§ 3.48 p.m.
§ LORD JACQUESMy Lords, with the permission of the House I will repeat a Statement made by my right honourable friend the Secretary of State for Prices and Consumer Protection. The Statement is as follows:
"As the House is aware, I have been concerned since my appointment to take action to reduce the rate of inflation.
"To this end, I have introduced subsidies on certain foodstuffs. The cuts that have been made in retailers' gross margin reference levels (which will in practice mean considerably greater falls in their net profits) is exerting considerable pressure on prices, both of food and other household goods.
"The Prices Bill, which is currently before the House, includes powers which would enable me to regulate the prices of food and other items which are of particular significance in the household budgets of those with low incomes. It will be necessary to use these powers in some areas—in particular setting maximum retail selling prices for subsidised foods. Beyond this obvious purpose, however, I have made it clear that I would prefer not to have to make widespread use of these statutory powers, provided that my objectives could be achieved by voluntary means.
"I have explored with the Retail Consortium and other representative bodies the possibility of achieving my objectives by building on such existing trade practices as lower than average margins on frequently purchased items, and special promotions, without radical change in the conditions under which they trade. Retailers with a
503 turnover of £250,000 or above who arc required to reduce their gross margin reference level by 10 per cent. will now concentrate that reduction on a list of basic items agreed between us. I am circulating this list in the OFFICIAL REPORT. I have also asked them to extend their reduction by concentrating promotional cuts as far as possible on this agreed list, and by further adjusting margins between these basic items and some other goods.
"The Retail Consortium, which represents a substantial majority of the retail trade, has agreed to recommend my proposition to its members. The voluntary groups have also put proposals to me designed to meet my objectives, and I am grateful for their initiative. The special position of the small trader was recognised in the exemption of those with a turnover of less than £250,000 from the 10 per cent. cut in the gross margin reference level, and so the scope for making reductions is less. But I have the assurance of bodies representing them that they will ask their members to make reductions on this list though they will not be able to include them all.
"It is only fair to add that it has been represented to me very strongly that the 10 per cent. cut, coupled with increasing costs, is biting very deeply into the net margins of retailers, to the extent that in some cases their net margins are already 25 per cent. below the reference level. This was the safety net for net margins which I had agreed with the Retail Consortium and which retailers are entitled to take into account in their response to the scheme. Nevertheless, it is agreed that the scheme should run until the end of March, 1975 (which is the currency of the powers in Clause 2 of the Prices Bill), subject to earlier review if special circumstances arise.
"I would like to pay tribute to the retail trade for their co-operation at a particularly difficult time. It does mean the sacrifice of some flexibility in their operations, and they understandably feel this to be commercially disadvantageous. Their response to my initiative is thus a measure of their concern to play a part in the battle against inflation. I have informed the 504 retail trade that, as long as this agreement is working satisfactorily, it will not be my intention to operate the powers of Clause 2 of the Prices Bill, except in relation to subsidised foodstuffs, since the objectives of this clause will have been met by the agreement instead.
"Food manufacturers have indicated their general support for this scheme. In the case of many manufactured foodstuffs, it is the manufacturers who largely determine the level and extent of promotional activity and they have undertaken, as far as possible, to concentrate this on basic items in the household budget. I am circulating this promotional list also in the OFFICIAL REPORT. I appreciate their co-operation.
"I believe this voluntary agreement will make a low budget shopping basket of basic goods more widely available. This should help in particular pensioners and other low-income families for whom inflation is an especially severe scourge."
My Lords, that is the end of the Statement. I should like to say that, as a pioneer and past Chairman of the Retail Consortium, it gives me great pleasure that they are able to speak on behalf of the retail trade and to come to this agreement with the Secretary of State.
§ Following is the list referred to: