Food Prices (Hansard, 25 July 1977)

§ 13. Mr. Durant
asked the Secretary of State for Prices and Consumer Protection whether he will give the latest recorded percentage increase in food prices since February 1974.

§ Mr. Maclennan
Excluding seasonal foods, the retail food index has increased by 86 per cent. from February 1974 to June 1977, or 20.5 per cent. expressed 15 at an annual rate. Over the same period, the figure including seasonal food is 92 per cent. or 21.6 per cent. at an annual rate.

§ Mr. Durant
Does the hon. Gentleman agree that these are appalling figures for the British housewife? Will he admit that part of the reason for them is the low sterling rate that we get, especially when dealing with those countries from which we purchase a good deal of our food supplies? Does he agree that this is entirely due to the Government's economic policies and is he aware that it is no good the Secretary of State saying that sterling is doing much better when it is at such an appallingly low rate?

§ Mr. Maclennan
The stabilisation of sterling is a factor that will lead to a deceleration in the rate of increase of food prices. The latest picture is quite encouraging. The retail food index increased by 4.4 per cent. in the three months up to June, and that is a marked improvement compared with the 5.6 per cent. increase in the three previous months. In addition, none of this improvement takes account of recent substantial falls in the price of fresh fruit and vegetables.

§ Mr. George Rodgers
Is my hon. Friend aware that the increase in food prices caused by our membership of the Common Market is cumulative and that the price increases referred to earlier have been superimposed on other and deliberate price increases? Does he agree that it is inevitable that prices will continue to increase?

§ Mr. Maclennan
It is inevitable that prices will continue to increase, but not at the rate that they have increased during the past year, when they were severely adversely affected first by drought, the effects of which have virtually worked through, and then by the fall in the value of sterling last autumn.

§ Mr. Adley
As the Question refers to February 1974, does the hon. Gentleman remember fighting the General Election on the slogan that the Labour Government and the social contract would reduce inflation? Did the social contract fail, or was the Labour Party misleading people?

§ Mr. Maclennan
The Labour Party fought that General Election on policies that included the introduction of food 16 subsidies, which the Opposition have consistently opposed and continue to oppose.

Mr. R. C. Mitchell
For the purposes of comparison, can my hon. Friend tell us how much of the increase since February 1974 has been due to our membership of the EEC and how much to the fall in the value of the pound?

§ Mr. Maclennan
As my right hon. Friend has already said, the further we get from the date of entry, the more difficult it becomes to calculate what prices would be if we were not members of the EEC. However, it is possible to calculate the additional increase in prices that is directly attributable to CAP adjustments and changes this year. That is the figure,.5 per cent., to which my right hon. Friend referred earlier.

§ 15. Mr. van Straubenzee
asked the Secretary of State for Prices and Consumer Protection whether he remains satisfied with the machinery available to his Department for monitoring the level of food prices.

§ Mr. Maclennan
I am satisfied that the retail food index provides an accurate and up-to-date indicator of movements in food prices. Where closer scrutiny appears necessary, the Price Commission is asked to carry out investigations of prices and distributors' margins for specific foodstuffs.

§ Mr. van Straubenzee
Was it that machinery, among others, that produced the statistics showing that in the year ended in May the cost of living had risen by 17.1 per cent., giving us the biggest gap between that and earnings since records started? What proportion of that 17.1 per cent. is due to increases in food prices?

§ Mr. Maclennan
The machinery for collecting the retail price index is the machinery that gave us the figures for the latest monthly change in the index.

§ Mr. Spearing
Since my hon. Friend said earlier that he would refer particular items to the Price Commission, will he consider referring the price of bread, since the Safeguard Britain Committee recently stated that, according to its calculations, the increased levy on grain from North America had put 7p on the price of a loaf? In order to get the facts straight, 17 will my hon. Friend refer that matter to the Price Commission?

§ Mr. Maclennan
The bread industry has been subjected to a number of inquiries recently, including one by the Monopolies and Mergers Commission, which has just published its report. The major bread manufacturing companies are subject to the control of the Price Commission under the new Price Commission Act. The three major companies will have to pre-notify proposed price increases, and in the past the Commission has not hesitated to reduce the proposed increases if it has felt that they are not justified.

§ Mr. Gow
What, in the opinion of the Government, would be the effect on the levels of prices, employment and investment if the Price Commission were abolished forthwith?

§ Mr. Maclennan
The effect would be exceedingly adverse, because there would be no guarantee that unjustified price increases would not be made by companies enjoying monopolistic or oligopolistic positions in the market.

§ Mr. McNamara
May I refer to my hon. Friend's original answer? Does he recognise that the earlier exchanges about fresh fruit and vegetables indicated that the Price Commission's methods of monitoring, particularly on seasonal foods, cannot be effective if it is not producing reports until two months after the prices have been paid?

§ Mr. Maclennan
As I indicated earlier, I propose to discuss with the new Commission the question of the time lag between its examination of prices and the publication of its reports on standing references. My hon. Friend is right to draw attention to the rapid fluctuations that occur in prices, largely because of changing supplies. Is it important to ensure that the consumer enjoys the benefit of the producer's reduced costs.

§ Mr. Giles Shaw
Will the hon. Gentleman comment on the Price Commission's report on coffee, bearing in mind his statement that the consumer should benefit from any reduction in costs? Does he think that the distribution of coffee will be maintained if, as is proposed, there is intervention in the distributors' margins for the sale of coffee? As the report exonerated those who trade in coffee from 18 profiteering, is this the way that he expects the Price Commission to operate in future? What will happen to the distributive margin policy if coffee prices come down?

§ Mr. Maclennan
I notice that the hon. Gentleman was careful to refrain from saying that the Opposition approve of price control where cash margins would be increased. It would be helpful if they would make clear their position on this matter. It was made abundantly clear by the Price Commission that because of increases in the gross percentage margins the cash margins had widened considerably. That is why my right hon. Friend announced measures to control the cash margins on the pound of coffee that the housewife has to buy. As for the hon. Gentleman's question whether the Price Commission's action on this matter portends its future action, it is up to the Commission, following reference by my right hon. Friend of a particular price or sector, to make its examination and to recommend proposals, which can include a freeze on cash margins or the setting of maximum prices.