HL Deb 12 July 1977 vol 385 cc795-852

3.53 p.m.

House again in Committee.

Clause 7 agreed to.

Clause 8 agreed to.

Clause 9 [Safeguard for basic profits]:

The Earl of MANSFIELD moved Amendment No. 33: Page 14, line 38, after ("fit") insert ("taking into account the matters listed in section 2(2) and in particular the need to ensure that companies are not handicapped financially by increases in any costs beyond their control,")

The noble Earl said: We turn now to Clause 9 of this Bill and to an Amendment to which we on these Benches attach considerable importance. Clause 9 is headed, "Safeguards for basic profits". It purports to place upon the Secretary of State the duty to make regulations which lay down minimum levels of profits which companies must not be prevented from earning through the operation of investigations or examinations under this Bill. I think that every noble Lord in this Committee must be concerned at the general decline of profits which has occurred over the last few years. I do not want to become too Party political, but one has to say that the rate of decline has accelerated, or at any rate sharpened, at times when the Government of the day have had a Labour complexion—and statistics will bear me out. The position, I suggest, is that any believer in the mixed economy must now be wary of imposing further controls on industry which may cause the situation to deteriorate still further. It was in this light that this Amendment was tabled in the name of my noble friends and myself.

We are concerned, in short, to prevent, or at any rate to minimise, the damage which can be inflicted on a company by the operation of this Bill. In previous debates many noble Lords have expressed alarm at the possible damage that a price freeze can do to a company, especially to those companies operating on low margins. Such a freeze, it has been suggested—and, in fact, it has scarcely been denied—could even threaten their ultimate viability as undertakings. Putting the matter in one sentence, therefore, we believe that the safeguards under the system proposed in this Bill should be at least of equal value with those under the previous Price Code. We do not attach particular value to the Government's proposals, and this Amendment seeks to remedy the position.

I will not go into the technicalities of profit margins at this stage, although I understand that some of my noble friends may well do so later on in the debate. What I would say is that a number of companies in quite different fields have expressed alarm at these new lower safeguards, and these feelings of alarm have in fact been communicated to the Department. I had perhaps better not call the Department obdurate, but the representations have not achieved more than minor improvements so far, while this Bill has progressed, and I therefore suggest that the case for improvements in this regard has been strengthened.

One asks: What does the Amendment seek to achieve? Noble Lords who may have followed the passage of the Bill through the other place will have realised that this Amendment is in different form from others which have been previously considered; and this is to try to meet Government objections which have been made to the concept, if I may so call it, of strengthened safeguards while the Bill has been discussed at various stages. The purpose of the Amendment is to provide a proper network—perhaps one might better describe it as a safety net—of truly protective safeguards, and at the same time, as I have said, to meet some of the criticisms which have been made of previous Amendments.

One of the arguments which the Government have relied on in the past is that the retention of the present Price Code safeguard levels would protect inefficient companies. Of course, efficiency, or indeed the lack of it, can manifest itself in many forms, and it is doubtful whether the Price Commission, investigating a proposed price rise which is put before it, is competent to act like a company doctor and within three months come to a meaningful appreciation of all the ramifications of a company which can lead to what I might call a cure, which by the very nature of the Commission's composition and duties has to be expressed in the form of a yea or nay to a price increase—and, of course, that yea or nay may be preceded by, accompanied by or coupled with a freeze.

When one couples these difficulties with the problem of cyclical profits it will, I suggest, become very difficult for a company to take a long view and to enter into meaningful forward planning of its affairs. Unless it can take a long view of its affairs, it is unlikely to make the investments which will eventually increase the size of its profits or turnover and lead to the expansion of jobs and the general increase in efficiency which is the avowed aim of the Government and which would undoubtedly lead to an appreciation of the national wealth. Nevertheless, apart from these aspects, unless the safeguard provisions are made stronger, if the Price Commission make a mistake—and from our discussions last night this does not seem to be a contingency that the Government are prepared to admit—or if in some way they misuse the discretion which the Bill gives them (and, let us face it, it is not unknown for organisations such as the Price Commission to exercise discretion unfairly or wrongly) a company which is subjected to such misuse of discretion may suffer lasting and even fatal damage without hope of recompense.

Had the roll-back procedure which we discussed yesterday obtained the approval of the Committee the damage would have been less severe, or potentially less severe; but the Committee came to the conclusion to which it was entitled to come and that idea was rejected. But a fairer and stronger system of safeguards for basic profits is now more than ever desirable. I commend this Amendment to the Committee. It is non-contentious, in the sense that it does not make the task of the Government, of the Price Commission or of the Secretary of State any more difficult, but it gives a very much better, more satisfactory safety net within which companies may operate. I beg to move.

4.3 p.m.


I should like to support my noble friend and I shall be going a little further into the details. As my noble friend has said, there would be no need for this Amendment if the safeguards were more satisfying. The safeguards, I am happy and grateful to say, have been before your Lordships since the Committee stage in another place and there have been (and the Government are to be commended for this) many opportunities for people to write in to raise points of detail. But the other side of the coin is that, on certain essential matters, the Secretary of State has so far been absolutely obdurate, and it is not entirely clear why he should have been so. Whether there is magic in the particular figures written into the safeguards (and, if your Lordships will allow it, I shall quote a few in a minute) or whether there is something else which is behind this which I find it difficult to discover, I do not know. In replying to the general debate on this Amendment, perhaps the noble Lord, Lord Oram, could give us some indication of the thinking behind the safeguards. The Secretary of State has not done so in meaningful terms. He has made generally bromide-like statements in reply to various representations by letter from industry and commerce; but there is nothing to underpin the actual figures.

I do not wish to labour the subject or to bore your Lordships with long explanations on this matter, and it may suffice to give one particular example. I refer to Command 6861, the consultative document on the prices policy. Paragraph 5 in page 4, describes, under the heading "Draft Safeguards", the principal safeguards for manufacturers and providers of services. It reads: The principal safeguard in the case of a manufacturer or provider of services in relation to a product is the greater of (a) a profit which affords a current margin of 3 per cent. and (b) a profit which affords a current margin of 50 per cent. of the base margin". In the nature of these documents, one has now to turn to paragraph 7 to find that the base margin shall be the excess of the price ascertained under paragraph 2 over the total cost ascertained in accordance with paragraph 3. I shall not bore your Lordships with paragraphs 2 and 3 except to say that what is in question is the excess of the price (described in fairly reasonable terms) over the total costs—I repeat: the total costs.

To come back to what I quoted earlier, we are talking about a current margin of 3 per cent. or a current margin of 50 per cent. of the base margin. The two figures are the same if the base margin is 6 per cent. That is to say, they are the same if the excess of price over total cost is 6 per cent. Your Lordships may think this a very high figure or a very low figure, depending on what sort of activities you have been involved in. Suffice it to say that, in a great deal of industry today, it is a figure which does not, in itself, allow sufficient opportunity to invest for the future. In fact, it is a higher figure than the industry with which I am particularly connected has been experiencing during this past year. To explain what this is all about, a by-product of that is that this particular industry which is—and there is no point in my hiding it for I mentioned it on Second Reading—the biscuit industry, is currently part of a study under the National Economic Development Organisation to see how we can find a way of meeting the Government's industrial strategy.

One of the things which comes out of the studies leading up to the report—and I shall not quote from the report, partly because it is not finalised and also because it would be unfair to pre-empt the NEDO in making an announcement when it does so—is the following: We discovered in trying to find out what manufacturing capacity our industry had over the next five years and what they were proposing to do to increase it over the next five years that, on an average, across the whole industry, they were not proposing to expand by more than about 3 per cent". The net result, they reported, was that collectively—although some firms are going to do more than others—they were going to have a decrease in employment of 0.8 per cent. across the board. That is, roughly․and we are talking about five years ahead—a static employment situation. Part of the Government's investment policy relates to trying to find ways of employing more people. So this is a disappointing situation.

I have gone further and have asked my friends and associates: "Why is it you cannot forecast that you will invest more in the next five years?" They have said: "Because it would be totally irresponsible of us to do that when we are so uncertain as to the amount of return of capital that we are going to get, as a result of our trading efforts and other factors". As everybody realises, part of the problem has nothing to do with the Government or the Bill, but is the cost of raw materials overseas (and one can spend hours going into that) and the fact that it is held down by the Government. It is easy for the Government to say: "Well, we have this as a safeguard. That is a sort of fallback position, that is the last situation we will go to." But this is a figure which is written down. It does not mean to say, because 3 per cent. is the safeguard level, that that is going to be the level which will be allowed. Maybe people will notify a greater increase in price, but nobody will bother about it. There will not be an investigation and this will be a happy situation.

That is not the point. The fact is that this is the figure with which people have to plan; it is the only figure they have before them. They have to assume that there is a friendly Government—and I said earlier that the Secretary of State in the Second and Third Readings in another place indicated that he was not a friendly person. Taking that point, you cannot blame them in practical terms for using this base line of 3 per cent. as one on which they have to plan. The net result is that they say they are not going to have enough reserves to do more than the minimum amount of replacement investment; and actually this figure is not good enough for that. Probably all your Lordships own motor-cars, or at least run them if they are owned by somebody else. These motor-cars have to be replaced at intervals and my collegaues in industry have to replace worn out materials—forgetting improvement—in order to keep things going and not run down and employ even less people. So we are talking about a figure which is higher than this.

Three per cent. is barely adequate for necessary replacement of equipment. Any concept of improvement must look at a different figure. It is because the figure here is so low—and the earlier one under the previous Price Code was not much more generous—that those in industry feel they cannot say to NEDO that they are prepared over the next five years to take risks and commit themselves to making investments with the hope that by 1982 they will be employing another 5 per cent. of people, or whatever the figure might be. They cannot do that, and that is why this figure is so important.

I am sure that the Secretary of State and his advisers, in their wisdom, look at the problem from the other end and say: "We have to put in a figure which is approved by the Treasury and looks right in economic terms", and of course at the back of their minds it is a minimum figure which they hope they will never have to use as a safeguard. Their attitude will be that they hope all of us will be more generous.

Forgive me for repeating myself but it is vital to convey this point. This has a deleterious effect on the attitude of mind of the people who are trying to plan for the future. It is the only figure that they have. I suggest to the Government that it is very reasonable for this Amendment to be passed. But the Amendment is only part of the way through. The Amendment allows us to ask: "Cannot we have written into the safeguards something which is more encouraging to industry so that they can plan for something better?" At the moment they are not even finding it possible to do that. I implore the Government not only to agree to this Amendment, which in itself is merely seeking to underpin the safeguards, but to try to convey to the Secretary of State the need to consider the problem from two sides, not merely from the one side from which he has considered it so far.

4.15 p.m.


