§ MODIFICATION OF SECTION 13 TO CONTROL INFLATION
''(1) The Secretary of State may by order make such modifications to section 13 of this Act as appear to him to be appropriate to restrain inflation or to enable any price or charge of interest on money lent or rent or charge for the use of land to be investigated.
(2) An order under this section may contain provisions to restrain, freeze or reduce a price or prices or other money charges mentioned in the preceding subsection.
(3) An order under this section may contain such transitional, incidental or supplementary provisions as the Secretary of State thinks fit.
(4) The power to make an order under this section shall be exercisable by statutory instrument, but no such order shall be made unless a draft of the order has been laid before, and approved by a resolution of, each House of Parliament.'
§ Brought up, and read the First time.
No. 33, in clause 13, page 19, line 3, at end insert,
(c) containing such recommendation for the restraint or reduction in the price specified as the Director considers justified.'.
No. 34, in clause 13, page 19, line 6, at end add—
'(7) Where the Director has made a report to the Secretary of State under subsection (5) above which contains a recommendation under paragraph (c) of that subsection the Secretary of State may by order regulate the price specified in the original direction to such extent and in such circumstances as may be specified in the order but not to an extent greater than the recommendation of the Director.'.
§ No. 46, in clause 24, page 25, leave out lines 38 to 43.
§ No. 48, in clause 24, page 26, leave out lines 5 to 9.
§ No. 49, in schedule 1, page 27, leave out lines 1 to 43.
§ No. 50, in schedule 2, page 28, leave out lines 1 to 24.
§ In consideration of what the right hon. Gentleman suggested earlier, it will also be convenient to take amendment No. 23, in clause 11, page 16, line 36, leave out paragraph (a).4.45 pm
§ Mr. Smith
We now move to what will prove a more controversial part of our deliberations. We move more directly to the heart of the Government's proposals which are the abandonment of any form of price control or price restraint. This group of amendments seeks to put some of the Government's proposals in the correct perspective. The Government seek to abolish the Price Commission, which was an important feature of the previous Government's counter-inflation policy. We seek to put that situation right by removing the abolition part of the Bill. We seek to strengthen the one part of the Bill that makes reference to prices. That is clause 13.
It is a curious part of the Bill under which the Secretary of State can make a reference to the Director General of Fair Trading. But, once the Secretary of State has received a report from the Director General of Fair Trading, the matter becomes hedged around with qualifications. It may be a matter of major and economic importance, and there are all sorts of dodges whereby the Secretary of State can avoid referring anything to the Director General. Even if a proposed price increase gets round all these hurdles and is referred to the Director General, my hon. Friends will not be surprised to find there is also almost nothing that the Secretary of State 234 can do except advertise the fact that the Director General has made such a report. In these amendments are proposals to put that situation right and to put some teeth into clause 13.
I am grateful to the House for allowing amendment No. 23 to be added to the grouping. This refers to the important matter of financial targets set by Ministers for nationalised industries, to which the hon. Gentleman referred in our last short debate. That is excluded from the matters that can be referred to the Monopolies and Mergers Commission under clause 11. It is no surprise that the Government took such a precaution in the Bill when they had in mind the savage increases in gas and electricity prices announced only last week.
This group of amendments is an attempt not only to focus debate on the problems of rapidly rising inflation, encountered as a result of Government policy, but to do something in the Bill about these matters. What do the Government say is their counter-inflation policy? The right hon. Lady says from time to time that it rests on two foundations. One of those foundations is what the Government call competition policy. Those are the provisions in this Bill and any successor Bills that may be brought forward. The other leg of the stool is the Government's general economic policy.
I see that the right hon. Lady nods in assent. I am grateful for her confirmation that this is what Government policy on inflation amounts to. I am sure that my hon. Friends will want to examine the policy in detail. But the difficulty is that the inflation problem is probably the most serious for a long time. Inflation, as defined by the retail price index, which has been the basis on which these matters have been discussed for many years—Iam glad that the other index that the Government launched appears to have been ignored entirely by serious commentators—has gone up from the figure of 10.1 per cent. that the Government inherited to the most recent figure of 17.2 per cent. In every month, except one, since the present Government came to office, the retail price index has risen.
I wish to remind the House of the record of the previous Labour Government. Looking at the retail price increases each month, one sees that for the 235 16 months until April 1979—the last 16 months of the last Labour Government—the RPI was in single figures. We kept inflation in single figures for 16 months. As soon as the present Government come to office, inheriting a figure of 10.1 per cent., we find ourselves with a figure of 17.2 per cent. after only eight months. I do not think that anyone now doubts that the floodgates of inflation have been opened.
The sad truth is that this Government appear to have no counter-inflation strategy. There are not even the glimmerings of a policy, let alone a fully worked out and effectively deployed strategy. There does not seem to be any great desire in the Government to have a proper counter-inflation policy. Not only are the Government inactive in countering and attempting to control inflation. They are also over-active in promoting inflation. This can be seen by looking at some of the economic policies which, according to the right hon. Lady, are part of their strategy. Almost the first action of the Government, in the economic sense, was the Budget with its virtual doubling of value added tax.
The Conservative Party did not go around during the last election saying that a vote for the Conservatives would mean an increase in VAT from 8 per cent. to 15 per cent. As a result of that increase, the price of cars, consumer goods and everything else has gone up massively. There was no indication of that increase before the election. There was reference in the Conservative Party manifesto to a shift to indirect taxation. There were various statements of principle. But, during the election, when Mrs. Shirley Williams demonstrated at a Transport House press conference, using a blackboard, what would happen under Conservative proposals, this drew a denial from the right hon. and learned Gentleman who was soon to become Chancellor of the Exchequer.
It was said that people should not believe the Labour Party propaganda because the assumption was being made that VAT would increase to 15 per cent. Of course, that is what happened. Many people thought that it might go up to 10 per cent. or 11 per cent.—some even thought that it might increase to 12½ per cent. In one swoop, the Government 236 increased VAT from 8 per cent. to 15 per cent.
§ Mr. Ioan Evans (Aberdare)
It is important to remember that VAT is a tax on spending which appears in the retail price index this year. However, it will be dropped from the RPI next year. For ever and a day, for every £100 worth of goods purchased, the Conservative Government will charge £15 whereas the Labour Government charged only £8.
§ Mr. Smith
I am grateful to my hon. Friend the Member for Aberdare (Mr. Evans) for drawing attention to that. Within a year VAT will disappear from the retail price index and its effects will not be shown. VAT has to be paid each time one buys a car, adult clothes, a meal in a restaurant and many other items. It was silly for the Government in their smart-alec Budget, in which they tried to show what tremendous tax cutters they were, to make a huge increase in VAT. A redistribution of tax in favour of the better-off sections of the community was involved in the last Budget, not a cut in taxation. We are suffering the effects of a deliberate Government policy which, on its own, put 3.5 per cent. or 4 per cent. on to the RPI for ever and a day.
That increase in VAT was bad enough, but at the same time the Government abolished the Price Commission without warning us in their manifesto. I do not understand why it was not possible for the Conservative Party to say that it would abolish the Price Commission if it came to power. The Conservatives spent most of their time abusing and criticising the Commission. There was nothing easier than to say that they would abolish it, because they do not believe in price controls. The savage increases in VAT were concealed from the British public and we heard weasel words about reviewing the role of the Price Commission.
The right hon. Member for Gloucester (Mrs. Oppenheim) had an uncomfortable time on television when she was asked specifically whether the Conservatives intended to abolish the Price Commission. There was much wriggling but no answer. We were told that the role of the Commission was being reviewed. That review took place pretty smartly—within days—and it was mentioned in the Queen's Speech. The most cynical of us believed that it had been planned all along. I 237 am cynical. I think that the Conservative Party planned to abolish the Commission but did not have the guts or honesty to state that clearly in their election manifesto.
What have the Government's economic policies done? I do not know of any benefit from competition policies or whether there will be any benefit. Prices are probably the most important issue to consumers. When the right hon. Member for Gloucester was in Opposition, she complained often enough about the dreadful scandal of price inflation.
The right hon. Lady claims that the Government's general economic policies will combat inflation. Let us consider those policies. The Government's monetary policies have driven interest rates up to 17 per cent. For most businesses the effective borrowing rate is several percentage points above that. The borrowing rate is 20 per cent. and sometimes higher. That is the real rate of interest for small businesses that do not have the clout with the lending institutions. If that is not inflationary, one shudders to think how one can describe it.
The interest rate is in addition to the running costs of small businesses and, therefore, leads to price increases to the consumer. The MLR, and, therefore, the real rate of interest, is the highest for many years. The Government's general economic policy is not only stifling economic growth but is directly inflationary in its consequences and will increase prices.
Another aspect of the Government's general economic policies affects millions of people even more directly. I refer to the 15 per cent, mortgage rate. The rate is 15¼ per cent. for those with endowment policies. My mortgage rate increases this month, and I am in the same position as millions of citizens who must pay a great deal more each month as a result of the increase.
I took out a mortgage at 9½ per cent. interest in November 1977 when the Labour Government were in power. I must now pay 15¼ per cent. when a Conservative Government are in office, just over two years later. That amounts to a 50 per cent. increase. Of course, the rate was higher than 9½ per cent. by the time the Labour Government left office. There has been a giant leap in mortgage 238 rates. Many of my constituents complain that their mortgage repayments have increased massively. They ask where that money is to be found out of what they have left in their salaries after tax. Many of them will find it impossible to find such savage and steep increases out of their incomes. That is one of the Government's general economic policies which they say will combat inflation.
We have still to see the effects of the mortgage increases in the retail price index—it will be reflected in the spiralling rate of inflation throughout the year. Is there any prospect of the mortgage rate being reduced at an early date? Will the Prime Minister intervene boldly, as she did in 1979, when she said to the building societies "Hold your hands. You cannot make the people suffer such an increase"? Then the increase was only to 12 per cent. That appears to be a pretty moderate rate for a Conservative Government in the light of recent history.
§ Mr. Gwilym Roberts (Cannock)
When faced with a proposed increase in 1974 to 12 per cent. or 13 per cent., the Labour Government made a loan of £500 million available to the building societies at a minimal interest rate and as a result the mortgage rate was kept down.
§ Mr. Smith
I am grateful to my hon. Friend the Member for Cannock (Mr. Roberts). It is instructive to examine current problems, particularly inflation, and compare what the present Government are not doing and what happened under the Labour Government. A simple examination of the RPI provides an instructive and illuminating comparison.
Another set of policies will have direct consequences on price inflation. I refer to the Government's public expenditure policies. A direct result of the Government's policies on the rate support grant and housing support grant will be inevitable and substantial increases in domestic rates this year. The Government will say that we should blame the local councils and that it is their fault for putting up the rates. Surely, not a sensible person in the country will believe that for one moment. If the Government cut their contribution, that will be reflected in substantial rate increases.
The rates have to be paid by the same people who pay the increased mortgage rates. There will also be substantial 239 increases in council rents as a result of the cut in the housing support grant. The council tenant will have to pay both increased rents and rates as a result of the Government's public expenditure policies. That leaves out of account the effects on the average family's budget of the inevitable increases that will occur in school meal and transport charges as a result of the Government's public expenditure policies. I am leaving out of account the substantial increases in transport charges now taking place.
People in the private housing sector are paying hugely increased mortgage rates as well as higher general rates. People in council houses will be paying the increased rents that are coming pretty smartly and will also have to pay increased rates. In their monetary policy, public expenditure policies and general economic policies the Government are not controlling inflation as the Minister for Consumer Affairs claims. They are promoting it and stimulating price inflation at a greater rate than ever before.
I am sure that my right hon. and hon. Friends read with fascination the glimpse into the future given in some of the Sunday papers by the Chief Secretary to the Treasury where he was speculating on further cuts in public expenditure. We should pay close attention to his view because I believe that there was a deliberate leak. As a result of that glimpse into the future—and forward to the Budget—we now know that there will be an increase in prescription charges and that, for the first time in the history of the National Health Service, patients will have to pay for a visit by a doctor to their homes. That is widely predicted by the Chief Secretary to the Treasury in a hint of things to come.
I have listed a formidable catalogue of change so far. Value added tax has doubled. Interest rates have risen to 17 per cent. The mortgage rate is at 15 per cent. Rapidly escalating rates, school meal charges, school transport charges, general transport charges and increased Health Service charges are to come. Every single aspect of Government policy is pushing prices upwards. It is not a case of the Government not doing anything to pull prices down. Their policies are pushing prices upwards.
240 Any doubts that the House might have had about that being the general trend of the Government's counter-inflation policy must surely have been removed by the statement on gas and electricity prices by the Secretary of State for Energy last week. I do not know what the Secretary of State for Trade or the right hon. Lady have been doing in the counsels of the Government. If they spoke up, they were not listened to very clearly before the decision that was announced last week. I suspect, however, that they do not speak up at all.
Someone in the Department of Energy worked a pretty smart flanker over gas and electricity prices. When that kind of issue comes up for consideration, there ought in any Government to be an intense debate about the case for increasing energy prices as against the counter-inflation consequences of imposing those increases. There ought to have been a vigorous debate about it, but it looks as if such a debate never took place because the Secretary of State for Trade and the Minister for Consumer Affairs—who, I hope, will reply to the debate—neglected their responsibilities. Either that or they are of so little political consequence in the Government that they were ignored.
Let me remind the House of what the Secretary of State for Energy said in proposing what must be the most savage increases in energy prices ever put before this House. He set targets for the British Gas Corporation which would mean increases of 27 per cent., 28 per cent. And 29 per cent.—I am not sure how the figure comes out, since it is not clear from the statement—over the next few years.
The boldness of the statement was revealing. Hansard of 16 January reported the Secretary of State as saying:in broad terms, the Government expect domestic gas prices to increase this year by 10 per cent. over and above the rate of inflation, followed by comparable real increases in the following two years."—[Official Report,16 January 1980; Vol. 976, c. 1646.]The Government are not even saying that they will allow prices to rise in line with inflation. They are saying that they will deliberately add 10 per cent. over and above an existing rate of inflation of 17 per cent. The way things are going—since this is an elastic formula—the Secretary of State for Energy will be able to have real increases of 20 per cent. and 30 per cent. in the price of gas.
§ Mr. Ioan Evans
There is a crippling steel strike and the Government have announced that we must leave the problems to market forces and not intervene. Yet in the gas and electricity industries they are deliberately intervening to increase prices to a level, apparently, to which the chairmen of the boards of those nationalised industries do not wish to go.
§ Mr. Smith
That intervention brings me to my second point, which is precisely the one already made by my hon. Friend the Member for Aberdare. Very perceptively, the hon. Member for Gillingham (Mr. Burden) asked a pertinent question of the Secretary of State for Energy. He asked whether the British Gas Corporation had asked for such an increase as was proposed by the Secretary of State. Hon. Members may find this hard to believe, but the reply given by the Secretary of State was:No. The Government set targets higher than those which the British Gas Corporation wanted. I am happy to make that clean"—[Official Report, 16 January 1980; Vol. 976, c. 1657.]The Secretary of State said that he was happy to make it clear that he had imposed increases over and above those asked for by the BGC. There is, of course, a problem created by the fact that domestic gas prices were out of line with other domestic prices. That is different from saying that 10 per cent. would be added above the existing rate of inflation and that the increases would take effect in a short period of time and reach a staggering level. There is no justification for imposing a greater increase than that asked for by the British Gas Corporation.
