HL Deb 04 February 1980 vol 404 cc1109-42

3.58 p.m.

Viscount TRENCHARD

My Lords, I beg to move that this Bill be now read a second time. The Bill, with its four main elements, is an essential component of the Government's overall economic strategy. Its very Title indicates not only the central features of the Bill but also the importance attached by the Government to a strong and effective competition policy. We believe in competition rather than control. I want to place competition policy in this Bill in the wider context of the economic policies of the Government as well as described in the Bill.

The importance we attach to competition is fundamental, and this is because we take the view that the free choices of the citizens should determine the pattern of economic activity. But choice and competition are the two sides of the same coin. Consumers are not free to choose unless suppliers compete. This means that economic freedom itself rests on competition, and monopoly is of course the denial of choice. We want to increase the citizen's choice, and the Bill will do that. Other legislation, for example on housing and employment, is also concerned with extending the citizen's freedom of economic choice.

Nowhere is competition more important than in the control of inflation. Previous Governments have put their faith in controls—statutory controls on prices, voluntary controls on pay and sometimes in various methods to enforce the voluntary controls. I have argued many times in the House that price controls, high personal taxation and the erosion of differentials have been adopted not really because Governments believed in them but because they were trying to placate or win favour from some sections of opinion in the trade union movement or on the Left Wings. Their reason for doing that was to try to make a pay policy acceptable and make it stick. It never stuck where it was meant to stick, and in the end it came unstuck altogether.

There is plenty of evidence for the assertion that price control, progressive taxation and the erosion of differentials were seen by Governments only as a means to an end; admissions that the effect on the RPI was negligible, agreements that taxes were too high but of course that it was never the right moment to alter them, and statements stressing the importance of paying attention to differentials which also, in the same paragraph, had statements pointing out the need to increase the pay of the low paid. Contradictions there were.

So the wealth-creating sector of the economy has been bludgeoned by all these means and gradually near strangled, and the start-up rate of new business, as we noted in the House the other day, has been reduced to probably half the levels of competitor countries, and all of that was in vain. The pay policy did not stick and inflation continued and prices more than doubled in the period of office of the last Administration. It will take time to correct all that, but we have started on a different track and this is one of the important measures along that track.

In my opinion, price control was actually worse than useless because it positively broke down competition; it changed the orientation of business from the market place, from new products and new designs, to one which at times reached near collusion to beat off the assaults of the Price Commission. The Price Commission, with its 500 staff and consultants to support it, was capable of asking enough questions to keep the minds of tens of thousands of managers away from wealth-creating in the sector that used so to create. So we are left with the inescapability of a very tough time and a long haul. Realism—I say this in the middle of the steel strike—aided by our yet very mild trade union reform, together with the correct control of the money supply and control of Government expenditure in the non-wealth creating sectors, are the necessary pre-conditions for the re-establishment of a healthy, wealth-creating, private enterprise-led economy. The re-creation of this economy must be along the lines of competition and freedom of choice, and the Bill is designed to strengthen those important elements.

The four main elements of the Bill are these: First, it strengthens the power of the Director General of Fair Trading and the Monopolies and Mergers Commission to deal with practices which restrict or limit competition in both the public and private sectors; secondly, it gives a new power to the Secretary of State to refer nationalised industries and other public bodies to the Monopolies and Mergers Commission to investigate their efficiency, costs and service provided to consumers and the possible abuse of monopoly power; thirdly, it creates a new procedure to enable the Secretary of State to ask the Director General to investigate prices of major public concern; and fourthly, it abolishes the Price Com- mission and repeals the associated legislation. That process is started in Clause 1.

The powers in Clauses 2 to 10 represent a significant strengthening of the powers to deal effectively and swiftly with anticompetitive behaviour, wherever it may occur, in the public or private sectors. The approach in the Bill represents an extension of the approach towards monopoly embodied in the Fair Trading Act. At the heart of this approach is the broad definition of an anti-competitive practice contained in Clause 2. This is coupled with a speedy, selective form of investigation.