The noble Earl, Lord Mansfield, stressed the great importance that he attaches to the Amendment, and indeed the wording of the Amendment is very significant, as I will at once agree. The noble Earl said that the Government's policy threatens a firm's viability. I am merely repeating a few of the phrases that I thought the noble Earl would wish to be emphasised.


It is plain common sense.


I was not agreeing with the noble Earl; I was merely using one or two of his remarks as an introduction to what I wish to say. He used the word "alarm", and so on. I do not underestimate in any way the seriousness with which the noble Earl approaches this problem, but I suggest that some of the language that he has used approaches this problem with undue exaggeration. Such words as "alarm" and "threatening viability" are not justified by what the Bill proposes.


If it is not alarm that affects the noble Lord, what is he alarmed by when he sees unemployment of one and a half million people?


Of course I am alarmed by that. But what I am saying is that the provisions of this Bill are not alarming. Indeed, they are part of the Government strategy which is intended to overcome the problems to which the noble Lord, Lord Trefgarne, refers. It is for these reasons that I welcomed the opening sentences of the noble Lord, Lord Mottisstone. He suggested that it might be helpful if I indicated the general background of more general safeguards which the Government have in mind against which the specific safeguards to be drawn up in Clause 9 are to be seen. That is an invitation to which I respond. In that respect, the noble Lord was perfectly correct.

It is helpful, and necessary, to get the situation in a clearer perspective. The Consultative Document on Clause 9 safeguards, which the Government issued on 15th June—the one to which the noble Lord referred—tried to do this. It tried to show why the safeguards which are proposed under Clause 9 are what they are, and how they are part of a wider range of more general safeguards.

This word "safeguards" can be a little misleading in this context. We are referring to the specific safeguards to be drawn up in regulations under Clause 9, but much of the Government's case in respect of this Bill rests on the more general safeguards that we believe are there to reassure firms in industry. In particular, the Government again explained in that White Paper—as it had been explained in its first Consultative Document of last February—that their policy is to replace the code rules about price increases, which bear on all firms, by this new process, by the investigations which bear only on the limited number of firms whose price increases or prices appear to require more justification than has been forthcoming, especially where it appears that the competitive forces are exercising insufficient price restraint. So we are not dealing with a policy which in principle could attack the profitability of every firm in Britain right across the board, and that was the effect of a succession of Price Codes in the earlier sense: they were applicable to firms right across Britain.

The present Bill, as I have indicated, applies to particular firms, carefully chosen for very good reasons. Therefore the policy I am suggesting is carefully directed at proper targets. I hope that this helps to show why the safeguards which have been progressively built up in the present Code are inappropriate to the new policy. They are safeguards against restrictions applied overall and indiscriminately and, like most of the provisions of this present Code, they do not involve the exercise of much judgment. They are almost automatic accountancy processes; they protect historical performance, whether or not it has merited that protection in the past and whether or not it still merits protection.

May I briefly review the safeguards I have referred to as more general safeguards for industry. The first is in the system itself. As was said in the recent Consultative Document: For the great majority of enterprises pricing decisions will not be subject to external rules and will revert to business judgment under the surveillance of the new policy". The second safeguard, I suggest, is in the Commission themselves. There can surely be no reason to infer from the appointments already announced that the Commission will be intent on bringing those firms which they select for investigation to the brink of insolvency. The Commission are not told to freeze prices. They are told to have regard to the criteria in Clause 2, including profitability, and they have the power to allow interim price increases—not only one but others if, as the investigation proceeds, the Commission believe them to be necessary and consistent with their duties. Moreover, the Commission have the duty to allow the interim price increases which are specified by the regulations made under Clause 9.

The Clause 9 safeguards, frankly, are not entirely on all fours with the new system proposed in the Bill, which I have just outlined. They were included at the insistence of industry, which wanted that kind of safeguard to be included. In a Bill which, as I have explained, otherwise turns on the judgment of the Commission and which turns away from the older system, the Clause 9 safeguards put a constraint on that judgment and they inject an historical basis into one part of the new controls. The Clause 9 safeguards are present because early discussions, as I have said, showed that firms seemed to want a safeguard with numbers in it, comparable with the older system, at least to serve during the period in which they become accustomed to the way in which the new Commission will operate. But there cannot be any question of turning the Clause 9 safeguards into protection against being investigated, and of regarding the minimum profit level as one which should be pitched well above the level attained by a large number of firms within the field of investigation, and protecting a level of profits whose only justification is that, high or low, it was what was earned some years ago.

Having said that, perhaps I need not dwell upon some of the other safeguard provisions—safeguards in the narrower sense. A firm has the opportunity to ask for an interim price increase above the minimum level provided for in the Clause 9 safeguard. A firm's competitors can also suggest to the Commission that there should be a more than minimal interim price increase if a freeze on, say, the market leader would be unduly damaging to the others which follow it. Finally, the Secretary of State can veto an investigation at any time if, for example, he believes that the investigation, and the Commission's use of the interim price increase, is inflicting unacceptable damage on the enterprise concerned. In practice, and for the reasons which I have already given, the veto power is there to be used if necessary but, in my view, the likelihood of its being needed is not very great.

I am not trying to say that no firm should stand in fear of this Bill, but I do not believe that an efficient and competitive firm need have any fear. Those who are investigated also have the different form of protection which I have described. They may find the going hard, but there is no conceivable reason to conclude from what the Bill provides that the purpose or the effect of any investigation is to drive them out of business.

It has been said that the safeguards which the Government propose under Clause 9 of the Bill are inadequate. Exact details of the safeguards, following the general account given in the Consultative Document of 15th June, were published on 4th July, and the comments received on them will be carefully considered. May I say that the noble Lord, Lord Mottistone, has quoted from the document and from his experience within the biscuit industry. I have no doubt that the association with which he is connected will put the same points through their normal channels, and I can assure the noble Lord that what he has said in this debate will also be taken into account in that way.

Some of the comments that are coming in are seeking higher levels of safeguard, but it is only fair to add that other comments made on behalf of wage-earners and the consumer show an anxiety lest the safeguards become a loophole or a means of escape from the new controls. I can give your Lordships an assurance that the Government do not intend to allow that to happen.

In my view, the Government's safeguard proposals go a long way towards meeting the substance of the Amendment put forward by noble Lords opposite. We propose that firms should be entitled to preserve a profit margin equivalent to 80 per cent. of their margin at a base date, while they are being investigated. For firms with a low level of profitability, 100 per cent. of the base margin may be preserved. The Price Commission will have a duty, as I have explained, to allow interim price increases in these circumstances. Moreover, if costs rise sharply in the course of an investigation, firms can claim a second interim price increase if they consider it necessary. But the Government cannot accept demands for safeguards set at such high levels that firms, with historically high profit margins, will be protected from effective investigation and price restriction where, in the view of the Commission, these are appropriate. Within these constraints, industry's comments on the Government's Consultative Document will, I assure your Lordships, be carefully considered before the Clause 9 regulations are made.

I hope that with that explanation of the overall policy of the Government in this respect, and the assurances that I have given about taking into due account the comments received on the basis of the Consultative Document, noble Lords opposite will feel that they need not press their Amendment this afternoon.


Before the noble Lords sits down, would he explain in what way the Secretary of State would be embarrassed by the acceptance of the Amendment put forward by the noble Earl?


Because it is unnecessary in view of what is already in the Bill, what has been said in another place and what I have said today. It is a sound principle of legislation that that we do not enact unnecessary Amendments.


It seemed to me that the Government's answer, to which I listened with great attention and which covered a great deal of the ground that I had gone over, did not cover the rather difficult point of the ability on the part of businesses to plan. It is the other side of the coin. I have quite understood why the noble Lord, Lord Oram, replied as he did, and indeed one understands a great deal of the logic behind it, though, like the noble Lord, Lord Robbins, I do not see that as a reason for not having the Amendment. That is another issue. But I should be grateful if the noble Lord, Lord Oram, could undertake to look closely at what I said about the need to give encouragement to planning for development.

The Government have a conundrum. They are trying to make sure that the safeguards are low, so that they can investigate the inefficient, and by so doing, because it is the only figure that they can give, they are discouraging the efficient. The efficient say, "If 3 per cent. is the kind of figure they are looking at, then that is all I can be sure of. Therefore, I must not plan for expansion and I will have no extra jobs in 1982, because I cannot be sure of anything better".

The noble Lord made a certain amount of play with the fact that under the new system—and I quite understand his point—the safeguards are not nearly so necessary as they were under the old system, and that industry had asked for it. Industry asked for it because it needs to plan. It is surprising that I have to address noble Lords opposite on planning. Perhaps they are not frightfully good planners, but they believe in planning to a greater extent than we do on these Benches. Experience has shown business that it must plan, because lots of money is involved, other people's money, and, unlike some, they are very conscious of being responsible for other people's money. Therefore, to be very serious, it is extremely important that they have yardsticks which are a kind of guarantee, and which enable them to plan. I am sorry to have to repeat this, but the noble Lord did not really take it up—I suppose because he was not expecting it—and I should be most grateful if he could give me an assurance that he will call the attention of his right honourable friend the Secretary of State for Prices and Consumer Protection to the remarks that I made in that respect.


The points that the noble Lord, Lord Mottistone, has made about the need for expansion, planning and so on are highly important. I do not deny that in the least. What I would draw to his attention is the fact that what he wants does not relate to safeguards under Clause 9. It relates more to the criteria by which the Commission will reach their judgments about price levels. As he was speaking on the second occasion, I was looking in Clause 2(2)(c) at the criteria dealing with profits. I am sure that this wording will appeal to the noble Lord, and it is worth quoting. The Commission are required to have regard to the need, to provide money for, and to encourage the promotion of, innovations and technical improvements in and the expansion in the United Kingdom of the enterprises"— including biscuit firms— which consist of or include the relevant businesses". So I suggest that that specifically puts a duty upon the Price Commission to have in mind all that the noble Lord has said.


I will not detain your Lordships any longer, but I should just like to say that that is a jolly good phrase. However, it does not produce any figures and one cannot plan without figures. Of course it does not produce any figures; figures would be inappropriate in an Act of Parliament. The principle is absolutely splendid, but without some kind of yardstick—and figures are a yardstick—one cannot make a financial plan for five years ahead.


That comes back to what I said in my main intervention, that these figures for which the noble Lord is asking, and which representatives of firms have urged the Government to include in Clause 9, are much less relevant to the new procedures which are being enacted under this Bill, than to the old system. I would ask the noble Lord to ponder that, and what I said earlier, a little more closely than he appears to have done so far.


Before the noble Lord concludes, will he not concede that this Amendment refers to what the Secretary of State will put into regulations, whereas Clause 2 is concerned with what the Commission must have regard to? This is what the Secretary of State has to consider and put into regulations. Surely there is a big difference there?


