all that silly stuff the right hon. Gentleman talked about whether the supermarkets would lower the price of bread in order to drive out the corner shops and then raise it again and make a killing. Who ever drove out a corner shop by dropping the price of bread? Corner shops sell everything. If the supermarkets are fool enough to lose so much money that the corner shops stop selling bread, it will not be long before they regain their senses, and then bread will return to the market everywhere.

The reason that corner shops survive is the one the Secretary of State gave—that it is more convenient to go to the corner shop than to take a bus to town at greater expense than the saving which can be made in the supermarket. So we do not need the maximum price at all, because prices have now fallen way below it. We do not need the right hon. Gentleman's help for the corner shops, for the bakers, or for the delivery drivers. All he is doing is interfering and floundering about. He would do far better to quit all price control of bread.

Let me remind the right hon. Gentleman once more that "my scheme", as he so patronisingly describes it, is the scheme of market prices and competition, which has always been the only way in which prices are held down.

This little vignette of a debate about prices is the ultimate answer to all those who have said throughout history that competition does not work. Here is the arch-Socialist admitting that competition is what controls the price of bread. I know it is unpleasant for Labour Members to have to learn this. I do not think that the hon. Member for Bolsolver agrees. He said "Is not the Secretary of State a member of my party, which believes in price control?" Does the hon. Member for Bolsover still believe in price control?

Mr. Skinner

Yes.

Mr. Ridley

The price is 21p in Area 1, 24½p in Area 4—Canna, Eigg, Muck and Rum—and 17p in the supermarket. What is the point of price control? That is a question that the hon. Member must answer. It is no use saying he believes in price control when the evidence before his eyes damns the whole concept of price control as being irrelevant, bureaucratic and futile.

Mr. Skinner

In the purist sense it presents some difficulty for me, but I ran into difficulties the moment I came into this building six years ago. I found that, except on rare occasions, I was never given the opportunity of voting on what was my purist view, just as the hon. Member for Chippenham and Tewkesbury (Mr. Ridley) forgot what he believed when he accepted the Common Market. On the face of it, the Common Market was about the free movement of labour and capital and the free market forces theory, yet superimposed above it, below it, and taking it over, was the common agricultural policy, which had built into it a superstructure of controls from beginning to end. That is the dilemma that he had to face. It is a dilemma that I have faced many times.

Mr. Ridley

I hesitate to follow the hon. Gentleman into the Common Market, which was debated earlier today. It is extraordinary that, having sought to intervene to answer my question, he could find no other point to make than one about a different subject.

Mr. Skinner

It is the same subject.

Mr. Ridley

I hope that he now understands that market forces control prices—not the right hon. Gentleman the Secretary of State.

The right hon. Gentleman made an appeal—in which he was joined by my hon. Friend—that the transport drivers should desist from their action. He suggested that the action was misguided in that it would not lead to a healthier industry if the price was held up, that the drivers should accept that true wealth would come from a slimmed-down efficient industry and the falling of prices was part of the mechanism by which that would be achieved. That was inconsistent with what he said earlier about not wanting to remove all price control because that would cause such falls in prices that many small bakers would go out of business and some transport drivers would lose their jobs. He was equivocating a little in his advice to the union to desist, but I do not criticise what he said.

It is a curious twist of fate that a Socialist Minister should blame the unions for trying to hold up prices. We always understood that the alliance of the Labour Party and the unions believed that it was the bosses and the capitalists who held up prices, but I am glad to see that that bogy is now laid as well, and that it is recognised that it is the restrictive actions of unions that are often the cause of price rises.

The social contract is designed to enable the Government to deal with inflation, to work with the unions and to hold prices. Would not this be a wonderful opportunity for the Government to invoke the social contract, to go to the union and say "In the name of the social contract, will you ask your drivers to desist from this industrial action so that there will be a reduction in the price of bread?" Is not this a perfect situation, fitting entirely into that noble concept of the social contract and the compact between the Government and the unions?

I can think of no better example than for the Government to invoke their side of the social contract and to ask the TUC to intervene in the way it likes doing. The right hon. Gentleman does not seem to like what I am saying. He does not seem to be enthusiastic in his reception of my remarks. If I have it wrong, and that is not what the social contract is about, what is the right hon. Gentleman going to do about the drivers?

It is no good the right hon. Gentleman saying "I believe in intervention and in telling everyone else what to do", but, when these union drivers keep up the price of bread, saying coyly "I am not come to do anything about it because I do not want to." What sort of Minister is he? He does not believe in price control; he does not believe in interfering with the unions; he does not want to do anything about it. I suggest that his heart is not in his job. He is not meeting with the approval of the Opposition, his hon. Friends, or anyone else. He would do better to take advantage of the free movement of labour and get himself a junior job in the Commission in Brussels. At least there he would be with his friends, and at least he would not be doing as much harm as he is doing here.

11.21 p.m.