The Government are deliberately increasing price inflation by these decisions. I do not know what the Secretary of State for Trade or the Minister who is supposed to look after the interests of consumers did within the Government when this important decision was arrived at. No wonder dissatisfaction was expressed from both sides of the House when it was announced.
§ Mr. D. N. Campbell-Savours (Workington)
Is not the real tragedy of this decision that the lower income groups were not insulated? That is the reason for the great bitterness in the country.
§ Mr. Smith
There is wide concern in all sections of the community that the savagery of these increases will be inflicted on those with the lowest incomes and those who depend on electricity for their lighting and heating. The abolition of the electricity discount scheme operated by the previous Government and the substitution by this Government of a much smaller scheme is a further reason for concern. We were promised action on this by the Government. The Government were said to be developing a social policy, to use the words of the Secretary of State for Energy. We will wait and see.
The situation with gas and electricity is rather like the one in which the fire brigade arrives at the blaze—we already had substantial price inflation before increased gas and electricity prices—and, instead of pouring water on the flames, it pours on petrol. How can we take the Government's counter-inflation policy seriously when they act in that way?
It is not a matter of accommodating the increases that happen as a result of increased oil prices and all the other things which Governments cannot control and should not even pretend to control. Here the Government are deliberately causing price inflation. That is all the more reason why there should be some protection for the public against rapidly accelerating inflation. The Government have been throwing caution to the winds in their economic and counter-inflation policies and there is no protection for the public. Indeed, the existing protection afforded to the public has been abolished by the Bill. The Bill could be more accurately described as the Abolition of the Price Commission and Price Control Bill than the Competition Bill.
I hope that the right hon. Lady will reply to the debate. During her period in Opposition we frequently heard her in the House, on television and in different parts of the country, shopping bag in hand, weeping crocodile tears about the problems faced by the housewife under the previous Labour Government. She will have the opportunity in this debate to tell us what she has done about those problems since she became Minister for Consumer Affairs. We have seen inflation and the RPI rise from 10 per cent. to 17 per cent., and they are still heading sharply upwards.
243 I hope that the right hon. Lady will tell us which of the economic and monetary policies to which I have referred will help to reduce inflation and bring it under I control. As I understand the Government's policies, they are designed to push up inflation. That is the most important aspect of the Bill. We shall press the clause to a Division in the hope that we shall be able to persuade one or two Conservative Members, who are angry and disappointed at the out-turn of the Government's policy—there must be many of them on the Government Benches—to support us.
The most important feature of the debate is our indictment of the Government for the fact that they have not been successful with their counter-inflation policy and have not encouraged the nation to expect to win the battle against inflation. What sort of psychology is it almost to double the rate of value added tax from 8 per cent. to 15 per cent. and to increase savagely gas and electricity prices? The public were becoming educated about the vital need to bring inflation under control. What sort of example are the Government setting? What is the psychology that they are adopting?
The Government's actions will encourage no one to take seriously a counter-inflation policy. Such a policy must always be desperately serious, but the Government will encourage no one to take that view while they continue to behave as at present. They are doing a grave disservice to the economy in pursuing their present policies. The clause will help slightly to ameliorate their effect. That is why I commend it to the House.
§ Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)
If we listened to the right hon. Member for Lanarkshire, North (Mr. Smith) with our eyes closed, we could imagine that he was speaking either on the Budget Statement or at the hustings. Much of the right hon. Gentleman's speech was irrelevant to the amendments and the new clause.
We believe that the Price Commission is an anachronism. It did little during the period of office of the Labour Government to control prices. The right hon. Gentleman would have us believe that the Commission kept down prices and 244 that it contributed to businesses being run more efficiently. He suggested that it stopped rapacious firms from taking great extra profits that they had not earned.
If I remember rightly, we had the greatest increases in prices since the black death while we had the Commission "helping" everyone by keeping down prices. Either the indexes were wrong or the right hon. Gentleman is wrong today. I should like the Commission to stay if I could believe the twaddle that has been spoken of it. It seems that the Socialist Party is trying to convince itself that the Commission worked. I agree that it provided extra jobs, but it created chaos and mayhem. Indeed, the jobs that it created must be judged by the standard of usefulness.
The Commission greatly altered the planning of many industries. It diverted management—senior management at that—from producing goods because of the varied and long-winded reports that the Commission required before it made up its mind. Individual companies in the food industry spent over £350,000 answering the questions that the Commission asked of them and in presenting their cases. The chemical industry spent over £600,000. The banks spent over £350,000 on the credit card system investigation.
What was the outcome? The Commission could hold back reality only for a month or two. The greatest use of the Commission came to the Labour Government in their dying days. That was when the Commission was most useful. It held back price increases because of the coming election. It did not stop the increases taking effect but it delayed them. As a result, many companies that needed working capital and extra money to increase wages had that funding withheld.
§ Mr. Gwilym Roberts
The hon. Gentleman claims that many companies were concerned about the amount of work that they had to do for the Price Commission and the delaying of necessary price increases by the Commission during the latter months of the Labour Government's term of office. The Conservative Government are doing away with the Commission. They are introducing a package of other policies. Against that background, why is it that business confidence now is lower than it has ever been?
§ Mr. Beaumont-Dark
I do not accept that business confidence now is lower than it has ever been. The problems that industry faces include many that the Government inherited from the Labour Government.
The right hon. Member for Lanarkshire, North spoke about interest rates. That argument was advanced by various Labour Members in Committee. The right hon. Gentleman and his hon. Friends seem to suggest that it is deliberate Government policy to increase minimum lending rate to 17 per cent. What utter nonsense that is from anyone who is not entirely economically and financially illiterate. Have they not heard of interest rates in the United States? They have increased to over 16 per cent. Shortly before the Conservative Government took office, minimum lending rate in the United States—I use the same term for the United States—was nearly 11 per cent. Have not Labour Members heard about interest rates in Japan? They are at levels that have never been reached before. The same comment applies to Sweden and Holland. Does it need to be explained to Labour Members that if there is a vast differential interest rate structure the United Kingdom will lose enormous sums because money will go to other countries?
§ Mr. Beaumont-Dark
I shall give way shortly.
We must keep a sense of reality. In the right hon. Gentleman's peroration in what I might call his Budget speech, he asked "What will turn back inflation? What will kill inflation?" Of course, inflation is at a frightening level.
§ Mr. Hughes
I hope that the hon. Gentleman will do so. If there is a differential interest rate structure between various countries, it will have less effect if exchange controls are retained. It was the abolition of exchange controls that led directly to increased interest rates in the United Kingdom and in other countries.
§ Mr. Beaumont-Dark
I have never heard such utter nonsense.
Price Commissions will not kill inflation. All that a commission can do in the end is delay reality. It is worth while studying the Russian economy. I am talking not about wicked Communism but absolute State control, where people's lives are controlled and there is control of economic reality, so called, from the womb to the tomb. The Russians have tried to implement it. All that happens is the development of a black market. It has developed hugely in Soviet Russia and it would develop to a greater degree in the United Kingdom. In a climate of absolute State control, companies are asked to produce goods at uneconomic prices. They are not able to borrow the money to do so because they will not be able to make a profit. Therefore, the goods cannot be produced.
In Russia the price of goods, when they are available, is increasing by about 27 per cent. a year. Russia has no Price Commission but has totalitarian power. If it cannot control prices, what hope is there of some wretched little body, such as the Commission, holding back prices in this country?
The factor that will reduce inflation should be simple for anyone to understand. Realism will reduce inflation. We cannot have half the population earning money and the other half expecting it to earn its share as well. The Conservative Government are not against the steel industry or the gas consumer. However, we cannot expect profitable industry to compete in an open and wide world while its profits have to be taxed at a rate sufficiently high to cover the losses that the steel industry is making. That is realism. Of course gas prices have to rise.
The right hon. Member for Lanarkshire, North has it wrong yet again. He mentioned that a charge will be made for the doctor-at-home service and that hospitals will make hotel charges. If he had bothered to be in the House this afternoon when my right hon. Friend the Prime Minister replied to that very charge, he would have heard my right hon. Friend make it clear to the Leader of the Opposition that the Government have no intention of doing that and that the money for the Health Service will remain the same, if it is not improved.
247 To try to bolster some weak and weary case, the right hon. Gentleman spoke of the elderly and claimed that those who cannot afford increased charges would suffer most. If he bothered to read what my right hon. Friend the Secretary of State for Energy and my hon. Friend the Under-Secretary of State for Energy have said on the matter, he would know that they have made it perfectly clear that the old and those who are unable to pay will be protected. A statement on the matter will be made at some future stage.
It is no good Members claiming that the Price Commission somehow helped to keep down prices.
§ Mr. Beaumont-Dark
I am not giving way. The hon. Gentleman will have the opportunity to make his important points in his own time.
It is perfectly clear that the Price Commission did little, apart from causing great aggravation. As I understand it, the Government propose to use the powers under the Bill, under the Monopolies and Mergers Commission and under the competition elements of the Office of Fair Trading, to ensure that industry genuinely competes.
I hope that when we come to the question of mergers we shall cease to ask "Why not"? and ask "Why?" When analysing the mergers that have taken place since 1970, it will be seen that 62 per cent. of companies are earning less today than before the merger, 65 per cent. are employing fewer people and the majority are producing fewer goods. Most mergers do not take place because it is believed that competition or productivity will improve. Most mergers take place to try to thwart competition.
I hope that the Government will use their powers genuinely to investigate proposed mergers. There is nothing wrong with companies trying to take over something, but it is the Government's job to see that they do not do so if it is against the public interest and restricts competition. It is the Government's job to see that laws, whether in regard to private enterprise or trade unions, are obeyed in order to protect those for whom they are made.
248 I hope that Opposition Members will vote with the Government on the matter. All the evidence proves that this is a commonsense Bill. It is a proper manner in which to encourage people to compete rather than have a fool's paradise proposal, believing that a Government Department can insist that companies produce at a loss. They will not, they should not, and it does not make sense. That is why the Price Commission must be abolished.
§ Miss Betty Boothroyd (West Bromwich, West)
Whatever the wording in the Conservative manifesto, there has never been any doubt in my mind that the Government were always committed to abolishing the Price Commission. The reasons that they have put forward from time to time have varied. It is argued that the activities of the Commission inhibited investment and did not prevent price rises, and that the bureaucracy of the Commission was not cost-effective.
When the Price Commission Act 1977 passed through the House, the right hon. Lady who is now the Minister for Consumer Affairs gave additional reasons for her opposition. I did not see the television broadcast referred to by my right hon. Friend the Member for Lanarkshire, North (Mr. Smith). The right hon. Lady has always been consistent in her opposition to the Price Commission. She repeated her reasons for her opposition in a Standing Committee when the Bill was debated upstairs. At that time she referred to the 1977 Act and said:I made my position on the powers…extremely clear on Third Reading when I made it clear that our opposition to the Bill was outright because of its powers, duration and lack of adequate safeguards. It was the powers to which we were objecting."—[Official Report, Standing Committee B, 1 November 1979; c. 87.]That was a fair and clear statement. The Conservatives objected to the Bill outright. They objected to the powers of the Commission. It follows that if the powers were too weak, the right hon. Lady—as champion of consumers—would be championing legislation to increase and strengthen those powers. That is not the case. I can conclude only that the powers are too strong and that the mechanisms that went some way to safeguard those who finally do the paying had to be abandoned in favour of a policy known as the exercise of competition.
249 Competition has a role to play in countering inflation. It cannot be carried out with any degree of success without relation to a price control mechanism. That is why I support the new clause and the amendments. We are asking that the functions, duties and powers of the Price Commission be transferred to the Director General of Fair Trading.
It has been argued by previous speakers that the Price Commission has little or no effect and that in a small percentage of cases only, where prenotification was given, was any action taken. We have to accept that, because there is substantiating evidence. What it is not possible to obtain is evidence of the deterrent effect of the Commission on those who wished to increase their prices but did not do so because they were deterred by its sheer existence.
It is not easy to make an assessment of what would have been the position had there been no prenotification of increases. The requirement to notify price increases by manufacturers restrained manufactuers from increasing the prices of their commodities. If a company can increase a price without reference to anybody, obviously it will do so. The fact that the Price Commission existed and that claims for increases had to be justified acted as a restraint and disincentive to those who wished to make higher charges.
I remind the Government that in matters relating directly to the public it is important to consider price increases that are of general public concern, even though it might finally be concluded that those increases were justified. I remind the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) that in a democracy the Government must show the electorate that price increases are justified, in the same way as they have to demonstrate from time to time that increases are not justified.
If the Opposition amendments are not accepted, the ability to monitor and supervise prices will disappear. The Secretary of State indicated as much on Second Reading, when he said that he was putting powers into the Bill. I believe that it was not his intention to act on those powers. If he should decide to act on them, there are wide restrictions on their use. As I understand it—I am sure 250 that if I am wrong I shall be corrected by the Minister when he replies—if the Secretary of State refers a price increase for investigation under clause 13 there are no powers to deal with the price increase, even if it should turn out to be excessive. I believe that he would have those powers under new clause 3 and the amendments. Perhaps we can have some clarification on that point when the Minister replies.
My right hon. Friend the Member for Lanarkshire, North spoke of the real problems of small businesses. I should like to give an example of a case that I came across at the weekend, because I should like the Minister to reply in principle and tell us what the position nowis. The case concerns a small business man. In fact, only he and his son are involved in the business. He showed me two gas cylinders, one containing Calor gas and the other propane gas. He told me the price that he had paid in December and the price that he had paid in January. There had been a 5 per cent. increase. He asked why there had been an increase, and he was told that, although the price of bottled gas had not been increased in the Government's statement, as the Government had increased the price of other fuels those companies would also increase their prices.
There used to be mechanisms whereby Members of Parliament could do something about that. What mechanisms now exist to deal with that situation? I ask this as a matter of principle, because that is what is happening today. It seems to me that the Government have given a licence for the price of other types of fuel to be increased, which in itself is a recipe for inflation.
One of the many complaints about the Price Commission was that it stored up inflationary increases—that there was a pipeline. I know that the Minister for Consumer Affairs is very fond of making speeches to her supporters warning of the Labour legacy that was in the pipeline. In fact, not many months ago she passed around the Kleenex tissues to her supporters, told them a sob story and listed some items that were in that pipeline. She told them that there were rent and rate increases, but she did not say that because of the Government's reductions in rate support grant and expenditure on 251 housing, householders would find themselves faced with increased rents and rates.
She claimed that Labour had left a legacy with regard to house prices, yet every owner-occupier with a mortgage is now paying a record rate of interest. When we left office the mortgage rate stood at 11.5 per cent. It is now 15 per cent., and that reflects itself in the retail price index.
I remind the right hon. Lady that it was not a Socialist pipeline but a Tory Budget that increased the price of petrol by 10p a gallon and that now one company after another is leapfrogging. The right hon. Lady also spoke of the price of holidays and said that they were in the Socialist pipeline, but she omitted to say that 15 per cent. VAT had increased the price of those holidays. In addition, as we saw last month, beer prices have increased.
Milk was 13½p a pint in May. Next month it will be 16½p a pint. That has nothing to do with Labour's legacy; it is the result of the devaluation of the green pound over the last nine months. The right hon. Lady also warned of Labour's legacy in regard to bread prices, but failed to say that it had nothing whatever to do—
§ Mr. John Wells (Maidstone)
I believe that the hon. Lady has a house in a rural area and that she is well acquainted with many farmers. Does she not agree that while the devaluation of the green pound may have an adverse effect on the budget of the urban housewife in the short term, unless the British farmers—who are the hon. Lady's friends and neighbours—have a proper standard of living and income, British farming will go out of business in the foreseeable future, as a result of which the cost of living will soar?