Certainly; but there is a big difference, too, in the relative significance of the regulations under the new system, and the major approach which is through the exercise of the judgment of the Commission in relation to Clause 2. I accept that the Amendment relates to the regulations, but what I am saying is that under the new system those safeguards are of less significance, since there will not ultimately be the Price Code method of operation. The greater significance attaches to the operation of the Commission in the way we have been discussing on earlier clauses.


Does not the fact that the noble Lord had to quote Clause 2 to me, in answering my point, show that he, too, thinks our Amendment is necessary? Because what it does is to ask the Secretary of State to use Clause 2(2) in his deliberations, just as the noble Lord has done.


No. I quoted it for precisely the other reason, to show that the noble Lord's Amendment is unnecessary.

4.40 p.m.


We start off with two basic premises: first, that the noble Lord, Lord Oram, has not chosen to say that this Amendment is technically deficient, and I take some consolation in that point. Secondly, the noble Lord has not chosen to say, as I suggested when I moved the Amendment, that it would cause the Secretary of State arty difficulty in carrying out his duty as laid down by this clause.

The noble Lord accused me of undue alarm and exaggeration. I do not know about that. One of the matters which has characterised the passage of the Bill, so far at least, through your Lordships' House can, I suggest, be summed up by the one four letter word "smug". Everything that the Government say makes one believe that we are about to enter a Shangri-la, a "Never-Never Land", where all, under the beneficent sway of the new Price Commission, will be just and fair, that companies will be allowed to get on with the business of running their undertakings, making reasonable profits and being socially aware of the needs of the wage earner and the consumer, and that somehow, under the benign direction of the Secretary of State, we shall enter a new world of prosperity and peace. If the noble Lord, Lord Oram, had been privy to some of the negotiations which accompanied this Bill and its introduction and had heard the alarms expressed by industry and companies from very different sections within it, he could not possibly have given vent to a statement of such unutterable smugness as he did when he prefaced his remarks about this Amendment.

What we are really speaking about has been very well exemplified by my noble friend Lord Mottistone. The word is "uncertainty". Of course we realise that investigations under the new powers will bear, and bear hardly, only on certain firms. There are to be, so we are told, only 40 investigations a year, but that will not help those firms to make up their minds about how to conduct their business. They will not know, because they will not have any proper guidelines, how to comport themselves, nor will they know whether or not they are to be brought within the Price Commission's net in the future. That is why one of the matters which concerns us most about the Bill is the continuing uncertainty of industry—manufacturing industry and distributors in particular—which cannot help them to earn the money and provide the expansion which we in this country so desperately seek.

The noble Lord went on to say that the Price Commission and their personnel will be a guarantee that an efficient and competitive firm need have no fear. The noble Lord may be content with the personnel of the Price Commission. I am not sure that industry will be, but only time will tell. What I say is that it appears, at any rate from the words of the Secretary of State in the other place, that the Price Commission are not a body which will engender confidence, at least in the short term. They will have to earn that confidence by the sensible and just way in which they go about their business. I notice that the noble Lord is nodding and I am grateful to him. We say that in this Bill we must make as sure and certain as we can that the Secretary of State—who is, after all, going to be in control of this organization—knows how difficult his task will be, for it will be difficult because of the criteria to which he as well as the Price Commission must pay heed. Therefore we are determined to stiffen the Bill so far as we can.

It was said that there had been comments on behalf of wage earners and consumers. Here again the noble Lord shows a total disregard and ignorance of commercial life in this country. It is in the best interests of the wage earner to work for a firm which is as competitive and prosperous as it can possibly be. That firm will be neither prosperous nor competitive unless it is making a reasonable level of profits. Therefore I hope that any representations on behalf of wage earners will ram home to the Government the point that a firm which is unable to make proper profits will

Aldenham, L. Elliot of Harwood, B. Luke, L.
Allerton, L. Elton, L. Lyell, L.
Alport, L. Emmet of Amberley, B. Mancroft, L.
Amory, V. Exeter, M. Mansfield, E.
Ampthill, L. Faithfull, B. Margadale, L.
Atholl, D. Fraser of Kilmorack, L. Melville, V.
Auckland, L. Greenway, L. Merrivale, L.
Balerno, L. Gridley, L. Monck, V.
Barnby, L. Hailsham of Saint Marylebone, L Monson, L.
Belstead, L. Halsbury, E. Morris, L.
Berkeley,, B. Hanworth, V. Mottistone, L.
Bessborough, E. Harmar-Nicholls, L. Mowbray and Stourton, L. [Teller.]
Campbell of Croy, L. Hatherton, L.
Clancarty, E. Hawke, L. Newall, L.
Clifford of Chudleigh, L. Hereford, V. Northchurch, B.
Clitheroe, L. Hewlett, L. Nugent of Guildford, L.
Craigavon, V. Hornsby-Smith, B. Onslow, E.
Craigmyle, L. Ilchester, E. Pender, L.
Cullen of Ashbourne, L. Inchyra, L. Rankeillour, L.
de Clifford, L. Inglewood, L. Rathcavan, L.
De Freyne, L. Ironside, L. Redesdale, L.
Dehnam, L. Killearn, L. Reigate, L.
Derwent, L. Kinross, L. Robbins, L.
Drumalbyn, L. Lauderdale, E. Rochdale, V.
Ebbisham, L. Long, V. St. Aldwyn, E.

never provide the security of tenure, so far as jobs are concerned, which everybody is entitled to seek. The same remark applies to consumers. If firms are driven to the wall by ill-considered legislation such as this, two things will happen. First, their products will cease to flow. Secondly, the jobs which they provide will cease to exist. It is as simple as that.

I have pondered whether anything which the noble Lord has said leads me to conclude that there is any possibility that he could meet us on this point. I really do not think that there is. The noble Lord has given me no hope and no undertaking. In any event, we have sufficiently discussed this matter and it is my intention to divide the House. In particular, I wish to see the reaction of what I might call the poodles of the noble Lord, Lord Peart—

Several noble Lords: Very cheap!


—from whom there has been a deafening silence on this important matter. We must come to a conclusion.

4.46 p.m.

On Question, Whether the said Amendment (No. 33) shall be agreed to?

Their Lordships divided: Contents, 92; Non-Contents, 96.

Sandford, L. Stracona and Mount Royal, L. Trefgarne, L.
Sandys, L. [Teller.] Strathspey, L. Vernon, L.
Skelmersdale, L. Sudeley, L. Vickers, B.
Spens, L. Terrington, L. Vivian, L.
Stamp, L. Teviot, L. Ward of North Tyneside, B.
Strathclyde, L. Teynham, L. Young, B.
Airedale, L. Gordon-Walker, L. Peddie, L.
Amherst, E. Greene of Harrow Weald, L. Platt, L.
Aylestone, L. Hale, L. Popplewell, L.
Balogh, L. Harris of Greenwich, L. Rathcreedan, L.
Banks, L. Henderson, L. Rhodes, L.
Birk, B. Houghton of Sowerby, L. Ritchie-Calder, L.
Blyton, L. Hunt, L. Rochester, L.
Boston of Faversham, L. Jacobson, L. Rusholme, L.
Brockway, L. Jacques, L. Sainsbury, L.
Burntwood, L. Janner, L. Seear, B.
Burton of Coventry, B. Kagan, L. Shannon, E.
Byers, L. Kinloss, Ly. Shepherd, L.
Caradon, L. Kirkhill, L. Shinwell, L.
Champion, L. Leatherland, L. Simon, V.
Chorley, L. Lee of Newton, L. Sligo, M.
Collison, L. Listowel, E. Stedman, B.
Cooper of Stockton Heath, L. Llewelyn-Davies of Hastoe, B. Stewart of Alvechurch, B.
Crook, L. Lloyd of Hampstead, L. Stone, L.
Crowther-Hunt, L. Lloyd of Kilgerran, L. Stow Hill, L.
Cudlipp, L. Loudoun, C. Strabolgi, L. [Teller]
Darling of Hillsborough, L. Lovell-Davis, L. Taylor of Mansfield, L.
Davies of Leek, L. McCarthy, L. Wallace of Coslany, L.
Davies of Penrhys, L. McCluskey, L. Walston, L.
Delacourt-Smith of Alteryn, B. Mackie of Benshie, L. Wells-Pestell, L.
Douglas of Barloch, L. MacLeod of Fuinary, L. White, B.
Elwyn-Jones, L. (L. Chancellor.) Maelor, L. Wigg, L.
Fisher of Rednal, B. Noel-Buxton, L. Wigoder, L.
Foot, L. Oram, L. Williamson, L.
Gaitskell, B. Pannell, L. Willis, L.
George-Brown, L. Pargiter, L. Winterbottom, L. [Teller]
Gladwyn, L. Parry, L. Wootton of Abinger, B.
Glenamara, L. Peart, L. (L. Privy Seal) Wynne-Jones, L.

[Amendment No. 34 not moved.]

Clause 9 agreed to.

Clause 10 [Directors to examine questions]:

4.54 p.m.

Lord TREFGARNE moved Amendment No. 35: Page 15, line 19, at end insert ("and in any such direction the Secretary of State shall state the reasons justifying the decision to direct the carrying out of an examination").

The noble Lord said: This is an Amendment to Clause 10, and it is a short Amendment which I can explain very briefly. The purpose of the Amendment is to provide that the Secretary of State shall declare his reasons for reaching a decision to direct the carrying out of an investigation or an examination. It is important for those companies which are to be affected by an examination to know the reasons why the Secretary of State has ordered that an examination should take place, so that they are in a position to know what potential transgression the Secretary of State may believe them to have committed. This is really an extention of points that have been made earlier in this discussion. We have suggested on previous Amendments that companies are not, under this Bill as presently drafted, sufficiently well informed as to the reasons either why an investigation has been initiated or why a price has been frozen. The corollary of that, which we argued yesterday, is that when they are so informed they ought to have the right to make representations to the Secretary of State, or indeed to the Commission. However, the purpose of this Amendment is to insert some words at the end of this subsection, to provide that the Secretary of State shall provide to the companies concerned details of the reasons why he has ordered an examination. I beg to move.


If the Secretary of State were required to justify his direction he could be put in the position of prejudicing the outcome of the examination by the Price Commission. It would be better for all concerned if the Commission approached the examination with an open mind rather than against the background of a public statement of a prima facie case against the prices or charges concerned. The Secretary of State must, of course, give the Commission clear guidance as to what they are expected to examine. This can be done under Clause 10(2) by prescribing fairly detailed terms of reference, if appropriate. An additional statement in justification of the direction is unnecessary for this purpose. The Secretary of State is required by virtue of Clause 20 to have regard to the criteria in Clause 2 when considering whether to give a direction. He cannot, therefore, give a direction on frivolous or malicious grounds.

If noble Lords or any outside interests consider that the reasons for a particular direction are not clear, the Secretary of State is, of course, accountable to Parliament, and appropriate Questions may be put down to him for answer. I very much regret that we are unable to accept the Amendment. It is considered completely unnecessary, and in point of fact was not selected in another place.