The Director General of Fair Trading, who is already largely responsible for the selection of monopoly investigations under the Fair Trading Act, will have under Clause 3 the responsibility of carrying out a quick preliminary investigation where he thinks there may be an anti-competitive practice in operation. His task will be to see whether there is prima facie evidence of limited or distorted competition and, if so, to say whether it is appropriate for him to refer it to the Commission for a full-scale investigation. Where the Director General's own preliminary investigation reveals no cause for concern, the expense and trouble of a full-scale investigation by the Commission is avoided.

The Bill thus provides for a two-stage investigation of suspected anti-competitive practices, and I will put this in, so to speak, chronological order. Clause 3 provides for a short investigation and report by the Director General of Fair Trading, to make a preliminary finding as to whether an anti-competitive practice is in operation. Clause 5 then provides, in appropriate cases, for a reference to the Commission, but before we get to that stage there is a four-week period after the preliminary report in which the firm or firms concerned can propose undertakings to the Director General. There is then an eight-week period—a maximum of eight weeks—during which these proposed undertakings can be discussed. If satisfactory, the matter can end at that point, but if not satisfactory or if no undertakings are proposed, then Clause 5 provides for reference of such practice to be known as a competition reference to the Monopolies and Mergers Commission.

The Commission is required by Clause 6 to ascertain whether the firm referred is indeed engaging in the practice referred to them, whether that amounts to an anticompetitive practice and, if so, whether it operates against the public interest. Next, the Commission is required by Clause 8 to report to the Secretary of State, who is to publish the report. Where there are adverse findings, the Secretary of State may, under Clause 9, ask the Director General to seek an undertaking from the firm concerned or he may, under Clause 10, make an order prohibiting the firm from engaging in the practice concerned or otherwise remedying its adverse effects.

What is new, therefore, is the fact that for the first time an individual practice by an individual firm can be throroughly investigated and stopped where it has anti-competitive effects and is found to be against the public interest, without involving every firm in the industry, without needing to find that there is a monopoly situation, and one must add again, without the delay of a full Monopolies and Mergers Commission investigation. Also new is the fact that the public and private sectors are treated exactly alike.

The definition of anti-competitive practice is in Clause 2, which refers to a course of conduct which has or is intended to have or is likely to have the effect of restricting, distorting or preventing competition … This definition has its antecedents in the 1965 Monopolies and Mergers Act and in the 1973 Fair Trading Act which replaced it. The Fair Trading Act defines uncompetitive practices as practices having the effect of preventing, restricting or distorting competition in connection with any commercial activities in the United Kingdom". Similar words are used in the Treaty of Rome.

Clause 2 also provides exceptions and the power for the Secretary of State to make by order exceptions from the definition of anti-competitive practices. In particular, subsection (4) allows the Secretary of State to exempt businesses by reference to size. The intention here is to allow small businesses to be exempt from investigation. The Secretary of State has mentioned that he has it in mind to exempt businesses with a turnover of less than £5 million per annum unless they have more than a 25 per cent. share of a particular market. In addition, there is a general power to make exceptions, but the Government have made it clear that they intend to use this power very sparingly. They have indicated, however, that the most likely ground for exemption would be for areas involving questions of international jurisdiction—notably, for example, international shipping services.

We intend to bring forward amendments in Committee to ensure that car parks and holiday caravan sites are within the scope of this part of the Bill and that local authority purchasing, whether or not in the course of business, is within the scope of this part of the Bill.

The Bill is also concerned with the encouragement of competition in both public and private sectors. The investigation of anti-competitive practices will thus apply to both sectors. But in the public sector there is often little effective competition, and even where the body concerned does not have a monopoly, it is not subject to the full rigours of the market place. It is not liable to take-over or liquidation. Clauses 11 and 12 therefore provide a mechanism for scrutinising the performance of public bodies. The Secretary of State will be able to refer to the Monopolies and Mergers Commission for investigation any question concerning the efficiency and costs of, the service provided by, or any possible abuse of, monopoly power in a wide range of public sector bodies.

