HL Deb 06 February 1979 vol 398 cc637-73

4.45 p.m.


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

Moved, that the House do now resolve itself into Committee.—(Lord Jacques.)

On Question, Motion agreed to.

House in Committee accordingly.

[The Baroness Wootton of Abinger in the Chair.]

Clause 1 [Amendment of Price Commission Act 1977]:

Baroness SEEAR moved Amendment No. 1: Page 1, line 7, after ("earning") insert ("(a)").

The noble Baroness said: With permission, I will at the same time discuss Amendment No. 9. No. 1 is purely a paving Amendment designed to insert "a" in order that in Amendment No. 9 we can proceed to insert the new para- graph (b), the purpose of which is to safe. guard enterprises which would otherwise be left without any safeguard in a situation in which the costs of raw materials had risen very greatly—as such costs at the present time are likely to rise very greatly—and which, with the removal of the 80 per cent. safeguard which has hitherto been available to them, would mean they would have no safeguard except in the judgment of the Price Commission. During the time the investigation was going on and, for that matter, afterwards—because it applies to both the investigation period and the post-investigation period—the price increases which they would have to sustain would not in any way be safeguarded because the safeguard clauses have now been removed. We want, particularly at this time when raw material prices are rising for reasons over which manufacturers have no control whatever, to make sure that this safeguard is maintained.

There may be some difficulties over the way in which the Amendment is drafted, but we argue that it is so vitally important that some safeguards should be given—particularly for this item, this over which it is crystal clear there will be great difficulties which manufacturers cannot possibly meet—and that there should be some assurance against a reduction of profits because of increases in raw material prices. I beg to move.

The Earl of GOWRIE

We on these Benches are glad to support the noble Baroness, Lady Seear, in her Amendment. Indeed, the Committee will be aware of Amendment No. 4 which stands in the names of my noble friend Lord Lyell and myself, so we are effectively debating No. 1, the paving Amendment, and Amendments Nos. 4 and 9, the substantive Amendments. I would only add to what the noble for protection at a time of rapidly shifting and escalating costs, which must be incontrovertible, that not only will the Amendment be welcome to many sectors of industry, particularly the food industry, but that in its intention, in its substantive points, it has all-Party support in another place. It was down in the House of Commons in the name of the Scottish National Party but was not discussed there simply because the previous draft of the Amendment was not acceptable to the Chair for technical reasons.

I have no doubt that the noble Lord, Lord Jacques, will, as the noble Baroness, Lady Seear, suggested, give all sorts of reasons why this proposal is in some way technically defective, but the Government have paid draftsmen at their beck and call and should have no difficulty in getting it into shape. It would also seem reasonable from the Government's point of view even to accept the Amendment to save it going back to another place. We shall listen carefully to what Lord Jacques says, but I should have thought that, particularly at the present time, the case was incontrovertible.


What I have to say in reply to the Amendments is a little involved, and important. Therefore, I shall read what I have to say, and I shall do so carefully and slowly. I can to some extent sympathise with the general feeling behind the Amendments. The cost of imported raw materials is to a great extent, though not entirely, outside the control of the purchaser. It therefore seems unfair that he should suffer as a result of increases in such costs. The Amendments are intended to give him some protection. I sympathise with that aim, but nevertheless I must oppose the Amendments. As I shall explain shortly, I believe that they are unnecessary, and that the concern behind them is unjustified. I also think that they reflect a fundamental misunderstanding of the nature of the safeguard provisions in the 1977 Act. Their acceptance would result in serious confusion.

Amendments Nos. 1 and 9, and the related Amendment, No. 4, make no sense in the context of a Bill dealing with the minimum level of profits which companies shall not be prevented from earning, and with the regulations governing such profit levels. If a company is to get a minimum level of profit, it would get that level of profit whatever its costs, since it would be able to pass on costs in the form of higher prices up to the point at which the minimum profit level was achieved. It therefore makes no logical sense to require, as the Amendments apparently seek to do, that minimum profit levels should be established to take account of one particular kind of increase in costs; namely, increases in costs incurred as a result of increases in prices of imported raw materials… The Amendments could make sense only if increases in costs of imported raw materials were the only cost increases which a company had to face; and that is obvious nonsense. A company cannot be guaranteed a minimum level of profit merely by virtue of being able to recover costs of imported raw materials; other costs must be taken into account.

I can, however, see what the noble Baroness and the noble Earl are driving at. I think that they may wish to oblige the Price Commission to agree to an interim price increase for a company under investigation when that company can show that its costs have increased as a result of increases in prices of imported raw materials. In other words, the Price Commission would no longer have discretion in such a case, but would be statutorily obliged to issue a variation notice under Section 4(5) of the 1977 Act to permit price increases governing such increases in costs. But this would not be an amendment to Section 9 of the 1977 Act, with which the Bill is concerned, but to Sections 4(5) and 5(4) of the Act, with which, except consequentially, this Bill does not deal. There is no way in which sensible regulations could be drafted by virtue of these Amendments.

An Amendment requiring the Commission to allow interim price increases where costs of imported raw materials have increased is in any case unnecessary. In exercising its present discretionary powers, the Commission is obliged to have regard to Section 2 of the parent Act. Under Section 2(2)(a) the Commission may have regard to the need to recover costs incurred in efficiently supplying goods and services and in maintaining the value of the relevant businesses; Thus the Commission already has a statutory duty to look at the need to recover costs of imported raw materials. The company concerned should of course be efficient, and I assume that the noble Baroness and the noble Earl are not suggesting that inefficient firms should be entitled automatically to recover costs. If it could be shown that the Commission was in breach of its duty under Section 2, it would be open to challenge in the courts. Meanwhile, I can assure the Committee that the Amendments as they stand are confusing and make no sense. Even if one attributes to them the purpose which I believe the noble Baroness and the noble Earl have in mind, they are quite unnecessary because they duplicate powers which the Price Commission already has.

Baroness SEEAR

I am afraid that it is not possible to accept the argument presented by the noble Minister. What he has really told us is that by the removal of the 80 per cent. guarantee, organisations are in fact left without any firm assurance that escalating costs are to be taken into account. As we said in the debate yesterday, there are of course general requirements under Section 2 of the 1977 Act for the Price Commission to take these matters into account, but these are all in the judgment of the Price Commission. The point which was made very clearly in the Second Reading debate is that, particularly at present when there are such rapid changes in costs which arise through no fault of the manufacturers, there should be no quantitative safeguard and that the only safeguard which the manufacturers are now to have rests on the judgment of the Price Commission. That is not satisfactory. What the noble Lord the Minister has really done is to make a case for not removing the initial 80 per cent. safeguard. That being so, I am afraid that we must divide the Committee.


I believe that one point has been completely overlooked. I said that I appreciated what the mover of the Amendment had in mind, and I went further and said that this could be done but by an entirely different Amendment. I would ask that the matter be taken back and an entirely different Amendment be considered for the Report stage. An entirely different Amendment would not cause the serious confusion which would be caused by these Amendments.


Will the noble Lord offer to the Committee to put the services of the Government draftsmen at our disposal to draw up such an Amendment which could be put down at the Report stage?


I do not feel that the question is so much one of drafting as of getting the right place and the right kind of Amendment, and I am sure that, with the noble Lord, Lord Wigoder, available to the Liberal Party, it would not be necessary for me to give the kind of assurance that has just been requested.

Baroness SEEAR

Lord Wigoder specialises in the subject of crime.