§ Miss Boothroyd
I take that point entirely, and I should like to answer it in two ways. The farmers whom I know have done very well out of the EEC, have sold their prize Jersey herds and have received large EEC subsidies as a result. All I am saying is that there must be some balance. It is perfectly true that farmers and farm labourers must have a proper income, but there must be a balance somewhere and I do not believe 252 that the Government have achieved it. Those are the points that I am making, and I feel that I am perfectly justified in doing so.
I was talking about the price of bread, which again has very little to do with Labour's pipeline. The right hon. Lady said nothing at all about the two big milling and baking concerns that I understand control 70 per cent. of the market. I checked the figures yesterday. As I understand it, it was the right hon. Lady's own Secretary of State who stopped the Price Commission inquiry into that industry. As I see it, the powers of the Price Commission could not have been all that ineffective when Ranks Hovis McDougall, Allied Bakeries and the entire Retail Consortium wanted to get rid of it, and did so with the help of the Conservative Party.
I shall not go into gas and electricity prices, because those were dealt with in earlier speeches. However, the right hon. Lady suggested that commodity price increases were also in the pipeline. Yet in the debate in Standing Committee she referred to the previous Labour Government in regard to commodity prices and said:over the whole period of that Government commodity prices, exclusive of oil, went up by less than 2 per cent. a year on average, which is one of the lowest rises in commodity prices for any period in recent history."—[Official Report, Standing Committee B, 1 November 1979; c. 100.]How does the right hon. Lady justify that statement when she told her supporters a few weeks earlier that there were a lot of commodity price increases in Labour's pipeline? She made that statement at a Conservative barbecue dance in July 1979. Which way does she want it?
The only consistent attempt that the Government have made with regard to inflation has been to throw the blame on to the previous Government, without recalling that when we left office the rate of inflation was 10.1 per cent. and it is now more than 17 per cent. However, I give credit where it is due. The right hon. Lady has always been generous in suggesting that although she herself is not in the Cabinet, and that there is no consumer voice in the Cabinet, her Cabinet colleagues shoulder the responsibilities for an effective counter-inflationary policy and that the voice of 253 the consumer now takes on a very different direction in Cabinet compared with the impact that it had under the previous Government. At that time she said that the voice of the consumer was not heard at all. Here again, she told the Standing Committee:Now that balance is being redressed. The voice of the consumer is becoming more important…That is the important difference in character between the two Cabinets."—[Official Report, Standing Committee B, 1 November 1979; c. 94.]Last week the Secretary of State for Energy was asked whether he had received representations from the gas and electricity consumer councils. He said:The views of the consumer councils have not yet been conveyed to me in detail."—[Official Report, 16 January 1980; Vol. 976, c. 1658.]From that it is obvious that the Cabinet took the decision without any consumer voice in the Cabinet.
§ Mr. Alan Williams (Swansea, West)
Does my hon. Friend agree that if the right hon. Lady were in the Cabinet it would hardly represent much of a voice for the consumer? When I was involved with prices during the early part of the previous Administration and we introduced "Operation Price Check" with the red triangles and the agreements to hold prices at a set level—far from representing the interests of consumers, the right hon. Lady wrote a letter to one of the companies that was co-operating in the scheme and told it that it was betraying its shareholders in doing so. When the letter was made public and when I released it to the press, far from denying it or trying to explain it away, all that the right hon. Lady did was to say that the letter must have been stolen from a cabinet when she was moving rooms in the House of Commons. Therefore, she was never on the side of the consumer.
§ Miss Boothroyd
I thank my right hon. Friend for that intervention. There are many of us who remember that. Even so, I am sure that my right hon. Friend would agree that what we seek is a voice for the consumer in the Cabinet today. When one looks at the inflation rate and talks not only to our constituents but to other members of the public whom we meet on a bus or a taxi, it is obvious that they realise that little is being done about consumer affairs. When I talk about consumers, I refer to those who at the end of 254 the day have to do the paying—the general public.
I am afraid that the faith that the right hon. Lady has in her colleagues is ill founded. Any prospect there might be of seeking redress for the consumer, which is what we are talking about, is impossible under this Government. It is about as easy as getting blood from a stone.
I hope that we shall have further speeches on this matter from the Opposition and that the Government will look carefully at the amendments and the new clause and see to it that the consumer has a fair deal in a period of high inflation.
§ Mr. William Hamilton (Fife, Central)
My right hon. Friend the Member for Lanarkshire, North (Mr. Smith) referred to the misleading title of the Bill. The Bill is like a lot of others that we have had with misleading titles. An example that springs to my mind as a Scottish Member is the Bill that dealt with compulsory sales of council houses, which was called the Tenants' Rights, Etc. (Scotland) Bill. I should have thought that that was a deliberate distortion of the Trade Descriptions Act.
The right hon. Member for Gloucester (Mrs. Oppenheim), when in Opposition, made great play about her shopping basket. She probably never shops, except for party political purposes. She made great play of the idea that all the price increases under the Labour Government were due to the inefficiency of that Government. If that charge was true then, it must be true now. All the price inreases that are now coming through, taking to its conclusion the argument that the right hon. Lady put forward 12 months ago, must be the direct responsibility of the present Government.
For that reason, I was interested in and excited about the headline in the Tory newspaper, the Daily Express, on Friday 18 January, which read "What Flaming Cheek". That headline referred to the increase in the price of gas, to which I shall come in a moment.
When the Bill was introduced, the argument was that competition would keep prices down. It was said that the consumer would be sovereign and that he or she would choose between one shop and another and that that would be more effective than the Price Commission. Let us look at what happened.
255 The Government believed that nonintervention in this and other areas would solve our problems—not immediately, but in the long term. The Chief Secretary said at the weekend that we were on a stony path, but it was not leading into a cul-de-sac. That stony path is leading us into something much worse than a cul-de-sac; it is leading us right over the top of the cliff to disaster. We shall see who is right in this respect.
I want to refer to two or three examples of what has happened, before the Bill has become law, under the philosophy practised by the present Government. First, let us look at petrol and oil prices. Through the Price Commission there was a considerable degree of control over the oil companies. The Commission could call for facts and figures from the oil companies and could delay price increases, which mattered greatly to the consumer. The consumer knew that the Commission acted like a watchdog and looked at what those companies did.
Ineffective as the Commission was, by heavens it was better than what we have now. Virtually every week the oil companies get together and say "What shall we charge those mugs now?" That is how the oil companies treat their clients. They treat them as mugs because they know they have friends in Government, and that allows them to do exactly as they like.
§ Mr. Hamilton
Yes, the Shah of Iran is a good example of the kind of friend the Government had at that time.
The brewers are exactly the same. They had to answer to the Price Commission and give facts and figures about their profit margins, increasing costs, and so on. Inadequate though that was, it was much better than allowing those companies to do just what they liked. It was much better than allowing the brewers to increase the price of beer and alcohol of all types. Now the brewers can sit down any day, week or month and decide to charge exactly what they like, and that is what they do.
I have here a copy of the Scottish Daily Record dated 4 July 1979, referring 256 to the price of petrol being £1.18 a gallon. That was in July last year. No less than three weeks later, on 22 July, the Sunday Mail reported that the dearest petrol in Scotland was not 118p per gallon but 141.9p per gallon. The price of petrol is much higher than that today. The competition that those papers were talking about at that time was not in prices but in gifts, such as drinking glasses, coffee mugs and toys. That was the type of competition that was going between petrol companies and that is what they were being allowed to do by this Government.
The Secretary of State for Energy, as long ago as last June, emphasised his belief in this kind of policy. He refused to intervene. He thought it was better to let prices rip. He said that the only sensible way of using fuel was to ration it by price. He was quoted in The Daily Telegraph of 6 June 1979 as saying:We must all share the misery.The Secretary of State gets off to a good start himself, does he not? There is nothing cheerful about him. He has a lot to be miserable about, and he is also making millions of people miserable.
That sentiment was underlined by the Chief Secretary to the Treasury last Saturday. He used these words:Britain faces three years of unparalleled austerity.He, too, has a good start. Let us take the right hon. Members for Oswestry (Mr. Biffen) and for Guildford (Mr. Howell). What a cheerful pair they are. They are a good example of government through misery.
The package that the Chief Secretary put forward to his Tory minions on Saturday not only gives freedom to the brewers, the petrol companies and the tobacco companies. When the Budget comes in March, the Government will increase the price of the commodities of those industries still further. The taxes on beer, alcohol, cigarettes and everything of that kind are going up, so there will be an enormous boost in the cost of living index.
What do the Government expect workers and their wives to do? The wives will say to the workers "You had better get an increase in pay. We are not going to allow this Government to reduce our standard of living by deliberate and malicious intent. We are going to 257 react." This is the great fight against inflation about which we hear so much.
The Tories, in their manifesto, used these words:Mortgage rates have risen steeply because of the Government's financial mismanagement.That was at a time when mortgage rates were 11¾ per cent. The right hon. Lady, the painted-faced lady, the Prime Minister, faced with the possibility of mortgage interest rates going up some time last year, intervened. There was then no question of non-intervention by the Government. The Prime Minister persuaded the building societies that owner-occupiers would be clobbered by an increase at that time. Indeed, she paraded her victory in this House and said "What a great gal I am. I have influence over the building societies. I can stop them from putting up their interest charges."
What now? Mortgage interest rates are now 15 per cent., and it is highly likely that they will go up still further in the next few months. I hope that all those owner-occupiers who voted Tory at the election get a good clobbering, because they deserve all that they are going to get, but I hope also that they have learnt that they were deceived by the most monstrous con trick of the Tory Party at the election.
On the latest scandal—gas price increases—I got a letter this morning from a constituent, and I want to quote that letter. I shall give his name and address, because he asked me what representations I had made on these matters in the House. I want to send him a copy of what I am going to say.
The letter is from Mr. John Honeyman, of 348 High Street, Leslie, Glenrothes, in the Fife, Central constituency. He writes:Dear Mr. Hamilton,I am writing to you as my representative in Central Fife about the 27 per cent. increase in gas charges—I think that it is 29 per cent., but it is hard to keep up with these increases as they are happening so often—that are going to be implemented shortly. I know that you have already made yourself heard in the Parliament about the same issue. There are also rises in phone charges, postal charges, electric and coal and also rates. How on earth does Mr. Howell expect old people and infirm to manage on the money we get? In my own case the only help I get is a rate rebate, and that is not much. I would ask you and all those who think likewise to hold out against these terrible increases and force 258 this Conservative Government to change their minds on this issue or I am afraid they will never again hold office in this country and the people of Scotland won't stand for much more of the Scrooges of this Government. There is also the big increase of VAT that was put on at the time of the budget.
§ Mr. Hamilton
This is a very good letter. This is grass roots stuff. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) is laughing his head off. He thinks that it is great. He thinks that it is funny. This is a letter from an old-age pensioner who is trying to struggle along. Old-age pensioners did not vote for this lot here. Scotland did not vote for this lot here. The Labour Party in Scotland got 40 out of the 70 seats because it knew what a load of thugs the Tories were.
The letter continues:Could Mrs. Thatcher or Mr. Howell live on our miserable pension? I am afraid not. So I would hope that everyone in Parliament that has any compassion for the old and helpless will make your voices heard loud and clear. I hope you will excuse writing as I am in my eighty-first year. I also live alone having been a widower for 26 years.That is the kind of thing that has to be put up with from this Government. These are the people who will suffer from the increases that were announced last week. I do not know how these people will survive this winter. Only last week there were two or three deaths from hypothermia in the Dundee area.
§ Mr. Gwilym Roberts
I am sure that my hon. Friend will wish to remind the House that that type of person was often supported by local authority social services and that this Government have been removing the possibility of providing such support from local authorities.
§ Mr. Hamilton
I was about to make that point. This fellow of 81 would qualify for the Government's rebate scheme, because it is for the over-75s.
A further point on this matter is that not only are wages in rural areas in Scotland generally speaking much lower than in other parts of the United Kingdom, but it is cooler in those areas. Therefore, on both counts those people will suffer as a direct consequence of the increased charges for fuel that were imposed by the Government last week.
259 The Government criticise the nationalised industries. Indeed, the Prime Minister said that the British Steel Corporation must exercise its right to manage in negotiation with the unions. But the Government say the opposite to the gas industry. They say that it is not to be allowed to manage. The gas industry did not want these increases, but the Government have insisted that these prices go up not only to keep in step with inflation but 10 per cent. above the odds.
We have a crazy set of ayatollahs sitting on the Government Front Bench. They will drive this country to revolution because the people will not put up with this situation much longer. They see the Government deliberately imposing ever-increasing misery on this country, and they will revolt against them, and very shortly. When the results of my election were coming through in May, I forecast that within 12 months we would have a general strike. I still believe that that may be true.
§ Mr. Gwilym Roberts
I support the need for new clause 3 or some effective machinery to replace the Price Commission.
I accept that the Price Commission was often ineffective. From time to time many Labour Members complained bitterly about the ineffectiveness of the Commission, but it had two important effects. First, it had a deterrent effect. It is impossible to measure the magnitude of the deterrent effect of the Commission Secondly, it made the community feel that it had a defender, however ineffective that defender was. It made the community conscious of the problem of inflation. People thought that there was some sort of caring about the problem within the Government. They are now rapidly coming to the conclusion that the Government do not care two hoots what happens to inflation.
I shall not cover the matters already dealt with so adequately by my right hon. and hon. Friends. The Government have imposed increases in prices of commodities such as gas and electricity—let us not forget that they removed the important controls that kept the price of paraffin down for poorer families for many years—and food prices also have 260 gone up steeply since the Government came to power.
The Minister for Consumer Affairs will remember very well her shopping basket. Where is the shopping basket now? She spoke to the House then with wrath and fury about prices. Since the election we have not heard her speak with the same venom about price increases.
I shall touch on the type of increases that have been imposed through local authorities.
§ Mr. John Fraser
The right hon. Lady is even now trying to avoid answering questions on the retail price index by trying to pass them to another Department.
§ Mr. Roberts
That does not surprise me in the least. The Government have already introduced a number of indices to cover prices. I have a horrible suspicion that those indices will be used for other purposes in the months ahead.
Clearly, one of the problems has been the sorts of increases that have been imposed by local authorities, and not only in rent and rates, for it is also proposed to increase the price of school meals and school transport. One of the worst aspects of the inflation created by the Government is the way in which they have tried to use local authorities throughout the country to carry out their dirty work. They have not been prepared to pass on the increases directly to the consumer but have forced local authorities to push up prices steeply.
I wish to deal specifically with the recent price increases that have been imposed by the brewers. Many sober hon. Members may not be so concerned, but many of my constituents are extremely concerned. As always at this time of the year, there has been a great spate of increases from the brewers. In previous years, those price increases were referred to the Price Commission. The Commission more often than not delayed them. The brewers, of course, are close to the heart of the Conservative Party. They are major contributors to it, in every sense.
I understand that the increases in January will be between 3p and 6p a pint. There are wide regional variations. January is the month when all the brewers put up their prices to suit their needs. This year the Price Commission 261 mechanism is no longer in existence. I asked the right hon. Lady only yesterday whether, in these circumstances, and in view of the fact that brewers generally are introducing a similar increase, she would not now refer the matter to the Monopolies and Mergers Commission.
Many hon. Members will remember the Price Commission report on the brewery industry. Concern was expressed about the profits and investment programmes of the industry. It was also pointed out that even if it did not have a global monopoly there were considerable regional monopolies in the hands of the industry.