The noble Lord is quite right; this matter was not debated in the other place. I am not sure that I want to pursue this discussion a great deal longer, but I do think that the noble Lord's reply has really been typical, if I may say so, of all the replies, or almost all the replies, that we have received to our various Amendments on this Bill. The Government, for reasons best known to themselves, seem unwilling to yield so much as a centimeter. That, I regret, is yet a further example of what I can only call the Government's intransigence over the Bill.

We are making the very modest and, I should have thought, quite harmless request that the Secretary of State ought to state his reasons for directing that an examination should take place. I am gratified that the Secretary of State's decisions in this respect can be questioned in Parliament and no doubt we shall take every opportunity to do that when the occasion arises. I shall not pursue the matter now, but I reserve the right to return to it at a later stage if I think it appropriate. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 10 agreed to.

Clause 11 [Examinations]:

5.2 p.m.

Lord REDESDALE moved Amendment No. 36:

Page 15, line 44, at end insert: ("(1A) In respect of retail prices which are recommended by manufacturers or suppliers of goods or services it shall be the duty of the Commission to examine and report on the use of manufacturers' or suppliers' recommended prices only for the purpose of ensuring:

  1. (i) that the sources of such prices are readily verifiable by consumers
  2. (ii) that such prices are reasonable and fair in relation to known or determined retail margins
  3. (iii) that a single manufacturer's or supplier's recommended price is uniformly available to persons selling such goods or services.").

The noble Lord said: With the permission of the House I should also like to speak to Amendments Nos. 45 and 46. I think that at the outset I should declare two interests, although I am afraid that they are extremely remote. However, it is better to be safe than sorry. I have connections with a catalogue mail order house and I am a director of a direct response company. Both of those businesses do, to a degree, use recommended retail prices. Therefore, although I declare those interests, they have at least given me an insight into what this matter is about.

It is interesting to note that in this particular Bill the recommended retail prices are not mentioned anywhere. A considerable amount of discussion took place on 19th May in Committee in another place, but both sides seemed to be fairly diametrically opposed, and when it came to a vote it was very close—eight to nine. The main point at issue in Committee in another place was, looking at it objectively, that the Minister did not, in my view, give a particularly good justification for the case. Therefore I feel justified, at this stage, to raise the matter again. Indeed, one or two matters have arisen since then about recommended prices.

If I may labour this point for a moment, let me begin with the definition of recommended prices. Recommended prices occur when a manufacturer puts up a price and publishes it or a retailer publishes a price. Sometimes they are suggested recommended prices because a figure is not actually given and someone has to work out a figure on margins. I am the first to admit that there have been some abuses. Indeed, this was discussed in another place. The Minister said that 80 per cent. of cases of recommended retail prices were perfectly honest. He said that 20 per cent. of such cases were doubtful and I shall not contend with that figure, because I believe that the 80 per cent. is the important point.

Let us consider the reason for using recommended retail prices. I am the first to admit that the Minister did not say that he was going to abolish them, although there have been so many ambiguous statements one way or another that one was rather led to believe that the machinery would be put into effect and that certainly they would be abolished on one section; namely, small electrical goods and probably, on others later, although that is a supposition.

I contend that recommended prices benefit the consumer in that they are an anchor point. A customer can see in a catalogue the price recommended by the manufacturer and what saving he can make. Somebody may say that these figures are inflated, but my Amendment takes that into account. That is the point that I really want to bring home later on. The recommended price acts as an anchor point from which the consumer can see how much is the saving. Many of us talk about consumer confusion, but I do not believe it. In my experience there is not a high degree of impulse purchasing. I do not agree that someone sees an enormous saving and then goes off to buy. Consumers are considerably better educated than that and it is talking down to assume that they are totally confused. The anchor point is useful because the consumer can see the saving. It may be that there appears to be a very good saving and if it is an enormous saving consumers will be a little doubtful anyway. Having seen this saving they will tend to shop around, and there is plenty of evidence of that. If they shop around they can see that they can get these goods at a lower price somewhere else.

Certain developments have taken place and there has been some research. The research indicates, as regards 117 lines where a recommended price was shown—that is, a double price: a recommended price and a saving price—that the actual prices at which the goods were being sold in most cases (in fact, over 51 per cent.) were at a lower price than could be obtained anywhere else. Therefore, as regards those items the recommended prices indicated that there were savings and the prices were at a much lower rate than the prices in other areas. There was a saving not just against the recommended price but against goods where only a single price was shown. I think that that is a telling point and something to which consideration should be given.

I ask the Government to look at the matter again in a very reasonable light. I am not making a great plea on this point, but I think that before the Bill goes through and the machinery is put in hand so that recommended prices can be dispensed with by order and not discussed in Parliament, we must remember that we are changing a method of selling. It is much more drastic than perhaps appears on the surface. We are giving a great deal of power to the Secretary of State.

My Amendment sets out to do several things. First, it limits the criteria upon which the Price Commission can make recommendations. At the same time, it prevents any retailers or manufacturers from using recommended prices to their own ends and misleading the public. Therefore, the objective is two-fold and is achieved by this Amendment, which says:

  1. "(i) that the sources of such prices are readily verifiable by consumers
  2. (ii) that such prices are reasonable and fair in relation to known or determined retail margins
  3. 819
  4. (iii) that a single manufacturer's or supplier's recommended price is uniformly available to persons selling such goods or services".

I hope that the Minister will consider this matter very carefully. I contend that the Amendment catches any area where recommended prices can be used to confuse the consumer. It preserves a freedom which I think should be preserved; namely, that when one changes a method of retailing it should be discussed fully. This is a large item to change and it should not be done just by order without any discussion in Parliament. I beg to move.

5.9 p.m.


The noble Lord, Lord Redesdale, has moved his Amendment in a reasonable and reasoned way, which I welcome. In doing so he referred to the debate on this subject in another place. As I recall, he did not remind your Lordships of what my right honourable friend the Minister of State said about the Government's intention as regards the powers in the present draft of the Bill, and that is something that I should like to repeat now. He said that it is not the Government's intention to use the new powers to outlaw recommended resale prices in general.


"Retail," not "resale".


I know that "resale" is a broader term. I have not checked what my right honourable friend actually said, but I think the principle involved is much the same. The powers can be used only in sectors where the Commission so recommend. There are sectors where recommended prices bear no relation to actual retail prices and serve only to confuse consumers. I think that the noble Lord, Lord Redesdale, accepted a proportion of 80 "goodies" to 20 "baddies". Even if we can agree on that sort of proportion, that still leaves the 20 per cent. that need attention. We should want to add in those areas where the 20 per cent. are operative.

We need these statutory powers to prohibit recommended resale prices. Our experience shows that we cannot always regulate the practice by voluntary means. If the Amendment of the noble Lord is accepted, we should have to rely on voluntary means—I assure him that we should. Perhaps I can give him an example of where the voluntary method was ineffective—the noble Lord made a passing reference to this example. In their report on small electrical household appliances and recommended retail prices the Price Commission recommended that the use of recommended retail prices be discontinued because it was more likely to mislead then to help. We were unable to reach any voluntary agreement on this with the trade.

It has been suggested, although not by the noble Lord this afternoon, that this kind of power is not necessary in the Bill because there is the Fair Trading Act, the machinery of which could be used. But I would suggest that it is appropriate to include in the present Bill provisions concerning recommended resale prices. After all, the major concern in the Bill is with the permanent regulation of aspects of non-competitive behaviour. Powers to control recommended resale prices are necessary to regulate one aspect of such behaviour, and they could be needed in the context of a Price Commission report on pricing generally in a sector.

I concede that, although it might be possible to use powers in the Fair Trading Act to control recommended resale prices, it is clearly more appropriate in these circumstances to have powers in this Bill. The Amendment which the noble Lord has moved seeks to restrict the scope of the Commission in examination of these practices. It would reduce powers generally in this respect, powers which we have carefully considered. In our view, we are not taking any unnecessary powers. We have weighed the matter up and believe that such powers are necessary and that the Amendment in the name of the noble Lord, Lord Redesdale, would not help the case at all.


I thank the noble Lord for his answer on this matter. I do not agree with him that it is a question of a voluntary agreement. That is just not the case. I do not think that he can have read the Amendment. The Amendment simply changes the criteria on which the Price Commission operate. There is no question at all of a voluntary agreement being introduced. I should be grateful if the noble Lord would consider that and read the Amendment again. We are concerned about the powers of the Price Commission.

Admittedly, it was argued in another place that the Fair Trading Act covered this issue. The Minister admitted it, but only after he was forced to do so in Committee. Mr. Fraser admitted that the powers exist, although he did not admit that they were adequate to look after this matter. I shall go no further than that because the noble Lord raised the matter himself and I believe that it should be left as it was argued in another place.

However, I should like to return to the point that it is not a question of a voluntary agreement. I said that I would go by the Minister's figure of an 80–20 split; I did not quote the figure of 80–20. At the outside, it was only 20 and, in fact, I believe that it was much less. The point is that, at the end of the day, this Amendment sets out to rectify the situation. It is not simply a limiting Amendment; it rectifies the situation should anyone go outside and try to mislead the public. It gives the Price Commission the powers to carry out an examination. On that basis, I should like the Amendment to be reconsidered.


Perhaps we shall not reach agreement on this matter, but the present powers in the Bill would enable the Secretary of State by order to prohibit the use of recommended resale prices in particular sectors where the Commission so recommended. But the effect of the noble Lord's Amendment is that it would prevent the Commission from recommending such prohibition because it provides that the Commission's examination of recommended resale prices be limited to the three areas which are set out in the noble Lord's Amendment and which I need not read out. So, in the first place, the Commission would be limited in their recommendations and therefore the powers of the Secretary of State to act would also be limited. It is that which is an undue limitation on the powers of the Secretary of State.


The point at issue here is that the Minister of State is assuming too much power. Of course, it does not let the Minister of State have enough power; he has far too much power, and far too much power has been taken anyway on this. I shall not weary the House any further. I disagree. I do not think that the point has been taken or that it was taken in another place. However, I reserve the right to reintroduce this Amendment at a later stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 37 and 38 not moved.]

Clause 11 agreed to.

Clause 12 [Undertakings and orders in consequence of reports on examinations]:

5.19 p.m.

Lord TREFGARNE moved Amendment No. 39: Page 17, line 1, leave out paragraph (b).

The noble Lord said: On behalf of my noble friends Lord Mansfield and Lord Mottistone, I rise to move Amendment No. 39. Noble Lords may be pleased to hear that this Amendment is a paving Amendment to Amendment No. 40 and that Amendments Nos. 41, 44, 47 and 48 are consequential upon Amendment No. 40. Therefore, with your Lordships' permission I shall speak to Amendments Nos. 39, 40, 41, 44, 47 and 48. When we have decided the fate of Amendment No. 39, the rest of the Amendments that have mentioned can be dealt with formally.