I wish to remind the noble Lord, Lord Jacques, that he started by saying that he had some sympathy with the intentions behind the Amendments and that they were intended to give some protection to efficient enterprises, which is true. May I put it to the noble Lord, as did the noble Lord, Lord Denham, that the best course for the Government would be either to come forward with their own proposition in order to achieve what we all want, or to allow us to defeat them so that they would be forced to the same end? That is what my noble friends Lady Seear and Lord Wigoder (with all his experience of crime), and I feel is the right thing to do.


There are two elements in this matter. First, we say that the Amendments are unnecessary, that the Commission is obliged by virtue of Section 2 to take into account the matter referred to, and that if it fails to do so, it can be taken to court. That is our argument, but we are saying that, if it is wished to write the obligation into the Statute, it should be done not in this way but in another way. I do not think that there would be any great drafting difficulty; it is a question of making an Amendment to the right part of the parent Act.

Viscount SIMON

I have listened with care to what the noble Lord, Lord Jacques, said, and I thought that in his original explanation he said that the Commission had a statutory duty to take the matter into account, but later, when he read part of the section, he said that the Commission may take it into account. I do not think that the Commission has a statutory duty to take the matter into account. I feel that the noble Lord gave me my case with the closing words of his original intervention, when he said that the Amendments duplicate powers which the Commission already has, but it is not a duty which the Commission has under the Act.


The Commission has a statutory duty to take into account increases in cost of raw materials, but it may say that there are other ways in which this problem should be dealt with and there should be no increase. But it must take them into account. If it did not, it would not be carrying out its duties under the Act and could be challenged in the courts.


The noble Lord has made the case (I have the parent Act with me) but what worries me, having listened carefully to his opening statement, is the burden of proof that the company is so called "efficiently" importing its raw materials—and that, it seems to me, is the only cost involved where imported raw materials are concerned. The noble Lord quoted from the parent Act, Section 2(2)(a), which says: The matters aforesaid are— a) the need to recover costs incurred in efficiently supplying goods … If a company has to go to law to decide whether or not it is "efficiently" supplying

the imported goods, then I think that the need for the Amendment is all the greater, because while going to law the cost of those imported goods is liable to fluctuate; and in this Amendment we are talking only of imported raw materials.


Which simplifies it. You need not go to law: all you have to do is to convince the Commission.


I really think that the only way we can clear up the Government confusion which has arisen from the statement which the noble Lord was good enough to read to us—and it must have been a carefully considered statement, but, quite frankly, I did not understand it—is to divide. In that way we can get this matter clear at the next stage.

5.2 p.m.

On Question, Whether the said Amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 113; Not-Contents, 72.

Ailesbury, M. Exeter, M. Northchurch, B.
Airedale, L. Falkland, V. Nugent of Guildford, L.
Alexander of Tunis, E. Feversham, L. Nunburnholme, L.
Allerton, L. Foot, L. O'Hagan, L.
Amherst, E. Forester, L. Rankeillour, L.
Amory, V. Fortescue, E. Robbins, L.
Ampthill, L. Fraser of Kilmorack, L. Rochester, L.
Auckland, L. Gisborough, L. Romney, E.
Avon, E. Gladwyn, L. St. Davids, V.
Avon, E Gladwyn, L. St. Davids, V.
Barrington, V. Glenkinglas, L. St. Just, L.
Belstead, L. Gowrie, E. Saint Oswald, L.
Bessborough, E. Granville of Eye, L. Sandys, L.
Bolton, L. Greenway, L. Savile, L.
Byers, L. Grey, E. Seear, B.
Caccia, L. Gridley, L. Selkirk, E.
Campbell of Croy, L. Hailsham of Saint Marylebone, L. Sharpies, B.
Cathcart, E. Simon, V.
Chitnis, L. Hampton, L. Skelmersdale, L.
Clifford of Chudleigh, L. Hankey, L. Strathcarron. L.
Clitheroe, L. Home of the Hirsel, L. Strathclyde, L.
Cockfield, L. Hornsey-Smith, B. Strathcona and Mount Royale.L.
Cottesloe, L. Ilchester, E. Strathspey, L.
Craigton, L. Inglewood, L. Swaythling, L.
Crathorne, L. Killearn, L. Teviot, L.
Cullen of Ashbourne, L. Kilmany, L. Teynham, L.
De Freyne, L. Kilmarnock, L. Trefgarne, L.
De La Warr, E. Lauderdale, E. Trenchard, V.
Denham, L. [Teller.] Long, V. Tweedsmuir, L.
Dulverton, L. Luke, L. Ullswater, V.
Ebbisham, L. Lyell, L. Vernon, L.
Effingham, E. Mancroft, L. Vivian, L.
Ellenborough, L. Marley, L. Wade, L.
Elles, B. Massereene and Ferrard, V. Ward of North Tyneside, B.
Elliot of Harwood, B. Merrivale, L. Westbury, L.
Elton, L. Mills, V. Wigoder, L. [Teller.]
Emmet of Amberley, B. Mowbray and Stourton, L. Winchilsea and Nottingham, E.
Evans of Hungershall, L. Newall, L. Wolverton, L.
Ardwick, L. Gregson, L. Paget of Northampton, L.
Aylestone, L. Hale, L. Pannell, L.
Bacon, B. Hall, V. Pargiter, L.
Balogh, L. Hanworth, V. Peart, L. (L. Privy Seal.)
Blease, L. Henderson, L. Phillips, B.
Boston of Faversham, L. Houghton of Sowerby, L. Plant, L.
Brimelow, L. Jacques, L. Ponsonby of Shulbrede, L.
Castle, L. Kaldor, L. Raglan, L.
Collison, L. Kirkhill, L. Ritchie-Calder, L.
Cooper of Stockton Heath, L. Leatherland, L. Segal, L.
Crook, L. Lee of Newton, L. Shinwell, L.
Crowther-Hunt, L. Leonard, L. Stedman, B.
Darling of Hillsborough, L. Listowel, E. Stewart of Alvechurch, B.
David, B. Llewelyn-Davies of Hastoe, B. [Teller.] Stone, L.
Davies of Leek, L. Strabolgi, L. [Teller.]
Denington, B. Lloyd of Hampstead, L. Taylor of Blackburn, L.
Douglas of Barloch, L. Longford, E. Taylor of Mansfield, L.
Elwyn-Jones, L. (L. Chancellor.) Lovell-Davis, L. Wallace of Coslany, L.
Fisher of Camden, L. McCarthy, L. Walston, L.
Gaitskell, B. McCluskey, L. Wells-Pestell, L.
Gardiner, L. McGregor of Durris, L. Whaddon, L.
Glenamara, L. MacLeod of Fuinary, L. Wilson of Radcliffe, L.
Gordon-Walker, L. Murray of Gravesend, L. Wootton of Abinger, B.
Goronwy-Roberts, L. Oram, L. Wynne-Jones L.
Greene of Harrow Weald, L.
Resolved in the affirmative, and Amendment agreed to accordingly.

5.13 p.m.

The DEPUTY CHAIRMAN of COMMITTEES (Baroness Wootton of A binger)

Unfortunately, the next two Amendments have been printed in the wrong order, so we now proceed to Amendment No. 3.

The Earl of GOWRIE moved Amendment No. 3: Page 1, line 10, after ("examinations") insert ("and section 4(5) of that Act ").

