HL Deb 12 July 1977 vol 385 cc780-91

3.9 p.m.

Lord ORAM

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, that the House do again resolve itself into Committee.—(Lord Oram.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.

Clause 7 [Restrictions, undertakings and orders in consequence of reports on investigations]:

Lord MOTTISTONE moved Amendment No. 30:

Page 13, line 29, at end insert— ("() If a relevant person for whom an order has been made under subsection (5) above can satisfy the Commission that costs related to a product, which is the subject of the Order have risen substantially since the Order was made, the Order shall be revoked by the Secretary of State.")

The noble Lord said: This Amendment is designed to strengthen subsection (6) immediately above it, and your Lordships may well question why it requires strengthening. I regret to say that it is mainly due—and we shall take this perhaps in greater detail when we deal with Clause 9—to the fact that we are not satisfied that the safeguards in Clause 9 are good enough. Quite frankly, we are not satisfied with the attitude of the present Secretary of State to the whole problem, and I gave some tongue to that in the Second Reading debate. Both on Second Reading and in the Third Reading debate in another place many things were said by the present Secretary of State which led one to believe that his predilections might lie in a direction which was not sufficiently sympathetic to the problems that might occur to businesses and, indirectly, to the employees of those businesses.

Therefore, it is important that we should have sufficient strength in Clause 7 to ensure that in certain rather extreme circumstances, which are the circumstances of rising costs, and to the satisfaction of the Commission, there should be an obligation on the Secretary of State to revoke in the terms of subsection (6). It is for that reason that we have introduced this Amendment. Noble Lords may say that one Secretary of State does not make "a candle" or whatever it is. But it is a fact that since I have had the privilege of sitting in your Lordships' House there has been an increasing number of places in Acts of Parliament and Bills before us where the Secretary of State has been given the ultimate power to look after the correction of regulations. This goes on and on—it repeats itself.

I suggest that the basic cause of the trouble lies in the fact that we have too many regulations. We try to regulate our lives minute by minute, detail by detail. As I attempted to say on Second Reading, for many areas of industry the market forces provide a much better regulation of prices than any Secretary of State or Price Commission can ever do. So by this very Bill we are in danger of over-regulating ourselves. But the trouble is that when we correct over-regulating by feeding in: The Secretary of State shall have power to revoke",

we are up against the problem that by his very nature the Secretary of State is a political person. It does not matter whether he sits on this side of the House or the other side of the House, or possibly one day on the Liberal Benches; I do not see the bishops becoming involved in this! Whatever it may be, the Secretary of State is a political animal and therefore will be conditioned by factors which do not of themselves bear a particular relationship to the problem in hand, which in this case is price control. The Secretary of State will be conditioned by all sorts of political factors which I shall not bother to go into for various reasons, quite apart from the fact that this is the Committee stage of the Bill.

The net result is that having used the Secretary of State to curb the regulations, one then has to consider whether it is necessary to curb the Secretary of State. In this particular case—and I shall not repeat this because we said it many times yesterday, and many noble Peers said it on Second Reading—the question of the escalation of costs, particularly of raw materials from overseas, is so serious, because it conditions the whole of this Bill, that we believe that the Secretary of State should be curbed in this area. I beg to move.

Lord WALLACE of COSLANY

I am afraid that we cannot accept the Amendment. That, of course, is nothing unusual. The Amendment fails to provide any test by which to judge whether or not a cost increase is substantial. It would therefore open up the issue to judicial review. Firms will be free to make representations to the Secretary of State at any time, that an order to which they are subject should be varied or revoked. We have undertaken in another place that we shall consult the Commission about any representations which we receive. We recognise that firms may face large cost increases of which the Commission could take no account when making their recommendations. There will therefore be occasions when orders need to be revoked or varied.

The Amendment does not define what is meant by "substantial". This would inevitably be a cause of dispute between the parties. Nor does it make provision for varying rather than revoking an order, which may be more appropriate in some cases. We are providing safeguards which in any case will give some protection to firms after an investigation. There will not always be a need to vary or revoke orders when the safeguards apply. That is the Government's view. I would suggest that the noble Lord either withdraws his Amendment or considers some revision of it.

Lord HAWKE

I am very glad to hear the noble Lord say that the Secretary of State has the power to revoke these orders when costs rise. I am rather surprised that he should shelter behind the interpretation of the word "substantially" because that word might easily have been omitted and the Amendment would then read: … which is the subject of the order have risen since the order was made,…". This is a very important point—as I know to my cost—particularly as it affects textiles, where the raw material forms a substantial part of the cost of the finished article. In recent years the prices of wool, cotton and everything else have been rising phenomenally, and those who have been turning these materials into finished articles have suffered rather severely from the fact that they have been unable to obtain their margin on the increased costs.