This clause empowers the Secretary of State to initiate what are called "sector examinations"; in other words, to instruct the Commission to conduct general examinations of prices in a particular sector. I do not think that we can underestimate the effect of such examinations upon the sectors; not only upon the market leaders but also equally, and perhaps more penally, upon the small businesses within those sectors subject to examination. As general examinations are initiated by the Secretary of State and not the Commission, it seems to us that they are likely, or at least more likely, to be of a political nature. I think that this criticism would apply whether the Secretary of State was appointed by the present Government or some other Government of some other political complexion in the future.

Because of the broader scope of general examinations, any order made by the Secretary or State arising from the examination is unlikely to be able to take full account of the differing circumstances of companies in the relevant sector, and we believe that inequity could then result. For example, different companies buy their raw materials from different sources. Some companies may be financed by loans in foreign currency, and the level of the pound, the dollar, or the franc might change.

Additionally, there is no restriction on the scope of the Secretary of State's actions where he is limited to be no more severe than the Commission recommendation, as exists in the case of investigation initiated by the Commission themselves. In other words, the Secretary of State, having received the report from the Commission arising out of this paragraph, might choose to be even more severe than the Commission recommend He might do that, as I said before, for political reasons and not for commercial, economic, or even consumer oriented reasons. As a sector examination is likely to be of a less specific nature than a company investigation, it is thought that it might be less likely to be treated so seriously by individual companies, although the consequences of an examination could easily be much worse for individual enterprises, particularly smaller ones. It is for these reasons that we move this Amendment.

There are, however, some further points that I would put. I would say that the Government would be better advised, rather than to introduce these sector investigations, to rely upon publicity, which has been so effective in a number of areas just lately—for example, the difficulties that arose over the question of television rental charges. There was a lot of publicity over that and a voluntary agreement was eventually reached. The Price Justification Tribunal, which is relied upon in Australia for these purposes, has no power to enforce its recommendations and yet is regarded as being very successful. Indeed, I am told that no recommendations of that Tribunal have, so far at least, been flouted by the companies concerned. There are a good many more reasons why the Secretary of State's powers sought under this clause ought to be curtailed or removed, but I hope that the ones I have give will, at this stage at least, be sufficient to convince your Lordships. I beg to move.


It seems to me that this is another case of the Secretary of State being given more power than is necessary. One wonders why. It would be helpful to us to have it spelled out in the reply to my noble friend why this particular extra power is thought to be so important. Is it related to the fact that in an earlier exchange one understood that an undertaking is not obligatory? I question the morality of an Act of Parliament which allows people to give an undertaking and not feel that they have to carry it out. This is a problem which I find is within the answers that were given on that earlier event. Is it for that reason that we are called upon now to have an underpinning of the undertaking by the Minister giving an order, or is it that the order is found necessary merely because the Secretary of State feels that he has not quite enough power within the Bill? If it could be explained a little more fully it would be easier for us to understand why it is in the Bill at all. It does not seem to fit.

5.25 p.m.


I shall do my best, but so far it would appear that this Front Bench has not been satisfying the Opposition Benches at all. At any rate, I shall endeavour to give an answer to the noble Lord, Lord Mottistone, in particular. The Government recognise that the powers under Clause 12 can be applied to whole sectors of the economy over long periods. The powers are also available to reduce prices and not simply to freeze them. But with the abolition of the cost controls and the eventual disappearance of margin controls, such powers are justifiable to regulate pricing behaviour in sectors where competition is weak and will remain weak. These powers will form the basis for the link between prices policy and competition policy, where competition cannot be stimulated and where there is a clearly identified need for regulation of pricing behaviour.

Examinations cannot be used to spread the network of control over the whole economy. There will not be capacity in the new Price Commission for more than about 10 of these each year. Voluntary undertakings are not enough. Statutory back-up powers are needed to ensure that the minority of firms who might be reluctant to act on a reasoned Price Commission report can be brought into line. But in practice undertakings may prove to be more appropriate than orders in many cases.

The existing reference programme has achieved useful results, but there has been evidence of lack of co-operation over the follow-up to Price Commission reports. For example, the domestic electrical appliances industry have not co-operated by ending the practice of recommending retail prices as the Commission recommended. Where industries have come to voluntarily negotiated agreements with the Departments, they may have been influenced by the theoretical possibility that tight controls could have been imposed on them through the Price Code if the Price Commission's recommendations had not been voluntarily implemented. The Code will no longer be available in its present form after July and it is more appropriate to take specific powers to act on Commission recommendations than to rely on the blunt instrument of the Code.

There are, of course, various forms of protection available to firms. The use of the order-making powers must appear appropriate in consequence of the indications—of matters requiring remedy—and advice given in the Commission's report; there will be an opportunity for firms to make representations before any order is made; and the safeguards under Clause 9 will apply. Amendments tabled by the Government in the Commons now provide for Affirmative Resolution procedure where regulation of particular prices under Clause 12 orders lasts longer than 12 months. That is referred to in Clause 12(7). For that reason the Government are unable to accept the Amendment, and trust that noble Lords will see fit to withdraw it.


Every time we discuss the powers of the Commission they become more and more rigid and it is more and more difficult to see how any differences can be accounted for on this question of retail prices. If one fixes retail prices very rigidly, one will sometimes be doing a great deal of harm because costs will be greater than those prices and one will sometimes be keeping up prices because they would have gone down had it not been for the Price Commission and the way they operate.

Having listened to the debates on the various Amendments, it seems that there is very little elasticity on the part of the Government, very little allowance for variations, and it seems that they are putting the Price Commission in an exceedingly dictatorial position, and that cannot be to the advantage of the consumer, and certainly it will be no advantage to the producer. I regret that the Government are maintaining an absolutely rigid view about this, because I think there is room for some variation which might be agreed on both sides, so making the Bill more acceptable and practicable. The Government are making it a very difficult Bill to work.


The noble Lord, Lord Wallace of Coslany, said the Government's position had been taken up largely because, as he said, there were markets which were not very competitive and would continue so to be. Clearly he feels strongly about this and has in mind a number of markets. May I ask him to give some examples of the markets he has in mind.


I was about to make that very point. However, if we can be assured that this will be applied only to markets where there is not much competition, I do not think the Minister will have much quarrelling from us; if the Liberals did not have their present self-imposed silence I think they would be with us on that point. In highly competitive markets we want to be guarded against arbitrary action on the part of the Secretary of State because, as we have said many times, we do not think the present Secretary of State is particularly sympathetic to the problems of industry. If we could be assured that, as the noble Lord said, this is designed to deal with markets in which there is little or no competition and that he will consider tabling an Amendment which said just that, that would go a long way to resolving the problem.


Is it not a fact that these provisions apply not only to markets for goods but also to markets for services? In other words, does this provision cover the whole field of professional services?


To answer the question posed by the noble Lord, Lord Mottistone, I think he will agree that there are very few perfect markets, and that is the main point we have in mind. Regarding the point made by the noble Baroness, Lady Elliot of Harwood, I would remind the Committee that the Government have agreed on Amendments in the Commons to introduce the Affirmative Resolution procedure, and that will provide an opportunity for challenge in both Houses. Therefore, although a great deal has been made of the increased powers of the Minister, they are sinister connotations which are not deserved. This is simply making sure that there is no escaping on the part of some difficult individuals, of whom there are a few here and there, and that is why the Government have taken this view.


The noble Lord, Lord Wallace of Coslany, referred to the Affirmative Resolution procedure. Was he referring to the one which the Opposition have put into the Bill—I think it was Amendment No. 1—and, if so, is it his intention to persuade his honourable and right honourable friends in another place to accept that Amendment?


No, and I will repeat what I said because the noble Lord has obviously misunderstood the point. Amendments tabled by the Government in the Commons now provide for the Affirmative Resolution procedure where the regulation of particular prices under Clause 12 orders last for longer than 12 months. Those Amendments were moved by the Government; the Government as well as the Opposition move Amendments, but we are more successful.


Would the noble Lord answer my question and name any markets he has in mind which today are not competitive? Clearly he must have some in mind from the way he spoke when he first replied to the Amendment.


I said there were very few perfect markets. I could not be more specific and define one.


I am still mystified about the Affirmative Resolution procedure which the noble Lord, Lord Wallace of Coslany, mentioned. I do not deny it is there, but I cannot find it; perhaps I am looking in the wrong place. However, to return to the Amendment, I argue my case on the assertion that voluntary agreements, particularly in relation to sector matters, are infinitely preferable to the sledge-hammer procedure which the Government seek to include here. The Government have failed, either in another place or here this afternoon, to persuade us that the voluntary agreement is in any way unsatisfactory. Nor have they been able to offer any examples where they have sought to achieve voluntary agreements and failed to do so; there are certainly none of any recent vintage.

In the last analysis, if companies do not comply with voluntary agreements or do not listen to recommendations from the Commission or suggestions from the Secretary of State, the Secretary of State or the Commission can initiate specific price or margin investigations in the relevant sectors, and maybe the Secretary of State can make an order arising out of such an investigation. I am totally persuaded that the effect of the Amendment would be entirely beneficial and I must therefore press it.


Before we reach a decision on the Amendment, perhaps I might inform the noble Lord, Lord Trefgarne, that the Affirmative Resolution procedure to which I referred can be found in Clause 12(7).


I am much obliged to the noble Lord.

5.39 p.m.

On Question, Whether the said Amendment (No. 39) shall be agreed to?

Their Lordships divided: Contents, 70; Not-Contents, 89.

Resolved in the negative, and Amendment disagreed to accordingly.

[Amendments Nos. 40 and 41 not moved.]

5.47 p.m.

The Earl of MANSFIELD moved Amendment No. 42: Page 17, line 11, at end insert ("and such persons or organisations as appear to the Secretary of State to have an interest therein.")

The noble Earl said: I beg to move Amendment No. 42, which is also part of Clause 12. This is a matter of getting the Government to state their position over a point which is not the largest that the Committee has had to consider this afternoon. Clause 12, in effect, enables the Secretary of State to make orders or accept undertakings in consequence of reports which come as a result of examinations undertaken by the Commission. Your Lordships will see in particular that under the last part of subsection (3), where the Secretary of State proposes to accept an undertaking or make an order …it shall be his duty, before deciding whether to accept or make it, to consult the Director General of Fair Trading …".

The Amendment seeks to widen the area of consultation to include, such persons or organisations as appear … to have an interest therein".

One can think of examples where there may be organisations which are vitally concerned and which would want to be consulted and, if necessary, to make representations at this stage. Therefore, it seems to us fair that something on these lines should be written into the Bill.


With all due respect to the noble Earl, the Amendment is unnecessary. Reports by the Price Commission following examinations will have to be published, and persons who consider that they may be affected by the report's content will have 28 days following publication in which to make representations to the Secretary of State. During that period, the latter will not be able to make any order.