The noble Earl said: Lest the Committee thinks that this wrong order may be a sort of collusion of incompetence among the various Front Benches, may I say that this is the trouble with taking legislation as hurriedly as is happening at the present time. One of the most enjoyable moments I have had in your Lordships' House in the last few weeks was yesterday, when on Second Reading the noble Lord, Lord Jacques, told us that this legislation had nothing to do with the emergency. For legislation which is engaged in minor and capitalistically perfectionist details on monopoly and competition and the like, it is certainly occupying a very frenzied place in the Parliamentary timetable, and it is because of that frenzy that some of these nonsenses have taken place.

While the Bill as drafted seeks to abolish both the interim and the principal safeguards, this Amendment has the effect of retaining the requirement for there to be an interim safeguard. May I say to the Committee that I should like to take with this Amendment, Amendments Nos. 11, 13, 15, 16, 17 and 18, all of which I take to be consequential upon this Amendment No. 3.

The reasons for retaining the interim safeguard are very clearly, I think, that safeguards are necessary because prices are frozen when a price investigation is announced. This is the effect of the repeal of the previous Bill. This we feel to be objectionable in two ways. First, we feel that it is unfair to prejudge the guilt of the company before any wrongdoing has been established by the Commission. A three-months' freeze is a penalty before the verdict is heard. Secondly, the whole purpose of the three-months' investigation of a price increase is to judge whether or not the increase is reasonable in the view of the Commission. The Commission has discretion to grant an interim award but the price freeze effectively forces the Commission to reach a judgment on the increase during the 28-day period prior to the investigation—when the same judgment is the whole purpose of the three-month inquiry. For businesses, the real fear of the prices freeze during the investigation is that cost increases can so quickly erode profits. There is a limit to the cost increases which a company can absorb and, when faced with sudden and large increases in raw material costs, little or nothing can be done but to pass on those costs. The interim safeguards guarantee that there is a limit to which profits are eroded as the costs increase while the prices are frozen.

I cannot too often remind the Committee that, in fact, this Bill is about the repeal of safeguards on profitability which the Government themselves saw fit to put into the original Price Commission Bill. It will be said that the Commissioners' discretion to grant increases is a sufficient safeguard. I do not think that this can be completely relied upon. If it is argued that the Commission will normally allow reasonable interim awards, there can be little concern, surely, at statutorily requiring them to do so. I beg to move.


The effect of these Amendments would be to negate a major part of the intention of the Bill; and this Bill, I might remind the Committee, has already been approved in principle by both Houses. The Amendments would restore the full effect of the safeguards during investigations by the Price Commission. Experience so far has been that the investigation safeguard is, in practice, the most important part of the safeguards. Acceptance of the Amendments will make a travesty of the Bill. Once an interim price increase has been allowed, whether under safeguards or otherwise, it cannot, as the parent Act stands, be reversed at the end of the investigation. The Amendments would not simply give firms protection during the investigation but, in practice, for a considerable time afterwards. Having given that explanation, I hope the noble Earl will feel that he can withdraw his Amendment.

The Earl of GOWRIE

The noble Lord has said that my Amendments, if accepted, would make a travesty of the Bill. I cannot accept that. The Bill is already a travesty and it would be impossible to "travestise" it any further. He also made the point, to which I am more sympathetic, that the principle had passed through the other place as well as through this House. In view of that and in view of the fact that the noble Lord will be aware that when we were dealing with previous Amendments (as led by the noble Baroness, Lady Seear) one of our arguments was that it would be right for the raw materials Amendment to be returned to the House of Commons—and if it is now his feeling that that is a fair thing to be done—I am happy to let the noble Lord off the hook on my present Amendment and beg leave to withdraw it.

Amendment, by leave, withdrawn.


We now go back to Amendment No. 2.

The Earl of GOWRIE moved Amendment No. 2: Page 1, line 10, after ("examinations)") insert ("and except as regards any notification given by the Commission in pursuance of subsection (1) of section 4 of that Act in respect of any increase of which notice has been given to the Commission in pursuance of an Order under section 5 of the 1973 Act where the said notice is given more then twelve months after the previous such notice".).

The noble Earl said: A very brief and temporary Lib-Con pact was put together to enable me to move this Amendment. There is no difference of opinion between the noble Baroness and myself upon it. The Government have emphasised that it is part of their prices policy that companies should seek to ensure the maximum practicable interval between price increases. While industry does not accept that such an arbitrary time period as 12 months is desirable or sensible, there is surely an argument for suggesting that those who keep to the spirit of the Government policy, which the Government feel is being reinforced by this Bill, should earn some additional protection from the effects of a Prioe Commission restriction. I beg to move.

Baroness SEEAR

We attach considerable importance to this Amendment. It does, as the noble Earl, Lord Gowrie, has said, encourage people to keep to what is the intention and the strong desire of the Government. We consider they should be given incentives so to do; and we consider it is of such importance that we shall push the Amendment to a Division.

The Earl of GOWRIE

The Liberal-Conservative pact did not originally include a Division, so I suppose the pact has now been disbanded. I must say that I think it would be a very good move if this Amendment went back to another place or was considered further on Report. At the same time, I am somewhat reluctant to take the eye of the Committee and both Houses off the Amendment I really mind about, which is the raw material Amendment. However, if my noble friends feel that they should follow the noble Baroness into the Division Lobby, it would be no part of my place to dissuade them.


Ought we not to hear from the Government before we make these decisions?


I thought that it was better to hear the whole of the opposition before the Government replied. The Government support the objective of increasing the interval between price increases. There has indeed been a notable increase in intervals between price increases since the Price Commission Act came into operation. The fact that there is a 12-month interval between increases does not, however, in itself justify automatic special treatment under the legislation. The price increase may be unduly high or existing profit levels already more than adequate, despite the length of the interval. It is better to rely upon the discretion of the Commission which can allow for individual circumstances.

The Commission can already in the context of the criteria take into account the length of time between increases in deciding whether to mount an investigation. The Amendment covers only those who notify the price increases to the Commission in advance. If this line is to be followed at all, would it not be desirable to cover the smaller businesses which are not required to pre-notify?

Why are they being ignored? The Amendment is not entirely clear in its effect; it is not clear whether it relates to two increases in respect of the same product or whether there has to be a 12 months' gap in increases of any kind notified. The latter would be very harsh upon large companies which are notifying increases in different products all the time. I am advised that the Amendment, as it stands, would mean the latter and would inflict that hardship on the larger companies. I hope that with that explanation the noble Earl will feel that he had better withdraw the Amendment.

The Earl of GOWRIE

I am in the hands of the Committee. I am certainly sensible of what the noble Lord, Lord Jacques, has said. This is a matter which, speaking for myself, I would be happy to look at again on Report. For my part, I am happy to withdraw the Amendment, but it may be that other noble Lords do not with to withdraw.


Is it your Lordships pleasure that this Amendment be withdrawn?

Several noble Lords: No!

5.25 p.m.

On Question, Whether the said Amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 24; Not-Contents, 77.