With confidence I asked the right hon. Lady yesterday to refer to the Monopolies and Mergers Commission the matter of the generalised increase by the brewery industry. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) rightly said—I praise him for it—that the Government should do something about it, but yesterday the right hon. Lady told me that this was a matter for the Director General of Fair Trading. In other words, the right hon. Lady was shelving all responsibility for the increases. She said that the reference is a matter for the Director General of Fair Trading, and according to the right hon. Lady he apparently had no intention of doing anything about it. The argument that references can be made to the Monopolies and Mergers Commission does not work. In the supreme instance of the breweries, we see once again that not only is the right hon. Lady not prepared to do anything but even such mechanism as is available is completely ineffective.
When the Labour Government were in power, the right hon. Lady frequently claimed that that Government had doubled prices during their four years in office. We have heard that said time and again. I am sorry that the hon. Member for Worcestershire, South (Mr. Spicer) is not in the Chamber. He is a numerate member of the Conservative Party and could tell the right hon. Lady that, judging by the rate at which the Government are increasing prices, they will far more than double them if they are in office for anything like their full term.
The Government have not only already increased the rate of inflation by 7 per cent. The dastardly thing is that, of the 262 7 per cent.-plus increase in inflation, the Government have directly contributed over 5 per cent. That lies directly at their door. If they look at the forecasts on inflation for the next year or two, they will find that all the forecasters predict that the level of inflation within the next two years will reach between 20 per cent. and 25 per cent. One or two suggest even 30 per cent. That could well occur under this Government.
If we assume that the Government's policies succeed, according to their interpretation of success, what is their target? I understand from the Treasury that the target is to get inflation down again to 10 per cent. by 1982–83. Is that not the figure with which they started? Even if they succeed, after all the misery and trials that they have imposed, they will have got us back to where we started. That is an indictment of the Government and their price policies. We need some mechanism to protect us against this sort of price movement.
The Government are pushing price increases on to our people. They should at least provide the mechanism to protect the public against the Government's own action. That is all that the new clause proposes.
§ Mr. Robert Hughes
The more one listens to the Government trying to justify their policy, the more one comes to the conclusion that the days of "Nineteen Eighty-four" are already with us. Many more people should read George Orwell's novel, because it is clear that the Government have adopted newspeak as their official language. Things are not what they are said to be. The title of every Bill is the direct opposite of the intention within it.
I hope that the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who is about to leave the Chamber, will stay with us as I intend to refer to his very interesting speech, which I followed with great care. He started by making a very stout and spirited defence of private enterprise as a method of competition and of keeping prices down. Perhaps he was diverted or distracted by one or two interventions, because he concluded by saying that there was a need for the Government to intervene where mergers and so on were against the public interest.
263 The hon. Gentleman made a savage attack on the business practices in this country as a result of which mergers take place and where, apparently, efficiency is reduced, production is reduced and fewer people are employed. He did not say that these companies were making smaller profits, although many may be doing so. But it was curious that his speech began by saying that the Government should leave everything to private enterprise and ended by admitting that there are business practices in this country which need to be controlled and which have nothing to do with the law. I took it that the hon. Gentleman was not suggesting that these companies were selling shoddy goods, unsafe goods or goods of inferior quality but that they were all ganging up to shut out the small man and prevent real competition taking place. That is why the Competition Bill, so called, is a complete misnomer and the direct opposite of the truth.
I sometimes, in my innocence, try to work out exactly what are the Government's targets. They tell us that they are to control inflation and to keep prices down, yet we have interest rates at record levels. Despite what the hon. Member for Selly Oak said, I very much doubt whether it would be right to say that there is no connection between the abolition of exchange control and the increase in interest rates. The only reason for increasing interest rates was to make sure that money either came to this country or, perhaps more importantly, stayed in this country. The very high interest rates would not have been so necessary if we had retained exchange control.
There has been a knock-on effect and as a result of the increase in interest rates mortgage rates have also increased. The Minister for Consumer Affairs and the Prime Minister would not today meet the kind of reception that they once expected to get in middle-class suburbia, where the people they claim to represent, the middle class, are striving to make their way upwards in the social scale but are being hit very badly by the level of mortgage rates. The young first-time buyers are being hit worse than anyone else by the high mortgage rates. I know that recently there has been a slight hiatus and a slight levelling off in house prices. 264 Nevertheless, the people who are having to pay vastly inflated sums to buy modest houses are finding the mortgage rates very hard to bear.
The Government are living in some respects in a kind of compartmentalised world. They do not seem to have any conception that what one Department does has an effect further along the line. The Minister for Consumer Affairs failed very badly in her duty in not pointing out to the Secretary of State for Energy the effect on prices generally that the gas price increases will have.
We are told that gas prices are to be increased by 10 per cent. more than the rate of inflation. At the same time—I say this as an aside, but it is a very important point—if workers ask for wage increases plus a percentage, they are condemned out of hand, not simply for trying to maintain their existing standard of living but for trying to better themselves and improve their standard of living.
Gas prices are very important to the consumer directly, but there are also many industries in which gas is a primary fuel, either directly in terms of manufacturing or in terms of heating. I wonder what sort of price increase will be passed on to the consumer as a result of the gas price increases. I wonder whether companies will feel that they must pass on prices which are 10 per cent. more than the rate of inflation and that they must then ask for another10 per cent. over and above that.
What determines the basis of inflation? There is certainly an argument whether inflation is caused by wage increases or by cost increases, or about the extent to which either of these is responsible. But if 27 per cent. or29 per cent. is added to basic fuel costs—because electricity, coal and oil prices are all going up—that must affect the rate of inflation. There is a sort of multiplier effect. Because of the price increases in primary fuels, the rate of inflation goes up. The seller of primary fuels has to get in even more money to stay 10 per cent. ahead of inflation, so that inflation goes up yet again. The gas price increases are directly fuelling inflation, and they affect every part of industry in the country.
265 But what about private industry'? Many of us have long suspected that, in determining its pricing policy, private industry does not sit down and do a complicated sum and then decide that it costs £X to produce a commodity, that a return of Y per cent. is needed just to cover the original investment, that another Z per cent. is needed in order to pay the shareholders, and that another percentage on top of that is needed for reinvestment purposes. In my younger days, when I looked at business affairs, I understood that some money was always set by for replenishing worn-out machinery. That practice now seems to have gone by the board. It is now a very old-fashioned idea, apparently. Perhaps some of us did not really believe that that was how it was done but knew that a company would test the market and that the price of the product was what the market would bear and had no relation at all to production costs or to the amount of money involved.
Now, the Government have adumbrated a new business principle, by which the price of the product has to be compared with the prices of other products. If a company's product is cheaper than that of another company, the reaction is not one of satisfaction. Instead, the reaction is to put up the price, because the feeling is that if the product is sold for less than another similar product, people may think that it is less valuable. On top of that, as I was saying earlier, a company now has to ensure that its product is priced at a figure that is 10 per cent. above the current rate of inflation.
I wish that someone in the Government would explain how, by increasing every cost that industry and commerce have to pay, they can possibly hope to reduce inflation. The truth—and I wish that the Government would sometimes tell the truth—is that they have no control over inflation and, what is more, they have no intention whatever of doing one minute thing to halt the rate of inflation or to try to slow it down.
As far as the Government are concerned, the public must bear the cost of inflation and in the harsh world of reality everything will be all right. The Government think that they can repeat time after time the tired old story—like a gramophone needle stuck in its groove—that all these price increases were in the pipeline. Any fair-minded person will 266 accept that price increases that take place the day after an election can hardly be blamed on the present Government. The same might be true if price increases took place the second day after taking office. I am glad that the hon. Member for Watford (Mr. Garel-Jones) agrees with me. I am sure that he will agree with me all along the line. The third day after their election, one could not blame the Government for price increases. A month after the election one could not say that they were directly responsible for price increases as those increases might have been in the pipeline. Perhaps a fair-minded person might say that the Government increased prices in their first Budget but that, nevertheless, some price increases were still working their way through and that those were no fault of the Government.
Just before Christmas I asked the Minister whether, as she was sure that the vast majority of price increases were in the pipeline—she was certain about that—she would be able to tell us when the pipeline would be empty. When will the rate go down? When will price increases cease to be the fault of the previous Labour Administration? There has been a rapid increase in interest rates and VAT has been increased, despite the Conservatives' election promises. Control on prices has been released, and I challenge the Minister to tell us tonight whether the pipeline is empty.
There has been a useful gestation period of nine months since the Government took office and the pipeline must be empty now. The Government's excuse is hollow and the Minister must admit that the Government are directly responsible for price inflation. However, she is doing nothing about it. It is time for her to change her tune and to admit responsibility for price increases. If she does not admit it, my charge that the Government have adopted the language of newspeak will become a graver charge, to the effect that the Government have adopted the policy of the late Dr. Goebbels and his insidious propaganda.
§ Mr. Ioan Evans
The Bill has had an interesting passage through the House. Hon. Members will recall that on Second Reading the Secretary of State made a two-minute speech and then sat down. He had great difficulty in finding anything 267 to justify the Bill and he could find nothing to justify the abolition of the Price Commission. One might have thought that he would make amends and that he would be here to listen to the proceedings. However, he has gone to Tokyo. I quite understand that Ministers must travel abroad, but one would have thought that arrangements could be made that consider the will of the House. There was a hiccup because the Secretary of State made such a short speech in moving the Second Reading.
We are discussing the Government's attitude to prices. Clause 1 abolishes the Price Commission. However, there has been an argument between different Departments about whether the Treasury should answer questions or whether the Department of Trade, the Ministry of Agriculture, Fisheries and Food or the Department of Employment should answer them. Under the previous Labour Government there was a Department of Prices and Consumer Protection. The Secretary of State is trying to duck responsibility for prices. When we go to the Table Office, we experience difficulty. The Government did not put their proposals to the electorate. They did not tell the electorate that they would abolish the Price Commission. In their manifesto they said only that they would review the Price Commission. However, to review something is not to abolish it. Later in the week we shall review nuclear weapons, but that does not mean that we shall abolish them. There is a great difference between reviewing a body and abolishing it.
The Government said in their manifesto that they would review the Price Commission. However, there was no mention of a review in the Queen's Speech. There might have been some sense in looking at the working of the Price Commission. It might have made sense to review the Price Commission and to see whether it should be strengthened or whether its powers should be changed. However, during the debate on the Queen's Speech the Prime Minister said, as an aside and without any indication before-hand, that the Government intended to abolish the Price Commission. That is the only policy enuciation about prices that we have heard from the Government.
In Committee we asked who was responsible for prices. The Minister replied 268 that all Ministers were responsible for prices. Nobody is willing to carry the can or to accept responsibility. That problem faces the House. We are in the first Session of Parliament, and the Conservative Party has been returned with increased numbers.
§ Mr. Evans
I cannot blame them for not being here, because it is terrible to have to sit through a debate about prices and to listen to the Government. I forgive them for being in the Tea Room or whatever they are.
The Government were elected on a slogan saying that the rising cost of living was the rising cost of Socialism. One might have though that we had the most Socialist Government ever. However, we have the most reactionary Tory Government who have ever been seen. This Government have nothing to do with Socialism. They completely absorb the economics of Friedman.
The Government get everything wrong. They told us the date of the Budget, but they did not realise that on that day the Archbishop was to be enthroned. They made a mistake. They did not realise. Nobody had told them when the Archbishop was to be enthroned. However, the Prime Minister is now on the road to Canterbury. She will be there and I hope that she will get the Christian interpretation of the parable of the Good Samaritan. The most nauseating statement that I have heard from the Prime Minister was her interpretation that the Good Samaritan could not have done any good without money. What an interpretation! That is the Government's attitude. They have an absolute belief in market forces and are dominated by their monetarist policies.
§ Mr. Gwilym Roberts
While my hon. Friend is dealing with the parable of the Good Samaritan, will he reflect that if the Good Samaritan had been around at the time of this Government he would have not have had sufficient cash to meet the hotel bills?
§ Mr. Evans
I shall not pursue that point.
I hope that the Prime Minister will come back and consider the parable of 269 helping others. This Government's attitude is the opposite to that of the Good Samaritan.
Old-age pensioners and other disadvantaged people in our society have been kidded and conned into voting for the Conservative Party. They thought that this Government would deal with the problem of price increases, and there is now anger in the land about the Government's actions.
It is argued that the Price Commission had no function and fulfilled no purposes. The manufacturers complained that it was doing too much and inhibiting them from putting up prices.
We cannot take all the credit for setting up the Price Commission. It was set up in the days when we had a less reactionary Conservative Government, and the Labour Government kept it in being. It had powers of prenotification. Conservative Members argue that the Price Commission had no real effect on prices; but why, then, do the manufacturers complain?
One result of the Price Commission was that increases were delayed. They had to be examined first. Now there are monthly, almost weekly, increases in prices. The fact that manufacturers, brewers and oil companies had to refer price increases to the Price Commission slowed down the implementation of increases.
Institutions are judged by their results. The Price Commission had been put into cold storage by the Tory Government, but under the Labour Government inflation was coming down from double figures. It came down to single figures. Since the abolition of the Price Commission it is rising month by month. Last month, there must have been a hiccup because the rise was 0.2 per cent. less than previously. Prices are going up, and the rate of inflation is increasing month by month. From all that we know of the proposals in the Tory pipeline, the 17½ per cent. inflation rate could well increase to 20 per cent., despite the removal of the VAT increase from future calculations of the RPI. There was justification for the Price Commission, and we can see the great need for it when we compare what happened during its existence with what is happening now.
Market forces will apparently control the law of supply and demand. They will 270 be the sole and dominant factor. The Government will not intervene. Everyone is expected to behave himself, to be loyal to the Tory Government and to keep prices down.
We all know what is happening. At a time when we are seeking wage restraint, market forces seem to be allowing manufacturers to do what they want. I do not believe that any Minister has yet condemned one price increase. We have had a multitude of price increases by a whole range of producers, and I do not recall any condemnation by the Government. We are on the way to hyper-inflation.
We are in the middle of a major steel strike, which will affect prices. Hon. Gentlemen cannot say that the strikers are militant and irresponsible when in that industry there has not been a strike for over 50 years. It has taken a Tory Government to bring the steel workers out on strike. In spite of the many price increases, the initial offer to the steel workers was only 2 per cent. Other offers have been made since, which involve productivity deals, but that was the only offer made without strings.
We do not know what effect the steel strike will have on foodstuffs. Consumers are acting responsibly and there has not been a rush to buy canned foods, but if the Government take no action such supplies will be limited in the future. The Government have decided not to act and to let market forces operate, but we know that those forces are not operating properly. The Government have told British Steel that there is no more money and that it cannot have one extra penny. They say that British Steel must settle the dispute. It is all very well to tell the steel workers that, but there are wage increases for the Armed Forces and in the public sector, and they are not told that the money must be found from within the enterprise. The Government are determined on a collision course in the steel industry, which will have a major effect on small businesses and the engineering industry generally. In South Wales it will lead to 12 pit closures, with the resulting serious impact on the coal industry, when we should be producing as much coal as possible. That in turn will affect prices and the economy—and yet the Government remain inactive.
271 One of the mistakes that the Government made was to end the Department of Prices and Consumer Protection. I believe that the Minister for Consumer Affairs did not support that move and wanted to keep the Department going. The consumer should be represented when the Government are considering prices, but there is now no one to represent the consumer in this Tory Government. That is a step backwards. It is accepted that various sections of the community should be represented in discussions on matters affecting them, but when prices are being considered the consumer is not now represented. In this Government there is no one to do that.
