§ 4.50 p.m.
§ Lord JACQUES
My Lords, I beg to move that this Bill be now read a second time. The basic purpose of the Bill is to amend the Price Commission Act 1977 to remove the provisions in Section 9 of that Act which guarantee companies a certain level of profitability during and following an investigation by the Price Commission into individual price increases, regardless of the Commission's findings. The Bill does not affect the safeguard provisions which apply following examinations by the Commission into whole sectors of industry, as opposed to individual firms. The safeguard provisions which the Bill seeks to abolish or amend were originally introduced into the Price Commission Act 1977 in response to 494 concern expressed by industry about the powers granted to the new Price Commission by that Act. The Government always maintained serious reservations about the necessity for such provisions and believed that the Price Commission would be fully able to make provision for the essential requirements of individual companies without needing to be constrained to do so by detailed regulations.
The Price Commission have now been in operation for 18 months and it can be confidently stated, looking at the Commission's record over that period, that those fears which led to the introduction of the safeguards were greatly exaggerated. The Commission have demonstrated in report after report their sensitivity to the particular circumstances of each individual case and to the need for industry overall to maintain a sufficient level of profitability to finance innovations and investment. In almost every report it will be found that the Commission devote a chapter or major part of a chapter to the cash flow position and financial outlook of the company. Often the Commission's conclusions have been strongly influenced by companies' impending requirements for finance to fund capital developments. There is therefore no evidence that the Commission are insensitive to industry's financial needs.
The Commission have, on the other hand, indicated plainly that the existence of the safeguard regulations has proved a considerable handicap on its ability to operate effectively. For example, the safeguards were invoked in 20 of the 31 investigations into pricing by individual enterprises which the Price Commission have now completed. In nine cases, the notified increases were fully safeguarded, while in 11 other cases the increases were partially covered by the safeguards. There is no doubt that the existence of a set of rules which enables prices to be increased automatically, whether or not that increase is justified in all the circumstances, runs counter to the basic principles of the prices policy enshrined in the 1977 Act. For such a policy to be effective, each price increase notified should be examined on its merits and the Commission's recommendations based solely on their findings. The existence of safeguards which guarantee firms certain levels of profitability during and following investigations regardless of the Commission's 495 findings about efficiency and competition, seriously narrows the scope for the Commission to make appropriate recommendations.
The passage of this Bill will not allow the Price Commission to restrain price increases indiscriminately with no regard to the company's profitability or plans for investment. The Commission will continue to be guided by the criteria in Section 2 of the 1977 Act in performing their functions. These criteria require the Commission to take account of a range of factors including the following: the need to recover costs; the desirability of making the best use of resources; the need to defray the cost of capital, including the compensation for risk element; the need to take into account changes in prices in determining the value of assets; and the need to finance innovation, improvement and expansion. One would almost have thought those guidelines had been prepared by the CBI, they are so generous and liberal.
The efficient company has nothing to fear from the Price Commission either now or after the passage of this legislation. What the passage of the Bill will secure is that it will no longer be possible for an inefficient company, using the automatic price increase that safeguards allow, to pass costs on to the consumer without even considering the possibility of absorbing some through greater efficiency. If the Bill helps to prevent this sort of action the consumer will benefit, and in the long term so will the company concerned, if, as a result of an investigation by the Price Commission, it is encouraged to adopt more efficient methods.
The Government have never argued that the work of the Price Commission would lead to a massive reduction in the rate of inflation. The work of the Price Commission has certainly made a contribution to the remarkable reduction in the rate of inflation which we saw last year, but it has never been expected that the Price Commission would have a quantifiable effect on the cost of living overall. The Price Commission operate on a selective basis; their role is to prevent unnecessary price increases, but not to act as an agency of control across the board. The Government are seeking through this Bill simply to make this selective control more effective.
496 I believe price control as we have it today is modelled on our needs. In our economy we have certain spheres where there is competition which goes a long way to controlling prices. In other spheres we have imperfect competition; we have many instances where the market is dominated by one or two market leaders and there is imperfect competition so far as price control is concerned, so that there is need for an agency. And of course we have, as a third category, absolute monopolies including State monopolies.
In such a mixed economy it is not necessary to have rigid controls across the board. That is costly to administer and is costly to industry. In such a mixed economy we require selective control, and that cannot be expected to have, and will not have, a fundamental influence on the retail price index; it cannot have. It is, alternatively, simply part of the monopoly legislation; it is part of the legislation which tries to prevent unnecessary price increases from being passed on to the consumer and is quite different from rigid, inflexible price control in its effect on the RPI. That is the kind of price control we have now and I should have thought that, because of the liberality behind it and because it is modelled to suit our economy, it would have had all-Party support.
I wish to draw attention to one factor which has been ignored by opponents of the Bill but which is of fundamental importance. This is the matter of the Price Commission's ability to allow price increases apart from the application of the automatic safeguards. While the removal of the automatic safeguards will prevent companies from putting up their prices, the Commission will continue to retain its discretionary power to allow interim increases during the course of an investigation and subsequently. Critics will argue that this is all very well but the Commission is not obliged to use its discretionary power and it is therefore unlikely that interim increases will be granted. To those critics I would merely point out that the Commission has already found that circumstances justified the exercise of this discretionary power on several occasions, and that was done in addition to the provision of the automatic safeguards. There are undoubtedly a number of cases where the discretionary power to grant 497 increases would have been used if the price increase under investigation has not been covered in whole or in part by the automatic safeguards. I am confident that the Commission will continue to use its discretion wherever appropriate. This will take more account of the public interest than is taken by the present automatic regulations, over which the Commission has no control.
The Bill has reached this House with the addition of a new clause which relates to the duration of the Bill. The Government accepted the clause, which will limit the life of the Bill to 12 months unless it is renewed annually by Order in Council preceded by an Affirmative Resolution of each House. My right honourable friend the Secretary of State made it perfectly clear in another place that the Government are not entirely happy about this clause. The Government believe that the increased powers which the Bill will give the Price Commission are right and necessary, and that ideally the Commission should be given these powers on a permanent basis. However, the Government are conscious of the support in Parliament for an annual review and have therefore agreed that this clause should be added to the Bill.
This, then, my Lords, is the Price Commission (Amendment) Bill. It has been suggested that the Bill will create a lack of confidence in industry and lead to a lack of investment and to greater unemployment. I believe, that because of the guidelines—the very generous and liberal guidelines—laid down in Section 2 of the 1977 Act it cannot possibly do so. I therefore reject the contention that it will create a lack of confidence, but I should add that if there is irresponsible, ill-informed, or exaggerated criticism of the Bill, that, rather than the Bill itself, will create a lack of confidence. The Price Commission has already shown in its reports that it is operating with distinction, common sense and judgment. The removal of the safeguard provisions will allow it to continue the task that it has begun so well, but with even greater benefit to the consumer and the economy as a whole. My Lords, I commend the Bill to the House, and I beg to move that it be read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Jacques.)498
§ 5.3 p.m.