Airedale, L. Foot, L. Rochester, L.
Amherst, E. Gladwyn, L. St. Davids, V.
Auckland, L. Grey, E. Seear, B. [Teller.]
Banks, L. Hampton, L. Simon, V. [Teller.]
Barrington, V. Kilmarnock, L. Swaythling, L.
Byers, L. Kimberley, E. Wade, L.
Evans of Hungershall, L. McNair, L. Ward of North Tyneside, B.
Feversham, L. Ogmore, L. Wigoder, L.
Ampthill, L. Brockway, L. David, B.
Aylestone, L. Bruce of Donington, L. Davies of Leek, L.
Bacon, B. Castle, L. Donington, B.
Balogh, L. Collison, L. Douglas of Barloch, L.
Bernstein, L. Cooper of Stockton Heath, L. Dowding, L.
Boston of Faversham, L. Crook, L. Elwyn-Jones, L. (L. Chancellor.)
Brimelow, L. Darling of Hillsborough, L. Energlyn, L.
Fisher of Camden, L. Llewelyn-Davies of Hastoe, B. [Teller.] Raglan, L.
Gaitskell, B. Rhodes, L.
Glenamara, L. Lloyd of Hampstead, L. Ritchie-Calder, L.
Gordon-Walker, L. Longford, E. Sefton of Garston, L.
Goronwy-Roberts, L. Lovell-Davis, L. Segal, L.
Gregson, L. McCarthy, L. Shinwell, L.
Hale, L. McCluskey, L. Stedman, B.
Hall, V. McGregor of Durris, L. Stewart of Alvechurch, B.
Henderson, L. MacLeod of Fuinary, L. Stone, L.
Ilchester, E. Milford, L. Strabolgi, L. [Teller.]
Jacques, L. Murray of Gravesend, L. Taylor of Blackburn, L.
Janner, L. Northfield, L. Taylor of Mansfield, L.
Kaldor, L. Paget of Northampton, L. Thomson of Monifieth, L.
Kilbracken, L. Pannell, L. Wallace of Coslany, L.
Kirkhill, L. Pargiter, L. Walston, L.
Leatherland, L. Peart, L. (L. Privy Seal.) Wells-Pestell, L.
Lee of Newton, L. Pitt of Hampstead, L. Whaddon, L.
Leonard, L. Plant, L. Wilson of Radcliffe, L.
Listowel, E. Ponsonby of Shulbrede, L. Wynne-Jones, L.

On Question, Motion agreed to.

5.35 p.m.

The Earl of GOWRIE had given Notice of his intention to move Amendment No. 4: Page 1, line 10, after ("examinations)") insert ("or of increases in the cost of imported raw materials incurred since the date of the last price increase.").

The noble Earl said: My only point in rising to my feet at this juncture is to establish that the Government accept that Amendments Nos. 4 and 9 are consequential on the vote we had on the first Amendment.




They cannot both be consequential. Is it not right to say that Amendment No. 9 is consequential on Amendment No. 1, which the Committee carried, but that Amendment No. 4 should not be moved?

The Earl of GOWRIE

I am most grateful to the noble Lord. That is right. Amendment No. 4 is not moved.

[Amendment No. 5 not moved.]

Lord LYELL moved Amendment No. 6: Page 1, line 10, after ("examinations)") insert ("or, in the case of companies operating in assisted areas in order to earn profits to maintain those operations.").

The noble Lord said: This small Amendment is, I hope, in pursuit of a major Government incentive. It seems that Government investment incentives are, and always have been, designed to further the interests of firms in the assisted areas. If this Bill is in any way likely to harm companies, as we think it might, then all the more reason exists for taking very careful note of this Amendment, with its reference to "assisted areas".

A virtually identical Amendment was not considered in another place, on a mere technicality, but there the Government spokesman admitted, just as has the noble Lord, Lord Jacques, this afternoon, great sympathy with the objective of the Amendment. Thus we look to the Government in this Chamber to take note of our plea, and indeed of the plea of the minority Parties in another place. It cannot be reasonable or justifiable for the Price Commission to strike at prospective price increases and thus, we believe, put further difficulty in the paths of these companies, particularly in areas which may be in some difficulty for one reason or another—perhaps they may be "geographically disadvantaged", as the phrase goes, or perhaps in areas where employment is temporarily on the decrease. Certainly we believe that every single possible advantage should be given to the assisted areas, and for that reason I beg to move this Amendment.


The Government regard this Amendment as undesirable, for three reasons. First, it is not necessary. By virtue of the Section 2(2)(c) (ii) of the parent Act, the Price Commission, in the exercise of their power to grant discretionary price increases, must have regard to the need for reasonable profits and to encourage the promotion of innovations and technical improvements and the expansion in the United Kingdom of the enterprises which consist of or include the relevant businesses;". Although this passage does not refer directly to the assisted areas, the reference to industrial expansion would certainly include industrial expansion in the assisted areas.

The second reason is that it is not necessarily in the interests of the assisted areas that this Amendment should go on the Statute Book. Under Section 2(1) of the parent Act, the Commission is required to act in a manner: consistent with the making of adequate profits by efficient suppliers of goods and services;". The maintenance of operations in the assisted areas is likely to be better served by efficient suppliers making adequate profits than by companies which are allowed to pass on costs to the consumer on an automatic basis and are therefore at a risk if becoming less competitive.

Thirdly, it would be very difficult to draft regulations which could be applied fairly. The safeguard regulations apply to individual prices and price increases. It would not always be easy to relate such individual prices and price increases to operations in the assisted areas. Should a company be allowed to increase its prices overall merely to cover a loss in one factory which happened to be in an assisted area, how could one ensure that the profits were used to maintain the operations in the assisted area rather than for some other purpose? It would be extremely difficult to devise regulations which were both fair in all cases and which could be administered by the Commission without the risk of frequent dispute. I hope, with that explanation, that the noble Lord will feel that he should withdraw the Amendment.


The noble Lords keeps referring to Section 2: would he not agree that the duties of the Commission are almost totally qualified by the wording of Section 2(a) where they are required: to have regard to all matters which appear to the Commission in the particular circumstances to be relevant"? The noble Lord has said more than once, and again just now, that the Commission must do this and must do that and it is all set out in subsection (2). But it is totally qualified, is it not, by the fact that they are allowed to make up their minds as to whether these matters are relevant.


I replied to that question last evening, at the end of the Second Reading debate. My advice is that if the Commission has discretion, it must use it. It must use it reasonably, and if it does not do so then it can be challenged in the court.


I suggest that an alternative view can be taken about that matter. It is perfectly true that if the Commission was perverse it could be taken to court, but it is highly unlikely that it could be challenged if its judgment was simply wrong. What we are saying, both on this Amendment and on earlier occasions, is that the Commission's judgment may well be wrong and, in view of the way in which the original Act is drafted, I doubt very much whether it would be possible to take it to court for that.


This is not a matter which I am prepared to pursue at this stage.


The noble Lord, Lord Jacques, gave three reasons why I should withdraw the Amendment. His third reason was that, very often, aid to assisted areas does not work fairly. I totally agree with him that the investment incentives given to assisted areas do not work fairly to companies and enterprises which are on the borders of assisted areas. But since we have legislation and Government incentives to help those areas, then I should have thought there was every reason for giving such companies and enterprises all the help that is available.

I was a little lost by what the noble Lord, Lord Jacques, said about the parent Act. I have the parent Act with me and I was flying through it while he was speaking. He referred me to the top of page 4, Section 2(2)(c)(ii) and the expansion of businesses. But the wording is, …the expansion …of the enterprises which consist of or include the relevant businesses ". I do not think that "relevant businesses", or anything in this sub-paragraph, relates to the problem that we have raised.