That is why in the past few months we have seen this Government adopt an anti-consumer attitude. We have had a foretaste, through leaks, of what we shall see in the next Budget. In the previous Budget, through taxation, the burden was taken from the wealthiest and, by increasing VAT, placed on those who have to spend money. Reference has been made to the fact that a television set which had a tax of £16 now carries a tax of £30. That is a direct increase by this Government. On a car worth £4,000 VAT alone has risen from £320 to £600.
We have had an increase in the minimum lending rate. We are told now that the MLR may well be reduced in the Budget. Why wait until the Budget? Is that the only piece of good news that we can expect in the Budget? Why not bring the MLR down now?
Owner-occupiers have been hit particularly hard. The Conservatives have always said that they were champions of owner-occupiers. I wonder whether there are many owner-occupiers left who believe that they will get a fair deal from the Tory Government. They have seen the cost of their mortgages increase substantially as the interest rate has risen from about 11 per cent. to 15 per cent. As Government policies work through to local authorities, council house tenants also can expect to face increases.
I do not wish to dwell on the increases in petrol prices, but I must point out that there seemed to be restraint under the previous Government despite the fact that oil prices rocketed. Under a Labour Government, international oil prices increased fourfold, which must have affected 272 petrol prices in this country, but in those good old days petrol cost between 75p and 80p per gallon. The Conservative Government do not just allow the oil companies to do what they wish and allow market forces to work. Instead, they intervene and put an extra tax of lop per gallon on petrol.
Tremendous profits are being made by the multinational oil companies, but the Government have done nothing about examining those profits and restraining prices. They leave it to market forces and let the oil companies see how much they can get. The only competition that exists on the forecourts of the petrol stations today is the competition to put prices up. Why does not the Minister stop that?
On the question of food prices, reference has been made to the devaluation of the green pound and the need to protect our farmers. This country has been taken for a ride through membership of the EEC. We are paying very heavily to the CAP and our payments mean that food prices have increased substantially. The only benefit the EEC has given is to the Russians, who get cheap butter. I do not know whether that practice has been stopped. There is a lot of talk about stopping the Olympics, but I wonder whether efforts have been made to stop sending cheap butter to Russia. It is certain that British consumers have not received any benefits of cheap butter.
Under previous Governments, we gave a guaranteed price to the farmers, and as a result consumers obtained dairy products far more cheaply than they do at present under the EEC arrangements. We have to buy products within the Community instead of taking the opportunity to buy them from New Zealand. Australia and Argentina. There is now an EEC tariff on such goods and, as a result our housewives suffer.
We are still net contributors to the extent of £1,000 million to the EEC, and that money goes primarily to the agricultural fund. I know that the Government intend to do something about that, but the problem still exists. We have heard a lot of arguments from Conservatives against food subsidies which were introduced by the Labour Government in order to keep butter and cheese prices down. The only difference now is that subsidies go to part-time Bavarian farmers.
§ Mr. Keith Wickenden (Dorking)
Will the hon. Member remind the House which party was in power when the EEC rules were renegotiated in 1975?
§ Mr. Evans
The Conservatives took us into Europe and we sought to renegotiate the terms. I agree that some Labour Members thought that the renegotiated terms were good, but others, like myself, did not. At least, there was a division of opinion on this side of the House. The Conservatives were almost unanimous—in fact, I do not remember hearing a single complaint from the Tory Benches about the renegotiated terms—
§ Mr. Deptuy Speaker (Mr. Richard Crawshaw)
Order. I hope that the hon. Member will leave that subject now.
§ Mr. Evans
I turn now to the question of the nationalised industries. The Gov- 274 ernment say that they will not intervene in the terrible steel strike. Instead, they sit watching it like petrified rabbits and allow it to continue. They say that they believe in freedom, in market forces and in the laws of supply and demand. It is surprising that when it comes to steel the Government are non-interventionists, but when it comes to gas and electricity prices they are more interventionist than we were. The Labour Government told the gas and electricity industries to restrain their prices, but this Government not only chose to let them have their heads but actually told the chairmen to put the prices even higher. We have a Government who intervene to clobber the consumers of this country, even though they were elected on the promise of defending them. We have a Government who, right along the line, have intervened in order to put up prices.
§ Mr. Tristan Garel-Jones (Watford)
I have listened with care to the speeches of both the hon. Member for Aberdare (Mr. Evans) and the hon. Member for Fife, Central (Mr. Hamilton). They both seem to imply that, although the Price Commission did not work, it provided the British people with some psychological comfort. People could sit at home and watch prices rise by 105 per cent. and calmly say "God bless the Price Commission and God bless the right hon. Member for Birmingham, Spark brook (Mr. Hattersley), who is defending our interests in the Cabinet." When prices increased by more than 100 per cent. under the previous Government, I wonder in what vein Labour Members replied to letters from their constituents. Did they say that, although prices had increased by such a large amount, the increases had been made with humanity and caring?
I would find the intervention of the hon. Member for Aberdare more convincing if, instead of giving lists of prices which are rising—we all regret this and hope that they will be restrained—he would suggest an alternative which his party would pursue. Does he suggest that we should continue with another five years of guaranteed rises of 105 per cent.?
§ Mr. Evans
Obviously, as has been made clear in the debate, world conditions determine prices. We said that when we were in Government and we are prepared to say it in Opposition. But when there was a fourfold increase in the price of oil the Conservative Party did not say that this was going to affect costs in this country. The attitude of the right hon. Lady and her colleagues now on the Front Bench—and indeed of the whole host of Tories when in Opposition—was that every price increase was due to the work of the Labour Government. Will they now admit that everything is due to them, because that is what they should do? But what they are trying to say now is that it is due to other factors, that it is due to the increases in our pipeline. The increase in VAT is due directly to them, the increase in the Budget was due directly to them, the increase in gas and electricity prices was due directly to them. These increases are not in any Socialist pipeline; they are in a Tory pipeline.
276 Would the hon. Member for Watford (Mr. Garel-Jones) repeat the point he was making in his intervention?
§ Mr. Garel-Jones
What I was trying to do, perhaps a little arrogantly, was to guide the hon. Member towards suggesting to us what alternative policy is offered by either of the two parties on the Opposition side of the House.
§ Mr. Evans
Of course, we had an alternative policy, because we were bringing the rate of inflation down from double to single figures. This was due to the fact that we had for many years the support of the trade union movement; its members were prepared to have wage restraint because there was price restraint. This Government say that they have nothing to do with prices. Yet they are deliberately intervening to affect wages. They are deliberately intervening to tell the steel workers that, although the inflation rate has gone up to 17 per cent., they must take an increase of only about 2 per cent., which means that the policy of the Conservative Party is to reduce the living standards of the people.
It is not for me to give the whole host of policies that are the alternative to those of the Government, but we want the Government to abandon the attitude whereby they glibly say that they must not get involved with market forces, that they must allow them to find their own way, that they must just sit there because they have no role to play in restraining prices. I believe that a Government must have a role in restraining prices. I believe that the Labour Government successfully intervened. I believe that the Government are reducing the living standards of the people by attacking the social wage. The parents of youngsters travelling to school have to pay increased bus fares and they have to pay extra for their school meals. The Government are attacking the whole Welfare State concept that we have set up in this country. We believe that we should restore the Welfare State. We believe that we need co-operation in industry, not competition. The Conservative Party are putting forward a whole host of policies that are wrong.
What is indicative of the situation in the House tonight? The hon. Member 277 for Birmingham, Selly Oak (Mr. Beaumont-Dark), who is the only Tory Member who has had the courage of his electoral commitments, has come into the House to defend the Government. He said that realism will bring down inflation. If that is the case, it will never be brought down by the present Government.
§ Mr. Donald Dewar (Glasgow, Garscadden)
I must say that I admired the comprehensive tour d'horizon to which we have just been treated by my hon. Friend the Member for Aberdare (Mr. Evans). I agreed with almost everything he said and I am not going to repeat it all, which may come as something of a relief to the House.
In my constituency, which is a particularly typical slice of working-class Glasgow, I notice that at the moment prices are yet again becoming a matter of great public anxiety. That may not seem surprising but in a sense it is, because there is a lot of competition; there are a lot of local issues which it might be thought would be in the front of people's minds. My constituency, for example, is in the centre of what the Government have accepted is probably one of the most difficult employment areas in Scotland. We have got the impact of council house sales, and I cannot think of any constituency in Scotland that will be more divided on that issue and where more tension and heat will be generated. So there are a lot of very hot political potatoes about.
But I find, again and again, as I go around that it is the issue of prices that is coming more and more to the forefront of people's minds. I must confess that I find the attempts of the Government and the repeated attempts of Government spokesmen to suggest that in some way we are getting on top of the problem of inflation totally unconvincing. I think it was the right hon. Lady the Minister for Consumer Affairs who said—piped, I might almost say—sotto voce during the speech of my hon. Friend the Member for Aberdeen, North (Mr. Hughes) that we would conquer inflation this month, referring to the fact that there is a 0.2 per cent. drop in the annual rate, from 17.4 per cent. to 17.2 per cent. But, of course, we all know, and it has been hammered out again and again from the Labour Benches, that there is a large 278 number of international factors and considerations, some of which I fully concede would plague any Government, which will force up prices in this country. But there is also an enormous number of deliberately manufactured policies which will have a very similar effect.
I think that we are entitled to protest about the abolition of the Price Commission and attempt, at least, although it may well be a vain attempt, to do something about it with this particular group of amendments, given the public anxiety and given the deliberate trend of Government policy. Everyone recognises the difficulty of controlling prices. I re-entered the House in April 1978, when the Labour Government had less than a year to run. At that stage inflation was running at an annual rate of about 7.9 per cent.—just under 8 per cent. People constantly came up to me and said "Why do not the Government peg prices totally "It was explained that that was not practicable for a whole variety of reasons. By and large, people were prepared to accept that, but they were prepared to accept it in the context of a Government genuinely trying to do something about an absolutely monumental problem that they could see daily eroding, or at least threatening, their living standards. They could appreciate the difficulties but they could also appreciate the efforts that were being made through mechanisms such as the Price Commission by the Labour Administration.
What makes people particularly angry at the moment is that they have what I think is the justified feeling that the Conservative Government are not making any effort at all but are doing the exact opposite—standing on the sidelines and cheering on the offenders. We have a situation in which Government policy is deliberately to let prices rip in a large number of sectors, and, when they try to say that they are holding down inflation, that is seen by a large number of people in my constituency, and, I am sure, throughout the country, as nothing but hypocrisy. That is an extremely dangerous situation
§ Mr. John Home Robertson (Berwick and East Lothian)
I should be very interested to know whether people in Garscadden are similar to people in East Lothian and Berwick shire in being 279 able vividly to recall a television programme in which the right hon. Lady took part, in the run-up to the general election. She had a shopping basket and she explained how cheap everything would be in due course, when she managed to get things under control. Would my hon. Friend agree that both our constituencies have been cheated in this matter?
§ Mr. Dewar
I certainly think that the results of the first nine months of Conservative Government might well leave people with a feeling that they had been taken for a ride and that they had been conned by the campaign at the last general election. I certainly have not seen so much of the right hon. Lady's shopping basket recently, and I look forward to the next time we see it. Perhaps we should ask her as a publicity exercise to produce it again and to go through exactly the items that she had in it last time, because that would be a nice, simple way of telling the people in the country what has been going on in the past nine months. I am sure that the right hon. Lady is strongly in favour of the widest dissemination of public information.
I accept that the Price Commission did not in itself make a substantial impact directly upon price levels. It is impossible to prove otherwise; it is not something that is open to objective evidence. There has been some discussion, however—I think rightly—about the deterrent effect, and we all have to make up our own minds about that. I think it is fair to say that some of the sound, the fury and the anger about the Price Commission and its existence suggests that it was not quite as ineffective a mechanism as some Conservative Members would have us believe. The deterrent and monitoring effects of the Price Commission were important.
Fears are sometimes exaggerated. People think that they are being taken for a ride or being "done" when they are not. If they had explained to them the high cost of manufacture, investment and raw materials, they would realise that sometimes a price increase was justified. There is a case for a mechanism like the Price Commission even if only to take just a few key test cases to examine and then to explain and illustrate what had hap- 280 pened. Such a mechanism would educate the public about the difficulties that many firms have to face and would also have a symbolic, cosmetic effect in showing that efforts were being made by the Government to keep down prices at a time when workers were being asked to keep down inflation by moderating wage demands. How can the Government persuade people to moderate wage demands if, at the same time, they are dismantling the Price Commission and deliberately increasing prices in certain public sector areas which are peculiarly sensitive?
The Tories preach the free market doctrine, but they do not live up to it. Many of the price increases which have to be borne by ordinary working-class families are the result of deliberate Conservative policy and interference.
It is calculated that in Scotland about £73 million will have to be recouped from rent and rates because of the restrictions placed on local authorities by the Government. That means on average an increase of about £1.60 per week for every council tenant in Scotland. The Labour members of the Glasgow district council have successfully fought a brave rearguard action to hold rent increases to 20 per cent.
There are many factors which affect mortgages—international money movements, international rates and international comparisons. All these factors exert pressure on mortgage rates. Pressure on the minimum lending rate perhaps cannot be resisted, but there are many actions which could have been taken by the Government—and were not—to relieve pressure on the mortgage rate.
It is extraordinary that the apostles of the free market economy should not allow management to take its own decisions but should tell industry that increases to match the rate of inflation plus 10 per cent. should be made this year and next year and probably for long after. The Price Commission is one of the few organs that is seen to be struggling with the erosion of living standards and rising prices. If the Government dismantle the Price Commission, they cannot be seen to have any credibility.
We have heard from the Chief Secretary to the Treasury gloomy prognostications for the future. There will be more and more pressure on living standards as 281 the months go by. I cannot see that the destruction of the Price Commission is anything more than a sop to preconceived notions of what is in the best interests of the Government. I do not worry about what is in their best interests, but I do worry about what is in the best interests of the country.
I like living in a country that has consensus politics. Since the war we have had cohesive, civilised politics, but now we are beginning to see a breakdown in that pattern. In the prejudice which is being shown by the dismantling of the Price Commission and by the increase in gas prices and local authority rents, we see the seeds of bitterness being sown.
I know that the Government will not change their mind tonight—that would be asking for a miracle, and miracles are rare in the House of Commons. But I hope that they will carefully consider the course on which they have embarked and also consider whether they should not be more mindful of the needs, aspirations and feelings of ordinary folk before they bash on, bull-headed and unashamed, on their prejudice course.
§ Mr. Campbell-Savours
I join my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) in his reflections on the need for equality of sacrifice. If the workers are to be required to make sacrifices on pay, it is for the Government to insist that manufacturers should be part of the general consensus referred to by my hon. Friend.
Behind the Bill is a clear assumption that the Price Commission did not work. I do not accept that. I believe that in part it was successful. Even if it did not immediately affect a great number of price increases, it acted as a major deterrent. It worked sufficiently well for the right hon. Member for Cambridge shire (Mr. Pym) to say on "Panorama" on 23 April last year:There is no commitment whatsoever to abolish the Price Commission.Yet within 22 days—11 days after the election—the Secretary of State for Trade said that there was no place for the Price Commission.
When I was elected to the House I was told that I must be careful what I said about Conservative Members, but it seems to me that prior to the election someone set out deliberately to mislead 282 the British people and, in doing so, was able to influence the Conservative victory. I was brought up to believe that in every part of my endeavour, day by day, I should try to be honest. The statement by the right hon. Member for Cambridge shire was grossly dishonest and misleading.