The Secretary of State's order-making powers will, of course, expire at the end of three months from the publication of the report. He will of course hold informal talks with the trade association concerned once a report has been published. The association will therefore be given fair warning if the Secretary of State decides that an order is necessary. However, it would be an unnecessary burden to impose a duty of statutory consultation on the Secretary of State in respect of orders and undertakings. The matters referred to the Commission under Clause 10 could be of interest to many firms and organisations, and it would be time-consuming to write separately to all of them. The requirement for an Affirmative Resolution procedure of both Houses of Parliament if the order is to last longer than 12 months is an additional safeguard for firms in the sector covered by a report. For those reasons we do not think the Amendment need be pressed.


Perhaps I could inject into the noble Lord's mind a thought which his remarks did not quite cover. It seems to me there is a great problem here between having an impartial, generally knowledgeable adviser, like the Director General of Fair Trading, and having proper technical advice at an early stage before it comes to the publication stage. While fully appreciating that there are opportunities for people to make representations at a later stage, one is always slightly suspicious of Government and their main agencies that they do not really know the details, particularly when they are dealing with a sector of industry. Therefore, there is point in my noble friend's Amendment, to make sure that the Government do not think of themselves so arrogantly as to be experts, and welcome the opportunity to consult with people who have expert knowledge, which indeed is left entirely open to them to choose. It does not say specifically who should be chosen: it merely gives them the opportunity and the guidance, if you like, for future generations, to have consultation on an expert basis, which Governments I am sure ought to admit they lack.


It is a very fine point that the noble Lord makes; but, quite honestly, I do not think the Amendment will make much difference at all. There is informal consultation already indicated, and an opportunity will be given for everyone to have full details. I do not see why we should have to extend it by including in the Amendment, … such persons or organisations as appear to the Secretary of State to have an interest therein". He will already know. If he did not, he would not be a very good Secretary of State, would he?


The noble Lord said it.


I think many of your Lordships may be puzzled as to what this is all about, and I am bound to say that I think that noble Lords on the Front Bench opposite could have given us a rather clearer explanation of what we are talking about in these clauses. Am I right in thinking that when, in Clause 10, it talks about examining any question relating to prices or charges", we are not really thinking about increases or decreases in prices or charges but about the way in which the prices are described; for instance, "So much off so-and-so", whether the charges should be described as including VAT, whether or not there should be recommended prices, and that sort of thing? These are questions "relating to prices or charges". Am I right about that? Because I do not see how one can inquire in general into prices or charges and come up with recommendations that could be formed into regulations, because prices vary so very much according to the outlet at the retail level. I remember one very large manufacturer telling me that there was no such thing as a general price; each price was a quotation suiting the market at that time, the prospective customer and all the rest of it. There is no way of making regulations about the level of prices in that sense.

From that, I deduce that these clauses must mean something else. Could the noble Lord now tell us what they mean, or at what they are directed? Only if we know that can we decide the sort of question we have to decide in this particular Amendment, which is to see whether what the Secretary of State proposes to do should be the subject of consultation.


Perhaps I may intervene briefly here. I thought the examples which the noble Lord, Lord Drumalbyn, gave were typical of the kind of problem that would be dealt with under these clauses, such as recommended retail prices and so on. The earlier part of the Bill, dealing with investigations into particular price increases by particular firms, is one kind of thing; but we are then taking powers to take more general problems concerning prices, such as those that the noble Lord quite rightly mentioned, and to ask the Price Commission to examine these more general questions. They could cover such things as general price levels, profit margins and price display matters, which do not relate to the actions of a particular firm in relation to a particular price but to more general questions of price policy.


I wonder whether the noble Lord could inform the Committee how many such investigations and orders he conceives to be likely to take place during any period of 12 months. I must say that I am entirely perplexed by answers which have been given from his Bench this afternoon. At one stage—I think it arose from something which the noble Lord himself said—I thought that the various matters we were discussing related to areas where there were obvious monopolistic elements which in some way or other most of us would agree needed to be dealt with. But when the noble Lord, Lord Wallace, replied to a question asked by the noble Viscount, Lord Rochdale, sitting on this Bench, he said that very few markets were perfect; and, consequently, to my eyes he opened up the vision of vast intentions. After all, there are tens of thousands of prices which are charged every day. I should not like to say how many prices are charged and how many exchanges take place in a comparatively small economy during a year. I am completely perplexed as to the scope of operation of the Commission that we have been discussing for the last two afternoons.


Of course, to some extent I should use the old adage, "We must wait and see". To some extent, it is a case of finding out how big are the problems which are referred to the Price Commission. But we have made some rough estimate having regard to the likely resources for the Commission and having regard to the general nature of the problem as we see it. The estimate that we have made is that, as to investigations—that is, under the earlier part of the Bill—there may be something like 40 or 50 such investigations; and, as to the more general examinations as they are called, under the second part of the Bill, probably something in the order of 10. When the noble Lord, Lord Robbins, refers to the vast array of prices, of course he is right; but I would recall the points we have made earlier, particularly in relation to the investigatory procedure, about the careful selection from among the many price increases that seem to the Price Commission to warrant special investigation. As I said in reply to an earlier Amendment, it is a case of having special targets for special reasons. It is not a widespread operation in the sense in which the noble Lord was holding up his arms in despair.


I cannot pretend that I am totally satisfied with the answers from noble Lords opposite. I do not suppose that they would believe me if I said that I was. However, I do not think that we can push this matter any further this afternoon. I shall read the noble Lord's answers in the Official Report with considerable interest. Meanwhile, I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

6.1 p.m.

The Earl of MANSFIELD moved Amendment No. 43:

Page 17, line 11, at end insert— ("Provided that no order or undertaking imposes a restriction on a price increase, price or margin to a greater extent or for a longer period than recommended by the Commission in a report made in pursuance of subsection (1) of the previous section.")

The noble Earl said: This relates, in effect, to the same Part of the Bill and is one more attempt on the part of noble Lords on these Benches to try to ensure that the Secretary of State acts in a fair way. I am sure that he will believe that he is acting responsibly, but this is an extra safeguard. Under Clause 10, the Commission is given power to initiate what are called general examinations. These are rather wider powers than in earlier Parts of the Bill. The danger is that an order enforcing a recommendation could, in certain circumstances, do serious damage to companies whose circumstances have not been taken into account. For instance, an order relating to a sector could, in certain circumstances, cause inequity of treatment as between different companies in that sector. In order to rectify the position to some extent, the Amendment says in effect that the Secretary of State should not be able to make orders or accept undertakings which are more severe than the Commission recommend in their report. It may be that the noble Lord who is to reply will say that this restriction on the discretion or power of the Secretary of State is somewhere written into this clause. If it is, I should be glad to be directed to it. I beg to move.


This Amendment was, I believe, debated in another place. Unlike orders following investigations, orders following examinations are not to be rigidly circumscribed by the Commission's report. Whereas the Commission will be able to make clear recommendations about price increases, price levels and margins following an investigation, they will necessarily be less precise in the advice they offer or in the matters that they indicate in a report of an examination as in need of remedy. This is because examinations will cover not just particular prices but pricing policy in general within a sector. They will also be concerned with the generality of firms in a sector rather than with a single firm.

The Secretary of State is, therefore, only required to make orders or to accept undertakings "in consequence" of the indications or advice in a report. In general, this would mean that an order would impose a restriction on a price increase, price or margin which was no more severe than, and lasted no longer than, suggested in the Commission's report. But it is possible for there to be some divergence because only the totality of the order has to be in consequence of the report. There could then be some variation between the price regulatory aspect of an order and what was said in a report.

There is no case for limiting undertakings. The firms involved in a sectoral report do not have to offer them. Furthermore, we believe that undertakings could range very widely, covering matters not specifically mentioned in a report but on which firms were prepared to give undertakings.

With respect, I believe that the Amendment is misconceived. It refers to "recommendations" made by the Commission in a report. Clause 11(2) makes it clear that the Commission will not make any such recommendations and that they should merely include in a report, first, advice where they have been asked for it in a direction and, secondly, indications of any matters which the Commission consider are connected with the question and should be remedied. My hope, following that, is that the noble Earl will do what his colleagues did in the Commons in Committee and will withdraw the Amendment.


Do I understand from the noble Lord that the recommendations that might be made by the Commission under Clause 11 will specifically not include those items listed in the Amendment, such as price increases, prices or margins? Will that not be the subject of the advice that is given or did I not hear the noble Lord aright?


What I said was that, in general, an order would impose a restriction on a price increase, price or margin which was no more severe than, and lasted no longer than, suggested in the Commission's report.


Therefore the Amendment is relevant to the subject under discussion. I thought that the noble Lord indicated that it was not.


I did not say that it was irrelevant; I said that it was unnecessary.


As it is relevant and as I am dissatisfied with the general attitude of the Secretary of State to this matter, it seems to me that it would be reasonable to have this further restraint on his potential action. I would personally support my noble friends on this particular point.


I do not think that this Amendment was withdrawn in another place because anybody was particularly satisfied with the answers of the Minister. My impression on reading Hansard is that they did not understand it any more than I did. They probably decided to have a go later on, but, as their procedures are different to ours, they did not get that opportunity. What I do not understand—and I am sure that it is due to my stupidity—is this. Does the noble Lord rely on the words "the Secretary of State considers appropriate"? What is it that the Government rely on in saying that there is in this subsection any fetter upon the discretion of the Secretary of State? I know it is said that he has to take the report and acts in consequence thereof; but what is it that restricts his right to make any order that he thinks fit?


I would suggest to the noble Earl that it is in Clause 12(5).


That subsection reads: The Secretary of State may at any time by order vary or revoke an order in force. That is not exactly a fetter on his discretion or powers of action. It seems to me that it gives him absolutely unlimited powers to do what he likes at any time. What I am asking the Government is this. If in the rather wider field which is initiated under Clause 10 the Secretary of State is minded to accept an undertaking or make an order—and the words, I think, are "in pursuance"'—is there a safeguard? If so, what is it?

Viscount SIMON

I do not know whether I completely misunderstood what the noble Lord on the Government Front Bench said, but I thought he said that in the circumstances of a Clause 12 order, the Commission would not have recommended any price increase, any limitation of a price increase or alteration of a margin; therefore the Amendment did not apply to recommendations made on this clause. If that is so, it seems, with great respect to the noble Earl, that the Amendment is misconceived.


I am grateful to the noble Viscount. I repeat my earlier remarks: the Amendment is, as the noble Viscount says, misconceived. It refers to "recommendations" made by the Commission in a report. Clause 11(2) makes clear that the Commission will not make any such recommendations and that they should merely include in a report (a) advice where they have been asked for it in a direction, and (b) indications of any matters which the Commission consider are connected with the question and should be remedied.