Lord DRUMALBYN

I should like to ask a question about the technical effect. Representations may be made under Clause 7(3) as follows: the relevant person may make representations in writing to the Secretary of State as to what should be done in consequence of the recommendations included in the report". That is during: any period while provisions included in a report have the effect mentioned in subsection (1) of this section in relation to an increase or a price". But is he able to vary the recommendations of the Commission during the currency of the restriction, otherwise than if he does it in the last 14 days of the 28 days immediately following the recommendations? This is a puzzling arrangement of the clause. Perhaps the noble Lord would be good enough to satisfy himself that the Secretary of State will have the power to revoke or vary the price increase. If he does have that power, under what particular provision does it fall?

From what he has said, I am sure that the noble Lord appreciates the necessity of being able to vary price increases. May I say how ridiculous the situation would be if he did not. If the effect of an increase in an order was to hold down the prices of one competitor as against those of another, obviously that competitor would be selling much more at an artifically low price in relation to his competitor than he did previously. That would give him an absurd advantage through being forced to hold down the price in that way. Then, at the end of the time of the restriction—and we are familiar with this in other spheres, particularly in wages—he would obviously have to raise his prices by an artificially large amount. This is becoming too artificial altogether.

3.20 p.m.

Lord ROBBINS

May I, from the Cross-Benches, express profound disappointment at the negative response of the Government Front Bench on this particular Amendment. The case envisaged must be palpably inconvenient and worrying to the businesses concerned. I should have thought that, at any rate in this case, some concession could be made in the wording of the Bill to make it perfectly plain that, in the event of such an injustice, it would automatically be rescinded.

I have been thinking about the prolonged debate which we had yesterday on earlier clauses. I yield to no one in my appreciation of the friendliness, courtesy, and integrity of those leading for the Government, but I ask myself what would be my position if, as a businessman, I were reading yesterday's Hansard. I am sure that I should say to myself, "They are determined that nothing shall be done to ease my position."

Lord WALLACE of COSLANY

In reply to the noble Lord, Lord Drumalbyn, may I say that the Secretary of State may vary, or revoke an order at any time. I refer the noble Lord to Clause 7(6). That is the position. I would also repeat what I have already said; that is, that the Government are providing safeguards which, in any case, will give some protection to firms after an investigation. There will not always be a need to vary or revoke orders when the safeguards apply.

There is one further point that I should like to put to the noble Lord, Lord Mottistone, and which may help him. The Amendment is deficient, in that it refers to a "person for whom an order has been made" rather than "to whom an order applies". It also fails to specify when the Secretary of State should revoke an order. Theoretically, he could do it on the last day on which the order runs, but that would not be his intent. Therefore, I hope that the noble Lord will withdraw this Amendment. He may want to withdraw it for further consideration, but I am afraid that the Government cannot accept the Amendment.

Lord MOTTISTONE

I thank the Government for their gentle reply. It would seem to me that, both in his opening remarks and in the remarks that he has just made, the noble Lord, Lord Wallace, pins the main criticism of the proposed clause on the technicalities of not having worded it correctly. It is quite true that, in discussing this with my friends, we had a lot of argument about the word "substantially" and whether we should put a figure in, which would deal with the first point that the noble Lord, Lord Wallace, raised. To be quite blunt, we could not come to an easy agreement as to what the figure should be.

As to the other deficiencies within the Amendment, these are those of the ignorant Back-Bencher rather than those of the well-supported Government spokesman. I should have thought that it was well within the wit of the Government to improve my Amendment to meet not only the point which the noble Lord, Lord Wallace, made at the end in his second address to your Lordships, but also the point he made to begin with.

Perhaps the Government would care to take this Amendment on board and improve it for me, because at no point did the noble Lord really say that he disagreed with the principle, which is that the Secretary of State requires special guidance in this rather special area. I agree with the noble Lord, Lord Robbins, that the Government have been what one might call unnecessarily stubborn about improving Amendments which do not in any way conflict with the principles of the Bill, and I think that it would be a good thing if they could demonstrate their accommodation on this. It seems to me that this is one matter on which they might be able to feel that they could iron out the bugs and produce an Amendment, because they are obviously more capable of doing it than I am.

From their point of view, they are, they hope, legislating for at least a year, and perhaps for longer. However, it could be that they will be sitting on these Benches and we shall be sitting on those Benches, and that they may be controlling one of our Secretaries of State. Therefore, it could, in a way, be a good thing for them to have the Secretary of State curbed, which might not have been the case if we had been talking about this a couple of years ago. May I suggest to the Government that they should take this on board, or is that asking too much?

Lord WALLACE of COSLANY

I am afraid that it is, but the noble Lord will have the opportunity to vary his own Amendment at a later stage, if he wishes. I am sorry that I cannot accept it.