The noble Lord, Lord Jacques, says that the Commission will have discretion, but, as was suggested by my noble friend Lord Cockfield, there is no way of knowing how the Commission will use that discretion. If it used its discretion in what was felt to be an arbitrary or unfair way, there would seem to be very little remedy for an aggrieved company, especially in the circumstances in which the parent Act and this Bill will be operating. I am not entirely happy with the reply of the noble Lord, Lord Jacques, but I do not wish to push this Amendment at this time. However, we may want to return to it at a later stage. Having said that, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.45 p.m.

Lord LYELL moved Amendment No. 7: Page 1, line 10, after ("examinations)") insert ("or in the case of companies earning a return on the book value of assets employed in the business of less than 15 per cent., in order to earn profits equivalent to that amount.").

The noble Lord said: Once again, it falls to me to move this short Amendment. It appears that Clause 1(2) removes any requirement for a floor level safeguard when a company wishes or is forced to raise its prices, and, indeed, discretion is left entirely in the hands of the Commission. This Amendment seeks merely to provide a minimum base below which a company's profitability should not be driven, and we believe that this floor level is adequately harsh.

The Government have constantly referred in another place, as well as here yesterday, to this Bill's having no harmful effects on companies or on industry generally. But the degree of profitability is not easily forecast or, indeed, monitored, which is the word that is currently used so often. For this reason, the Amendment seeks to suggest a real minimum below which the return on the investments of a company will not fall. The level suggested in the Amendment is very low, and far too low to provide reasonable funds for any reinvestment. So I hope that the Government may see their way to accept this Amendment. I beg to move.


It cannot be accepted that there should be any fixed standard level of profitability, even a minimum standard, for the whole of industry. This is contrary to the whole spirit of the Bill. Companies' financial needs vary widely, especially in the short-term, and so does the scope for increased efficiency. By guaranteeing companies an average level of profitability which could not be reduced at any time following an investigation, the Amendment would seriously restrict the Commission's scope for action; indeed, far more than at present. By referring specifically to the return on the book value of assets the Amendment ties the safeguards to an accounting system which is known to be unreliable. Furthermore, even if the accounting profession adopted a new standard which took into account inflation, there would be an unreliable standard, as is well known in the profession. In view of the unreliability of the standard which the Amendment proposes, I hope the noble Lord will feel that he ought to withdraw the Amendment.


The noble Lord, Lord Jacques, has been involved, as I have, in the profession of accountancy. He will know, as my noble friend Lord Boyd-Carpenter pointed out, that the Price Commission is run at the middle and lower levels by hordes of young accountants, as my noble friend described them. Those young accountants are doing all the work, and it is they who have to ferret out these figures. Those young accountants are in no way unreliable. If the noble Lord, Lord Jacques, is suggesting that inflation accounting is unreliable for the purposes of the Bill, then he should consider many aspects of yesterday's debate because the entire procedure is monitored and checked by young persons in the accountancy profession, about which the noble Lord has had such harsh things to say.

I agree with the noble Lord that the figure of 15 per cent. which we have just offered as a target may appear to be unreliable on a nationwide basis. We believe, however, that there should be some base level below which companies should not be forced to accept a profitability level. It was for that reason that we put down this Amendment. I do not believe that the noble Lord, Lord Jacques, can say that inflation accounting, or conventional accounting and the rate of return upon the book value of one's investments is entirely unreliable, because that is going to turn the whole operation of the Bill on its head.

The noble Lord, Lord Jacques, mentioned that this Amendment is contrary to the spirit of the Bill. The Bill works only pace the professional accountant and the young accountants who are seconded from firms. It was not necessarily a very good answer that the noble Lord gave. Once again, I think that we should do better to return to this matter at another stage. Therefore, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.51 p.m.

The Earl of GOWRIE moved Amendment No. 8: Page 1, line 10, after ("examinations)") insert ("or in the case of companies which are investing, profits sufficient to provide enough funds to ensure that cash flow is in balance over the coming 12 month period, so as to ensure that there is no damage to current investment plans and hence the prospects for jobs and higher output".).

The noble Earl said: If I may make a point in respect of the last Amendment, I think that the burden of my noble friend's speech is this: if the noble Lord, Lord Jacques, were running a small business, would he like young accountants like the noble Lord, Lord Lyell, to come in and tell him how to run it? Turning to Amendment No. 8, I propose to read out the Amendment in full because, more than a speaking note, I think that it says exactly what we are trying to do. In Clause 1, at page 1, line 10, after "examinations" we seek to insert: or in the case of companies which are investing, profits sufficient to provide enough funds to ensure that cash flow is in balance over the coming 12 month period, so as to ensure that there is no damage to current investment plans and hence the prospects for jobs and higher output ".

On Second Reading we debated—and I was certainly far from being the only person who felt that this Bill was cosmetic—the political context of the Bill. That is not our business this afternoon. Nevertheless, I think that the noble Lord must be aware that there has been a great chorus of anxiety from businesses that a Bill, which is not entirely innocent of political intent, political timing and the rest, might get in the way of real problems and real challenges over running businesses during a period of inflation. Of course, cash flow difficulties, with wildly varying interest rates and the like, are very substantial. We feel that companies will be discouraged from investing if they are not sure that they will be able to maintain cash flow. Even a large company might postpone a necessary employment-generating piece of investment.

Clause 1(2) of the Bill, as the Committee knows, removes the protection of the safeguard from those companies which have committed themselves to investment expenditure and which are reliant upon a price increase to secure adequate funds. It might be—and we shall come to the point of timing on a later Amendment—that provisions relating to investment, which assume a later price rise, have already been made and that the Price Commission could freeze such companies' price rises and totally alter their investment plans. I beg to move.


The Amendment requires safeguards to provide for all companies which are investing. This would apply, one hopes, to most industrial companies. Safeguards would therefore have merely the same scope as at present. Moreover, safeguards for these companies would have to be such as to enable them to finance their investment plans out of retained profits, if they choose to do so. This is a very sweeping provision and goes far beyond the purpose of the existing safeguards. Of course the Government recognise the importance of providing funds for investment. This is allowed for already in the Section 2 criteria of the parent Act. The Commission must therefore take investment needs into account, and they have dealt with this point very carefully in their investigations so far. It cannot, however, be assumed automatically that the whole amount of investment should be financed out of retained profits and hence ultimately by the consumer. It may be desirable for at least part of the investment to be funded by raising capital on the market. This Amendment goes much further than the parent Act. In view of that explanation, I hope that the noble Earl will withdraw his Amendment.

The Earl of GOWRIE

I see in this argument some very curious and, if I might say so—not to the noble Lord but to those who have drafted the Bill—inexperienced economics. If I understand him aright, it does not seem to me to be a matter for the Price Commission to decide whether something should be done out of retained profits, or for a directive from the Price Commission to go out instructing companies to raise capital on the market. This is an absurdity, it seems to me. However, I shall study what the noble Lord has said, and if we can get this Amendment into better shape I will return to it at a later stage. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.57 p.m.

Baroness SEEAR moved Amendment No. 9:

Page 1, line 10, after ("examinations)") insert— ("or (b) in consequence of any increases in costs incurred as a result of increases in prices of imported raw materials purchased or used by such persons; ").

The noble Baroness said: Amendment No. 9 is, I think noble Lords will agree, consequential upon Amendment No. 1 which has already been agreed to. Therefore, I beg to move.

Baroness SEEAR moved Amendment No. 10:

Page 1, line 10, after ("examinations)") insert— ("or (c) in consequence of any increases in costs incurred by such persons as a result of Government action; ").

