§ 2.45 p.m.
§ Mr. John Fraser
I beg to move Amendment No. 23, in page 7, line 4, after 'goods', insert—'and which includes an increase made after 31st May 1977'.
§ Mr. Fraser
I do not know whether I am delaying the House by speaking to this amendment. However, I think that I should say something about it because it is a concession to the Opposition. I repeat, this is a concession to the Opposition.
In Committee, I undertook to consider an Opposition amendment which proposed a cut-off for investigations into the prices of a non-pre-notifier under Clause 5. Amendment No. 23 provides that the price of a non-pre-notifier will be liable to investigation only if it has been increased since 31st May 1977. The other amendments are consequential and provide for regulations laying down what constitutes an increase in a price level.
We have chosen 31st May 1977 because it gives a little time before the operation of the new policy on 1st August. We had to choose that earlier date to prevent 1490 non-pre-notifiers getting in price increases between 31st May and 1st August which might not be discovered for some time. Generally speaking, this meets the point made by the Opposition, and I am pleased to offer this concession.
§ Mr. Neubert
In the face of such blandishments and the offering of a concession—a rare, exotic fruit in our experience of the Bill—it may seem churlish to say that I am not alogether sure that it is a concession that we sought.
In Committee, we asked that the price increases liable to investigation should be those occurring only during the currency of the new régime. This amendment brings the date forward from 31st July 1977, which was the purport of our amendment, to 31st May. Presumably the Minister is anxious to prevent any anticipation of the Bill's effects by people seeking price increases immediately, knowing that the increases may be subject to the new régime and perhaps unacceptable to it if they are put in after the Bill has been enacted. For that reason, we find it a little uncharitable.
As we are already about three weeks past that point, will the Minister indicate whether there has been any evidence of companies acting irresponsibly by anticipating the Bill and putting in price increases which perhaps would not be justified under the new régime but which, presumably, can be justified under the existing Price Code régime? We cannot see why we are being offered a concession which takes place from 1st August rather than 1st June, when it would already have been in effect for three weeks.
§ Mr. John Fraser
I told the Committee that there was a problem involving the non-pre-notifiers and that we could not choose the same date as that which operates for those who notify their increases. Non-pre-notifying firms are involved, and I have not been notified of price increases in anticipation of 31st July 1977.
§ Mrs. Sally Oppenheim
I am sorry to disappoint the Minister, but it will not do to say that they are non-pre-notifying firms. We are talking about small distributors who are continuing with the Price Code which they believe to be more 1491 rigorous on them, and whose profit margins are more eroded than those of large notifying firms.
The element of redistribution in the change of date from the one for which we asked to the one that the Minister has given is not acceptable to distributors who are already in a disadvantaged position as a result of the code. If there were an investigation now, some type of rollback in the code could happen at the same time because the provision is being made retrospective to May.
§ Mr. Fraser
"Retrospective" is not the correct word. We had to choose a dividing line. It is unlikely that the Commission would mount an investigation into price increases of small firms that are non-notifiers unless, on the face of it, they were unjustified. One must choose between protecting firms and protecting the general public. We have chosen a date which is fair and which is only two months before 31st July. If we had chosen a later date it might have encouraged people to increase their prices to the disadvantage of the public.
If the Opposition do not like the concession that I have offered them, they know what they can do with it. I have genuinely tried to act in the way I said I would, although I warned hon. Members that the date would not be the same as that for notifying firms.
§ Mr. Neubert
Unfortunately, the Minister continues to contend that this is a concession. We cannot regard it as such. We think that it is retrospective and casts slight on companies. At a time of rapid inflation, two months can be a long time in a highly competitive market for a company that must cover its costs.
§ Question put, That the amendment be made.1492
§ Amendment agreed to.
§ Amendment proposed: No. 24, in page 7, line 7, leave out from 'may' to notify' in line 13.—[Mr. John Fraser.]
§ Question put, That the amendment be made:—
§ The House divided: Ayes 246, Noes 221.
§ [For Division List No. 174, see c. 1653]
§ Question accordingly agreed to.
§ Mr. Speaker
Government Amendments Nos. 26, 27, 28, 29, 30, 31, 32 and 33 have all been discussed. If it is for the convenience of the House, by leave of the House I shall put the Question on those amendments en bloc.