The Earl of GOWRIE
My Lords, for my part I am glad to welcome the noble Lord, Lord Jacques, back to the Government Front Bench, and I congratulate him upon the fighting spirit which he showed in presenting this invidious little Bill to the House. Since it has been publicised as the last plank in the Government's counter-inflation platform—the others having gone up in flames—it really should, in my view, have been presented by a Member of the Cabinet: say, the noble Lord the Leader of the House, or the noble and learned Lord the Lord Chancellor. But, as always, when there is a thoroughly nasty piece of work to do—it was just the same when we were in office—it is a case of, "Send for the Lords in Waiting." Like the boy in the poem, the noble Lord has stood on the burning deck whence all but he had fled, as I do not notice that any noble Lords from behind him have put down their names to support him this afternoon. Again like the boy in the poem, the noble Lord has acquitted himself with courage and tenacity. We are very glad to see him back, and we are only sorry that it is likely to be for such a short time.
It really is extraordinary that the Government should sandwich this supposedly most important remaining plank of their counter-inflation platform between the Ancient Monuments and Archaeological Areas Bill and the Arbitration Bill. This is surely a Freudian slip on the part of the Whips' Office.
My guess is that this Bill is the last piece of legislation on prices and incomes matters—legislation as against statements of intent, solemn and binding agreements, and the like—that the Government will in fact present to Parliament. It was rushed through the House of Commons entailing an all-night sitting for the Committee and following stages, with a great fanfare of urgency, suggesting that here was in fact a positive response to the industrial crisis and the inflationary consequences of the breakdown of the Government's 5 per cent. pay norm. And yet the Bill is by definition, and deliberately, entirely negative in its intentions. It is designed to remove the present safeguards—that is to say, the safeguards which the earlier Bill, the Government's own Price Commission 499 Bill, had contained—which guarantee a minimum level of profitability for companies subject to investigation by the Price Commission.
Your Lordships will be aware that there are two safeguards: one applies during the period of investigation by the Commission, and the other, which I think is less valuable, applies after the Commission has finished its inquiry. The present Bill seeks to abolish both. Yet nothing has changed since the Secretary of State agreed earlier to the safeguards. They were introduced because the CBI and others argued at the time of its passage that the Price Commission Act bestowed an undue amount of discretion on the Commission and on the Secretary of State. This was worrying because the Act contained potentially ruinous powers to freeze prices, even before the Commission had passed judgment on any particular proposed price increase. In view of the threat to profit, and the general uncertainty of this method, industry needed some assurance that there would be a limit to the extent to which the Commission would be able to depress profits. The Secretary of State himself accepted the argument and built in the safeguards.
Since then nothing has changed—or I may be wrong in saying that; if anything has changed, it has surely changed for the worse. Profitability in British industry is still critically low and needs to increase to finance more jobs and investment. The actual performance of the Commission to date has been a cause for concern in industry, so that the uncertainty about the system is as great as, if not greater than, before. I think therefore that the Bill is a real blow to industrial confidence, ! and it is so, even if its effects on prices are certain to be negligible, as I shall argue and as the noble Lord, Lord Jacques, acknowledged.
My real complaint, however, is that everything about this Bill is bogus. That is why it is a nasty piece of work and why it is distasteful even to have to debate it. In the past five years we have had many Bills—surely too many—which we have thought wrong in theory and damaging in practice, and we, and the Liberals, and the Cross Benchers, and sometimes even noble Lords who sit on the Back Benches 500 opposite, have tried, sometimes with success, to limit the damage by amending them in Committee. But most such legislation was portrayed by the Government as having some relevance to their counter-inflationary strategy. This I take to be the desire to seek the consent and I co-operation of the TUC in a policy of progressive wage restraints: 10 per cent. one year, 5 per cent. the next, and so on.
The present Bill is bogus in that there is no pretence that the Price Commission can materially affect the rate of inflation. The Secretary of State for Prices and Consumer Protection agreed with his shadow, my honourable friend Mrs. Oppenheim—and the shadow displays an altogether more elegant figure than the substance—in another place on 20th November last that the effect of the Price Commission over last year was to restrain prices by less than half of one per cent. He himself said that the Commission was not an agency for getting prices down. He himself, on the same occasion, as reported at column 890 of the Official Report, acknowledged that removing the safeguards, or changing them, wouldinvolve some penalties in terms of industrial confidence".I hope that we shall not hear too much of the argument—it was set out by the noble Lord, Lord Jacques—that the object of the Commission is to encourage competition and to discourage monopoly within industry. The fair trading and anti-monopoly legislation does that, and if the Government wish to strengthen such legislation or its executive arms, let them do so directly. We are ourselves interested in doing so, and we might (who knows?) even support them.
The flurry and fanfare with which the Bill is being introduced is also bogus. If there were a desparate need for the Government to abolish their own safeguards for protecting a firm's profitability during its period of being investigated by the Commission, why was Parliament not recalled to perform this urgent amputation during the first fortnight in January? I do not, I believe, usually trade in gossip, but I believe that, for once, repetition of gossip at the Dispatch Box may be justified. If you spend any time in the lobbies or talking with lobby correspondents, you will discover that the common view within the Labour 501 Party is that this Bill is cosmetic, presentational and political. It is not about inflation; it is not even about prices. The Prime Minister himself has said that, where price rises are determined by wage-push, the costs must be passed on. He said it last Saturday: more than 10 per cent. (the officially allowed figure has doubled now, it seems) on the public sector manual workers' claims, and the burden must be taken by the ratepayers. The Prime Minister is quite right, of course. Only, if he believed in his 5 per cent. he should have stuck to it and insisted that costs over 5 per cent. be also passed on.
The Chancellor himself has said that wage increases averaging more than 5 per cent. (or has that figure now changed as well?) must be clawed back in higher prices caused by increased indirect taxes or by lower purchasing power caused by increased direct taxes—and for the ordinary person I think those two amount to the same thing. The Chancellor is quite right as well—if he sticks to it. Last, and surely least, the Secretary of State himself, the sponsor of the Bill, has made a nonsense of the provisions of his own Bill by freeing the road hauliers from price restraint. He is of course right to do so: costs in excess of a minimal level of ploughback profitability must be passed on to the consumer if the firm is not to go out of business; and if the consumer resists or finds an alternative, the firm may later go out of business in any case.
But, my Lords, what cynicism is being displayed here! Politics, surely, in the lowest, in the Tammany Hall sense of the word. The Government know very well, for instance, that, whatever the representations of Mr. Silkin, France and Germany are likely to win around a 2 per cent. increase in farm prices in the EEC Commission. That will put up food prices here. Can the Price Commission freeze these for three months—enough to get over the hump of a General Election, for instance? The motive can only be political, as the Government well know that they have no powers to reduce such price increases.
If the Bill is not about inflation and higher prices, what, then, is it about? It is about giving Labour Members of Parliament something to say in the constituencies. A Bill with "price" anywhere in it—and we on this side have 502 been guilty of this in our time—is always cosmetic. Price rises are a symptom of inflation, not a cause. You do not cure a cold by amputating the nose. The Bill is designed to produce the effect of having the Opposition vote against it so that my honourable and right honourable friends can be presented as friends of the bosses, of profiteers, of "them" against "us" in the ancient, damaging and wholly bogus language of class and confrontation. It is this kind of thing, this kind of language and legislation, not seemingly so important in itself, which so terrifyingly dents the confidence of our friends and allies and, above all, of our creditors abroad Were it not for North Sea oil coming on stream and the troubles of the dollar, the pound would probably be now back at S1.60 as a result of the recent crisis—its level when the Callaghan Administration came in.