As a further measure of the interventionist success of the operation of the Price Commission, I should like to quote what was said by the Director General of the CBI last year. In a report on price controls and the Price Commission, he said:The activities of the present Price Commission have caused particular concern. Indeed, in my experience, there are very few issues which have caused more worry.It must have been having some success and effect. I should like to measure the success of the Commission's operations under the Conservatives, who, despite what has been said during the debate, introduced the Price Commission in 1974. The right hon. Lady, who has spent much of the debate smiling at our references to the Price Commission and the need for it, was one of those who voted for the Price Commission to be set up in 1973. The campaign guide of the Conservative Party in 1974 quoted the chairman of the Price Commission as saying:The consumer had been saved some £316 million at trade prices.The chairman, who had referred to a fall in the increase in the retail price index, was also quoted as saying:As a result of seasonal changes as well as control of price, increases by Category I companies, over which control was strongest, were particularly small.Those are remarks about the operation of the Price Commission, not under a Labour Administration but under a Conservative Administration. It can be seen that the Commission had a vitally important part to play in the fight against inflation under a previous Government, yet repeatedly during the Committee stage the right hon. Lady and her hon. Friend were trying to tell us that the Commission was ineffective.
It is interesting to compare the origins of the Price Commission, which was set up by a former Conservative Administration between 1970 and 1974, and the climate that surrounds the closing down of the operations of the Commission 283 under this Government. The Conservative Government of 1970–74 saw a climb in bank rate, rising unemployment, a fall in the number of job vacancies nationally, low growth and a massively deteriorating deficit on the balance of payments. All that is exactly the same today. There was also a drop in the purchasing power of the pound. Between the election in 1970 and the decision to introduce counter-inflation proposals in 1972, there was a reduction from 100p to 85½p.
A very similar reduction has occurred under this Government, from 100p last May to 90.2p now. The same conditions exist over the levels of income tax. The Government who came to office in 1970 reduced income tax by 2½p. This Government reduced it by 3p and fuelled the fires of inflation.
All the circumstances surrounding the introduction of the Price Commission in 1972 remain exactly the same today. If they were similar at that time, one has to ask why the Conservative Government now have the objective of phasing out the vitally important powers that they thought were so important then. There is a reason. It is very important. The whole Conservative Party has changed.
At that time, the right hon. Member for Sidcup (Mr. Heath) had a particular view and pursued that view with determination. In many cases, I am informed, although I was not in the House at the time, the right hon. Gentleman suffered much criticism from his own Back Benches. The present Prime Minister pursues a totally different form of policy and apparently carries the whole support of Conservative Members. The right hon. Lady does not accept the need for consensus politics to which my hon. Friend the Member for Glasgow, Garscadden referred. She does not understand the need to pursue, in conjunction with the trade unions, a policy of consent in pay bargaining and prices. The right hon. Member for Sidcup treated those factors as crucially important in his fight against inflation. The right hon. Lady forges on. As she does so, people, not only on the Opposition Benches but throughout the country, recognise increasingly that this policy invites disaster.
During the debate, both here and in Committee, it has become obvious that 284 Conservative Members are unwilling to accept that the Price Commission played an important role by dampening down the effects of rising prices. The prenotification factor acted as a considerable deterrent. Many companies, despite what has been said in this debate, did not apply for price increases. They knew that they would not get approval from the Price Commission. As a result of the phasing out of these powers, many smaller companies, as I spent some time in Committee explaining, will suffer almost as much as general consumers.
The Government should admit to their objective. I believe that they have made a clear estimate and set clear objectives for the future. I do not believe that they are worried, from a political point of view, about the rise in prices this year. They have calculated that if they can manage a five-year term in office, the first two or three years—that is their calculation of suffering—will have been forgotten by the time of the next general election. That is the belief of myself and many of my hon. Friends. I wish, however, that the Government would come clean.
It might be interesting to state what Labour would have done if we had won the election. From my conversations, it is clear what we would have done. We would have retained and strengthened the powers of the Price Commission. We would have added to the resources in the hands of the Director General of Fair Trading to investigate. We would have produced, like this Government, new competition legislation. Our policy would have had a major effect on the future of price rises inasmuch as we would have contained inflation effectively.
I should also perhaps admit that I believe that a major row would have occurred on the Labour Benches about the whole question of incomes policy. I do not believe that the principle of price restraint can be separated from the need for an incomes policy.
I believe that the Minister should hang on to the prenotification powers. If she is not willing to consider the wholesale use of prenotification powers, she should certainly consider their use in selected areas, as my hon. Friend the Member for Norwood (Mr. Fraser) so adequately demonstrated in Committee. The public demand that whatever machinery is 285 available for restraining prices should provide for a speedy system that can operate quickly in the event of the public interest being affronted.
This Bill is an attempt to introduce delaying mechanisms that will force on to the Director General of Fair Trading and later the Monopolies and Mergers Commission the responsibility for functions that they will undertake over a long period and during periods of great public anxiety—functions that were previously carried out far more rapidly by the Price Commission.
Important powers to intervene in profiteering—powers which existed under the old Price Commission—are removed by the Bill. That is deplorable.
§ Mr. Gwilym Roberts
Does my hon. Friend agree that such decisions should be taken not by the Director General of Fair Trading but by the Government?
§ Mr. Campbell-Savours
If the Bill were framed in the right way and if we retained the powers of the Price Commission, that suggestion would not have to be made.
If we are to deal with the problems of profiteering, we should consider the position of people who, as a result of shortages of foodstuffs, find that when prices rise there is no machinery available to move in fast with an inquiry to ensure that suitable reductions are made.
In Cumbria, following the nationalisation of the State brewery some years ago, private companies were able to buy up the major public houses and overnight raise beer and other drinks prices by as much as 30 per cent. simply because of a change of ownership. It is a pity that at that time, in 1971, the powers of the Price Commission were not available. If they had existed, my constituents would have been better off. The public demand a quick system. The Price Commission provided such a system.
A document was sent to me and other hon. Members this morning by the Retail Consortium. I have no doubt that representatives of that organisation are now within the confines of the House. Taken with schedule 8 to the Fair Trading Act 1973, the Bill enable Ministers to refer price increases to the Direc- 286 tor General of Fair Trading, after overcoming a number of hurdles. The Minister should say what she feels about the Retail Consortium's comments. It states:We consider that this negates the effects of abolishing the Price Commission and inded the powers given to the Secretary of State in many ways go beyond the powers of the Price Commission particularly as Orders, made under the Bill, will have no time limit.It is said that the reason for including such powers in the Bill is to deal with a situation where neither a monopoly or merger exists within the meaning of the Fair Trading Act 1973, but nevertheless, some of the consequences of a monopoly or merger are likely to subsist after an anti-competitive practice has been controlled, if so, we consider that the situation should be controlled either by separate legislation or by amendment to existing legislation.The Retail Consortium is saying that despite the Bill's intention being to phase out the powers of a body which we would like to be retained, there are in the Bill, taken with schedule 8 to the Fair-Trading Act, sufficient powers for the Minister to operate as if there were some form of price control machinery. I should like to hear the Minister's comments on that, because if that is correct we shall be happy that at least something is coming from this legislation which fulfils our objectives.
§ Mr. Robert Maclennan (Caithness and Sutherland)
The Conservative Party used to pride itself on being a pragmatic party that viewed economic events as they unfolded and responded to them, that eschewed ideological convictions and recommended that that was the way to handle the economic problems. The only type of pragmatism that the Conservative Party in Government is demonstrating in regard to inflation is a willingness to depart from the undertakings which were given in Opposition and promises made during the election campaign to the effect that the Price Commission would be left intact.
It is fair to say that the Conservative Party sought at every stage when in Opposition to weaken the powers of the Price Commission and to criticise its operations. At no time until the Conservatives gained the responsibility of office did they frankly admit that their purpose was not merely to limit the powers of the Price Commission but to wrap it up 287 and deny themselves the opportunity to intervene in order to deal with unacceptable price increases.
The debate stems from new clause 3 and a number of associated amendments. Their purpose is to put into the Government's hands some power to intervene when a price increase is demonstrably contrary to the public interest. The right hon. Member for Gloucester (Mrs. Oppenheim), who is called the Minister for Consumer Affairs, may think that she can wash her hands of all responsibility for prices and that she can convince the public that she has no means of controlling unacceptable price increases, even when they are demonstrably unjustified, but she cannot in an Act divest her Government of responsibility for unacceptable price increases.
The public will realise that by her Pilate-like act the right hon. Lady is subscribing merely to dogma. The responsibility for unacceptable price increases will lie with her none the less, because under clause 13 she has attempted to divest herself of any powers to deal with the situation. Clause 13 is strange. It purports to give the Secretary of State the power to investigate prices while leaving him powerless to do anything about prices.
What does the right hon. Lady think will be the consequence of clause 13 if, following a reference, the Director General reports that a price increase is wholly unjustified? What does she propose to do about that? There is nothing that she can do except to say that it is regrettable and unacceptable. The right hon. Lady will have no power to intervene.
It is unlikely that the Government will refer any questions to the Director General for investigation, because when we were in Government the Conservatives objected to all our references on the grounds that they were unjustified, that no prima facie case had been made out and that companies should not be judged guilty before being proved guilty. References to the Price Commission were described repeatedly by the Conservatives as efforts to pin guilt on companies before a prima facie case had been made out.
If that is the philosophy of today's Government, few references will be made under clause 13 to the Director General. It is questionable whether the right hon. 288 Lady has taken powers that are capable of being used even to refer a price increase to the Director General for investigation. The matters which are capable of being referred are described as being only those of "major public concern".
Who is to say what is of major public concern? How will the right hon. Lady measure how this concern is to be expressed if she is challenged in the courts? Will she be able to prove that such matters are of major public concern? She neither intends to use nor could she use her powers. They are a fig-leaf and a disgrace to the Bill, which in some aspects of competition policy does have meaning and may have some effect. The right hon. Lady might as well have excluded clause 13 from the Bill entirely in relation to the investigation of prices. The clause is purposeless and otiose.
We in Opposition approach these matters with more pragmatism than the right hon. Lady and her colleagues. We would like to see her, even now, repent, recant and recognise that in the lifetime of this Government she may very well regret having divested herself of the power to do anything about price increases that are recognised by the public as being unjustified.
We take no pleasure in demonstrating to the right hon. Lady that she has been wrong. We shall take no pleasure if the Government find it necessary to come back to the House in the lifetime of this Parliament to take up again the powers that they so wantonly threw away. We shall take no pleasure in indicating that the difficulties are difficulties of their own creation.
Even now there is a chance for the right hon. Lady to recognise that she could retain the power to stop unjustified price increases. She should not stand on the sidelines and pin the blame upon those in industry and commerce who are not acting in the public interest. The Government—and she as Minister for Consumer Affairs—have a responsibility to protect the public interest, to prevent abuses of the market and to improve a situation—increasingly common as British industry becomes more concentrated—where the market is unable to operate to protect the consumer.
289 These matters will not always fall within the scrutiny of the Director General of Fair Trading under the competition provisions of the Bill. There will be times when it will not be possible to demonstrate beyond peradventure that there has been an abuse of the market even when it is quite clear, after objective investigation, against the broad criteria of the public interest, that a particular increase is unjustified. It will not be possible in those circumstances to intervene to stop such an increase.
The right hon. Lady has been doctrinaire in her approach to her responsibilities. It is a matter of profound regret to all of us that the Conservative Party is departing from its traditional approach to the management of the economy and from the recognition that one cannot, by laying down a series of carefully constructed rules and by establishing a price code similar to that operated by the last Conservative Government, catch all situations within the net.
The right hon. Lady may now dissent from the policy of the previous Conservative Government, but she was a member of the Conservative Party in this House at the time and supported that Government. We were able to modify the approach to price control in a way that I believe was wholly sensible and well adapted to the differing conditions of the various parts of British industry which need to be kept under scrutiny.
The right hon. Lady has abandoned the price code and now she abandons even the possibility of intervention. New clause 3 is not perfectly constructed. I could make some improvements to it if f were given the opportunity to introduce them. The purpose of new clause 3 is clear. It seeks to arm the Government for the battle against inflation and against unjustifiable price increases. That is a battle that the country expects the Government to join. Unless the Government win that battle, they will be consigned to a very long period in Opposition. I would welcome that but not the cost that would have to be paid.
§ Mrs. Sally Oppenheim
Anyone who had come into the House during the last two and a half hours might have been forgiven for being surprised at learning that the House had been debating new clause 3 and amendments Nos. 23, 33, 290 34, 40, 48, 49 and 50. Until we heard the speech of the hon. Member for Caithness and Sutherland (Mr. Maclennan), I do not recall anybody referring to any of those amendments. As far as I can remember, they were not even propounded by the right hon. Member for Lanarkshire, North (Mr. Smith).
§ Mrs. Oppenheim
All right, so they were propounded.
Some Labour Members have expressed concern about the effects of the present levels of inflation on the most vulnerable people in our community. I do not question the sincerity of those hon. Members. I share their concern. The levels of inflation that we have experienced in this country over the last five and a half years have had a devastating effect socially and economically. However, they did not start nine months ago. They started over five and a half years ago, and nobody is more aware than myself and the Government that this great evil must be overcome. That is why we are sticking relentlessly to realistic economic policies, however unpopular they may be in the short term. We are determined to overcome this evil.
Whereas I accept the sincerity of the concern expressed by some hon. Members in this debate, I do not accept the hypocrisy of some other hon. Members who have criticised this Government for the present levels of inflation as if inflation had never happened before. The previous Labour Government presided over rates of inflation as high as—or higher than—present levels, not for a mere seven or eight months but for nearly two years during their period in office.
The right hon. Member for Lanarkshire, North criticised the fact that inflation has risen during each of the seven months since the general election, but it went down last month. Under his Government it went up—with one exception—not for the first seven months but for the first 23 months when his Government were in office. Anyone who had walked in in the middle of this debate could also have been forgiven for thinking that he had arrived at some kind of audition for a second-rate repertory theatre company. Hon. Members who have taken part have been long on drama and short on credibility.
§ Mrs. Oppenheim
There were rate increases and rent increases. Interest rates rose. None of these factors could be controlled by the Price Commission. Where were Labour Members when all these increases were taking place when the Labour Government were in office?
The right hon. Member for Lanarkshire, North talked about school meal increases. Where was he when school meal charges increased by over 100 per cent. under the Labour Government? He forgot to mention that the recent increase introduced by the Conservative Government was planned and approved by the Labour Government before they left office.
§ Mr. Robert Hughes
In the early part of the right hon. Lady's speech she said that prices increased for the first 23 months of the life of the previous Labour Government and that it is unfair for the Opposition to criticise the Conservative Government as they have been in office for only seven months. That is fair enough, but how long are prices to continue to rise? Is the right hon. Lady able to tell us when they will stop rising and begin to go down?
§ Mrs. Oppenheim
I shall let the hon. Gentleman know when they will stop rising. I wish that the answer were "In a very few months".
Labour Members continue to shed their crocodile tears. Where were their tears when prices rose by 110 per cent. when the Labour Government were in office? Where were their tears about the Common Market when food prices increased by over 120 per cent. during the term of office of the Labour Government?