Amendments made: No. 26, in page 8, line 2, leave out '"whole or part of the increase to be unrestricted"' and insert
'from "whole" to "section"'.
§ No. 27, in page 8, line 3, after 'price', insert 'ought'.
No. 28, in page 8, line 8, after 'and', insert
'"subsection (2)(b) of this section" in paragraph (a) and the words'.
§ No. 29, in page 8, line 10, after 'increase"', insert 'in paragraph (b)'.
No. 30, in page 8, line 11, after 'and', insert
'"section 5(3) of this Act" and'.
§ No. 31, in page 8, line 24, after 'provision' insert'—(a)'.
§ No. 32, in page 8, line 25, after 'and', insert '(b)'.
No. 33, in page 8, line 27, after 'distributors', insert
(c) as to what for the purposes of subsection (l)(a) of this section is an increase made after the date there mentioned'.—[Mr. Hattersley.]
§ Mr. Shersby
I beg to move Amendment No. 34, in page 8, line 28, at end insert:'(7) No investigation of a margin of a distributor of goods may be carried out by the Commission under this section, except in cases where the margin in question exceeds the relevant margin reference level or levels of the distributor of goods as determined under the provisions of a code which is in operation 1493 at the time of the investigation and has been prepared or altered under the provisions of section 2 of the Counter-Inflation Act 1973.'The purpose of the amendment is to provide that no investigation of a margin of a distributor of goods may be carried out by the Commission under this clause except in certain very precisely specified circumstances. The position at present is that under the clause the Commission can initiate an investigation of a price which does not have to be pre-notified to the Commission but not the price of a distributor or the margin of a distributor. Under subsection (6) regulations may be made defining a distributor and a margin, but only the gross margins are to be investigated.
My reason for moving the amendment is that, despite the tributes paid to the distributors by the Minister of State during the Committee stage, there is still concern among many distributors that their sector may have to bear the brunt of the Government's price control policy. Distributors also fear that the powers contained in the Bill may be used against them unreasonably as the result of pressure on the Government—as distinct from the manufacturers, for whom it is intended that the allowable cost rules should be abolished.
When we debated this point in Committee, the Minister of State was forthcoming. He said:Wholly to exempt the distributors from any kind of investigation would be a mistake, notwithstanding their good record. It would give them an unjustified advantage over manufacturers. Although I think that the circumstances of investigation might be rare, we should be unwise if we omitted that power from the Bill.I was glad that the Minister admitted that the circumstances of investigation might be rare. I think that that statement alone is an excellent reason for accepting the amendment today. After all, it is proposed that distributors should be subject not only to all controls under the present code—gross and net margin controls—but also to the new investigation and examination procedures. On grounds of equity, I suggest that distributors, if they are to continue to be subject to the present gross and net margin controls, should be exempt from investigations.
As the House knows, distribution is a highly competitive industry in the United 1494 Kingdom. It is well known that the distributors here are more efficient than their counterparts of the Continent of Europe. In Australia, distributors are exempt from the burdensome task of notifying certain information. Thus, in Australia there is some recognition of their special position and differentiation in their position as compared wth manufacturers.
My deep concern is that, as a result of an investigation under the clause, a distributor could have his margin reduced even though it had not been increased, whereas the worst that a manufacturer can suffer is to have the price increase prevented. The distributor, unlike the manufacturer, does not know whether he is at risk from an investigation. I know that the Minister of State shares my view about the efficient, competitive nature of our distribution industry. He said in Committee that consumers had a great deal to be thankful for about the way in which our distribution industry was organised. He was at one with me in agreeing that the level of prices was in part being restrained by that degree of efficiency and competition. The Minister added in Committee:in sharp distinction to the situation in some other parts of the world." [Official Report, Standing Committee B, 17th May 1977; c. 278, 275.]Why, therefore, must the Minister of State be so unwilling, as he was in Committee, to accept my amendment? Why does he adopt what is perhaps an unnecessarily rigid view? I can only hope that, after the interval since our pleasant exchanges on this subject on 17th May, the Minister will be willing to give demonstrable proof of his admiration of our distributors and our distribution industry by agreing to accept my amendment.