I have myself been listening to the word from the marginal constituencies. Labour Members and candidates have been saying that the recent troubles—the strikes, the breakdown in services and the crisis—have been due to the combined votes of the Opposition Parties against the Government's proposed sanctions against employers who granted wage rises in excess of 5 per cent. What schizophrenia!, since the accumulation of the unions' negative or disruptive powers over the economy—which has been persistent under all Parties since the war but which the present Government and Mr. Wilson's Government after the miners' election accelerated—makes it impossible for employers to resist inflationary wage claims where they want to and governmental incomes policies, responding to such inflationary wage-push, make it impossible for employers to grant claims for wage increases even when, as in the Ford case, they are able to do so and want to do so. This same schizophrenia is at work in this Bill. Let us combine, it seems to say, the maximum damage to business confidence, and therefore to investment programmes and jobs, with the minimum effect on price increases, which we all know, and which the Bill's sponsor has admitted, will be the consequence of the Bill's becoming an Act. What nonsense this is, and how distasteful !
I do not object to the electoral or the Party argy-bargy. It is inevitable; it is a consequence of democracy. It is perhaps even a safety valve. But I do 503 object to its taking place, as it is at the moment, through the medium of legislation. That affects people who are not caught up in the Party argy-bargy but who have lives to get on with, jobs to keep and livings to earn. I do not know what my noble friends feel, or what the Liberal Benches feel, but I am tempted not to fall into the trap, and even to speed this scrap of paper, unamended, on its way to Royal Assent—though not, I hope, unshown-up. I really do not want to give Labour Members in another place the satisfaction of saying to their constituents that the House of Lords was holding up or tampering with a Bill to hold down prices. Not that I think that the constituents would be fooled. This is purely a Muppet Show of a Bill, with the Secretary of State King Canute as played by Miss Piggy. I am tempted to say, "Let him have his cosmetics, his eye-shadow and his false lashes, and much good may they do him".
The sad thing, though, is that we could do so much in Parliament at this time. There is a new spirit around in Britain at the moment. For the first time in years, I think, millions of people, whether Labour, Liberal or Conservative, or of no fixed political allegiance, whether unionised or not unionised, agree that this country's long slide from eminence towards irrelevance will accelerate unless something is done, and will be irrecoverable unless something is done. For the first time since the war there is general agreement that the something which has to be done concerns the labour unions—their freedom from legal restraints, their monopolistic tendencies, their inability to keep to the agreements they make, their economic isolationism and their failure to police their own ranks or to reform their own malpractices from within. If the Government would use this precious second of national consensus to give a lead and bring forward some reforms in this area, it could take industrial relations out of Party politics for the seven or eight years which we need for national recovery. It could restore the balance of power between management and labour, without which collective bargaining is either suicidally inflationary or suicidally destructive of jobs.
There is some evidence, even, that the Prime Minister would like to do this. If he would turn wishing into acting, then 504 he might go down in history as a great Prime Minister—and (who knows?) might even win a General Election. But this present and disreputable little Bill puts paid to such fantasies. About the best thing to be said for it is that, far from proving a plank in the Government's platform, it is likely to be a nail in their coffin.
Lord BRUCE of DONINGTON
My Lords, before the noble Earl sits down—I was unable to catch his eye because he was paying such close attention to his papers—would he tell the House what evidence he has in support of his assertion that Mr. Silkin would give way to the pressure from Germany and France for a 2 per cent. increase in agricultural prices in the EEC; and will he state whether his own Party in the European Parliament will be prepared to vote for such an increase when it comes to the point?
The Earl of GOWRIE
My Lords, whether Mr. Silkin gives way or not, such price increases will be agreed between France and Germany, in my view, and will inevitably find their way back here in any case.
§ Several noble Lords: Order, order!
§ 5.21 p.m.
§ Baroness SEEAR
My Lords, when the Price Commission Act 1977 was going through Parliament, we on these Benches gave it very full and complete support. This was because it was part of a combined strategy of policy to control both prices and pay. Our support for it was given because it was two-handed, because it was put forward while the Government were operating a seemingly successful policy to control pay. It is a very different matter to ask for support over prices at a time when control over pay has become completely out of hand and is no longer a reality in any shape or form. This is why we here who believe in control over prices and pay are asking—we have repeatedly asked and now ask again—not for tampering with prices with this petty little Bill for but the establishment of a proper Prices and Incomes Board; a Board which 505 their predecessors set up and which the Tories in their unwisdom removed. This is the way to deal with the threat to prices; and not to put through at the present time a Bill which it is generally agreed cannot do more (as the noble Earl, Lord Gowrie, has said, as the Minister admitted, and as was admitted in another place) than affect 0.5 per cent. of the level of prices. Something far more thorough and effective to deal with prices is required than this little Bill which we are discussing here today.
When the Price Commission Bill was going through Parliament before it became an Act, we were aware that the safeguard clauses were a matter of great importance to industry—unaware as industry was of how the legislation was going to work, deeply anxious as it was about its ability to invest and about what could happen; and this is true still in many concerns—to their cash flow during the period while investigations are going on. Throughout all the negotiations which took place at that time, the emphasis of the employers on a requirement for safeguards was made very clear and was accepted by the Secretary of State. Of that, there can be no doubt. The assent of industry to this legislation was conditional upon the safeguards.
I can accept that the particular form of safeguards in the 1977 Act needs to be looked at again. For example, and perhaps in particular, the deadline date, the bench-mark date, of July 1977 becomes more and more meaningless as the months pass. It would not have been unreasonable of the Secretary of State to have gone back to industry and said: "While accepting the need for safeguards, the particular safeguards which are in this Act need to be reviewed"—and to have discussed again with industry what kind of safeguards would be appropriate to bring legislation up to date. This I could understand; but knowing, as the Government do, the importance attached to those safeguard clauses, surely it would have been better to try to revise the clauses rather than to abolish them.
The Minister says (and it was said in another place) that there is no need to have the safeguard clauses because the position for industry is safeguarded in two ways. It is safeguarded through Section 2 of the original Act—and the 506 Minister read the main items in Section 2. Of course, there are general directions to the Commission as to what they have to take into account when estimating whether or not a price increase is going to be excessive, but in every case this requires the judgment (at the end of the day, inevitably, the subjective judgment) of the Commission as to whether what is being asked by the enterprise is reasonable or not. Nowhere in the legislation, except in the safeguard clauses, is there anything at all of a quantifiable nature. It is purely a matter of the judgment of the Commission. The safeguard clauses give a quantifiable safeguard—and it is in this regard that they are different from Section 2 and give a kind of reliability to the undertaking which none of Section 2 can do.
Again, the Minister said: You can trust the Commission to act reasonably; they are all honourable men. I am not saying they are not all honourable men—and it is to the credit of the Government that they are not even all men. The fact remains that it relies on their judgment. And individuals change. How are we to know who will be on the Commission in a few months' time? All sorts of alterations can take place. It is not good enough in any legislation of this kind, in which the viability of undertakings—and, as a result of that, the existence of jobs—depends on these judgments, that there should be nothing built into the legislation as a safeguard and that it should be left to subjective judgment. This is the objection to the removal of specific safeguard clauses with quantifiable limitations on what the Commission are able to do. It is asking too much to expect people to be so happy with the judgment of any Quango, however honourable and well qualified—as, indeed, I believe they are—the members of this particular Quango at the present time appear to be.