Under the new provisions the Monopolies and Mergers Commission may be asked either to make a factual investigation, or, in addition, to advise whether the body is pursuing a course of conduct which operates against the public interest. Where the Commission makes art adverse finding, Clause 12 provides powers to take corrective action. These include a power for Ministers to require an investigated body to prepare a plan for remedying or preventing the adverse effects which they consider arise from a course of conduct criticised by the Commission. Additionally, in consequence of an adverse report by the Commission, the Secretary of State may use the powers set out in Part I of Schedule 8 to the Fair Trading Act 1973, other than the power to control prices.

These provisions are intended to improve our ability to scrutinise the effectiveness of the public sector within the overall framework established for it by broader policy considerations. However, the Bill provides that the Commission may not criticise the appropriateness of any financial obligations or objectives set by Ministers or under statute. These include financial targets in terms of profitability, guidance as to price levels, and external financing limits.

The Government believe that these new powers will mean a significant improvement in the scrutiny and accountability of the public sector, and they intend to make full use of them after Royal Assent. They have already referred the London letter post under the Fair Trading Act and have announced their intention of referring British Rail's London and South-East Commuter services under Clause 11, when enacted.

I have mentioned our views regarding the Price Commission and its abolition, but I should also mention that under Clause 13 the Government recognise that on occasion there may be a great public concern over particular price increases and in such cases there could be value in an independent and public scrutiny of the underlying reasons. The Government have therefore included a reserve power in Clause 13 allowing the Secretary of State to require the Director General of Fair Trading—and it is in that order—to investigate questions relating to prices and charges. I must emphasise that the Government do not intend to use this power in any but the most exceptional circumstances. The Bill accordingly provides that the Secretary of State may refer a price to the Director General only if he considers it to be of major public concern, and he must particularly consider whether the supply, or acquisition, of goods or services in question are of general economic importance, or the price is of special significance to consumers. No powers of control are attached to the procedure, since, as the Government have said on many occasions, we believe that prices are best contained, not by detailed controls, but by firm economic policies, complemented by an effective competition policy.

In conclusion, I repeat that there are four principal components of the Bill, and in addition there are a number of supplementary provisions and amendments to existing legislation in the later; clauses. The Bill therefore removes the ineffective and damaging price controls, and introduces new and useful complementary provisions aimed at curbing abuse of market power in both private and public sectors, as well as new means of investigation of questions of efficiency and standard of service in the public sector. My Lords, I beg to move.

Moved, That the Bill be now read 2a.—(Viscount Trenchard).

4.18 p.m.

Lord PONSONBY of SHULBREDE

My Lords, I should like to thank the noble Viscount, Lord Trenchard, for explaining the constructive parts of the Bill. If it were not for the fact that Clause 1 was included in the Bill, I could welcome it, but Clause 1 abolishes the Price Commission without proposing that its powers, responsibilities, investigative techniques and ability to act quickly be transferred to any other body, and the reserve powers under Clause 13, to which the noble Viscount referred, seem to be quite inadequate. That is most regrettable, particularly at a time of rising inflation. When the Second Reading of the Bill took place at the other end of this building the rate of inflation was 11.4 per cent. Today, it is edging up to 20 per cent.

The noble Lord has said that it is a central point of Government strategy to abolish the Price Commission and, by doing so, to do away with any form of price control. Inflation, as noble Lords know, is an enemy of full employment and an enemy of our competitiveness. It is an enemy of social stability itself. There is, indeed, no single cure for inflation, nor any single cause of inflation. A lot of it, such as oil price rises, is outside our control. But one area where the Government have some responsibility is that of price control, and that is the area which the Government are choosing to abandon. I would say that any hope of a pay policy working in the future will depend on some measure of control over prices.