The noble Lord's answer is coming perilously close to what on other occasions, and feeling more rude, I have described as "semantic waffle". If the Commission are going to give advice, presumably it is in the mind of the Commission that the Secretary of State should act upon it. I see the point that it is not going to be a formal document, report or piece of advice, as is contained in other parts of this Bill. I wonder what the point of it is unless there is going to be some advice upon which the Minister can make up his mind and act. I do not want to weary the Committee any further and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 44 to 46 not moved.]

6.13 p.m.

On Question, Whether Clause 12 shall stand part of the Bill?


I should like to ask two small questions on this. At the top of page 18 it says: (c) provide for the enforcement of the order by an authority specified in the order". Can the noble Lord tell us anything about that? What authority has he in mind—the trading standards authority or what? Will it be obligatory for the Secretary of State to disclose the advice he gets from the Director General of Fair Trading about any proposal that he may make under subsection (3) of the clause? The noble Lord could write to me if he is not able to give the answer now.


I will accept that offer because it is difficult at short notice to give the answer. I hope that we will advise him in sufficient time for the next stage.


Could the noble Lord say whether he will give this advice before the next stage of the Bill, which I understand is being rushed at us?


I said that. I will endeavour to see that the noble Lord receives the information. I know that time is short.

Clause 12 agreed to.

[Amendment No. 47 not moved.]

Clauses 13 to 19 agreed to.

Clause 20 [Further duties to have regard to specified matters and sanction provisions]:

[Amendment No. 48 not moved.]

6.16 p.m.

Lord TREFGARNE moved Amendment No. 49:

Page 25, line 17, at end insert— ("(4) Notwithstanding the provisions of sections 15, 17 and subsection (3) of this section, the sanction provisions shall not be operative until a separate order is made by the Secretary of State under this subsection setting out the limits on pay increases to which the sanction provisions relate and any such order shall require approval by resolution of each House of Parliament.")

The noble Lord said: On behalf of my noble friend Lord Mansfield and myself I beg to move Amendment No. 49. The purpose of the Amendment is to add a new subsection to Clause 20 of the Bill, to provide that the Secretary of State shall lay an order before either House and seek its approval with respect to limits on pay increases as part of his policy, and so that companies affected by the provisions of this Bill, as presently drafted, may have some guidance as to the levels of pay which the Secretary of State regards as reasonable when they are conducting negotiations with their people but, above all, when they are formulating their prices.

On this side of the Committee we would say that the control of pay in the battle against inflation is at least as important as the control of prices. The Bill provides for a very detailed price control mechanism, but control of pay is conspicuous by its absence from this Bill. We are told that the Government are in negotiation with the Trades Union Congress and I gather that there is a White Paper which we may see before the end of this Parliamentary Session, but nothing in this Bill, not a word. An Amendment along the lines suggested is the least that we can do to impress upon the Government—and, indeed, the Price Commission —that the effect of the omission from this Bill of the control of pay will be very serious and therefore we ought to add this new subsection.

I hope that on this occasion at least we may rely upon the support of the Liberal Benches. I am not wishing to be anything other than reasonable, but the Liberals have said clearly and publicly that they regard the control of pay as crucial. If I recall aright, the right honourable gentleman Mr. Steel has said clearly that his continued support for this Government is dependent upon the production of an effective pay policy. I regret that the Government have been discouraged of late in achieving that end. We have all heard of what has happened in the Isle of Man to the unfortunate Mr. Jones, and what has happened in Tynemouth at the Conference of the National Union of Mineworkers. It may be thought that now the Government are not able to produce an effective pay policy. Whether or not that is true remains to be seen. A prices policy without an effective pay policy is ineffective, unworkable and unjust.

Can we consider for a moment what would be the effect of a price policy without a pay policy? While I agree that the Government have declared their intention of producing an effective pay policy, none yet exists and certainly none is included in this Bill. The Session has but two or three weeks to run. The effect would be that one vital element of companies' costs—that is, wages and salaries—would be quite uncontrolled, while the control of their prices remained as effective as ever. We have seen, in some of the Amendments moved earlier, how price increases beyond the control of companies, such as changes in exchange rates or a change in the price of commodities coming from outside the United Kingdom, are only marginally protected, in our view, so far as producers and manufacturers are concerned.

Without a control of pay, a further huge element of cost remains outside the control of companies. My noble friend Lord Mansfield has spoken repeatedly and at length during this Committee stage on what happens when companies' profits are reduced. I would say that in this situation the question is not one only of reducing profits but of creating losses—and sustained losses lead to closures of companies, to redundancies and to massive dole queues. The dole queues in this country are already too long. I am sure the Government agree with that. But without proper pay controls added to the controls of prices which we are here debating, those dole queues will become longer and longer. I hope, therefore, that your Lordships will agree that this new subsection will be a useful addition. I beg to move.


I should like to support my noble friend, rather in the same way as I was saying earlier, that in order to plan people need to have sensible figures written into the safeguards; so it seems quite wrong and inequitable to have a clause in the Bill which can be operative when it might be compared against a vague statement. I am not saying there will be a vague statement in relation to pay, nor am I saying that the Government would wish there to be one: I am sure they do not. But it may be all that a Government, at some time—not necessarily this Government, but any Government—can achieve, and if they can achieve only a vague statement, it seems to me that without what one might call "figures" in the business, it is not reasonable to allow this clause to be operative.

As I read my noble friend's Amendment, all that it does is to say that sanctions will not be applied unless there is a pay policy—and by that is meant a formal pay policy which has probably been put before Parliament—rather than just a vague agreement with the TUC, which may be all that can be achieved either in this year or in another year. I should have thought, therefore, that this is the sort of Amendment over which the Government might be able to demonstrate to us that they are relenting, although so far on this Bill they do not seem to be very forthcoming.

6.24 p.m.

Baroness SEEAR

This is perhaps one of the most serious Amendments which has been brought forward by the Opposition Front Bench. Of course we agree that pay and prices are intimately related one to the other; but you cannot get an adequate pay policy unless there is an assurance that there is going to be some kind of a price policy. That absolutely stands without any further emphasis.

My Party, as the noble Lord, Lord Trefgarne, has said, stands absolutely behind the need to have a control over pay, but I do not think that at this time that can, or should be, expressed in terms of a simple figure. The idea has been put forward that there is to be a figure presented to Parliament and that unless it is presented in terms of control of pay, then the essence of the Bill is wrecked. That is, as I understand it, what the Conservative Front Bench are saying; and this Amendment is also saying that unless there is a very detailed and specific control over pay the whole principle of the Bill falls. That is what I read into the Amendment—


If the noble Baroness will forgive me, I think perhaps she needs to look at the Amendment more closely. It is only this clause and not the whole Bill, as I read it, which is under threat. Perhaps I have misunderstood my noble friend.

Baroness SEEAR

I do not think you are going to be able to get, and I do not think that we should write into this Bill at any stage, a requirement for a specific figure, which is what I understand the noble Lord, Lord Trefgarne, to be asking for. There has to be an agreement about pay, and obviously there has to be a limit on the extent to which pay can increase. Quite plainly, also, the operation of this whole Bill depends on reasonable control over pay. Unless that happens, the Bill cannot be put into force. While that is true, as I see it, that is not a reason for supporting this Amendment, which asks for something so specific in terms of pay control that I do not believe that it can be delivered at this stage.


Do I take it, from the speech we have heard from the Opposition Front Bench, that the Tory Party have at last decided that they are in favour of maintaining an incomes policy? For the last two or three years we have been trying to get them to say that, but their history in this respect is somewhat varied. For two years, Mr. Heath would not touch one, and then suddenly he grabbed one. Since the change of leadership, we have tried very hard to find out what would happen as regards an incomes policy if the Tory Party were in power.

From what the noble Lord was saying, he will not accept that there is any need for any policy on prices unless we guarantee a pretty strict one on incomes. But the history of the last 12 months has shown that there is a far stricter control on incomes than on prices. Indeed, our problem now with the trade unions is that one cannot deny their claim that there has been a marked reduction in the standards of life. That comes about because, as I have suggested, there is a far stricter control on incomes than on prices. Therefore, if indeed we have now reached the advance stage at which there is a categorical assurance that the Tories would in fact support a strict prices policy, provided there is an equally strict incomes policy, that is a great advance. We have not had it before.

Therefore it seems to me that they are willing to take into consideration—I will not give a percentage—the undoubted fact that living standards have been falling because, remarkably enough, the trade unions have adhered to Phase II of the incomes policy while prices have been going ahead much faster. At this stage, I am not arguing over who is to blame. As the noble Lord said, the devaluation of our currency has had quite a lot to do with it. On the other hand, there is the feeling in trade union ranks, and indeed among other ranks, that some of the increases we have seen have been quite unjustified.

I have spent my life, man and boy, working for a prices and incomes policy—indeed, I operated one for 12 months—which is fair and equitable on both sides. I do not think we can maintain one without the other. If there are to be increases in incomes which we feel are unjustified, then T would argue that the employers concerned should not be permitted to increase their prices. Therefore, I hope that the Opposition Front Bench will not be frivolous about this matter. As the noble Baroness suggested, it is one of the most vital issues we can discuss, and they should tell us whether they are now taking a stand on the need to keep complete control of incomes as a condition of accepting price control.

6.31 p.m.


I hesitated to see whether the noble Lord, Lord Trefgarne, wanted to reply to my noble friend's very pertinent question. Possibly he will take an opportunity of doing that later. But I think we should resist the temptation to go too broadly over the ground of pay and prices policy in relation to the purposes of this Amendment, interesting though such an exercise would be.

However, may I just say, in general, that I hope the noble Lord, Lord Mottistone, and the noble Lord, Lord Trefgarne, will not be too surprised if I say that found myself in sympathy with a certain amount of what they said about the importance of pay restraint equal to, or in addition to, price restraint. I thought that the noble Baroness, Lady Seear, also emphasised very pertinently the need for effective action on both sides. This Bill is providing the instrument for action on the side of prices. That is what it sets out to do. But there is a link through the clause that we are now discussing.

In relation to the Amendment that has been moved, though in a sense I share the objective which the noble Lord has expressed, I must advise the Committee that it is quite unnecessary to act in this way, because the Amendment gives no more protection to companies than they already have. What the Amendment seeks to do is, in effect, already provided for in the Remuneration Charges and Grants Act 1975, as extended by this Bill in, I think, Clause 17. The 1975 Act provides that a pay sanction may be contained in a Price Code only when Section 1 of that Act is in force. Moreover, the pay sanction must refer to limits set out in a White Paper and in an order which has been approved in draft by both Houses of Parliament. "Limits" is the important word, and I agree with the noble Baroness, Lady Seear, that to try to define those limits in this year by a tight figure is probably not appropriate. But the word "limits" is in existing legislation, and it is that which provides the kind of safeguard which, presumably, the Amendment seeks to achieve.