With the noble Earl, Lord Gowrie, I do not believe that this little Bill has really anything to do with price control. I believe it is a sop to the trade unions at this particular moment when the Prime Minister was looking for Danegeld to pay in order to try to win them back into the paths of sanity. This is not good grounds for bringing in a Bill at the present time, and I suspect that the Secretary of State knows this perfectly well. The Secretary 507 of State is second to none in this country—and we know this and it is much to his credit—in his determination to try to hold down inflation. Nobody on either side of this House or of the other place has fought harder than he to try to hold down inflation. He cannot believe that this little Bill is going to do anything to hold down inflation.
In the longer run, what will hold down inflation is getting the employers and the unions and the Government together in a spirit of confidence to work out how these appalling problems that we face arc to be handled. If that is what you want, what an extraordinary moment to produce a Bill of this kind, to stick a knife into the employers at a time when they are having the most difficult period they have had since the three-day week—and perhaps it is even more difficult than then. At this moment many of them are not getting their raw materials; they are not able to meet delivery dates; they do not know what is going to happen to their pay bill. They are in a situation of great uncertainty, and if the Government really want to get both sides of industry together, then I say to them and to the Secretary of State—who I believe does want to see a successful solution—drop this shabby little Bill.
§ 5.29 p.m.
§ Viscount TRENCHARD
My Lords, I have already, a fortnight ago, described this measure as madness in terms of the present crisis, and I do not want to repeat too much. However, 4 per cent. return on capital in inflation-proof terms is the all-industries statistic. One can argue it up to 5 per cent. If one takes oil out of it and looks at manufacturing industry only, currently it is certainly below 4 per cent. return on capital, return on investment, in real terms. What could be more inappropriate in an accumulated long-term crisis for British industry than to bring in an extra price control measure at this time? That 4 per cent. is half the current rate of inflation and, although we all regret it, that current rate is bound to rise. So industry is in a really disastrous position from a profitability and investment point of view. The cost of money is well above even the rate of inflation.
It has already been said by my noble friend and by the noble Baroness, Lady 508 Seear, that this is—if I may paraphrase them—an appeasement move. It can only be an appeasement of the trade union position and one gets very depressed about this when one considers a point that has also been discussed in the House in the past week: that the vast bulk of the funds of the Party opposite is supplied by the trade unions, and 130 Members and many Ministers are sponsored by the trade unions. I wish somehow that the moderate element of the Party opposite could disregard this situation, but I cannot see that it can.
A nicer word than "appeasement" which has been used before now is that this is a quid pro quo. If this phrase had only been heard once in a temporary measure lasting a year or two, it might have been all right; but, along with other industrialists, my classical education was not very good, and after 12 years industry is wondering whether the literal meaning of "quid for what?" is not a nearer description. What has happened over these 12 years of price control, dividend control and other things which have made it worthwhile? Almost nothing, my Lords. I personally do not agree with the line taken by the Liberal Party on the need for a permanent statutory incomes policy. I believe such policies can only be applicable on a short-term basis, and we have had this one, as I have said, for too long. The real answers lie—and the Government must know that they lie—in the kind of reforms to balance the bargaining position of which my noble friend Lord Gowrie has spoken.
My Lords, what about the effect of price control? The old style Commission claimed that at the peak, between April 1973 and May 1977, it had had a 3 to 4 per cent. effect on prices. My own feeling, with apologies to my noble friend Lord Cockfield (who is to speak in this debate), is that the effect is not really calculable, because one only knows, on the one hand, the notification for price increases and the actual price changes that take place. One never knows what the position would have been without price control and with the competition and market forces at work. A point which is often badly overlooked is the immense effect of 1 per cent. on the sales value or the retail price index. For British manufacturing industry as a whole, 1 per cent. on the retail price index is the equivalent 509 of 16 per cent. of profit. For many firms it is much higher than that: 20 per cent or a quarter. Thus delays—a matter to which I shall return in a moment—can easily knock a big chunk off the profitability and the ability to invest of important companies.
We need profitable companies. If we turn to the case for individual or selective control, we find we need such companies because they are usually the ones which are growing and investing, whether they are in such a position by their skill or by good fortune. And, my goodness, we need jobs! A lot has been said about price leadership and market dominance. I was for four years president of an organisaton called the Institute of Grocery Distribution, which was primarily concerned in research across the whole field of food, food manufacturing, food retailing and the things that go with it in most of the modern stores today. We could find no evidence that price leadership or market dominance where one firm was large weakened the force of competition.
I came very much to the conclusion that there is a great muddle in the minds of some economists and some academics today on the subject of perfect competition, or, as the noble Lord, Lord Jacques, said, imperfect competition. Most of the text books paint a picture of rows of barrow boys selling apples with prices moving a farthing every hour or two in the old-fashioned street markets. The fact that that could have been called cutthroat competition, with no resources for investment and no resources for development, does not ever seem to occur to the writers of these books. The fact that in modern economies the nature of the competition has changed to longer term, often to world wide competition; that it builds in to a much greater extent factors other than price, such as quality, convenience and service, and that the modern, busy housewife is not looking for changing prices by the hour (indeed, they would only confuse her to a very high degree)—these changes in the nature of competition in a modern economy do not mean that competition is any less fierce.
In my past experience I have been both a "big boy" in a market place, and a "small boy" in a market place. I have been in concentrated industries with few firms and in fragmented industries. 510 I have not been in a State monopoly; I agree that in terms of State monopolies the Monopolies Commission would seem to be the right agency to deal with the question of pricing where there is a need.
Since it is in the "big boy" areas that many neutral-minded people have criticism of the market place, let me take the case which the right honourable gentleman, in the debate on this subject in the other place, mentioned many times. First, let me declare a past interest. I am no longer a director of Unilever, but I was a director for 10 years. As those who have read Hansard know, the Lever Brothers company has been quoted by the right honourable gentleman on several occasions. Let me start by saying that I get just as irritated as anybody else with the soap advertisements that I see on the television, though I find from market research that, curiously enough, the mass market does not seem to get so irritated. Competition in that highly developed industry consists of some very big international firms: American and German; and Lever Brothers is the English firm. It is an industry where there are a few big advances in technology every now and then, and a great number of small advances which do not get noticed but which, if one looks back over the years, have changed to a major degree the quality and service that the products perform for the housewife.
However, in all my years in that company—and they ended at the beginning of 1977—we knew that if we were to stay in the battle with large American and even German companies, we had to earn in that industry some 8 to 10 per cent. on sales; otherwise one could not make the necessary amount of reinvestment in new methods, do the research and development or have the ability to launch new products in order to keep up with this very strong competition. If you are interested, your Lordships will find on page 31 of the Price Commission's investigation into this company, which was so much quoted by the right honourable gentleman, that between the years 1973 and 1977 the profit as a percentage of sales was reduced from 9.9 to 4.4. What could be the excuse—and he gave this company as an example—to hold up the price application of that company? I feel that many industrial leaders, apart 511 from much neutral opinion, have not really studied the mass market and do not have real experience of it. Competition has changed but it is as fierce as it ever was.
The noble Lord, Lord Jacques, has said that we have nothing to fear. The Government spokesmen in the other place have said much the same and that the opportunity to investigate before a price move takes place is the objective of the Bill before us. My noble friend Lord Gowrie has pointed out that both kinds of safeguards—the permanent as well as the temporary—are removed. Let us just take the temporary. First, there has to be 28 days' notification of a price increase, and then the investigations can last three months. It took all 630 staff, supported by many outside firms of accountants and consultants, to do 20 individual price investigations in, I think, 1978: I am not absolutely certain of the exact period. How, then, are they to discharge their work and how are they, if I heard the noble Lord correctly, to follow the purpose of the original legislation as he described it, and investigate each price application?