Lord MOTTISTONE

I am sorry that the noble Lord feels that he cannot take it on board himself, but perhaps your Lordships will allow me to consider this for a later stage of the Bill and will allow me to withdraw the Amendment.

Amendment, by leave, withdrawn.

[Amendment No. 31 not moved.]

3.27 p.m.

Lord TREFGARNE moved Amendment No. 32:

Page 14, line 15, at end insert— ("(9) Notwithstanding anything in the preceding provisions of this Act, if a person has given an undertaking under this section and it has been accepted or if an order made under subsection (5) of this section applies to a person and that person represents to the Commission that the circumstances have changed since the date of the undertaking or order so that a restriction of a price or margin is no longer appropriate the Commission shall forthwith investigate the representation and if the Commission think that it is justified the Commission shall not later than 28 days after receipt of the representation make recommendations to the Secretary of State in accordance with their findings; and if within 14 days after receiving such recommendations the Secretary of State does not release the undertaking or vary or revoke the order accordingly he shall lay before each House of Parliament a memorial giving his reasons therefore.")

The noble Lord said: On behalf of my noble friend Lord Mansfield and myself, I beg to move Amendment No. 32. Clause 7(6) of this Bill confers upon the Secretary of State discretionary power—and I emphasise the word "discretionary"—to vary an order which has been made by him after a Commission of investigation, which order restricts a price or a margin, and the discretionary power to vary is conferred upon the Secretary of State with relation to the price or margin which may be controlled by the order.

The purpose of the discretionary power is to allow the Secretary of State to ease, for example, the restraint upon a price increase, or upon a margin, which he has seen fit to apply in the light of a report from the Commission, and the discretionary power here conferred upon him is presumably provided so that he may ease the restraint when the circumstances substantially change. As a result of a report and an order from the Secretary of State, producers may have given certain undertakings. We seek by means of this Amendment to make provision for producers to be released from the effect of these undertakings, and indeed from the restraints upon the prices which they may have not raised as a result of the order.

It is not difficult to imagine circumstances where producers are faced with quite sudden cost increases which they could not have foreseen at the time that they gave an undertaking to the Secretary of State, or which indeed the Secretary of State himself could not have foreseen when he imposed certain restraints upon them. We believe that the discretionary power conferred by the Bill as presently drafted is really not adequate. We think that the power should be more fettered than that. We believe that in certain circumstances companies ought to be able to go to the Price Commission and, if the Commission agree, the Secretary of State ought then to be under an obligation, in certain circumstances, to release companies from any undertaking they may have given, and to waive any controls he may have imposed on the price which they would otherwise have wished to charge. That, in a nutshell, is what we seek to do with this Amendment. We propose to add a new subsection to Clause 7 of the Bill. I hope that this additional provision will meet with your Lordships' approval. I beg to move.

Lord WALLACE of COSLANY

To initiate formal procedures leading up to the variation or revocation of orders might lead to unnecessary delays where the circumstances demand urgent action. Conversely, in other cases 28 days might be too short a period for the Price Commission to reach a conclusion about the application. As the original order will have been the responsibility of the Secretary of State, it is more appropriate that firms should apply direct to him rather than to the Commission for variation or revocation of the order and the Government have undertaken to consult the Commission in every case.

The Secretary of State would not unreasonably refuse to vary or revoke an order. In any event, he can be expected to have regard to the criteria in Clause 2. He will obviously take account of the extent of the severity of the restriction envisaged in the Commission's report and the effect of any changes in circumstances on the severity of the order. The firm will also be protected by the safeguards under Clause 9.

The Amendment also refers to release from undertakings. The firm does not in fact need to ask the Commission or the Secretary of State for release from its undertaking, and this procedure is not envisaged elsewhere in the Bill. It is free simply to breach the undertaking if it considers such action justified. The breach would revive the Secretary of State's order-making power, but the firm would have the opportunity to make representations to the effect that an order implementing the Price Commission's original recommendations was no longer appropriate. That is the attitude of the Government to the Amendment and for this reason it is not acceptable.

Lord MOTTISTONE

The noble Lord's reply surprises me, especially when he says that one can breach any undertaking without incurring any form of penalty, except an order from the Secretary of State. Perhaps I am quoting out of context, but I draw his attention to Clause 5(3)(b) which says: …if he does so he shall be guilty of an offence and liable on summary conviction to a fine …". There is all manner of nasty stuff built into the Bill and I think it would be quite wrong for someone to risk breaching an undertaking—an undertaking is something quite solemn in common English, let alone within the meaning of the Bill—in the hope that the Secretary of State will be kind. That seems ridiculous. Perhaps the noble Lord will examine that part of his reply, because it does not seem to fit in with what is in the Bill.