The noble Baroness said: Amendment No. 10 is of the same order and in some regards is complementary to Amendment No. 9 which has just been agreed to. As noble Lords know, Amendment No. 9 deals only with increases in the price of imported goods, but there are other extremely threatening increases in prices which manufacturers are going to have to face over the next 12 months.

Where those increases in prices are clearly the result of Government action, it is surely reasonable that safeguards should be incorporated in the manufacturer's right to price increases. In particular, and as an example of the kind of thing we are speaking about, if it is allowed that the wages of local authority employees have gone up considerably—and it has already been agreed, apparently, that they will go up by at least 10 per cent.—this is bound to mean a substantial increase in rates. This will fall very heavily on manufacturing industry, and a safeguard comparable to the safeguard for increases in imported prices is appropriate for increases in prices which manufacturers have to bear as a result, as this Amendment says, of Government action. I beg to move.


The Bill does not remove the Commission's power to grant discretionary increases. In deciding whether to do so, the Commission are required to have regard to all matters relevant to restraining prices, so far as that is consistent with the making of adequate profits by efficient suppliers. Where Government action produces an unavoidable increase in costs which cannot be absorbed by greater efficiency, then the Commission will in effect be bound to allow the increase to be passed on to the extent necessary to allow an adequate profit. The Secretary of State would face great difficulty in making regulations which satisfy the requirements imposed by the Amendment. There would be no power to define what is meant by "costs incurred as a result of Government action". It would have to be left open so that the Commission or, following an investigation, the firm itself would have to consider what constituted such a cost. This would introduce an undesirable element of uncertainty into the Bill.

The Earl of GOWRIE

I wonder whether the noble Lord could clarify something which I think would help the Committee. The noble Baroness pointed out—very fairly I thought—that while this Amendment was in no sense consequential on the Amendment which we passed earlier, it was closely linked to it. As I understood him, in his reply the noble Lord said that if a price increase or raw material cost rose because of Government action or because of Government obligations, the Price Commission would be bound to allow this to be passed on. I am not clear where or how it says that the Price Commission would be bound to do so. I should be much happier about this if he could show us in what way the Commission is bound to allow the cost to be passed on.


I think I had better quote the exact words which I used: Where Government action produces an unavoidable increase in costs which cannot be absorbed by greater efficiency the Commissior will in effect be bound to allow the increase".

The Earl of GOWRIE

That is fine; that comes out of the noble Lord's brief. But where does it come in relation to the Bill?


The Commission is obliged under the criteria in Section 2 of the parent Act to allow costs in so far as they are consistent with the efficient management of the business.


The noble Lord is referring to the words "It is the duty of the Commission to have regard to". He has gone (has he not?) very much further than that in his statement in the Committee today?


Our interpretation of that is that if there was an increase of Government costs, unless the Commission could show that that could be absorbed by greater efficiency, in our opinion it would be obliged to allow the costs under Section 2.

Baroness SEEAR

I suspect that the difficulty in which the noble Lord finds himself is that he very much sympathises with this Amendment and that if rates are increased it is entirely appropriate that they should be allowed; but following the comment made by my noble friend Lord Wigoder I submit that although it is the intention of the noble Lord and the intention of the drafter of the noble Lord's brief, it is not in fact in the 1977 Act. That is all that matters, and it does not say that they are bound to; it only says that they are bound to have regard.

You can have regard to something and then, having looked at it, you can turn the other way and do something quite opposite.

There is nothing in this legislation to say that they are bound to take that increase in rates consequential upon Government action into account automatically. They only look at it and say, "It may be or it may be not". If the Minister wishes to make it in the sense that he said, that they should be required to do so, then he will accept our Amendment, because that is the only way to be sure that what the noble Lord said he wants to happen and he believes will happen will in fact happen. I submit that it will not happen on the basis of the 1977 Act.

The Earl of GOWRIE

Might there not be a way out of this difficulty? As the noble Baroness has pointed out to the Committee, the noble Lord, Lord Jacques, has given us a very clear statement of how he feels this should be interpreted. Might he not go back and see whether his clear statement of intent could not be institutionalised in some way and make his own suggestion on that?


I am advised that if the Commission concludes that costs are unavoidable and cannot be absorbed by greater efficiency then it cannot refuse the increase. That confirms exactly what I said.


That seems again to be an opinion which has been expressed from that Despatch Box. What we are looking for is the authority in the Act which puts that obligation on the Commission. Would the noble Lord not take the point of view expressed by the noble Earl, Lord Gowric, and have another look at this matter? We have to go through the Report stage and Third reading; this is something which ought to be cleared up and we should like to know the authority.


I think the authority is what we discussed earlier: it is that the Commission, having been given a discretion, must use it reasonably, and if it does not do so it can be challenged. I believe that is the authority.

Baroness SEEAR

I am very sorry, but I am afraid we cannot accept that as an adequate answer. The noble Lord has not told us where to find the legal basis; he has not given us the words from the Act. The Committee is asking the noble Lord to tell us where in the Act of 1977 the words "have regard to" appear. Given that there are no safeguards, we want it legally written in that the Commission has to do more than "have regard to". We want it written in that it is required to allow such increases to be included in the price increase.

If the noble Lord will take this matter back and look at it again, we shall be glad to withdraw the Amendment and to bring it in again at the Report stage. We do not ask him to commit himself either way at this stage. I am not anxious at this moment to press this Amendment to a Division, but if the noble Lord is not able to say that he will look at it again then I fear that I shall have to do so. I should prefer to withdraw the Amendment, to ask the noble Lord to look at it again and to bring it up at the Report stage.


Before the noble Lord replies, would he please remember the intervention earlier of my noble friend Lord Cockfield, who is not in his seat at the moment, with all his experience of Price Commission matters and all his background as an absolute expert in tax law and interpretation? He stated that he could not see, under this Act, how a company would have any action in law against the Commission for failing to regard one of the many criteria as being relevant.


I would suggest that perhaps the best thing is to withdraw the Amendment and to table the same Amendment at Report stage, and then I shall either give the same answer or a different answer or I shall produce an Amendment which will achieve the same objective.


Could it be a better answer?

Baroness SEEAR

I thank the noble Lord very much, and in the light of that I shall be glad to withdraw the Amendment, but on the clear understanding that we shall reintroduce it at Report stage. We hope that by that time the noble Lord will have come forward with what I think his Party likes to call a "copper bottomed" answer to this problem. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.9 p.m.

The Earl of GOWRIE had given Notice of his intention to move Amendment No. 11: Page 1, line 12, leave out subsection (2).

The noble Earl said: This Amendment has been taken with Amendment No. 3.

Lord LYELL moved Amendment No. 12: Page 1, line 17, after ("effect") insert ("and subsection 4(5)(ii) shall be replaced with the following subsection: "in a case where, upon receipt of an application pursuant to subsection (5) above the Commission do not subsequently give a variation notice to the relevant person, they shall be required to provide that person with a notice setting out that fact and explaining, by reference to such matters specified in section 2 of the Act as it considers are relevant in the circumstances and in particular by reference to such of those matters mentioned in the original application of the relevant person to the Commission, their reasons for not giving a variation notice".")