Quite apart from the level of agreement between us on the efficiency of the distributors, there is, as the Minister knows, a wide recognition of the employment opportunities that the industry offers. As the hon. Gentleman said during the Committee stage,It takes quite a disproportionate number of young people from school and finds work for them."—Earlier this week we heard the Prime Minister say in reply to my right hon. Friend the Member for Worcester (Mr. Walker) that the Government, together 1495 with our European partners, are giving urgent consideration to the problems of teenage unemployment. That is a matter which concerns every hon. Member in the House. Why do not the Government make a start today by exempting the distributors who provide much employment for teenagers from the bureaucracy of the Price Commission in the way in which I have suggested? After all, we were very close to agreement in Committee. The debate on this topic was a most interesting one, such was the close identity of our views on this section of the industry.
I know that the Government gave 70 per cent. stock relief last year and also extended investment relief to cover investment in shops. All that is welcome. In fact, it is clear from what the Minister of State said in reply to my amendment in Committee that he regards the distributors as very much the blue-eyed boys. But they are not to be lulled into the belief that they will be left alone to get on with being efficient and competitive and to continue providing jobs for young people. I say this because in Committee the Minister spoilt what was one of the best speeches he made, and a good deal of harmony as well, by saying:It might be that within that highly successful, very competitive industry there are one or two distributors who would merit an individual investigation, and it would be wrong if we ruled out that possibility."—[Official Report, Standing Committee B, 17th May 1977; c. 278, 275, 276.]I put it to the Minister that today provides him with a very good opportunity to change his mind and to put the distributors and the distribution industry very much on trust in order to keep up their good record. I therefore appeal to him this afternoon to think again and to demonstrate the opinion which he and I hold of this excellent industry by accepting the amendment.
§ Mr. Gow
Clause 24 provides that the Bill shall come into force on 1st August. When you, Mr. Speaker, were not in the Chair a few hours ago, the Secretary of State urged upon us, as one of the reasons why we ought to continue with our discussions, the fact that if we did not complete our discussions this country might be without price control on 1st August. In a sense that was a charge flung at the 1496 Opposition Benches with the enthusiastic support of Labour Members. Can there, by implication, be a person as wicked, sinful, and irresponsible as to believe that the Conservative Opposition could contemplate a United Kingdom without price control?
§ Mr. Gow
I wish to pick up the gauntlet flung down with such a vigorous flourish by the Secretary of State a few hours ago. I assert that this nation, which has known rigorous price control during the period that the Secretary of State's party has been in office, has had price control over the past three years and more. At one stage during this period of stringent price control, the year-on-year rate of inflation rose to 27 per cent. and the current rate of price increases is 17 per cent. Therefore, since we are now considering the amendment moved by my hon. Friend the Member for Uxbridge (Mr. Shersby) that there should be a restriction on the powers to investigate, I and my hon. Friends who have viewed so-called price control with due scepticism, rejoice that some restriction is to be imposed upon those powers of investigation.
There are those of us—I respond directly to the Secretary of State's challenge—who believe that the power of a Commission appointed by the Secretary of State to investigate prices, to require that information be submitted to it, and ultimately to impose penalties, has not been conspicuously successful during the last three years in producing stability of prices. Therefore we can congratulate my hon. Friend on his limited virtue, because to restrict the power of investigation is at least a step in the right direction.
One of the unseen attenders at our debates is Dr. Witteveen, the Managing Director of the International Monetary Fund. I wonder whether he will consider that the amendment as drafted by my hon. Friend is sufficient. He is very assiduous in studying the misdemeanours of this Government, and very much more assiduous in studying the virtues of my hon. Friend. I wonder whether he will think that the amendment goes anything like far enough. [Interruption.] I shall gladly give way to the hon. Member for Liverpool, Walton (Mr. Heffer). In fact, 1497 I would welcome the opportunity to respond to him. But I do wish that if he had any observations to make he would make them in a way that I can understand, or remain silent.