Mr. Michael Neubert (Romford)

At a first, scientific, dispassionate glance one might find it hard to discover what the fuss is about. The price of bread represents just over 1 per cent. of the average family budget, and the effect of a penny or two on the price of a loaf is hardly likely to be of much importance to the average family. Nor can one see much political significance in the immediate technical price of a loaf, because a loaf represents only one-half of 1 per cent. of the food price index and only 11 parts of a thousand in the retail price index. So it seems a minor matter, to say the least.

But it is clear that our daily bread has a meaning well beyond itself. It seems that the Secretary of State believes that if he intervenes in bread prices he will somehow convince people that he is intervening effectively in food prices. If people believe that—and I do not believe that our punch-drunk public will—they are doomed to disappointment. It is clear for a number of reasons that food prices generally will go up substantially this year. As my hon. Friend the Member for Gloucester (Mrs. Oppenheim) pointed out, last year they went up by about 25 per cent. The British public is reeling from the impact of food prices. This dispute about bread prices is, therefore, likely to prove academic very quickly.

The Secretary of State made sweeping assertions, on the basis of six days' experience of his scheme. He cannot at this point have deduced anything with conviction as to the results, however. But there is a significant way of testing the right hon. Gentleman's intentions towards food prices by comparing bread with potatoes, which are an equally fundamental part of the family diet. Indeed. potatoes are a more important staple.

Whereas, for example, the average person eats, per week, 30 oz. of bread—just over a standard loaf—he eats 44 oz. of potatoes. The order proposes a maximum price of 21p for the standard loaf, which works out at about 12p a pound for bread, yet, in recent months, certainly in the last 18 months, potato prices have gone well past that without any intervention by the Minister. Time and again his hon. Friends have questioned him about what he was going to do about the price of potatoes, but he has felt powerless to intervene. He has reviewed and investigated and referred, but has found nothing to justify his interfering in the price of potatoes. So the poor public has had to endure, for good reasons which the Opposition accept, a much higher price for potatoes.

Therefore, let us try to nut the question of the price of bread in perspective. At 17p. for a standard loaf of 28 oz., the consumer is getting bread at a lower price than, in many shops and on many occasions in the recent past, it has been possible to obtain potatoes. But that is neither here nor there. We know that this is a political ploy on the part of the Secretary of State to establish himself as a force in the consumer market, to give the impression like his predecessor, that he is doing something about prices. Yet that, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said, is largely an illusion. The right hon. Gentleman cannot control the increase in food prices. If his predecessor had been able to control the price of food, it would not have increased by about 70 per cent. in the three years or so that the Labour Government have been in office.

Food prices have increased and they will continue to increase, but the subject of this debate is to what extent the Government are to blame. The Secretary of State may be very ironic, not to say sarcastic, about the reason for the Opposition proposing this motion. He knows that unless the order was opposed it could not be debated. On his edict, the order would be passed without the House having a chance to express a view.

The Government have only themselves to blame for the reaction of the union to this move by the Minister. The question of the members of the union striking arose because they felt that their income was at risk—and so it was. Here I disagree slightly with my hon. Friend the Member for Cirencester and Tewkesbury. Like him, I should like to see a free market, but there must be a market in labour as well as in the price of products. For this reason, the competition is not entirely free.

From the average deliveryman's point of view, his income is inhibited by pay policy. We should consider this matter in the wider context of pay policy and the Government's general performance. In a situation in which the deliveryman has his income inhibited by pay policy and in which his standard of living is eroded by rapid inflation, he is being asked to forgo a substantial element of his income by sacrificing commission on the sales of bread.

Though I condemn, with everyone else, the action of the drivers—it is monstrous and insupportable that the community should be held to ransom in this way and that the terms of trade should be determined by deliverymen to uphold their own income—I can understand that it is a reasonable point of view to them. Therefore, if the right hon. Gentleman is to introduce a freer market, as he wishes to do, he should endeavour to do it in all aspects of life, because there is a price for labour just as there is a price for anything else, and it is an important element in the price of bread.

Time inhibits my developing my case. What we are talking about is an increase in the price of a loaf when the profit on a loaf to the plant bakers is about ½p.

If the Secretary of State says that he is in some magical way reducing the price of bread—he will do it in certain instances, but by no means in all—he is doing it in one of two ways. He is doing it either at the expense of the profitability of an already perilously unprofitable industry—½p a loaf is scarcely profiteering—or at the expense of the income of the drivers. In either of these two ways, he is failing to reduce the cost of bread. Therefore, this is a sleight of hand which will deceive nobody. It certainly will not deceive the House, nor, in the longer term, will it deceive the public.

11.29 p.m.

The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan)

The hon. Member for Romford (Mr. Neubert) has left me with barely a minute to reply to the debate. That is unfortunate, because the Opposition have raised a number of serious points, though I regret that they have done more to reveal their misunderstanding and, I suspect, their unwillingness even to attempt to read the order and understand what the Government have been doing in respect of the price of bread. They have not resolved their internal—

It being half-past Eleven o'clock, Mr. DEPUTY SPEAKER put the Question forthwith, pursuant to Standing Order No. 4 (Statutory Instruments, &c., (Procedure).

Question negatived.