What was the Labour Government's solution for the inflation that they let loose upon Britain? It was to introduce a succession of so-called prices policies, all of which were introduced with loud trumpetings to the effect "Here at last is the answer to price inflation." All their policies had three things in common— 292 first, they were designed specifically to delude and deceive consumers; secondly, they were expensive; and, thirdly, they failed. They all failed to do anything more than marginally halt the rising rate of inflation in the short term.
I shall remind the House of some of the Labour Government's policies. They started with food subsidies and associated price controls. The subsidies and controls cost nearly £3,000 million, most of which went to the better off. They were phased out when the money and the credit ran out, which is what I said would happen all along. At their very peak, and for a short period only, they restrained the retail price index by about 1½ per cent.
§ Mrs. Oppenheim
No. We moved on to Shirley's shopping basket. The basket was one-third empty a year after she had filled it. That was followed by the selective price check scheme, which cost £1½ million. It did not cause even a hiccup in the retail price index. The scheme depended on some lines in some shops. For example, any line in biscuits might be held for a specific period. When the shopper checked out at the supermarket, he or she asked the checkout girl "Is it digestive biscuits or the custard creams that are in the scheme?" There was no other way of knowing which line was being held. As I have said, the scheme cost £1½million.
Those schemes and policies were followed by the Price Commission Act 1977, to which I shall refer in greater detail. Meanwhile, behind the cruelly misleading facade of the so-called prices policy, the Government were stoking the fires of inflation through their economic policies and their spending and borrowing until the IMF stopped them. Fortunately, the fund stopped their borrowing and their increasing of the money supply. That left us with unpaid bills to pick up and a rising rate of inflation. Those were inevitably the consequences of the Labour Government's disastrous policies. They left us, too, with the appalling economic inheritance with which we are now grappling.
Now those who were responsible for those disastrous policies, the right hon. Member for Lanarkshire, North and the hon. Member for Norwood (Mr. Fraser) 293 were members of the Labour Government. Those responsible for those disastrous policies are presuming to tell us what to do through the new clause and the amendments. They want us to perpetuate the failed policies that they pursued. By introducing new clause 3 they want us to go even further. We do not need any lessons from them.
§ Mts. Oppenheim
The Labour Party has instituted a commission of inquiry. It is sitting to decide why the Labour Government lost the general election. I shall tell Labour Members why they lost the election. The answer lies in their failed prices policies. We do not want any more of their controls at work.
§ Mr. Robert Hughes
On a point of order, Mr. Deputy Speaker. The right hon. Lady began her speech by criticising all occupants of the Chair during the debate for allowing speeches that she said were not in order and had nothing to do with the amendments and the new clause. Is it right that she should introduce a matter that plainly has nothing to do with the Price Commission?
§ Mr. Deputy Speaker
Hon. Members have been going wide of the amendments and new clause during the debate. That may be allowed to happen as long as they return to the subject after a brief spell in the outlying area. The Chair does not wish to intervene. This is probably one of the most important series of amendments that the Opposition are advancing. The right hon. Lady is seeking to answer some of the arguments that were advanced.
§ Mrs. Oppenheim
We are rejecting Labour's price controls and the Price Commission, which failed and which were damaging, futile and extremely expensive. Such price controls do not work and cannot work. At best, they create short-term illusions. The reality is all the harsher when it inevitably comes through. At worst, they can do great harm.
There are some Labour Members who sincerely believe that price controls will work. There are not many of them any 294 more. However, I say to those who still have that belief that if prices are frozen at a time of rising costs for producers, either the goods will not be produced or the producer will go out of business. The consequence will be less choice for consumers, fewer jobs and ultimately higher prices. If prices are frozen at a time when goods are in short supply, that will lead only to goods disappearing from the shelves.
§ Mr. John Smith
The right hon. Lady is giving us a lecture about supply and demand. Will she tell us how the Government are assisting the fight against rising prices by adding 10 per cent. on top of the inflation rate to gas prices? That has nothing to do with the previous Labour Government. It has nothing to do with supply and demand. It is a deliberate Government decision to increase prices. What has that to do with the fight against inflation?
§ Mrs. Oppenheim
I shall be coming to that shortly.
New clause 3 provides more draconian powers by far than those that exist in the Price Commission Act 1977. The order-making power is so wide that it is difficult to envisage the finite effects of the new clause. As the Americans would say in the vernacular, the powers go out of sight.
The new clause extends far beyond the items covered in the Price Commission Act. It is not clear whether the powers would have to be used following an investigation. It is likely that they could be used without any investigation. No time limits are sought for the period of control. No limit is set over what could be controlled, nor over the extent of the controls. It represents a wider power of delegated legislation than anything hitherto introduced. Even if the principle behind the new clause were not unacceptable, the extent of its powers would make its acceptance impossible.
Under the new clause, the Secretary of 295 State could make orders more onerous than those recommended by the Director General. Responsibility for wielding such powers would be in the hands of one man and not a commission. They would be vested in one man who would not even have staff to carry out the task. It is clearly a preposterous proposal.
There are price control powers linked to the Bill in relation to the adverse effects findings following a Monopolies and Mergers Commission investigation of an uncompetitive practice. That is what the Retail Consortium was complaining about. Those circumstances are already provided for in fair trading legislation. The power proposed in the new clause would serve no more useful purpose than the complex and futile price controls of the Labour Government. It would do even more harm as the powers that it proposes are even more sweeping.
The amendments that the Opposition have tabled represent an attempt to preserve the Commission together with the prices legislation under which it has been operating. Is that any sort of answer to inflation? As we have shown repeatedly, and as the former Secretary of State for Prices and Consumer Protection acknowledges, that policy had a minuscule effect on the retail price index. It intervened in fewer than 1 per cent. of the cases prenotified, and in the overwhelming majority of those interventions the full price increase was granted either at the beginning or during the early stages of the investigation.
Is that really the institution that the right hon. Member for Lanarkshire, North has described as important to containing inflation? Are Opposition Members seriously claiming that such an institution has any relevant part to play in containing inflation? Do they really believe that it merited the expenditure of £7½ mllion per year?
It is true that that institution produced one or two interesting reports in areas of limited competition as a result of action taken. The action that could be taken on uncompetitive practices by the Office of Fair Trading and the Monopolies and Mergers Commission under the Bill would be pursued in far greater depth than was possible under the Price Commission. As a result of the Bill, the powers will be there to act in those cases. 296 In any number of cases where the Price Commission reported distortions of competition, there were no powers to do anything about it. The previous Secretary of State for Prices and Consumer Protection referred only one such case to the Monopolies and Mergers Commission. We have replaced the only useful role of the Price Commission with a stronger and more comprehensive power to deal with anti-competitive practices.
During the course of the debate, a number of Opposition Members have postulated—as they have done before—that prenotification was a deterrent and that companies were afraid to prenotify price increases because they were afraid of an investigation. As a number of hon. Members have acknowledged, it is impossible to measure exactly what happened and the exact effect of prenotification. However, they have levelled the charge that when we abolished prenotification we opened the floodgates for price increases.
There are two yardsticks that give a clear idea of what happened. They do not tell the whole story, but they tell a great deal. I am speaking of the input and output indices. Over the past 12 months, the raw material price index has risen by nearly 26 per cent. Over the six months following the abolition of prenotification and price controls, output prices have risen at a rate of about 14 per cent., barely half the level of raw material price increases. What do we find over that period when the floodgates were supposed to be opened? To a great extent manufacturers have been absorbing these increases without passing them on in increased prices. They have been doing so without the help of prenotification or price controls.
In a similar period when there was prenotification and price controls—the year to the end of November 1977—raw material prices rose by 1.6 per cent. only, but six months later output prices were rising by almost eight times as much. I submit that that evidence shows that prenotification has no effect on the level of increases in manufacturers' prices but that competition does. It was competitive pressures that forced manufacturers to keep down the level of their price increases to almost half of that of the raw material increases. They are not the only factors in cost, but I am speaking of 297 manufacturers' prices only because in 1978 the previous Labour Government abolished across-the-board profit margin controls for distributors.
A number of hon. Members, especially the right hon. Member for Lanarkshire, North, have asked questions about energy prices. The right hon. Gentleman and other hon. Members spoke about gas prices. I note the right hon. Gentleman's remarks.
Specific questions about specific details of the gas price proposal, to which I think he was referring, are not for me but for the Secretary of State for Energy."—[Official Report, 14 March 1977; Vol. 928, c. 3.]
§ Mrs. Oppenheim
That is the reaction for which I wished. Those were not my words but the words of the right hon. Member for Birmingham, Spark brook (Mr. Hattersley), during Question Time on 14 March 1977, when he was asked about the previous Government's gas price levy. Unlike the right hon. Gentleman, I am prepared to respond.
Of course, the proposed increases in gas prices are large. Nobody likes increasing prices, especially in an area of family expenditure that is already sensitive. I emphasise that the increases are being phased in two stages this year and, subsequently, over the next two years.
If we are to have a responsible, fair and rational strategy for energy conservation—we believe that it is both essential and overdue—we must recognise that to continue the current highly uneconomic pricing of gas could lead only to eventual shortages, rationing and higher prices that would be worse, in the end, for consumers.
We are burning our gas resources dangerously fast. When they are gone, the new gas that we shall need from the North Sea will cost ye or six times more than the present gas. It would be irresponsible to consumers to allow the position to continue.
What the Government are doing is slowing down the rate at which prices would rise in a free market. If that market were entirely free, gas prices would be moving higher and faster because oil prices, to which they are linked, have risen by 100 per cent. over the past 12 months.
§ Mrs. Oppenheim
No, I will not give way. I am answering a matter raised by the right hon. Member for Lanarkshire, North. Hon. Members are right to express concern about the effects of the increases on the poor. I assure the House that urgent consideration is being given lo possible ways of helping the poorest consumers to meet rising energy costs.
I can understand the concern among hon. Members on both sides of the House about the use of the extra profits that would be made by the British Gas Corporation. They wish to know that the profits would be used for the common good. Much of the extra profits would be needed for new, more expensive, supplies of gas. The rest would go to the Exchequer to reduce the public sector borrowing requirement. It is the size of the public sector borrowing requirement that determines the amount of future Government expenditure, the rates of inflation and the interest rates that Opposition Members complain about so bitterly. We shall be taking part of the profits into the Exchequer to help everyone, and part will go for investment in the Gas Corporation.
If we are to defeat inflation, we can do so only by facing reality and not by dodging difficult decisions or by attempting to disguise our energy problems. They have existed for a long time and were persistently ignored by the previous Government.
§ Mr. Deputy Speaker
Order. If the right hon. Lady does not wish to give way, the hon. Gentleman must resume his seat
§ Mrs. Oppenheim
I wish to discuss electricity prices because Opposition hon. Members mentioned them. They must have forgotten that electricity prices rose, on average, by 33 per cent. per year under the previous Government. Why are they 299 now beating their breasts about electricity prices? They have the same double standards about electricity prices as they have about anything else.
We had confirmation of the view that we were witnessing some sort of audition in the theatre. We had a deus ex machina. We had the right hon. Member for Swansea, West (Mr. Williams) dashing in to make an accusation about a letter that I was supposed to have written—which I hope he will produce—and then dashing out again, never to appear in the debate again.
We are also discussing Opposition amendment No. 23—
§ Mr. Maclennan
Perhaps the right hon. Lady will go back to gas prices. Does her statement that the extra money will be used to reduce the public sector borrowing requirement mean that she is categorically rejecting the proposals that have been put to her by the chairmen of the nationalised industries' consumer councils that some of that money should be used for the benefit of poorer consumers? She has specifically not given that impression.
§ Mrs. Oppenheim
Had the hon. Gentleman listened, he would have heard me say that part of the money will go back to the Exchequer to reduce the public sector borrowing requirement. He would also have heard me say that urgent consideration is being given to what help can be provided for the poorest consumers. That must come out of public funds. Therefore, I would have thought that the answer to that question was self-evident.
During the debate, Labour Members have tried to show that they have some kind of monopoly of concern about prices and that they have the solutions. They have neither. We are just as concerned about prices as they are, but our approach differs from theirs in three fundamental ways. It is honest, realistic and likely to succeed. We believe in tackling the root causes of inflation, in preventing it from happening. We do not believe in trying to fiddle and hide temporarily the short-term effects of inflation as the previous Government did over and over again.
In rejecting the new clause and amendments, we are rejecting the damaging, ex- 300 pensive and futile policies of the previous Government which proved so disastrous. Of course, we do not claim, and have never claimed, that competition alone can overcome inflation. What we do claim, and what I have said repeatedly, is that the strengthening of competition, of which this Bill is the first step, together with the realistic economic policies that we are pursuing, will provide the most effective long-term solution and will benefit consumers most in the end.
Therefore, not only do I reject the new clause and the amendments but I deplore the motivation behind them, which, once again, is to try to mislead the people into thinking that these solutions can work. They never have, they never will, and they never can. I urge the House to reject them.
§ Mr. John Fraser
The Minister has treated us to a history lesson. She went through the period of the Labour Government and made a good speech. It ought to have been a good speech, because she has rehearsed it so often. We hear very little else when she answers questions or when she makes contributions in Committee.
However, when we try to get some indication from the right hon. Lady of her policy as Minister for Consumer Affairs, we get nothing. That is perhaps not entirely true, because what we had from her today was a passionate defence of an increase in the price of gas by 10 per cent. above the rate of inflation. But that was the only bit of light that was let into the Government's policy against inflation.
The right hon. Lady might have told us whether she had consultations with the chairmen of the energy consumer councils before the gas price increase was announced. Perhaps she can tell us whether she was consulted by the Secretary of State for Energy about the gas and electricity price increases. She might have told us whether she made any contribution to the debate inside the Government about these matters, and whether she urged the adoption of a rebate scheme similar to the one which the Conservative Administration has only just abolished. We had no indication on those matters at all. As usual, we had a tirade from the right hon. Lady but no indication whatever of the way in which she proposes to proceed in the future with regard to the battle against inflation.
301 I was rather complimented by the criticism of new clause 3, which I drafted. I think that it has done me some good. The amendments offer a choice. The right hon. Lady can have new clause 3, which toughens up the absolute sham of clause 13, or she can have the provisions relating to the Price Commission that are at present on the statute book.
The right hon. Lady is fond of criticising the Price Commission and is fond of saying that price control by itself will not conquer inflation. I agree that the causes of inflation are complex and difficult to contend with. It does a Government no credit at all to try to make light of them. We never tried to make light of them. But the existence of price control powers and a Price Commission at least shows that the Government are setting out in the right direction and have good intentions which they can pass on to others who have an effect on inflation as well.
§ Mr. Fraser
The hon. Gentleman says "cosmetic", but the reports of the Price Commission were not cosmetic. Time and time again, the Price Commission investigated areas in which a firm, whether a private firm or a nationalised industry, had a dominant position in the market or where there was a group of companies that had a complex monopoly. Nearly all of the Price Commission's investigations took place in that respect. It investigated the price of tea, where three or four firms control the market. It investigated the price of bread, where two firms control the market. The right hon. Lady murdered that inquiry within days of coming into office. There were many other cases as well where firms had a dominant position in the market and where the Price Commission had a clear effect.
It had the second effect of making every firm responsible for a price increase publicly accountable for that increase. Sometimes the increases were justifiable, sometimes they were unavoidable, but at least there was public confidence that a body was able to look after consumers, whether in respect of private or public price increases. That confidence has been removed. The Price Commission also had the advantage that it could investigate any price increase at all. It did not have to be prenotified.