§ Lord JACQUES
My Lords, may I interrupt the noble Viscount? The Commission does not investigate each price increase application. The whole basis of the legislation is that it is selective. The Commission have full discretion to decide which they are going to investigate and, in point of fact, up to date they have completed investigations in only 31 cases.
§ Viscount TRENCHARD
My Lords, I thank the noble Lord for that intervention. I will read Hansard, and I trust he will also, because I think that at one stage he said the purpose had been to investigate each case. But obviously that is not possible and obviously they must be selective. As the noble Baroness, Lady Seear, said, it is a matter of judgment in selection and in how each new team, coming to each new company in different industries, interprets the situation. I cannot help feeling that there is a pretty high degree of arrogance in the assumption that perfect judgments, or even good judgments in the main, can be reached on highly complicated issues like this in the time available. 512 We are talking of a four-month delay in any event, and anyone with marketing experience knows jolly well that while price increases in some areas are frequent and in other areas only occasional, there comes a moment when there is a market opportunity, when the right thing to do is to move it, when you can indeed get your profitability nearer to a level at which investments can be found. And you can miss that market opportunity completely with this four months' delay and be unable to tackle it again for another year, during which time, if your return is as the average is at the present moment, or even if it is above average, your cash flow is going to look pretty silly.
The noble Lord, Lord Jacques, has said that the Government regret that this Amendment Bill will last for only a year; but it is a pretty "key" year, with inflationary pressures as they exist and with industry in many cases really on the rocks. The level of bankruptcies is already too high and the level of investments, as we all know, has been much too low. The effect of the dislocation and strikes that have taken place, also mentioned by the noble Baroness, means that there will be more bankruptcies; and now we have a power to delay at least for four months, which can be quite critical, price applications from companies making virtually no profit at all.
I wish I could fully agree with my noble friend that the effect of this measure will be really only cosmetic and therefore the best thing to do is to let the miserable scrap of paper go through, even though it has no relevance. I believe it is more than possible that it can do real harm, that it can add to the total of jobless and that it will do so unless some floor level—whether the old floors under the regulations in the Bill were correct or not is a matter for debate—is established in terms of profitability, to the position wherein a company can increase prices without waiting for a long investigation to take place. I would suggest that floor level should be put at the current rate of inflation, or perhaps at the rate of inflation and move with it; because if a return on capital on a current cost-accounting basis is below 8 per cent. at the moment, that company is already in a very bad way and there is a real risk that a four months' delay, in a year when 513 inflationary pressures are building up, could just make the difference.
Will the Commission, with the number of members it has and with the workload it has, be able to use its discretion correctly to let the price go up anyway in cases which are deemed to be really serious? I personally doubt it, and at this stage I should like to hear what the noble Lord has to say about it. I should have liked to give Notice of an Amendment to be raised at Committee stage to bring in a floor at this ridiculously low level, which would at least avoid the risk of causing more unemployment. I have been told that there is a possibility, owing to the rushed timetable and other technicalities which someone so amateur in the political world as I am does not really understand, that any Amendment passed by this House which would send the Bill back would mean that the Bill could not proceed. I do not know whether the noble Lord can explain this matter, perhaps in his winding-up speech today.
§ 5.48 p.m.
§ Lord COCKFIELD
My Lords, I have been reluctant to address your Lordships before on the question of price control because I have always taken the view, in this and in other fields, that if one has had the responsibility for implementing a policy and then relinquishes that responsibility, one ought to leave one's successors to get on with the job without either fear or expectation of help or criticism from oneself. However, the present Bill does raise a point of constitutional importance, and Í adopt the phrase that was used by the noble and learned Lord, Lord Denning, in his judgment in the case of GEC v the Price Commission—a judgment, if I may say so, which is itself of great constitutional importance. That being so, I feel I must talk to your Lordships about this specific aspect of the matter. I wish to make it clear that I am not attempting at this stage to argue whether or not there ought to be a price control. The Bill in front of us deals with a very narrow issue: namely, the amendment of one particular section of the 1977 Act, and that is the matter to which I will address my remarks.
The control established by the 1973 Act has been the subject of a great deal of 514 criticism; indeed, I myself criticised it both during its currency and since Í left the Price Commission. But it did have one great merit, which was that the rights and obligations, both of the Price Commission and of the company which was the subject of the control, were clearly and specifically laid down. The effect of this was that if there was a disagreement between the Commission and the company as to what were their rights and obligations they could always have access to the courts, and indeed on a number of occasions cases were taken to the courts; one of them went as far as the House of Lords. Cases were similarly taken involving the old Pay Board. These judgments were of great assistance both to the companies concerned and to the Commission in interpreting their rights as well as their obligations.
The 1977 Act, however, marked a sharp break with that tradition. It was drafted in a way which made it almost impossible for an aggrieved company to have access to the courts. There are a large number of criteria laid down in Section 2 of the Act, but they are all expressed in the most general terms and—what is perhaps more important than that—the Act itself specifically provides that these considerations are to be taken into account only "so far as the Commission consider them relevant". Attempts to oust the jurisdiction of the courts are not always successful; nevertheless, it is difficult to escape the view that any attempt to go to the courts under this Act would be extremely difficult.
One will no doubt remember that, at the time when this Act was passed, the Government had suffered a series of reverses at the hands of the courts. There was the Jenkins case involving the TV licences, there was the Tameside case and there was the Laker case, and this Act was drafted to ensure that there would not be any more of them so far as this legislation was concerned. But there is another point that I wish to make. Not only, on the face of it, was the legislation written in the hope—I do not say the certainty; I shall be quite clear about that—of excluding the jurisdiction of the courts, but something else was done. The Prices Act 1974, which was an Act passed by a Labour Government, so its parentage is, presumably, beyond reproach, provided that in the case of an order to prevent or 515 restrict price increases the power could be exercisable only by Statutory Instrument, which of course was not only debatable in the House if the House so wished, but a vote could be taken on it. The 1977 Act provided, in general, for no such oversight or supervision by Parliament. Therefore, the position we have is that not only has the jurisdiction of the courts been largely excluded, but so has the supervision of Parliament as well.
There was, however, one single bulwark erected to protect a company, and that was the safeguard contained in Section 9 of the Act. This said that however much you held down a company, whatever you did, you could not go beyond a figure to be specified in regulations made by the Secretary of State and in due course approved by Parliament. It would have been a perfectly understandable course of action if the Government had said, "We have now come to the conclusion that the figures contained in those regulations are no longer appropriate, and we want to come along and amend them", which would have meant that we should have had a new set of figures which we could have debated and, if necessary, voted upon. But the Government have not done that. They have said instead, "We wish to sweep away altogether this one final protection which appeared in the 1977 Act."
The result is that the powers which are now possessed by the Price Commission are not only extremely wide, but, in the technical sense of the term, not subject to any constraint or any real control. I know it is argued, and probably correctly argued, that the Price Commission act reasonably and responsibly. It is argued that the Price Commission consists of people who are experienced and knowledgeable, and that their judgment can be relied upon. But from the point of view of the argument that I am putting forward, that is totally irrelevant. You cannot defend despotism on the ground that it is a benevolent despotism. You cannot defend dictatorship on the ground that it is an efficient dictatorship.