My Lords, I am the first to acknowledge that the value of the Price Commission cannot be measured only by the yardstick of the specific prices which it froze. The mere existence of the Commission has had two overwhelming advantages. The first advantage was that its power to investigate prices acted as a deterrent. Firms did not apply for price increases as they did not want to be held publicly to account. There was a value in the number of times the Commission did not in fact have to use its powers. The second advantage was that the existence of the Commission demonstrated the Government's concern about prices and the fact that they were prepared to do something about them. However, the Government are choosing to abandon that responsibility, and are so abandoning any hope of controlling wages. In passing, one should note that the Commission staff was 536 last May, of whom 351 were directly employed, the remainder being civil servants on secondment. A resettlement unit has found jobs for 113, leaving, on my reckoning, something over 200 employees without a job to which to look forward. I hope the Government are concerned about this new area of unemployment which they have created.

My Lords, I indicated at the start of my remarks that one could welcome this Bill if it were not for Clause 1; and, certainly, in so far as it follows the recommendations of the interdepartmental group of senior civil servants under the chairmanship of Mr. Hans Liesner, it is to be welcomed, although I believe it could be, and can be, improved. Currently, of course, a monopoly situation exists where one quarter of goods or services are in the hands of the same person, so that no reference can be made to the Monopolies and Mergers Commission in respect, for example, of domestic television rentals, where the six leading firms control some 58 per cent. of the market and do not behave in a competitive way; or of footwear, where, according to the Price Commission, the British Shoe Corporation controls some 20 per cent. of the market; or of tea blending, where four firms possess some 85 per cent. of the market. However, under the proposals in the Bill such anti-competitive non-registrable practices can be referred to the Commission by the Director General of Fair Trading with a competition reference, and this, indeed, is to be welcomed. Likewise, the fact that a manufacturer refuses to supply a retailer with television sets because he knows that the retailer will undercut the price at which he is selling the goods in his own shops can also be investigated; and this, too, is to be welcomed.

However, I believe that the scope of Clause 2 is not wide enough. Competition references can be made by the Director General only; ministerial initiative is excluded. The ability of a Minister to make such references directly or via the Director General should be included. It is I think ironic that, although the Secretary of State cannot make a reference, financial objectives imposed by a Minister, however expressed, cannot be investigated. The noble Viscount, in explaining the Bill, talked about the private and public sectors now being treated equally. but then, later in his speech, referred to the fact that if a Minister imposed a particular financial directive on an industry that was not something which could be investigated by the Director General. So the fact that the Minister has imposed a directive on the energy-producing industries and has said that the prices of gas and electricity shall increase at such and such a rate is not something which the Director General will be able to investigate. Apparently, this does not constitute an anti-competitive practice. This seems a typical example of double-talk: on the one hand, we are saying that we are treating both sides of industry equally; on the other hand, we are excluding certain references from the Director General's orbit.

The present wording of Clause 2 would also seem to preclude a reference being made in respect of anti-competition practices being followed by a group of persons such as, for example, estate agents or solicitors in respect of their charges, and obviously it would be right that such practices should also be referable. I was glad to hear the noble Viscount say. when explaining and introducing the Bill, that the Government in fact intend to come forward with amendments which will make local authority purchasing an area which is referable. I hope that the amendment will also include hospital purchasing, and that that will be treated in the same way as local authority purchasing, because, of course, as we are aware, there is a considerable amount of purchasing done, by tender, by local health authorities, and that is another matter which we would certainly wish to see included in the Bill. There are, indeed, a number of points, as I have indicated.

Lord ROBBINS

My Lords, would the noble Lord confirm my impression that there are wide sections of restrictive practices which do not fall under the definitions in this Bill, and would he say whether or not he regrets their omission?

Lord PONSONBY of SHULBREDE

My Lords, the noble Lord, Lord Robbins, is quite right in saying that there are areas which are not included. I have indicated some of the areas which, in my view, have not been included in the Bill. I regret their omission, and, in fact, I hope that when we come to the Committee stage these areas will be included in the Bill. Indeed, the noble Viscount opposite has given a specific example of where he proposes to come forward with amendments, and I shall come forward with others.

Lord ROBBINS

My Lords, do I understand the noble Lord to say that he wishes all restrictive practices to be brought under this Bill?