302 The right hon. Lady failed to answer the question that was ably put by my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan). What happens if she discovers an unjustifiable price increase? It used to happen with the Price Commission, not only in respect of large matters but also in respect of small matters, where people complained to their trading standards officer or to a consumer organisation and where details of the price increase were forwarded to the Price Commission. Very often, the mere fact that the Price Commission was prepared to start making inquiries led to that price increase being withdrawn. That public accountability and that ability to investigate have disappeared entirely. The right hon. Lady, who is now busy chatting as she usually does during these debates, knows perfectly well that she has no power at all to deal with these matters once the Price Commission or the improvement to clause 13 has disappeared.
I do not claim, and neither did the Labour Government, that the Price Commission and price control powers would by themselves cure inflation. However, they did have the effect of enabling bargains to be entered into with others, be they unions, firms or suppliers, who also had an influence on prices. Therefore, we do not claim that price control by itself will cure inflation. What we do claim is that by abolishing the Price Commission and price control, and by abandoning price investigations that were taking place when the right hon. Lady took office, she will give the green light to price increases, not only by large firms but by small firms. She did it by discarding the recommendation for restraint on the price of biscuits. I do not accuse her of any connections with Sir Hector Laing and the contributions—
§ Mr. Fraser
I leave that to my hon. Friend the Member for Fife, Central (Mr. Hamilton). The right hon. Lady has given the green light. There was also the question of the price of bread, which is in the hands of a monopoly. Two firms control the market. She abandoned any kind of control there. That began to indicate that firms could go ahead and increase prices where they wanted. The right hon. Lady then abandoned noti- 303 fication and finally discharged altogether the activities of the Price Commission. So she gave the green light to these matters.
Secondly, the right hon. Lady created an atmosphere in which price increases were acceptable because nothing could be done about them. I believe that the then Tory Opposition created an inflationary expectation because of their attitude to all that the Labour Government tried to do about rising prices.
We can add a further accusation against the right hon. Lady and the Government. They have not only given the green light to price increases and abandoned any form of control, but, as has been clearly demonstrated in nearly every speech by my right hon. and hon. Friends, they have created inflation. What else was the increase in value added tax but the largest addition to the retail price index that we have seen for some time?
Indeed, the Government were able, in one month, to increase the rate of price inflation by a figure that was reached in six months under a Labour Government, when we had price inflation down to about 8 or 9 per cent. In one month the Government were able to bring about that lift in the retail price index by increasing VAT. I do not want to rehearse further all the promises made to the public during the last election and the deceptions used.
The increase in mortgage interest rate is still in the pipeline and its effect has not yet been seen in the retail price index. We have not yet seen the effects of rate increases or of increased interest charges. Although these are still to come, the rate of price inflation is 17.2 per cent.—almost 75 per cent. higher than the rate of inflation that the Government inherited when they came into office in May last year. The Bill takes the brakes off completely.
My hon. Friend the Member for Caithness and Sutherland described clause 13 as a fig-leaf. It is certainly that. It is constructed in such a way that, unless it is amended, it will be almost impossible, if the Minister wants to do so, to refer
§ a price increase. We all understand that there is no power to do anything about it if the Minister discovers that a price is too high after investigation. But how will she select a price? She cannot just refer a price under clause 13. It has to be a price that causes concern. But that is not enough, because it has to be a price that involves "major public concern". That delimits the Minister's powers. However, the Minister does not leave it there because she then adds that it must be "of general economic importance". As if that were not enough, the right hon. Lady then says that consumers have to be "significantly affected". The Minister has so drawn the provisions of this fig-leaf that she will find it almost impossible to refer anything under it.
§ What concerns us most is that in response to a long debate, in which concern has been expressed from many quarters about price increases and in which particular price increases have been drawn to the Minister's attention, and the general trend of inflation has been debated before her, no strategy, plan or detailed outline has been given of the way the Government propose to deal with these matters.
§ The Opposition have seen adequately proved that the Government not only have no strategy on inflation but most of their policies have so far led to increased inflation. The Government have embarked upon inflationary policies which will consume the country and the Government.
§ Lord Byron said on the death of Castlereagh that that gentleman cut his own throat but not before he cut his country's throat. What Lord Byron said about Castlereagh on that occasion will be true in a few years' time of the Conservative Party. The Conservatives have damaged the country, but in due course the country will take its revenge on that party for deceiving the electorate at the last election.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 150, Noes 196.307
|Division No.141]||AYES||[8.14 p.m.|
|Abse, Leo||Armstrong, Rt Hon Ernest||Bennett, Andrew (Stockport N)|
|Allaun, Frank||Ashton, Joe||Booth, Rt Hon Albert|
|Anderson, Donald||Atkinson, Norman (H'gey, Tott'ham)||Boothroyd, Miss Betty|
|Archer, Rt Hon Peter||Bagier, Gordon A. T.||Bray, Dr Jeremy|
|Brown, Hugh D. (Provan)||Fraser, John (Lambeth, Norwood)||Mulley, Rt Hon Frederick|
|Brown, Robert C. (Newcastle W)||Gilbert, Rt Hon Dr John||Newens, Stanley|
|Brown, Ronald W. (Hackney S)||Gourlay, Harry||Oakes, Rt Hon Gordon|
|Brown, Ron (Edinburgh, Leith)||Grant, George (Morpeth)||Orme, Rt Hon Stanley|
|Buchan, Norman||Hamilton, W. W. (Central Fife)||Palmer, Arthur|
|Callaghan, Jim (Middleton & P)||Hardy, Peter||Park, George|
|Campbell-Savours, Dale||Haynes, Frank||Parry, Robert|
|Canavan, Dennis||Heffer, Eric S.||Powell, Raymond (Ogmore)|
|Carmichael, Neil||Home Robertson, John||prescott, John|
|Carter-Jones, Lewis||Hooley, Frank||Race, Reg|
|Cocks, Rt Hon Michael (Bristol S)||Hudson Davies, Gwilym Ednyfed||Richardson, Jo|
|Cohen, Stanley||Hughes, Mark (Durham)||Roberts, Albert (Normanton)|
|Coleman, Donald||Hughes, Robert (Aberdeen North)||Roberts, Ernest (Hackney North)|
|Concannon, Rt Hon J. D.||Hughes, Roy (Newport)||Rooker, J.W.|
|Conlan, Bernard||Johnson, James (Hull West)||Ross, Ernest (Dundee West)|
|Cook, Robin F.||Johnson, Walter (Derby South)||Sheerman, Barry|
|Cowans, Harry||Jones, Rt Hon Alec (Rhondda)||Shore, Rt Hon Peter (Step and Pop)|
|Craigen, J. M. (Glasgow, Maryhill)||Jones, Dan (Burnley)||Smith, Rt Hon J. (North Lanarkshire)|
|Cryer, Bob||Kilroy-Silk, Robert||Snape, Peter|
|Cunliffe, Lawrence||Lambie, David||Soley, Clive|
|Dalyell, Tam||Lamond, James||Spearing, Nigel|
|Davidson, Arthur||Leadbitter, Ted||Spriggs, Leslie|
|Davis, Clinton (Hackney Central)||Leighton, Ronald||Stewart, Rt Hon Donald (W Isles)|
|Davis, Terry (B'rm'ham, Stechford)||Lestor, Miss Joan (Eton & Slough)||Stoddart, David|
|Dean, Joseph (Leeds West)||Lewis, Arthur (Newham North West)||Stott, Roger|
|Dempsey, James||Lewis, Ron (Carlisle)||Strang, Gavin|
|Dewar, Donald||Litherland, Robert||Taylor, Mrs Ann (Bolton West)|
|Dixon, Donald||Lyon, Alexander (York)||Thorne, Stan (Preston South)|
|Dobson, Frank||Lyons, Edward (Bradford West)||Tinn, James|
|Dormand, Jack||McDonald, Dr Oonagh||Torney, Tom|
|Douglas, Dick||McElhone, Frank||Wainwright, Edwin (Dearne Valley)|
|Dubs, Alfred||McGuire, Michael (Ince)||Watkins, David|
|Dunn, James A. (Liverpool, Kirkdale)||McKay, Allen (Penistone)||Weetch, Ken|
|Dunwoody, Mrs Gwyneth||McKelvey, William||Welsh, Michael|
|Eadie, Alex||MacKenzie, Rt Hon Gregor||White, Frank R. (Bury & Radcliffe)|
|Eastham, Ken||McWilliam, John||Wigley, Dafydd|
|Edwards, Robert (Wolv SE)||Marks, Kenneth||Wilson, Gordon (Dundee East)|
|Ellis, Raymond (NE Derbyshire)||Marshall, David (Gl'sgow.Shettles'n)||Wilson, William (Coventry SE)|
|Evans, Ioan (Aberdare)||Marshall, Dr Edmund (Goole)||Winnick, David|
|Evans, John (Newton)||Marshall, Jim (Leicester South)||Woodall, Alec|
|Field, Frank||Mason, Rt Hon Roy||Woolmer, Kenneth|
|Fitch, Alan||Maynard, Miss Joan||Wright, Sheila|
|Flannery, Martin||Mikardo, Ian||Young, David (Bolton East)|
|Fletcher, Ted (Darlington)||Millan, Rt Hon Bruce|
|Foot, Rt Hon Michael||Mitchell, R. C. (Soton, Itchen)||TELLERS FOR THE AYES:|
|Ford, Ben||Morris, Rt Hon Charles (Openshaw)||Mr. Walter Harrison and|
|Forrester, John||Morton, George||Mr. James Hamilton.|
|Aitken, Jonathan||Carlisle, Rt Hon Mark (Runcorn)||Hannam, John|
|Alexander, Richard||Chapman, Sydney||Haselhurst, Alan|
|Alton, David||Churchill, W. S.||Havers, Rt Hon Sir Michael|
|Aspinwall, Jack||Clark, Hon Alan (Plymouth, Sutton)||Hawkins, Paul|
|Atkins, Robert (Preston North)||Clark, Sir William (Croydon South)||Hawksley, Warren|
|Atkinson, David (B'mouth, East)||Clarke, Kenneth (Rushcliffe)||Hayhoe, Barney|
|Banks, Robert||Cockeram, Eric||Heddle, John|
|Beaumont-Dark, Anthony||Colvin, Michael||Henderson, Barry|
|Beith, A. J.||Cranborne, Viscount||Hicks, Robert|
|Bendall, Vivian||Critchley, Julian||Hill, James|
|Benyon, Thomas (Abingdon)||Crouch, David||Hogg, Hon Douglas (Grantham)|
|Benyon, W. (Buckingham)||Dean, Paul (North Somerset)||Hordern, Peter|
|Berry, Hon Anthony||Dover, Denshore||Howells, Geraint|
|Best, Keith||Dunn, Robert (Dartford)||Hunt, David (Wirral)|
|Bevan, David Gilroy||Dykes, Hugh||Hunt, John (Ravensbourne)|
|Biggs-Davison, John||Eden, Rt Hon Sir John||Johnson Smith, Geoffrey|
|Blackburn, John||Fairgrieve, Russell||Jopling, Rt Hon Michael|
|Bonsor, Sir Nicholas||Faith, Mrs Sheila||Kaberry, Sir Donald|
|Boscawen, Hon Robert||Farr, John||Kellett-Bowman, Mrs Elaine|
|Boyson, Dr Rhodes||Fenner, Mrs Peggy||Kershaw, Anthony|
|Braine, Sir Bernard||Finsberg, Geoffrey||Knight, Mrs Jill|
|Bright, Graham||Fletcher, Alexander (Edinburgh N)||Lang, Ian|
|Brinton, Tim||Fookes, Miss Janet||Langford-Holt, Sir John|
|Brittan, Leon||Fraser, Peter (South Angus)||Latham, Michael|
|Brown, Michael (Brigg & Sc'thorpe)||Fry, Peter||Lawrence, Ivan|
|Browne, John (Winchester)||Garel-Jones, Tristan||Lawson, Nigel|
|Bruce-Gardyne, John||Glyn, Dr Alan||Lee, John|
|Buck, Antony||Goodhew, Victor||Le Marchant, Spencer|
|Budgen, Nick||Gorst, John||Lennox-Boyd, Hon Mark|
|Burden, F. A.||Gow, Ian||Lester, Jim (Beeston)|
|Butcher, John||Gower, Sir Raymond||Loveridge, John|
|Butler, Hen Adam||Gray, Hamish||Lyell, Nicholas|
|Cadbury, Jocelyn||Griffiths, Eldon (Bury St Edmunds)||Macfarlane, Neil|
|Carlisle, John (Luton West)||Griffiths, Peter (Portsmouth N)||MacGregor, John|
|Carlisle, Kenneth (Lincoln)||Hamilton, Michael (Salisbury)||MacKay, John (Argyll)|
|McOuarrie, Albert||Pink, R. Bonner||Stevens, Martin|
|Major, John||Pollock, Alexander||Stradling Thomas, J.|
|Mather, Carol||Porter, George||Tebbit, Norman|
|Mawby, Ray||Powell, Rt Hon J. Enoch (S Down)||Temple-Morris, Peter|
|Mawhinney, Dr Brian||Prentice, Rt Hon Reg||Thatcher, Rt Hon Mrs Margaret|
|Maxwell-Hyslop, Robin||Price, David (Eastleigh)||Thompson, Donald|
|Mellor, David||Proctor, K. Harvey||Thorne, Neil (Ilford South)|
|Meyer, Sir Anthony||Raison, Timothy||Thornton, Malcolm|
|Miller, Hal (Bromsgrove & Redditch)||Rathbone, Tim||Townend, John (Bridlington)|
|Mills, Iain (Meriden)||Rhodes James, Robert||Trippier, David|
|Mills, Peter (West Devon)||Rifkind, Malcolm||Viggers, Peter|
|Miscampbell, Norman||Roberts, Michael (Cardiff NW)||Waddington, David|
|Moate, Roger||Ross, Wm. (Londonderry)||Wainwright, Richard (Colne Valley)|
|Moore, John||Rost, Peter||Wakeham, John|
|Morrison, Hon Charles (Devizes)||Sainsbury, Hon Timothy||Walker, Bill (Perth & E Perthshire)|
|Morrison, Hon Peter (City of Chester)||St. John-Stevas, Rt Hon Norman||Waller, Gary|
|Murphy, Christopher||Shelton, William (Streatham)||Ward, John|
|Myles, David||Shepherd, Colin (Hereford)||Warren, Kenneth|
|Neale, Gerrard||Shepherd, Richard (Aldridge-Br'hills)||Watson, John|
|Needham, Richard||Silvester, Fred||Wells, Bowen (Hert'rd & Stev'nage)|
|Nelson, Anthony||Sims, Roger||Wickenden, Keith|
|Newton, Tony||Skeet, T. H. H.||Wiggin, Jerry|
|Onslow, Cranley||Smith, Cyril (Rochdale)||Wilkinson, John|
|Oppenheim, Rt Hon Mrs Sally||Smith, Dudley (War. and Leam'ton)||Winterton, Nicholas|
|Osborn, John||Speed, Keith||Wolfson, Mark|
|Page, John (Harrow West)||Speller, Tony||Young, Sir George (Acton)|
|Page, Richard (SW Hertfordshire)||Spence, John||Younger, Rt Hon George|
|Parris, Matthew||Spicer, Michael (S Worcestershire)|
|Patten, Christopher (Bath)||Sproat, Iain||TELLERS FOR THE NOES:|
|Patten, John (Oxford)||Stanbrook, Ivor||Mr. John Cope and|
|Penhaligon, David||Stanley, John||Lord James Douglas-Hamilton.|
|Percival, Sir Ian||Steen, Anthony|
§ Question accordingly negatived.