May I give your Lordships an example? What would be the reaction, not only in this House but in the country, if we did this kind of thing in the taxing Statutes? Let us suppose that we had a Finance Bill 516 which said that the rate of income tax shall be fixed by the Chancellor of the Exchequer after taking into account any of the following list of matters, to none of which he may pay any attention unless he thinks it is relevant. That is not a fanciful example. Your Lordships will be familiar with the case of Rex v.Hampden and the very grave consequences which flowed from that case.
It will, I know, be said that this is a very small Bill, that it is not the kind of thing which represents so major a breach in our traditions or practices that it really supports the kind of argument about the constitutional position, or the worries about the constitutional position, which I have put to your Lordships. But let us always remember that the erosion of our liberties comes not in one sudden cataclysm; it comes in the thousand-and-one small things which erode our liberties. The reduction in the sovereignty of Parliament comes not in one great measure, but in the thousand-and-one little ways which reduce its sovereignty. The reduction in the rule of law comes not in one great step; it comes by erosion over time in a thousand-and-one ways.
May I remind your Lordships of the words which were uttered nearly 200 years ago by Judge John Curran, in times which were just as turbulent and troublesome as they are at present. What he said was this:The condition upon which God hath given liberty to man is eternal vigilance, which condition, if he break, servitude is at once a consequence of his crime and the punishment of his guilt".I commend those words to your Lordships.
§ 5.59 p.m.
§ Lord MOTTISTONE
My Lords, it is indeed a privilege to follow my noble friend Lord Cockfield, whose views are always to be treated with respect, but on this occasion he has surpassed even himself in the skill with which he put his case. It is a real pleasure once again to find a Government Bill being introduced by the noble Lord, Lord Jacques. I have happy memories of that well-known partnership, Oram and Jacques, which used to keep us fully occupied into the middle of the night some 2½ years ago. But this is not such a happy occasion.
517 Apart from giving us memories which are happy, the noble Lord, Lord Jacques, is one of the very few members of the Government who has practical experience of the business world. I think that the Government are extremely lucky to have him to put their case. I therefore listened with particular care to his argument justifying the Bill, and I found it quite impossible to be convinced by his proposition that there is any real need for the Bill on the one hand and any real desire for it by the Price Commission on the other.
It is said that the Price Commissi honave felt frustrated that their decisions have had to be underpinned by the safeguards which are currently available under the Price Commission Act. However, it does not seem to me that when they have finally completed their investigations they have been in any way seriously incommoded by the fact that in some cases but not all, the firms concerned have invoked the safeguard clauses and enabled themselves to put up their prices in advance. It seems to me that the difference, if any, that there would have been if there had been no safeguard clauses would have been minimal.
With that in mind, I should like to turn to two points which were made by the noble Lord, Lord Jacques. The first is that the guidelines are general and liberal; therefore we can rely very well on Section 2 of the Act and be wholly confident that, applied by a wise and sensible, albeit perhaps dictatorial Price Commission, effectively the safeguards will be taken care of through that process. That is absolutely so, provided, of course, that the guidelines are applied in the way that we, as the recipients, might like them to be applied. But we cannot be sure of that.
It has been said that the Price Commission have been in existence for 18 months and that they have a great deal of experience. This may be so but, as the noble Baroness, Lady Seear, said, one cannot be sure that the Price Commission will stay exactly the same, even for a year—the present time limit of this amendment to the Act. So I question whether it is safe enough—and it was here that my noble friend Lord Cockfield made his point so very forcefully—to rely upon broad-brush guidance which can be interpreted by one person in one way and by another person in another. As again 518 has been said by my noble friend Lord Trenchard, I suspect that this is a singularly awkward and unfortunate moment to take off the further guidance that the safeguard clauses gave. This is a moment in time when the effects of the recent disturbances on raw material supplies and, hence, on raw material prices are quite beyond the wit of man to be sure about and when we find that the other great variable in the cost to companies—labour cost—is itself going wild in proportion to what the Government required, as from last August. Consequently, from the point of view of companies, this is a particularly unfortunate moment to remove the very reasonable extra guidelines which the safeguard clauses provided.
Turning to the Price Commission themselves, I wonder whether it is fair on the officials of the Price Commission who will have to conduct the investigations, make judgments and advise the Commission on what those judgments might be. When there were safeguards, at least they had some kind of guidelines of a positive nature. Those guidelines enabled them to make the right kind of recommendations to the Commission. Now, however, they will be, as it were, naked in the advising chamber; they will have nothing to rely upon except the very broad-brush requirements of Section 2 of the Act. I suggest that it is unfair not only on companies but also on the officials of the Price Commission.
This leads me to question yet again why it should be necessary to have the Bill. I am not going to suggest that we should go further than my noble friend Lord Gowrie advised and try to reject the Bill, but it seems to me, for practical reasons, to be totally unjustified. As has been said by many noble Lords, the Bill is not going to convince any of the trade union leaders or, more especially, the trade union members whom some people have suggested it is designed to placate. Therefore, I cannot see why the Government feel that it is so necessary to have this particularly measly little Bill and force it through Parliament so terribly fast, as though the results of it were going to be the complete answer to all the country's problems. It just does not make sense.
When he comes to reply, I hope that the noble Lord, Lord Jacques, will be able to give us a real reason. If anyone can give 519 us a real reason, if there is one, the noble Lord, Lord Jacques, can. If he cannot, I shall suspect that the Government have lost control—as we learn almost daily from the newspapers that they have—over their art of trying to run this country.
§ 6.8 p.m.
§ Lord BOYD-CARPENTER
My Lords, I must begin by declaring something of an interest. A company of which I happen to be chairman, the Rugby Portland Cement Company, is at the moment under investigation by the Price Commission, although I am glad to say that the notification in respect of which the investigation is being made was submitted comfortably before 17th January. I declare this interest because noble Lords may feel, understandably, that that interest may bias the views which I seek to express to your Lordships. On the other hand, there is the compensating advantage of immediate and practical experience of what this means.
I am bound to say in that context that I thought the noble Lord, Lord Jacques, shrugged off rather lightheartedly the effect on any company of the mere mechanics of such an investigation. Substantial numbers of young accountants, hired from an outside firm of accountants, descend upon your company. They monopolise a great deal of the time of senior management which otherwise would be devoted to furthering the interests and developing the profitability of the company. They demonstrate an insatiable appetite for statistics, coupled with no very conspicuous indication of knowledge of the problems of this or, indeed, of any industry. Although these are things, like our climate, which fortitude enables one to endure, it is a little bit of a mistake to suggest, as did the noble Lord, that this is rather a nice thing to happen to one.
Having said that, may I say how much sympathy I have been feeling during the last hour and a half for the noble Lord. As he knows, noble Lords in all parts of the House have a great affection for him. Therefore, it must be very disagreeable for the noble Lord to have to sit there, without a word raised in his support, listening to noble Lords who speak not mainly with that ordinary spirit of Party bias and controversy, which is a very healthy thing in itself, but almost without exception with 520 direct authority and experience of the subject-matter of his Bill.
I was a Minister for a good many years and I know how lonely one feels when a legislative Chamber is almost unanimously—or, in this case so far, is unanimously—critical of one's measure. When that criticism comes, it comes from people like the noble Viscount, Lord Trenchard, the noble Lord, Lord Cockfield, with his unique experience in this area and others. It must be very uncomfortable for the noble Lord because, being a man of sensitivity and sense, he must have a sneaking feeling in his mind now that they are right and that his masters, who put this Bill into his hands, are wrong.
