§ The Question was as follows:
§ To ask Her Majesty's Government whether and, if so, to what extent, the Price Commission takes into account the cost of promotion when considering an application for a price increase on commodities or services.
§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)My Lords, the costs which the Price Commission can take into account are the allowable costs specified in paragraph 25 of the Price and Pay Code within the restrictions applying to total costs and profit margins. Promotion costs relating to bought-in services are not allowable. Where, however, promotion costs are incurred by an enterprise carrying out this function for itself, a part of the cost is allowable.
§ LORD HALEMy Lords, have any rules been laid down about what part of the cost, and is any notice taken of the economic situation? For example, so far as petrol is concerned, would any advice be given that on the whole it is not very wise to spend many millions on advertising petrol when we are running short of it and the Government are contemplating possibles measures for rationing? As to various commodities, is there a graduated scale, for example, for detergents—something for that which washes white, more for something that washes whiter and a more substantial percentage for the one that washes whitest?
§ LORD DRUMALBYNMy Lords, so far as promotion costs are concerned, I could perhaps best answer that question by example. An increase in the cost of 1500 a company's own sales force would be an allowable cost, subject to the 50 per cent. productivity deduction, but increased expenditure on advertising in newspapers or on television would not qualify, because this is a bought-in service. So far as the interpretation is concerned, this is a matter for the Price Commission.
§ BARONESS SUMMERSKILLMy Lords, can the Minister say whether, in considering the cost of introducing a proprietory drug, the promotional cost is taken into account and, if it is, what percentage of the cost is regarded as appropriate for promotion?
§ LORD DRUMALBYNMy Lords, this is rather a different question. I think my main Answer covers the point to some extent: if it was an entirely new product then there would be no comparison with the costs that have gone before. If it is an existing product then the rules would apply.
§ LORD HALEMy Lords, can the noble Lord say whether account has been taken of the possibility of giving advice to advertisers? Now that advertisers have adopted the system of having enforced warning notices on cigarette packets—though I am not sure whether I agree with censorship for advertising —could the noble Lord comment on whether we might have a little advice on Rowntree's chocolate to say that gambling is dangerous, or that there should be a notice on Benson & Hedges cigarettes to say, "Don't walk behind the bowler's arm: this offence is on the increase"?
§ LORD DRUMALBYNMy Lords, it is essentially a matter for the individual advertiser to decide, on commercial grounds, the appropriate level of costs. What we are dealing with in the Question is allowable costs for the purpose of price increases.
LORD DOUGLASS GP CLEVELANDMy Lords, can the Minister say whether trading stamps are an allowable cost in this connection?
§ LORD DRUMALBYNMy Lords, I am not aware that the cost of trading stamps has increased. I am not sure that the question arises.
§ BARONESS SUMMERSKILLMy Lords, may I ask the noble Lord whether 1501 he would look again at his earlier answer to me?—because there are so many more proprietary drugs coming on to the market that his answer is made irrelevant. You cannot compare the cost of a new drug with that of another drug; it is an entirely new drug.
§ LORD DRUMALBYNMy Lords, I think the new drug would be treated separately, because there would be nothing that had gone before with which to compare what was being spent on the promotion of the new drug. It would thus be outside the terms of reference of the Price Commission. If it is an old drug, then of course the rules apply.
§ LORD SLATERMy Lords, can the Minister justify the reason for the setting up of this Price Commission, in view of price increases that have taken place since it came into existence—and particularly with regard to baby foods?
§ LORD DRUMALBYNMy Lords, I am afraid I have not looked particularly into the cost of baby foods; but the whole purpose of the setting up of the Price Commission—it is stated as the first general principle—is to limit the extent to which prices may be increased on account of increased costs.
§ LORD WYNNE-JONESMy Lords, if I understood the noble Lord correctly, he said that he was not aware that the price of trading stamps had increased. May I ask him whether it is not true that the price of trading stamps is the price of the goods supplied against the trading stamps? If that is so, have not the trading stamps necessarily increased with the increase in prices?
§ LORD DRUMALBYNMy Lords, I think that is rather a complicated question. What we are dealing with here are the applications for permission to increase prices because of the increases in costs. What I was saying was that I was not aware that there had been an increase in the cost of trading stamps.