Happily, Dr. Witteveen has a strong influence on the economic policy of the Government, and that is a matter of great rejoicing for me. We have the Chancellor of the Exchequer on our side in this amendment. On 15th December last, the Chancellor wrote to Dr. Witteveen. I quote from that letter:An essential element of the Government's strategy will be to bring about a substantial reduction over the next few years in the share of resources required for the public sector.If there is to be a reduction in the share of resources required for the public sector there must be a corresponding increase in the share of resources for the private sector. But as long as we continue with the whole paraphernalia of investigation and price control, the share of resources available for the private sector will not increase. It must be increased as an essential element of Government economic strategy. As long as we have that need, as defined by the Chancellor, any opposition to it is the continuance of the pretence that by passing Acts of Parliament we can control inflation.
I support my hon. Friend's timid amendment. I wish that it had gone very much further. Happily, my hon. Friend is moving slowly in the direction of logic and sense, and slowly we are learning to repudiate the mythology of the past. I hope that in the next instalment of the Price Commission Bill my hon. Friend will take his courage in his hands and table an amendment to restrict very much further these investigatory powers.
§ Mr. Godber
I want to intervene very briefly. This amendment has my unqualified support, and it is in line with representations that I have made to the Secretary of State elsewhere and in another capacity.
It seems totally unnecessary to have the strict margin controls that we have already and at the same time to give to the Price Commission the powers of investigation into distributors that are given in this Bill.
1498 On Second Reading I called attention to certain statistics issued by the Price Commission, which show conclusively that the level of profit of distributors in this country is very much below that permitted by the present Price Code. My colleagues will recall that both gross and net margins are controlled under the present Price Code. Gross margins at present are less than 90 per cent. of the gross margins introduced in 1973, when the Price Code was first instituted. They were cut back from 100 per cent. to 90 per cent. by this Government when they came to power.
The net margins at present are not being made by a single distributor and certainly not by a single retailer. There is a safeguard clause in the present Price Code which provides that if net margins are below 80 per cent. of that permitted in the code it is possible for the gross margins to exceed 100 per cent. and rise to 105 per cent.
Gross margins are so severely controlled that the safeguard clause is used by a large number of retailers. In recent months the on-cost returns suffered so much that the gross margins in many cases were over 90 per cent. but well below 100 per cent., and therefore the safeguard clause has been used in almost every case, because net margins were well below 80 per cent.
The margins of distributors are very much less today than they were in 1973. The factor controlling prices in the shops today is something that labour Members find totally impossible to understand—competition in the High Street. This is the real and active deterrent to increased prices. This is what is keeping prices down, not Government legislation.
That is why I agree entirely with my hon. Friend when he repudiates the implications made by the Secretary of State that the abolition of control would be a disaster for housewives. In distribution this is utter nonsense, and the Minister knows it. He knows that it is competition that is keeping prices down. This is fully substantiated in the Price Commission's own report.
§ Mr. Heffer
I really did not intend to intervene, but the right hon. Member says that competition in the High Street is keeping prices down. That was applauded by other Conservatives. But 1499 there is a great deal of mythology about competition in the High Street. An increasingly monopolistic position is developing and certainly the production side is getting into fewer and fewer hands. It is not true to say that there is the same kind of competition in the High Street that there was once. To some extent the monopolistic position in many areas is creating higher prices and there is a need for price controls to correct that situation.
§ Mr. Godber
The hon. Member has twisted the argument that I was developing. He switched from the High Street to the producers. I do not agree with him in any case. I spoke on behalf of the distributors, as Chairman of the Retail Consortium, and in that capacity I was developing my argument. In distribution there is no doubt that there is competition in every sector, other than those controlled by the nationalised industries. That is the only place where competition does not operate in distribution.
I have no authority to speak about production. However, I doubt whether there is a significant kind of monopoly situation. If there is, the Government have powers to stop it under the Monopolies and Mergers Commission. I understand the hon. Member's approach, but I wish he would look at the figures issued by the impartial Price Commission. The figures that I quoted bear out every word that I have said about competition in the distributive trades. This amendment refers only to the distributive trades, so I concentrated on them.
The hon. Member has only to go into any supermarket to see intense competition. One set of stores recently repudiated the use of stamps because it wanted to reduce prices, because of competition from other chain stores. There is intense competition. What I have said is backed up solidly by the Price Commission reports and the information from the Department. The Minister of State cannot deny it.
In relation to distribution, on which I have authority to speak, there is genuine and continuing competition. I think that there is genuine competition in all aspects other than those controlled by the nationalised industries.