It may also be seeking to achieve a certain clarity in the expression of pay policy. I believe that that, also, is achieved by existing legislation, and, if we bear in mind that the White Paper containing arrangements about pay must have the approval of both Houses of Parliament, that is a sufficient safeguard in respect of the clarity point. Of course, it is the Government's view that future pay arrangements should be framed in sufficiently clear terms to enable every firm and union—I take the point of the noble Lord, Lord Mottistone, in this connection—to know whether a proposed settlement is, or is not, in accordance with the arrangements as set out in the White Paper. Those would be our clear intentions.

I hope the Committee recognises that this week, embarking, as we are, upon particularly difficult and delicate negotiations with trade unions, is not the time for me to start pronouncing too categori- cally upon these difficult questions. But on the narrower point of the link between pay policy and the pay sanction within this Bill, I hope I have sufficiently assured both noble Lords that their Amendment is not necessary.

6.36 p.m.


I am sorry that I am not persuaded by the arguments of the noble Lord. I listened carefully to what the noble Baroness, Lady Seear, said. She was anxious, as indeed was the noble Lord, Lord Oram, not to write into the Bill precise figures which might cause difficulty at some later time, and of course my Amendment does not seek to do that. We ask only that such figures as may be arrived at should be approved by Parliament. As the noble Lord, Lord Oram, said, there are difficult and delicate negotiations in train this week, and I understand that a White Paper will be published at the end of those discussions. I do not suppose that we shall have a chance to debate that White Paper in this Session, but, whatever is contained in it will be to all intents and purposes the Government's pay policy for the year beginning on 1st August.

I am disappointed that the Government do not feel that, by an Amendment such as this, their hand would be strengthened rather than hindered in the negotiations now in train. I am equally disappointed that the noble Baroness, Lady Seear, and her colleagues do not feel able to offer more forthright support to this proposal. I must confess that the words of the noble Baroness tonight, which are presumably pronounced with all the usual force of the Liberal Front Bench, which I acknowledge, were not as forthright as those that I heard from her right honourable friend Mr. Steel. But be that as it may. As I have said, negotiations are now in progress and it may be that by next week, when we come to the next stage of the Bill, the matter will be more clearly in the Government's mind, and perhaps we shall be able on that occasion to have a more meaningful debate on this subject.

In those circumstances, I think it better to withdraw this Amendment and perhaps return to the matter at a later stage, hoping that we shall have a more clear response from the Government and, perhaps, more satisfaction. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 20 agreed to.

Clause 21 agreed to.

Clause 22 [Interpretation, supplementary provisions and repeals]:

6.40 p.m.

The Earl of MANSFIELD moved Amendment No. 50: Page 27, line 7, at end insert ("but no such order shall so provide with regard to any matter concerning which provision is made in or in pursuance of sections 6(5), 7(5)(a)(i) and 9 of this Act.")

The noble Earl said: This is the penultimate Amendment on the Marshalled List. Clause 22(2) contains provisions which, when one looks at them for the first time, appear to be almost breathtaking in their simplicity and, at the same time, in the power which they give the Secretary of State. The clause says: The Secretary of State may by order—(a) provide that such of the provisions of this Act as are specified in the order shall not apply in such cases as are so specified".

It is true to say that some fetter on the Secretary of State is provided, because the subsection goes on to say that no order shall be made in pursuance of this subsection unless a draft has been approved, in effect, by each House of Parliament. Also it is true to say that the matter was taken up, in a very cursory manner, in the other place. One of my honourable friends—I think it was Mr. Shaw—voiced the worries and received some kind of assurance, in reasonably ringing tones, but no more was heard. I do not believe that assurances in ringing tones, or even in not so ringing tones, are quite good enough when one is discussing potential Acts of Parliament.

I should like to explain the worry, for it may be that somebody will be able to assure me that it is one which either is misconceived or can in some way be allayed. One appreciates that in certain circumstances the power to override the provisions of the Bill by order could be used to the advantage of industry, either as a sector or in relation to an individual firm. Equally, one appreciates that such a power could be used in a way which might damage and harm either a firm or a group of firms. For instance, the Secretary of State could make an order to overrule the safeguard provisions which are contained in Clause 9. I believe that to be the most obvious example that I can give.

In such circumstances, I should like the noble Lord to tell me what it is that is contemplated by subsection (2). And, if there is to be any fetter on the control of the Secretary of State, is it provided by any more than the resolution clause at the end of the subsection?


I hope that I can satisfy the noble Lord. The Amendment is unnecessary. The basic purpose of exception orders is to remove firms from the possibility of being investigated or examined. The Secretary of State has no intention of using the powers under Clause 22 to enable the safeguards and other restrictions on the Secretary of State's and the Price Commission's powers which the Bill contains to be disapplied. Regulations under Clause 9, which are subject to the Negative Resolution procedure, could in any case be drafted in such a way as to impose less generous safeguards on some firms rather than others. The Amendment would in no way alter this. The Government have already amended the Bill to require that exception orders must be approved in draft by both Houses of Parliament. Such a procedure would act as a strong deterrent to any Minister who wished to use Clause 22(2) to remove safeguards which the Bill confers on firms. I should like to add that the Amendment as drafted is somewhat loose and is regarded as defective because it refers to: … any matter concerning which … or in pursuance of sections 6(5) …". The Amendment relates to prices and charges in general and would, in effect, ensure that virtually no exceptions could be made.


I am not so sure that that would not be a good thing. I believe that the noble Lord is saying that we have the protection of the Resolution of each House of Parliament. That is the only protection. If the Secretary of State were supported—as he would be, one assumes—by his majority in the other place, and if there were the alliance provided by the "Laberals" that we have here today, the safeguard would be less than effective. On that note, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 22 agreed to.

Clause 23 [Expenses]:

6.46 p.m.

Lord MOTTISTONE moved Amendment No. 51: Page 28, line 4, after ("department") insert ("and any company being investigated").

The noble Lord said: I do not propose to detain the Committee for long. This is in the nature of a probing Amendment. I touched upon it yesterday when I spoke to an earlier Amendment to the Bill. Its object is to call the attention of the Government to the fact that nowadays an enormous amount of expenditure is built in, almost by mistake, to many Acts of Parliament, including this Bill. During my time in this House we have reached the stage of very wisely putting into the Preamble to Bills their probable financial cost. This Bill says on page v that the administrative expenditure incurred by the Price Commission is expected to be £5 million per annum and that expenditure on grants under Clause 18 is expected to be £3.5 million. That is £8.5 million which the Government can put their fingers on. One is conscious of the fact that the Government are very aware of the problems involved in trying to make the economy as a whole more effective, but they tend to forget that the kind of things which are written into this Bill create an enormous amount of extra work and, in some cases, the engagement of extra people.

My own job at the moment is a direct result of intervention in our affairs by the European Economic Community. The organisation for which I work got on very nicely with a secretary and deputy secretary for many years. Then a Labour Government came into Office which made it rock a little, because of the intervention policies of Labour Governments. When we entered the Common Market my organisation decided that yet another person was needed—and that is me. The result is that companies have to pay out a great deal of extra money. I can assure noble Lords that I am grateful to my organisation for it, but, to be quite frank, I feel that I am something of a drain. I am there only because central bureaucracies, whether based in Westminster or Brussels, are causing more work and hidden expenditure which, if you add it all up—not just the effects of this Bill but the countless other Bills which have been passed by Parliament over, say, the last 20 years—probably has more of an effect in letting prices run away than anything that this Bill is trying to control.

May I suggest that Governments need to tackle this problem, although I do not suppose that it is easy to produce a figure. Unfortunately, the Government have rushed the Bill through both Houses of Parliament so fast that I did not have time to ask my friends to produce a figure for noble Lords. It would be difficult to obtain an estimated figure, but it is the principle with which we want to involve ourselves. I could not put this down as an Amendment. I wanted to put down an Amendment to the statement on page v regarding the financial effects of the Bill. I should have liked my Amendment to use the phrase: … and the Government have also taken into account the vastly increased cost this is going to cause to companies which might be investigated",

or some such phrase, just to show that they understand and realise this fact.

We live in a collective economy and these things grow in tiny ways. Even if extra people are not employed, although in some cases they are, it takes up the time of busy executives who should be getting on with making money for their company and, indirectly, for their country. Therefore it is important that the Government should address their mind to the problem, to find out whether they can give me an undertaking that in future they will take note of the point and try to fit it into future Bills in order to help us to watch all the pennies, not just those which the Government control.


The most certain answer that I can give to the noble Lord in rejecting this Amendment is one which frankly I have hesitated to bring forward. Having spent so many years in another place and such a short time in your Lordships' House, I am still puzzled by the contrast between the rules of order in the two assemblies, but this particular Amendment, I am advised, relates to one of the financial provisions of the Bill and is, therefore, strictly out of order.


I wonder whether I might intervene. I do not think that will do. On a recent measure in which the noble Lord's noble friend Lady Birk and I were involved the same point was raised, and the answer then was that we are perfectly entitled to put financial Amendments into Bills in this House, although it is subsequently open to the other place to reject them on the grounds that we are interfering with their prerogative. But we are perfectly entitled to move, and indeed carry, Amendments of a financial nature in this House.


My Lords, I am grateful to the noble Lord. We live and learn. I did admit my hesitancy. I am glad there has been a recent precedent. In any case, I was not going to rest on that in not offering a reply to the noble Lord. The second point that I think he should realise is that his Amendment is deficient, in that it applies only to costs incurred during investigations, for some reason, which may be a good reason in his mind, he has left out expenses incurred during examinations. However, I expect half a loaf would satisfy him, but I am not going to give it to him, I am sorry to say. It would be a novel departure and conceivably a dangerous precedent to reimburse firms for expenses incurred during investigations. In any case, there is nothing to stop them from seeking to recover such expenses through prices, provided they can justify them in terms of the criteria in the Bill. Whether the noble Lord's firm could justify his salary in those terms is perhaps open to doubt, but it would be open to a firm to take these expenses into account in putting up their case. Indeed, where expenses are significant, we would expect the Commission to take them into account during the investigation. It is certainly not an Amendment which we can accept, and I think the noble Lord, Lord Mottistone, recognises that; but there would be possibilities of them recovering their expenses in other ways.


May I thank the noble Lord for his reply and indeed for being kind enough not to be totally guided by the thought that we cannot discuss finance at all in this House. There is just one tiny point. The burden of his answer, or the important part of it, was that companies could recover the costs through their increase in prices. The whole point of the Bill is to provide some measure of avoiding that. The whole point of my Amendment was to try to show the Government that, in having a Bill of this nature, they will cause extra expense, which in itself may have the very opposite effect of what they intend by the Bill. With those words, perhaps I might be allowed to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 23 agreed to.

Remaining clause and Schedules agreed to.

Title agreed to.

House resumed: Bill reported with an Amendment.