It is indeed a very curious time at which to bring forward this Bill, as has been pointed out. But, in defence of the noble Lord, I must say that his unhappy situation stirs my remaining flickers of chivalry. It is at least a Bill consistent with this policy of the Government of which he is a member. It is brought forward, as last summer was the Bill to restrict dividends, with no real belief that it will do any good, with no real belief that its consequences will be other than harmful to the economy, but because of the pathetic belief of Ministers that the loyalty and co-operation of the trade union leadership can be obtained by steps which, by imposing misery on the employers, reconcile the trade union leaders to the misery which the Government are inflicting on them. As I have said before in this House, I think that that underrates the wisdom and judgment of the trade union leadership, to think that they are really going to be affected or induced to co-operate by considerations of this sort.
Surely, as thinking men, their concern must be with the continued employment of their membership; surely they must be concerned with whether the companies for which they work will be profitable enough, not only to continue to employ them but to employ more of their members and to be profitable enough to offer a tempting target when the next wage demand comes along. They cannot really believe, any more than I think any noble Lord in this House believes, that a step of this sort taken at this moment will make any contribution whatever to the effective operation of the British economy.
521 It has been said before, and I will not weary the House by reiterating it, that it must discourage investment in British industry. Any noble Lord—and there are many here—with experience of investment decisions knows that this is made on a judgment as to the likely profitability of the particular investment: if you install new equipment or if you open a new plant, is it going to be profitable and make a profitable return? But if you induce into the calculation of the viability of an investment (difficult enough as it is) this further consideration that you may be subject to an outside interference by a strengthened Price Commission concerning the price which you calculate should be paid on the product of that investment, are you not simply going to mark that file "Bring forward six months hence" or "Bring forward a year hence"? Are you not going to add to the already excessively low level of investment in British industry and therefore continue to perpetuate the disheartening size of the unemployment total? That surely must be the practical and the consequential effect.
Of course, by taking away the safeguards, which the Bill seeks to do, it is argued that one only defers the price increase for three or four months and that the Commission, in its discretion, may not even grant that deferment. But, as has been said already, those three or four months may be crucial to the year's results of any company. Moreover, there is no certainty whatsoever that the Commission, freed, as it may regard itself, of the incubus of the safeguard provisions, even after three or four months will allow at least the price increase which a proper calculation of the safeguard provisions would cause them to apply. Several times the noble Lord said that it was left to the discretion of the Commission and these are wise, amiable, well disposed, public-spirited citizens. It may so be, but it is not the general policy in this country to rely solely on the amiable character of public functionaries and for that reason to exclude them from any check or control. As I understand it, the Commission, in deciding whether to allow an interim increase in prices during its investigation, acts wholly in its discretion. As I understand it, no Minister is responsible for what it does or does not do in that respect. It is insulated by the legislation from Parliamentary control.
522 That is not good enough. Ministers of the Crown are—or so the noble Lord will say—high-minded, public-spirited men of the highest character, and no doubt many of them are, but at their most arrogant they have never argued that for that reason they should not be subject to parliamentary control and questioning. Yet it is that kind of insulation from any measure of public control which this Bill proposes to confer on the Commission during at any rate the three or four months to which otherwise the safeguard provisions would have applied.
What is the significance of those three or four months? A glance at the calendar makes it only too painfully obvious that this is to give the impression, it is not?—and the noble Lord would say so if he was being frank with the House—to the electorate during the next few months, in the period leading up to the election, that price increases are being held. The fact that this is a purely temporary dam over which the waters will surge at the end of the four months will be as easily forgotten as was the real rate of inflation forgotten by Mr. Denis Healey during the election of October 1974 when he told the astonished electors that the rate of inflation was down to 8.5 per cent. That is the explanation of it, and if the noble Lord would only say that I think we would understand that there was a reason, however blatantly political, for this measure.
I want to follow up one aspect of this matter. I have told the House that my own company was subject to one of these examinations and for that reason I naturally regard it as being appropriate and proper to defer, until that operation is concluded, any observations I may desire to offer to this House on the working of the Price Commission. However, I do want to invite the attention of the House to the spirit in this respect in which the Minister in charge of this Bill in another place is bringing it forward. Mr. Hattersley, Secretary of State for Prices and Consumer Protection, in the course of the Second Reading in another place—and if noble Lords wish to look at the reference, it is column 1067 of the House of Commons Hansard of 29th January—was interrupted by one of his honourable friends who suggested to him that there existed cases of underhand price rigging. 523 Mr. Hattersley immediately responded, favourably to his honourable friend, by saying that that led him on to a particular case, and he proceeded to refer to the applications made a little time ago by what he described as "Associated Portland Cement"—but which in fact is now called Blue Circle, although Mr. Hattersley does not appear to know that—and by my own company, and he went on to appear to accept the insinuation that the applications put forward by these and other companies in the industry were connected with underhand price rigging.
That extraordinary ministerial observation is made the more extraordinary when I point out two things. First of all, as the Secretary of State apparently did not have time to mention, the common price agreement in the cement industry under which these applications were made has twice been before the Restrictive Practices Court and on both occasions was blessed by that court as being appropriate and in the public interest. I think that if a Minister in charge of this Bill in another place thought fit to cast aspersions in this connection on my own company and on Blue Circle, common fairness surely would have impelled him to point out that, whatever he might think about the arrangement, it had been subjected to impartial review by the body set up by Parliament to undertake that review, and on two occasions. Of course, it may be that Mr. Hattersley did not even know this; nothing in connection with his grasp of affairs would surprise me. But, if he did, I think the House will feel that he behaved extremely badly.
The second point which I think is of some significance is this. When the Price Commission has concluded its investigation it will report to him, if he is still in office, and observations of this sort made in the House of Commons at the moment when the investigation is beginning do not suggest that any report that the Price Commission may send to Mr. Hattersley will be viewed with the objective realism which any citizen is entitled to expect of a Minister of the Crown exercising functions conferred on him by Parliament. I think this particular episode, which I thought it right to mention to your Lordships, indicates, perhaps somewhat unpleasantly, the spirit 524 in which in certain circles—and I acquit the noble Lord, Lord Jacques, entirely—these proposals are being brought forward.
There is one other comment I would make, if I may, and it is this. I find the Government's new found enthusiasm for competition rather agreeable. It has all the vigorous freshness of Saint Paul arriving at Damascus. But I wonder if they are going to carry it into the public sector. Are they going to waive the Post Office monopoly and give that enormously overgrown organisation a little healthy competition? Are they going to allow competition in coal, steel, shipbuilding or water? How far does this conversion to the principle of competition go? Or is competition only for the private sector, while, of course, the Government's darlings in the public sector must be sheltered from that cold breeze?
I come back to the central point: the effect on investment, on the morale of industry, on that industrial confidence on which the industrial expansion and the recovery we all want to see in this country depends, will be, and must be, adverse. The fact that the Government have made it clear once again that they will seek to support their policies by knocking employers, by leaving the unions at liberty to do what they want but knocking the employers on the head, must be a discouragement. The prospect for employers of being crushed between the nether millstones of the Price Commission and the trade union movement is not one which is going to encourage investment or enterprise in this country. If I ever knew of an encouragement to invest anywhere but in this country, it is surely a measure of this sort. And worst than this, morally, though not perhaps in its long-term effect, this Bill is designed to cash in on the worries and anxieties of the housewife and the pensioner, who are desperately frightened of inflation, desperately scared of rising prices, and it seeks to prostitute their faith by a measure which the Government know cannot bring about the effects that are being suggested.