1500 3.30 p.m.
This amendment is justified because if there is margin control, as there undoubtedly is, and a system that is not breached, these additional powers to investigate a particular retailer are unnecessary and, I believe, harmful to individual retailers. If a retailer is to be investigated, the investigation takes some time and even if the person is vindicated the fact is that the firm will be damaged. I believe that the amendment deserves to be accepted and that there is no justification for the position that the Secretary of State has taken up. I ask the Minister, despite the views of his hon. Friends below the Gangway, to accept the amendment.
Reference has been made to the employment of school leavers, who are very much in our minds at present. It is true to say that retailers are large absorbers of school leavers. At present, because of intense competition retailers are having to cut back on the number of school leavers taken in for employment. If we choke back retailers' efforts still further, they will be reluctant to take on additional school leavers.
§ Mr. John Fraser
I am glad that the House has heard the authoritative voice of the right hon. Member for Grantham (Mr. Godber). I made clear in Committee, and I do so again, that the vast majority of the distribution industry, particularly High Street outlets, are efficient and provide cheap, efficient and reliable service for the consumers.
I also agree that to a large extent competition and not the operation of the Price Code has had the effect of restraining prices in these areas. If I grant him that, I ask him not to sing from the rooftops the allegation that the Price Code has had the effect of depressing employment investment and business activity. The right hon. Gentleman cannot have it both ways. If I grant him that competition has had a great effect, he cannot in the same breath say that the operation of the Price Code has had deleterious effects and has sapped confidence. On that I am sure we are in agreement.
§ Mr. Godber
If the Minister accepts that argument, that is surely sufficient to justify the acceptance of the amendment.
§ Mr. Fraser
It is not sufficient, but so far we have reached agreement on some points.
I do not think that the distributors in the retail food and drink sector have very much to fear. If I may call in aid a recent publication of the Price Commission, I would instance the fact that the sector's average net profit margins in the fourth quarter of 1976 was 1.8 per cent. of turnover. As the right hon. Gentleman knows, distributors are given a safeguard level of 2 per cent. of turnover. They cannot therefore complain that they are being harassed. I have made clear that safeguard levels are not norms but safety nets.
I ask the House to consider two matters. First, with the full support of the Opposition and of my hon. Friends, Price Code will continue for only a further year. If the code goes altogether, as would happen if the amendment were carried, or certainly if the intention behind it were adopted, there would be no form of investigatory system at all. That is the first weakness of the amendment. Its second weakness is a lack of confidence in the operation of the Bill and of the Price Commission, which I believe to be utterly unjustified.
The hon. Member for Gloucester (Mrs. Oppenheim) said in her only speech of substance on the Bill—now a matter of 24 hours ago—that she felt there was not widespread abuse of the consumer, or words to that effect. I agree with the hon. Lady, but that does not mean that there cannot be individual cases of abuse of the consumer, and that can be said to be as true of distribution as of any other area.
Let me give two examples—one involving Australia and the other this country. In Australia there has been considerable concern and investigation by the Prices Justification Tribunal into the distribution of spares for foreign cars. A semi-monopoly exists, and there has been widespread complaint by motoring organisations and car owners. Jointly they have decided to conduct an investigation in one isolated area where it has been possible to use one's market position to abuse the consumer.
Let me give another example from this country, where there has already been an investigation by the Price Commission, 1502 namely, the distribution of bananas. Everybody knows that the banana trade is controlled by two or three companies—the United Fruit Company, now known as Fyffe's, Geest who operate in the Windward Islands, and another large consortium with interests in Jamaica. I do not say anything against those companies, but in them we have a potential complex monopoly situation. Those companies are capable, if they care to exercise their powers, of exploiting the shopper and the developing world. I do not make any allegations against the firms concerned, but I am seeking to illustrate the complex monopoly situation in distribution. Power to investigate evidence of consumer abuse should not be excluded.
Cases where investigation into distribution would take place would be limited. The House may be assured that competition will in the main take care of prices in the distribution area. We shall see that the safeguards are sufficiently well drawn to give assurance to industry. It would be wrong to deprive ourselves of a power which might be used only occasionally but which, when used, would be helpful.