Lord HAWKE

Did I hear the noble Lord, Lord Wallace of Coslany, aright? I was astonished when I thought I heard him say that one could breach any of these orders at will. Would he please restate his opinion on that?

Lord WALLACE of COSLANY

I think there is some confusion here. This is not breaching an order but breaching an undertaking.

Lord HARMAR-NICHOLLS

Are they not very nearly the same?

Lord WALLACE of COSLANY

The Bill does not formally provide for any release from an undertaking; a firm is always free to breach its undertaking, as I said, and the only sanction is for the Secretary of State to make an order based on the Price Commission's original recommendations, if he still considers them appropriate. That is the basis of it and it is quite clear that a firm can breach an undertaking. As I say, this is not a question of breaching an order, when of course penalties could be imposed.

Lord HARMAR-NICHOLLS

This is all rather confusing. An undertaking is part of an order, is it not?

Lord WALLACE of COSLANY

No.

Lord HARMAR-NICHOLLS

What sort of undertaking is it, if it can be broken at will? I thought the Minister's original answer was particularly weak. One recognises a weak answer when irrelevant matters are brought in. The irrelevancy the noble Lord introduced in this case was that the 28 and the 14 days might be longer than would be warranted if it were left to the Secretary of State and the Commission under the Bill as drafted. By accepting the Amendment, the noble Lord would not be removing the speedier action which the Secretary of State could take if he so wished. This is designed to ensure that if one had a dilatory Secretary of State or one who, for some other reason, did not want to face up to new evidence, he would be restricted to the particular number of days set out in the Amendment.

I should have thought that the noble Lord would have recognised that, by drawing attention to the 28 and 14 days in the way he did, he was in fact drawing attention to this weakness. In my view, the Amendment would improve the Bill along the lines the noble Lord seemed to describe. If he does not want the rectification of a wrong to be delayed, then what he said he wants is more likely to be achieved by accepting the Amendment.

Lord DRUMALBYN

The noble Lord, Lord Wallace of Coslany, was probably right to say that my noble friends should have restricted their Amendment to the case where the terms of an order were breached because, in the case of making undertakings, a manufacturer will be likely to say to the Secretary of State after making his representations, "I undertake to observe the recommendations of the Commission", or whatever,"subject of course to things remaining more or less as they are". In that case, there would be no breach; if things did not remain more or less as they were—if, say, there were a large increase in wages—there would not be a breach. To that extent, the noble Lord was rather strong in the words he used on that point.

It is possible, of course, that an undertaking may have been given without any such explicit conditions. But surely there would have been some underlying conditions that there would not be something to upset the agreement, such as a very great increase in wages or a strike. Would the noble Lord at least consider the possibility of accepting the Amendment in relation to any orders that may be made, where of course it would not be open to those concerned—the manufacturer or producer—to suggest any conditions of their own, nor in all probability would the order include any conditions?

In other words, I would support the Amendment in part, in so far as it relates to an order, but I am glad to hear from the noble Lord that the Secretary of State would be prepared to consider the situation where an undertaking had been given and where, through circumstances beyond his control, the manufacturer or person providing the services has been forced to make an increase in his prices, despite the undertaking, and that that would be fully understood.

Lord TREFGARNE

It appears that the Government have nothing further to say on the matter, but I certainly have. The noble Lord, Lord Wallace of Coslany, produced two points in argument against the Amendment. To begin with, I think that we are wrong to distinguish too sharply between undertakings and orders. Although undertakings are initiated by the producer and orders are initiated by the Secretary of State, the fact surely is that undertakings will have been given simply so that the Secretary of State refrains from making an order. When, and if, an undertaking was either not produced, or was broken, then the Secretary of State would forthwith make an order, and no doubt could do so very swiftly if he thought it was necessary. Our purpose, therefore, is to provide that the Secretary of State cannot unreasonably continue either the implementation of an undertaking, or the effect of an order when costs, or some other circumstances, have drastically changed since the order was made, or since the undertaking was given.

The other point that the noble Lord, Lord Wallace of Coslany, made was that sometimes the time scale that we have suggested in our new subsection would be too long; but as my noble friend Lord Harmar-Nicholls said, this is a new and additional subsection and does not remove from the Secretary of State any of the powers already contained in previous subsections of this clause. I am sorry to tell the noble Lord, Lord Wallace, that once again he has quite failed to persuade me with the force of his arguments. I do not think that it is appropriate for me to pursue the matter at this point, but we certainly reserve the right to do so at a later stage. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord STRABOLGI

This may be a convenient moment to take the Statement, and I beg to move that the House do now resume.

Moved accordingly and, on Question, Motion agreed to.

House resumed.