The noble Lord said: This particular Amendment arises as a result of Clause 1(2) of the Bill. Clause 1(2) seems to us—and indeed it is intended to—to remove the interim profit safeguard, but we are told that the Commission still has the power under this Section 4(5)(ii) of the main parent Act to grant an interim increase at its own discretion; that is, at the discretion of the Commission. Our Amendment is designed to introduce one or two procedural safeguards on the use of this particular discretion. We might be treading on some of the same ground that the noble Lord, Lord Jacques, was covering in the last Amendment. It seems that if the Bill is passed the interim profit safeguards are going to be removed; the discretionary power of the Commission to grant any interim awards, again under Section 4(5)(ii) of the main, Parent Act, becomes in this case of crucial importance.

Companies which are faced with increases in particular raw material costs are wholly reliant on this discretionary power of the Commission. Raw material costs can increase suddenly and it is impossible for the company to absorb them by way of increased efficiency, to which the noble Lord, Lord Jacques, has drawn attention. I wonder whether in the course of his remarks the noble Lord could tell us how it is possible to improve efficiency so far as imported raw materials alone are concerned—nothing else, not the handling from the ports, not the handling in the particular works, but the actual cost of imported raw materials. I cannot see that there is a relevant and logical link between the argument of efficiency which was used by the noble Lord, Lord Jacques, and what we are concerned with here, the cost of raw materials.

The legislation, particularly the parent Act, provides very little guidance to the Commission on the use of their power of discretion. Indeed, Section 4(5) of the parent Act says that when the Commission have received a request for the variation notice they may—and I emphasise "may"—give to the relevant person a variation notice.


May I ask the noble Lord which Amendment he is speaking to?


I am speaking to Amendment No. 12. I understood we had disposed of No. 11.


I understood that we were considering No. 12 and I could not relate what the noble Lord was just saying to Amendment No. 12.


I was speaking to Amendment No. 12. I am sorry if the noble Lord thinks I have strayed. I think there is a little red book which has been used in recent history to quote relevance. If the noble Lord, Lord Jacques, has missed any of my remarks he may be able to pick them up, if not tonight then tomorrow. I was speaking about Section 4 of the parent Act which says that the Commission may give to the relevant person a variation notice. In performing this duty they must have regard to the matters in Section 2, and this is what the noble Lord, Lord Jacques, has referred to.

There are two very distinct concerns about the use of this power in this new situation which we are in this evening, referring to this Bill. First, the Commission may be more restrictive than is justified simply in pursuit of a short-term price delay. Secondly, because it seems there is no procedure for them to follow in the Bill, there will be no evidence that they have examined that particular increase and fully considered the merits of the case so far as is possible in the circumstances of the case and according to the time available.

This Amendment will not materially affect the obligation on the Commission, but we believe it will make them consider any arguments sufficiently to provide the basis for a written reply to the company's application. This appears to be a reason- able request, to ensure that the Commission are seen to respect and account for the use of their crucial discretionary power. We have heard a lot about the discretionary power this evening. We hope that the Commission can be seen to justify this power and to make reasonable use of it. I am sorry if I strayed off; I was speaking on Amendment No. 12. I beg to move this Amendment.


The question was raised how you might become more efficient and absorb the increase in the cost of an imported raw material. There are several ways in which you could do that: you could use less; you could substitute a British material; you could have a different process of handling the material. There are many ways in which you could look at the whole question of being more efficient as a result of the price increase.

I want now to come to the Amendment which is before us. This Amendment would make it an obligation upon the Commission to give a reason for refusing an interim increase. The Government have given very careful consideration to this Amendment. The Commission are already required to give reasons for their recommendations when making their report. The question arises, why not at an earlier stage?—which the Amendment would require. The answer is that during the investigation the Commission will not by definition have all the facts at their disposal. In considering an application for an interim increase the Commission will necessarily be relying heavily on the arguments put forward by the person concerned. If those arguments stand up, then very probably an increase would be allowed. But the Commission will only have heard one side of the argument. It would be wrong in principle for them to have to give as the basis of their reasoned decision factors which they have perforce only considered in this way. The chances are that to require them to do so would work against the interests of those concerned.

Variation notices are a form of relief, and if a reasoned decision were required the Commission would be likely to insist on a far higher standard of proof so as not to prejudice the recommendations made in their report. Refusal to allow an interim increase will not, as the Bill stands, mean that the Commission have finally made up their mind, but merely that the case has not so far been made out. The applicant can always come back with further argument by making a fresh application. This Amendment would require the Commission to make up their mind at an early stage and so prevent proper consideration of the issues during the remainder of the investigation. We believe that this could act against the person seeking the interim increase rather than for him.


I must say that I am amazed by the convoluted arguments of the noble Lord. If I may say so, this is a very simple Amendment, or at least I take it to be so—an Amendment which makes one tell the victim, as soon as one can, just why one disagrees with what, in effect, is his application. I believe that it is as simple as that, and I should have thought that the Government would have welcomed the Amendment particularly, and if only, because of the crying need for good public relations on behalf of the Price Commission which badly needs some good public relations.

As I see it, the Amendment will at least reduce the Star Chamber image which the Commission is rapidly acquiring, protected as it is from the need to use any criteria other than its own judgment. At least it enables the victims to take the earliest opportunity to complain and to challenge the Price Commission in terms of its own thinking and of their application. I believe that this Amendment is good, sound common sense.

Finally, although I do not wish to enter the realms of going to the courts, let me say that, if justice is indeed deing done, it always seems to me as well that it should be seen to be done. Therefore, I can see no reason at all why the Government should not accept the Amendment unless, if I may say with all respect to the noble Lord, they are being totally unreasonable and totally pigheaded. Their very refusal to consider anything seems to me to put their attitude in that light.

I ask the noble Lord to try to have some sympathy with this fairly simple view. Indeed, perhaps he could tell us that he has some sympathy with what I have said and that at a later stage he may be able to help us. I think that that would be for the good of everyone—for the good of the Government, for the good of the Commission, and for the good of the firm which really believes that it needs to raise its prices. I commend the thoughts behind this Amendment to the noble Lord for further and very careful consideration.


Are not the Government asking to have it both ways? In reply to previous Amendments the noble Lord has said that the Commission will use its discretion. He has even suggested that it has a duty to have regard to all the important factors—of which there are many—before it refuses a request to put up a price immediately. I am particularly concentrating on the delay for four months.

As regards Amendment No. 12, we say that if the Commission has considered the relevant matters, and has refused an interim application to put the price up immediately, at least it should state its reasons for refusing and state how it has used its discretion. However, the Minister says: no, it cannot possibly do that in the middle of an investigation—I take him to have in mind that it has so many matters to investigate in the three to four months; it cannot possibly say on what grounds it has refused to give interim permission for the price to go up; indeed, that cannot be done until the full report is made.

I suggest to the Government that they are asking to have it both ways. I suggest and hope that during the Report stage we shall find that they have found a way of confirming that there is a legal requirement in the Bill for the Commission to take account of those factors which have been mentioned in previous Amendments—most recently in Amendment No. 10. However, if in fact, as my noble friend Lord Cockfield and others have suggested, the Commission does not have such an obligation, and it can decide which factor is relevant, then—if it refuses an interim increase which a company considers desperately necessary and for lack of which it may well have to lay men off—if we are to rely on the Commission's discretion, the very least that can be done is that the Commission should declare how it has used its discretion and under which of the criteria it has decided to refuse this vitally important interim increase. I suggest to the Government that they cannot have it both ways.