§ Mr. Crouch
I am glad to have the opportunity of following the speech of the Minister of State. I do not entirely agree with my right hon. Friend the Member for Grantham (Mr. Godber) that the Minister of State was talking utter nonsense. The Minister of State is not at difference with most of us in the House in seeking to ensure a fair deal for the consumer. However, he assumes that there is only one mechanism that will give a fair deal to consumers and will ensure that they are not exploited. I refer to the Price Commission, with its extra special powers. We are in debt to my right hon. Friend the Member for Grantham for reminding us that there is still at work in our economic system a powerful competitive element that is to the benefit of the consumer.
The Minister of State is a reasonable man and will agree that this short debate has not been expressed in uncertain terms but has been conducted eloquently and sensibly. The contributions, even at this late hour and after so many hours of debate, have been constructive. The major amendments in which I have taken an interest have been debated for as much as eight hours, and all our discussions have been constructive. They have not been destructive. They have not tried to 1503 take anything out of the Bill. They have tried to weaken the overriding and overwhelming power of the Commission—but that is what Oppositions and Parliament are for.
Our amendments are not destructive; they are constructive. This amendment emphatically improves the Bill. It restricts the overwhelming power of the Commission in the area of distribution of goods and services. My right hon. Friend the Member for Grantham rightly told the Minister that we should not remove the element of competition that is so important today and that is operating for the benefit of the consumer, and at times doing so rigorously and even harshly.
I remind the House that I know well an area of industry in which I used to work—the chemical and synthetic fibre industry. As the Minister will know, there has been a wold-wide problem in the synthetic fibre industry. A year ago I was talking to ICI about its great problems and the enormous losses incurred in the production and sale of synthetic fibres, mainly nylon. I asked ICI why it did not go to the Price Commission to seek increased prices to cover the losses, but I was told most emphatically that it could not do that, because it would lose too much business to competition from foreign producers. The company was not complaining; it was telling me about normal life in the economic world of today. The international market has a power and pressure of competition that can work for the benefit of the consumer.
We are in debt to my hon. Friend the Member for Uxbridge (Mr. Shersby), who moved the amendment in such a moderate tone as catch the ear, the eye, and the attention of the Minister. We also owe a debt to my right hon. Friend the Member for Grantham, who brought us back to earth with the reminder that competition is such a major factor today. I said earlier, during my remarks on another amendment, that I wanted to see the House applying some restrictions to the Price Commission. A bureaucratic abuse, which I do not like to see, is emerging in our society. There are too many arms of bureaucracy, and even arms of the corporate State. I do not use that expression emotively, but there are inhibiting elements of control outside the House that are making life difficult.
1504 We must use our opportunities of debate in the House to tell the Government to take note of the amendments that would prevent such power being given away and that would restrict the power of the corporate State a little.
There are other elements at work that can safeguard the consumer, and we must not forget them. The Government have good intentions to control prices but we are all worried about their approach. They want to do it their way, but I am suggesting other ways.
§ Mr. John Fraser
Does the hon. Member for Canterbury (Mr. Crouch) realise that under the Counter-Inflation Act 1973 there is no control over the actions of the Price Commission? Under this Bill, if the Price Commission conducts an investigation into a distributor, it can impose no penalty—unless the investigation is a penalty—neither can the Secretary of State, except by making an order, which would be subject to parliamentary control. I hope that nobody will run away with the idea that we are creating Government control. We are democratising and giving greater democratic control in the application of the policy.
§ Mr. Crouch
That is a helpful point, and I concede it. My criticism is that the Government are creating more of a corporate State, but all Governments do that and my criticisms reach back over the years just as strongly.
§ 3.45 p.m.
§ Mr. Richard Page (Workington)
The operation of Clause 5 and its effects have been more than fully demonstrated by my hon. Friends. Its effects will be disastrous unless we can remedy them to a degree through Amendment No. 34. The amendment provides that no investigation would take place into the margins of a distributor of goods under this clause because of the way in which margins now will exceed margins later. That comes back to the Counter-Inflation Act 1973. Refusal to accept the amendment—which has been described as a timid one—would screw even tighter the economic lid on distributors of goods and services.