§ 6.26 p.m.
§ Lord JACQUES
My Lords, first of all I want to thank the House for the goodwill which has been expressed, and I will try to be worthy of it. I thought 525 that the noble Earl, Lord Gowrie, spoke about anything except the Bill. I do not think the Bill has got any relevance whatever to the present crisis, none at all. I think that anybody on my side who pretended it had would be blind.
§ Lord BOYD-CARPENTER
My Lords, will the noble Lord allow me to intervene on that point? Can he explain why it was that the intention to introduce this Bill was announced by the Prime Minister in his Statement on the crisis in the House of Commons on 16th January?
§ Lord JACQUES
Well, my Lords, I know it was announced by the Prime Minister on 16th January, and it was done when he was making a Statement on the crisis. I still do not accept that it had anything to do with the crisis; quite frankly, it has nothing to do with the crisis at all. This Bill and the 1977 Act are part of the monopoly legislation, and all the evidence supports me on this. First of all, it is selective, it is not rigid across the board. Secondly, only the large firms have to submit their price increases, the people who are semi-monopolistic or could be semi-monopolistic.
§ Baroness SEEAR
My Lords, surely the noble Lord the Minister is not expecting us to believe that because you are large you are necessarily monopolistic?
§ Lord JACQUES
My Lords, I am not suggesting that because you are large you are necessarily monopolistic. What I am suggesting is that it is part of the monopolies legislation; monopolies are large, and therefore, because of that, only the large firms have to give notice. The noble Baroness is coming to conclusions which do not arise out of what I said.
§ Lord JACQUES
No, my Lords. When I am finished I will be prepared to answer the noble Viscount's question if I can, and if I cannot I will write to him.
§ Lord JACQUES
Furthermore, if anyone looks at the cases which have been investigated by the Commission he will see that many of the firms involved are very large; there could be good grounds for a suspicion of imperfect competition or monopoly. I suggest that all the evidence is there to show that the Bill is part of the monopoly legislation and has nothing whatever to do with the crisis. I certainly would not like to have to use it as if it had something to do with the crisis.
The noble Baroness, Lady Seear, said that we should have a prices and incomes board. I was glad she admitted that we did have it under the 1964 to 1970 Labour Government, and that it was the Opposition when in office who abandoned it. She would like to see it back. I think there is a good deal to be said for what she has in mind. I take the view that so long as there are institutions, whether they be trade union or industrial organisations, who have power to extract monopoly value from the consumer we need institutions to safeguard the community. If it has to be a prices and incomes board, so be it. But I do not think that at the stage we have reached in this Parliament that kind of legislation could be contemplated. As was done in 1964, that is something to be done at the beginning of a Parliament.
The noble Viscount, Lord Trenchard, said that he had found that market leadership did not necessarily mean imperfect competition. That experience is different form mine, and I have been in distribution all my life. I found that the market leaders could afford the advertising necessary to gain the support of the public—to get the name across and to get the goodwill. However, their small competitors could not afford it. Consequently, the small competitors could not compete in advertising. The only way in which they could compete was to try to sell their commodities at a price lower than the advertised price of the market leaders. I know something about that because I was associated with the Co-operative Wholesale Society which had small-scale outputs as regards hundreds of items in competition with market leaders. Indeed, that is still so.
§ Lord JACQUES
My Lords, we did very well, but perhaps that was for the reason that ours was a co-operative organisation, and not for the reasons which the noble Viscount has in mind.
§ Lord JACQUES
My Lords, I wish that your Lordships would let me finish my argument and not butt in. As I was saying, I found that the small man had only one way of competing with the market leader and that was by asking a lower price. It follows that immediately the market leader increases his price all the little people can follow suit whether it is justified or not. That is what I mean by imperfect competition and I challenge anyone to say that that is not the position in practice.
§ Viscount TRENCHARD
My Lords, as regards price leadership, if the market leader puts his price up by too much—I have been a market leader and a small man—the small man, on quality as well as on price, will very often nibble his market share and the big man's price will come back. The history of the market place is littered with exactly that type of example.
§ Lord JACQUES
My Lords, it is so long since we had price reductions that I had forgotten that that ever happened. The noble Viscount, Lord Trenchard, also raised the question of interim increases where there is an investigation pending. As I said in my opening speech, the Commission not only has a discretion in making interim increases but it has shown in its reports that it is sensitive to this practice. For, in several cases, in addition to the automatic increases, it has awarded interim increases and if the automatic increases had not been available there would no doubt have been many more cases where it would have used its discretion.
The noble Lord, Lord Cockfield, raised a legal point which is rather out of my province. However, I am advised that the 528 Commission must have regard to the criteria in the section; that a discretion given to it must be exercised reasonably and that if the Commission does not do so the courts will intervene. Therefore, I would submit that, in spite of the wording of Section 2, it would be possible to challenge in the courts the way in which the Commission used the discretion.
§ Lord COCKFIELD
My Lords, I am sorry to interrupt the noble Lord, but I should like once again to read to him the actual words of the Section. Section 2(1)(a) says:to have regard to all matters which appear to the Commission … to be relevant",and in Section 2(1)(b), it says:to have regard … to the matters mentioned … so far as the Commission consider them relevant".Is the noble Lord suggesting that those words have no effect at all?
§ Lord JACQUES
My Lords, I am merely suggesting that the Commission must use its discretion reasonably and that if, in the opinion of the court, it had failed to do so, then the court would act not by submitting something different, but by causing the Commission to have another look to see if it could not use its discretion more reasonably.
The noble Lord, Lord Mottistone, raised the question of the automatic safeguards and the reason they should not be abandoned. The Government's view is that we have gone a long way to get rid of rigidity. The inflexible code of the Board has gone. Only one piece of rigidity is left—namely, the automatic safeguards. The Government are of the view that all rigidity should go and not just part of it. Therefore, they have come forward with this Bill.
§ Lord MOTTISTONE
My Lords, by the same argument, would the noble Lord think it more appropriate for ladies to bathe with no clothes on at all rather than just a bikini?
§ Lord JACQUES
My Lords, whether I would or would not, my judgment on that particular question has little relevance to the Government's view. If I were Mr "A" I would take one view and if I were Mr. "B" I would take another view. Therefore, I cannot see the relevance of that question.
529 The noble Lord, Lord Boyd-Carpenter, accused me of shrugging off the frustration and inconvenience of an investigation. I was not aware that I had done so. I am confident that I did not do so. However, if I did, I would sincerely apologise because I have suffered the inconvenience of that type of investigation and it can be frustrating and costly.
I think that I have covered the principal points raised. I have a note on the question of Royal Assent which might be of interest to the House. This matter was raised by the noble Viscount, Lord Trenchard. Under the existing law, the Price Commission must consider notification of price increases within 28 days. If it does not do so, the applicants may raise their prices. The 28 days expire on Tuesday next, 13th February. According to Press reports certain price increases, including beer and petrol, were notified just after the announcement of my right honourable friend the Prime Minister. The Price Commission meet on Wednesdays and thus would consider these price increases on Wednesday next, 7th February. For that reason we have been seeking to obtain Royal Assent by Thursday of this week to avoid uncertainty. That is much the best outcome. But, it would also be possible—and contingency arrangements have been made against delay in obtaining Royal Assent—for the Price Commission to consider these increases up to Tuesday, 13th February. That, I think, answers the point raised by the noble Viscount, Lord Trenchard.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.