Price Commission (Disallowed Price Increases)

HC Deb 05 March 1979 vol 963 cc882-4

8. Mr. Sainsbury

asked the Secretary of State for Prices and Consumer Protection whether he will direct the Price Commission to include in its next report an analysis of the factors used in its decisions on disallowing price increases, including whether or not productivity schemes have been found not to be self-financing.

Mr. Hattersley

No, Sir. The Price Commission Act 1977 gives me no powers to direct the Commission as to the matters to be included in its quarterly reports.

Mr. Salisbury

Does the Secretary of State agree that if, as seems to be indicated by the recent report on the British Oxygen Company, the question whether a productivity deal is self-financing will become a critical factor in a Price Commission decision, two points follow? The first is that it would be illogical to make that decision binding for 12 months, because clearly within that period productivity could change dramatically. The second is that if the private sector is to suffer from this it will need to be very much reassured that the public sector monopolies' so-called productivity deals are equally rigorously scrutinised.

Mr. Hattersley

I regard it as a matter not of suffering but of simple common sense. If a company accepts a further financial obligation and increases its costs in a way that at one time it suggests will not result in increased prices, but it then admits has resulted in increased prices, it should have no automatic right to pass on those increased prices to its customers. That seems to me to be elementarily true and elementarily right.

With regard to the hon. Gentleman's second point, he must understand that the Price Commission makes its own judgments about self-financing productivity deals or, for that matter, any other element in a company's or industry's costs. When it inquires into the public sector, as it does from time to time, it can make exactly the same recommendation as it did in the case of the British Oxygen Company.

Thirdly, as to altering the imposition of a price freeze if a company were to increase its efficiency, if the productivity deal were suddenly to bear the fruits that were promised, I made it clear in the press notice accompanying the report on the BOC that the Government would respond in exactly that way.

Mr. Durant

Will the Secretary of State bear in mind what my hon. Friend the Member for Pudsey (Mr. Shaw) said about firms that feel that they waste a great deal of time dealing with the Price Commission? Will he do so particularly in the case of Metal Box, which merely passed on the increased price of tinplate from the British Steel Corporation? There was no additional increase, but a great deal of time was spent looking at that increase in price, which was obviously allowed because the Government had agreed to the price increase by the BSC.

Mr. Hattersley

The case of Metal Box demonstrates a number of morals that we should draw from Price Commission investigations. Not the least is that one of the reasons why that investigation came about was that pressure was brought to bear by the Food Manufacturers' Federation which said that it wanted an inquiry into tinplate prices and the prices of the containers in which its members sold their wares. One moral to be drawn is that the Commission should be allowed to make its own judgments, rather than have investigations imposed on it by vested interests of one sort or another.

Mr. Giles Shaw

Does the right hon. Gentleman agree that there is also a moral to be drawn on the subject of disallowed prices? Would he care to comment on the position with regard to paraffin, where a controlled price agreed between his Department and the Secretary of State for Energy has resulted in the wholesale price going up but the retail price being fixed? As a consequence there is now a grave shortage of paraffin in certain parts of the country because distributors no longer find it profitable to sell or stock it. Is not this, too, something that the Secretary of State should investigate?

Mr. Hattersley

In principle, I am not attracted by the idea of controlled and fixed prices. I much prefer to allow a freer system of price determination to come about, and when it is not free, because the price is determined by monopolies rather than competition, I am in favour of the Price Commission's examining the circumstances in that particular case. Therefore, the hon. Gentleman's general point receives some sympathy from me, but I do not think that the conclusion that he draws about the specific example is correct.