Hon. Members are aware that distortion of market forces can be allowed for only a limited time. If the distortion is left too long, one creates undesirable and frequently disastrous side effects. If 1505 it is left as it is, the clause will produce even more damage to business overseas, which has already severely shaken continuing investment because of the fall in returns on investment. Two or three years ago good returns could be expected on capital invested, but there has been a steady drop during the last 15 years. In the early 1960s the return was 13 per cent. plus, but in 1975 it was an average of 3 per cent. No Government can expect companies to expand and to provide employment on such a low financial return, because that is an absolute impossibility. The low returns of the last few years are an example not of how capitalism has failed the country but of how Socialism is preventing private enterprise from doing its proper job.
Goods distributors must act mostly in the market place. Competition is fierce and hard and may lead to the loss of orders. That may lead to reorganisation in a company or in heavy shaving of the profit margins. However, we are operating in a market place in which the profit margins of distributors of goods and services are not all that they should be. Companies must make their own firms the best and the most efficient organisations. The distortion would be reduced a little by Amendment No. 34.
I shall quote an example of which I know personally. An extremely efficient company and a fairly well known one operates mainly in the area of the South of England as a distributor of goods and services. It buys products from a wholesaler and some manufacturers, and so also do its competitors. It is, therefore, the efficient internal organisation of the company that must produce a higher profit on turnover. The Price Commission decided that the company should shave its profit margins because of its increased efficiency during the last few years. The company had little option. It increased its sales, which in turn caused severe hardship to its competitors in the neighbourhood. Those competitors reorganised their businesses, laid off staff and so caused unemployment.
The distortion which occurred simply through the intervention of the Commission did not end there. The company wanted to expand and to put up new premises. It therefore employed more people, but the profit that the company 1506 had earned had had to be cut back. It did not have the resources to expand. In addition, its large sales had caused the edge of its once efficient and competitive staff to be blunted because they were practically giving the product away and they did not have to go out and look for orders. Amendment No. 34 would provide a little relief to the stifling effect of Clause 5 and help a little the distributors of goods and, in turn, the industries which supply them.
Bearing in mind our poor industrial performance in recent years, we need every bit of help we can get, especially when we take into account that industrial production in the first quarter of this year is only 3.3 per cent. higher than the comparable figure in 1970 and it has struggled just to equal the famous productivity figures of February 1974.
I make only a small apology for this detour into industry. In the past 23 hours hon. Members have detoured far further, but I believe in dealing with the things that matter. By increasing our industrial productivity, we shall move towards increasing our GNP and, logically from that, towards a reduction in inflation and unemployment.
I have just learned that unemployment in my constituency went up by 0.9 per cent. last month. Most of this figure comprises the 400 boys and girls who have just left school and are relying upon the distributive and retail network for jobs. The clause does not give them a chance, and I end with an appeal to hon. Members to support the amendment.
§ Mr. Brooke
I am delighted to speak following the speech of my hon. Friend the Member for Workington (Mr. Page) though, in the patois of the earlier part of the debate, I shall be following him in countries other than Great Britain. The Under-Secretary was rebuked earlier for speaking as if we had all been members of the Standing Committee. One of the advantages of a long debate is that it enables those of us who were not members of the Committee gradually to catch up with our Committee reading and to follow the issues that were originally discussed—though I have noticed a similarity between some of the speeches made today and some of those made in Committee.
There were references to Australia, mainly, it seems, because of the existence 1507 of the Australian Prices Justification Tribunal. I go to Australia fairly frequently, though not to study its distribution, and it seems that in terms of its geographical patterns and historical development Australian distribution is a much more oligopolistic system than is ours, and it does not lend itself to comparison with the United Kingdom system.
Comparisons have been made—to the discredit and disadvantage of the Continent—between our distribution pattern and that on the Continent. While the Continent is obviously closer in terms of the general pattern of distribution, it is still a great deal further behind us in its pattern of distribution.
From my experience it seems that the closest comparison in terms of the pattern of distribution and historical evolution can be drawn with the United States. Hon. Members who have studied the working of the American system will be conscious of the remarkable consistency of distribution costs as a percentage of goods sold in America over the years. It has not fluctuated by more than 1 per cent. over the past quarter of a century. That seems to endorse the remarks of my right hon. Friend the Member for Grantham (Mr. Godber) about the effect of a really competitive system in giving the consumer a good deal.
