HC Deb 02 May 1977 vol 931 cc29-30
31. Mr. Ridley

asked the Secretary of State for Prices and Consumer Protection what percentage return on capital employed he believes to be adequate profits for the purposes of Clause 2 of the Price Commission Bill.

Mr. Hattersley

The adequacy of the return on capital depends on many factors, including the cost of the capital, the business risk and the need for further investment, all of which vary from company to company. For this reason it is impossible to give a figure as an indication of adequate profits which applies generally throughout the economy.

Mr. Ridley

If the Government really believe in a profitable private sector, it is no good leaving it at that. Will the Minister tell the House whether he means real profits, profits computed on the old, or on the new inflationary basis, and whether the profits that he thinks acceptable are adequate in terms of a percentage return? Otherwise he is relying on the gentlemen in Whitehall knowing best, which is the usual recipe for disaster.

Mr. Hattersley

I certainly mean profits calculated after proper allowance has been made for inflation. Without that allowance, the profits are a spurious and inflated figure. In future, however, we have to be less concerned with the level of profits and more concerned with their use. The new Price Commission Bill, against which the hon. Gentleman voted last Wednesday, is intended to help industry to choose to invest its profits in new plant and new machinery and to produce more jobs and better exports.

Mr. Ioan Evans

Does my right hon. Friend agree that investment has been encouraged by Government action to bring clown the minimum lending rate from 15 per cent. to 8¼ per cent., which is lower than it was when the Conservative Government left power?

Mr. Hattersley

It is substantially lower than when the Conservative Party left power. All the indications from the CBI survey, as well as from the Department of Trade investigations, suggest that investment will improve during this year. The substantial reductions in the minimum lending rate to which my hon. Friend referred will accelerate that process, which is central to economic recovery.

Mr. Speaker

Order. I have been advised during Question Time that the hon. Member for Rochester and Chatham (Mr. Bean) was in his place when Question No. 2 was called, but because of a hearing infirmity he was not aware that his Question had been reached. In these circumstances, and without setting precedents, I know that the House would expect me to call the hon. Gentleman.