The situation is quite clear. The Government say that after an investigation the Commission must give its reasons for refusing, if it refuses. The Amendment says that the Commission must give a reason before it has had the opportunity to investigate. I suggest that that will, in the long run, operate against interim increases rather than for them. I suggest that it is unfair to expect the Commission to give reasons before it has commenced its investigation—afterwards yes, by all means. That is the difference between the Government and the Opposition.


In reply to the last comment of the noble Lord, Lord Jacques, I think that there is a little more than that which divides us. However, I am grateful for the support and very careful arguments that I have heard from my noble friend Lord Trenchard and, indeed, from the noble Earl, Lord De La Warr.

As for the reply of the noble Lord, Lord Jacques, after I had sat down, I am afraid that I lost him very rapidly after he passed a comment about referring to the other side of the argument. I wonder who else is concerned and on whose behalf the Price Commission is acting. Is it running around like a latter day St. George smiting down overweening companies, or what? I would suggest that certainly other people are concerned: the companies' employees, the companies' customers and the public at large, who presumably want to buy the companies' products or the company would not necessarily be in business.

However, the noble Lord, Lord Jacques, in his last remarks and reply to my noble friends believed that the Commission could not give reasons before it held its investigations. However, I wonder whether the Commission goes into every investigation in every sector and every different firm with complete wide-eyed innocence? I wonder whether the Commission needs to take, in many cases, such an inordinate time when presumably it is not embarking on an investigation of a particular sector or company, let us say, "cold"—in other words, the Commission does have some knowledge and experience and records on its files of similar investigations in similar sectors with firms doing the same sort of business. I wonder whether the Commission has some idea, from its researches, of what it is indeed looking for. If that is not the case, and the Commission says to a firm, "You may not raise your prices, but we shall look into each and every reason why", then I think that there is a great deal of justification for this particular Amendment.

The noble Lord has said that he believes the Amendment will act against interim increases. I am afraid that I did not follow that. Perhaps he could explain it to me briefly now or on another occasion. I am tempted to ask the noble Lord whether he can give me any further explanations, but I suspect that we might have pushed this matter far enough tonight. I certainly have said enough and probably my two noble friends have expressed their opinions fairly forcibly. I wonder whether it would be wise to allow the noble Lord, Lord Jacques, and the Government to read and to consider what we have said tonight. I tell him that we shall return to this particular Amendment, or something very similar to it, at a later stage because we believe that we have raised a number of points. I have been totally lost, but people more expert than I in this particular business or, indeed, in industry which is liable to be investigated by the Commission, are similarly confused. That said, I beg leave to withdraw the Amendment at this stage.

Amendment, by leave, withdrawn.

[Amendment No. 13 not moved.]

6.32 p.m.

The Earl of GOWRIE moved Amendment No. 14: Page 2, line 28, leave out ("17th January 1979") and insert ("the date that this Act receives the Royal Assent.").

The noble Earl said: My Lords, one of the many unpleasant things about this Bill is the element of retrospection which is contained in it. If that were not bad enough, the element of retrospection is also ambiguous. A Committee stage is fundamentally designed to try to improve a Bill, to elicit information from the Government about the exact intentions of a Bill, or to examine the ways in which a Bill might work out in legislative practice. However, that is extremely difficult in the case of this Bill because, as we argued on Second Reading, it is fundamentally—I will not use an emotive word; perhaps "political" is now emotive—a presentational or a cheer-leading Bill.

This morning I read a leading article in the Labour Weekly about the industrial crisis, the strikes and the like. The conclusions of the leader writer were as follows: What is needed is action to control the root causes of current unrest".

Certainly, we would agree with that. He continues: Principal among these remains inflation".

Certainly we would agree with that. He then went on to say: The Government must take tough action on prices, no interim rises, no profits safeguards and rigid investigation of all applications".

What we see in the Bill and what makes it so difficult to analyse and discuss coherently is a legislative attempt to meet such political or other demands.

Our view is very much that legislation is the wrong way in which to do it. I think this point is made with the confusion on the retrospective element in the Bill. Clause 1(7) clearly provides that a company which has made notification before 16th January and has qualified for an interim award may maintain that award regardless of the passing of the Bill. The status of notifications made between 16th January and the date on which the Bill may actually pass is however not made clear. In announcing this Bill, the Prime Minister suggested that there would be an element of retrospection about it. He said: The Bill will also provide that firms which pre-notify price increases after today"—

and he was speaking on 16th January— will not qualify for safeguards if the Price Commission decides to investigate those price increases".—[Official Report, Commons, 16/1/79; col. 1559.]

The primary purpose of our Amendment is to gain clarification from the Government of the intention of the subsection, which we find highly ambiguous. That is why in this case I make no apology for tabling an Amendment which has been treated in another place; because in commenting upon it during the Committee stage in the House of Commons, the Minister himself recognised that it was not properly drafted. That reference is to be found in the Official Report of the House of Commons of 31st January at col. 1604. As a matter of principle, it is essential that however much we object to its intention, the legislation is at least clear as to its effect. Therefore, the Amendment which we propose will make it quite clear that the Bill applies only to notifications made after the date that the Bill receives the Royal Assent. The virtue of that is that there can be no argument or doubt upon the date when this Bill receives Royal Assent. I beg to move.


It is reasonable that firms which pre-notified price increases before the Government announced this proposal to introduce the new legislation should be entitled to the investigation safeguards, even after Royal Assent; because they may have taken the level of safeguards into account in preparing the notification. That is achieved by the existing subsection (7). However, it is not reasonable that firms which notify after the Government's announcement should have this privilege. Notifications made on or after 17th January in the light of the Government's announcement might be made at a higher price or an earlier date than otherwise would have been the case. In the interests of the counter-inflation policy, it is desirable that such increases should not be protected by safeguards.

The Earl of GOWRIE

My Lords, we have heard a number of remarkable statements there. Taking them in reverse order and referring back to the noble Lord's speech on Second Reading, I understood him to say that this Bill had very little to do with counter-inflation policy and that it was mainly to do with maintaining competition and the like. Leaving that aside, I submit that he is really saying that here was a Bill presented by a Government which provided firms with certain safeguards to their profitability. It was, therefore, likely that they would take such safeguards to their profitability into account in making applications for a price rise or in passing on a price rise to the customer, or whatever.

He then demonstrates that the Government are presenting a Bill which effectively takes these safeguards away. Far from being called "safeguards" any more, the safeguards are now called "privileges". He implies that privileges are being taken away from firms. Surely the point here is that it is perfectly reasonable for a firm to try to maintain its hold on the safeguards without the element of retrospection, because the safeguards were given to them by the Government in the first place. The Government must have believed that they were worthy or worthwhile. Even if the Bill were necessary as a result of the present situation, why is it necessary to backdate it?


My Lords, put very briefly, the position is that those who gave their notifications before 17th January had no knowledge of the Government's intentions. Those who made them after that date but before Royal Assent could have had some knowledge and could have framed their notifications accordingly. Therefore, in the first case it is reasonable and in the second case it is not reasonable.

The Earl of GOWRIE

My Lords, in terms of the Amendment, that is a perfectly clear answer; but, like so much that goes on in Parliament, it is infinitely removed from the way in which real life and real firms order their affairs. However, I do not at this late hour intend to press the Amendment, but I give notice to the noble Lord that we may return to it at a later stage. I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Clause 1, as amended, agreed to.

Remaining clauses agreed to.

The Schedule [Repeals]:

[Amendments Nos. 15 to 18 not moved.]

The Schedule agreed to.

House resumed: Bill reported, with the Amendment.