In Committee, the Minister said:Although I think that the circumstances of investigation might be rare, we should be unwise if we omitted that power from the Bill."—[Official Report, Standing Committee B, 17th May 1977; c. 278.]It was generally recognised that cases would be rare, and it is a reasonable general observation that one of the problems with control systems of any sort is how to get a respectable return to compensate for the considerable expense of setting up the system. The Minister sought to persuade us that there would be only rare occasions, but I have grave misgivings that, if the powers exist, the distribution industry will be subjected to them, either directly or indirectly. I shall not follow the interesting example that has been raised of the Australian motor parts case, because, as I have said, I am not sure that it is relevant. As a consumer of bananas for many, many years I have always been conscious of the monopoly situation in the banana trade, 1508 but I have always assumed that if the Government wanted to do anything about it they could do it without a Bill such as this.
§ Mr. Neubert
This has been a restrained and responsive debate on an amendment that was persuasively moved by my hon. Friend the Member for Uxbridge (Mr. Shersby). We all agree that it has been immeasurably assisted by the contribution of our right hon. Friend the Member for Grantham (Mr. Godber) who, as Chairman of the Retail Consortium, can speak with considerable authority on this issue. That authority was recognised by the Minister, who, no doubt, has taken my right hon. Friend's measure in countless meetings round negotiating tables.
I also welcome the intervention of the hon. Member for Liverpool, Walton (Mr. Heffer), not so much for what he said as for the fact that he gave evidence that the Labour Benches had regained their voices after hours of silence.
In the long watches of the night we were stimulated and prompted to real debates particularly between Labour Members below the Gangway and my hon. Friends. No doubt some edict has gone out saying that they should not speak so often. Progress on the Bill was assisted rather than delayed by their contributions, which were helpful and gratifying.
We have already touched on the question of discrimination against the distribution industry, which, while being acknowledged as the most efficient, is nevertheless subject to the most stringent controls.
There is an irony here. The Minister recognises that the keenest competition is in the High Street, and that retail distribution companies are the housewives' best friends because of their efficient organisation. Yet the Government are keeping price restraint at a time when many costs are uncontrollable. The Minister is determined that this industry should remain more stringently controlled than the manufacturing industry, that the greatest controls must operate in this area, and that the power of investigation should be available. We know that it is unlikely that there will be many cases that are subject to the new powers.
1509 4.0 p.m.
I agree with my hon. Friend the Member for Workington (Mr. Page), who said that this was yet another turn of the screw. Distributors are already subject to the 10 per cent. cut in their profits margins that was introduced in May 1974. That must surely have taken account of any historically high margins of profit which they enjoyed as a result of previous circumstances. However, they are still to be subject to this strict control.
We think it reasonable to press the amendment to a vote, as we think those concerned should be entitled to some relief.
I heard Big Ben strike 4 o'clock. We have reached an historic stage in the consideration of this Bill, as we have now been dealing with it for 24 hours. Perhaps the reason for this long consideration lies in the fact that so many issues remained unresolved until the Committee stage. If some speeches have had a familiar flavour, it is because the issues are the same and have had to be revived and resolved by the House. I hope that this amendment, which we whole heartedly support, will be accepted.
§ Mr. Shersby
This has been one of the most interesting debates of the past 24 hours. It has contained a good deal of harmony between the Minister and the Opposition. I only express my keen disappointment that, despite the acknowledgement which the Minister gave to the efficiency of the distributors, he does not feel able to depart from his previous position and accept the amendment.
My right hon. Friend the Member for Grantham (Mr. Godber) made some telling points. He said that the margins were less now than they were in 1973. He referred to the importance of competition in the High Street as being the factor that restrains prices—a point with which the Minister was in full agreement. He also referred to the importance of the distributors in offering employment to the many youngsters who are out of work today.
The purpose of my amendment was to relieve the distributors of yet another burden which would distract them from the important tasks that they must carry 1510 out. I am sorry that the Minister has not felt able to accept the amendment. I shall join members of the Opposition in pressing this amendment to a Division.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 239, Noes 253.
§ [For Division List No. 175, see c. 1657]
§ Question accordingly negatived.