Lord PONSONBY of SHULBREDE

My Lords, I think it will undoubtedly depend what particular restrictive practices the noble Lord is referring to, but certainly I would wish to see all restrictive commercial practices brought under the Bill.

My final point, my Lords—and it is the matter which we always appear to leave to the end of the Committee stage—is the question of the Title of this Bill. I do not think that it is a very descriptive Title. A number of noble Lords have asked me what the Bill is about and some noble Lords, I believe, have the impression that it was about pools, crossword puzzles, "Spot the Ball" and so on. I think that the Government could do better and think of a better Title than that which is given to the Bill at the present time.

I would say that for many years I was secretary of the Fabian Society and I spent a considerable amount of time arguing with authors of pamphlets about the descriptive nature of the titles of their pamphlets. I can remember that on one occasion I argued with the noble Lord, Lord Vaizey, who then supported a different political party to that which he now supports. He wished to call a pamplet of his, The Queen and her Horses Reign. It was about education in the class society; and I told him that that was not a descriptive title; it did not tell anybody what it was about. The title eventually came out as, Education in a Class Society. Perhaps I may give noble Lords opposite some suggestions about the Title of this Bill: Competition and Trade Practices; Price Competition; or, perhaps, to be absolutely realistic, The Abolition of the Price Commission and Related Matters. I hope that when we proceed into Committee stage we shall be able to amend the Bill; but, for our part, we very much object to the proposal to abolish the Price Commission.

4.32 p.m.

Baroness SEEAR

My Lords, we on these Benches give general approval to the objectives behind this Bill. My Party has a longer and more consistent tradition of opposing monopoly, wherever it is found, than can be claimed by any other party in this House. It is not surprising that a Bill which is intended to attack monopoly is one which meets with our general support. Unlike the Labour Party, we are perfectly prepared in certain circumstances to see the abolition of the Price Commission. At the time that the Price Commission Bill was going through this House, we suggested from these Benches that a prefereable procedure would have been to introduce a very much strengthened Monopolies Commission. We did not see any very great virtue—although we went along with it in the event—in having a Price Commission, a Monopolies Commission, the Restrictive Practices Court and the work of the Director General of Fair Trading. This seemed to be too much machinery to deal with problems which had a great deal in common and which would be better dealt with together by a smaller number of adequately-equipped and powerful institutions. The actual abolition of the Price Commission is not something which, in itself, we regret.

We also welcome the much wider definition of an anti-competitive practice which is given in Clause 2. I accept the point that has been made: that there are still some matters which are not covered by that definition. It would be our intention to see that that definition is sufficiently enlarged to have a much wider coverage than is at present apparent in the wording of the clause. Whether, when this is done, it will cover the point which is in the mind of the noble Lord, Lord Robbins, I have yet to discover. We also welcome the fact that, for the first time, the public sector is to be subject to investigation; although we would go along with the criticism made from the Labour Benches that the ministerial directive to the nationalised industries should not be excluded from the investigatory powers of the Monopolies Commission.

So far as the objectives are concerned, we would give our support to the Government and to this Bill. So far so good; but not very much further; because we do not believe that this Bill as it stands is going to be adequate to achieve the objectives which the Government declare that they wish to pursue. We believe it is inadequate because in our view it is based on false assumptions about how the system works, and it is not sufficiently extensive or sufficiently powerful in the procedures that it proposes to adopt. By "false assumptions" I mean—and this was said at the Committee stage in another place and said again here by the noble Viscount, Lord Trenchard—that the Government are entirely confident that they can get rid of monopolies, that they can control price increase, by competition through the measures which they propose in this Bill.

This seems to me to imply a somewhat naive view of the way in which monopolies operate in this country at the present time. The Government are totally converted to Adam Smith and to the free market. I am second to none in my admiration for Adam Smith; but I must say that the Government's attitude towards Adam Smith reminds me of Queen Victoria's attitude towards her late lamented husband. In neither case does it seem to have occurred to them that the beloved object, the beloved mentor, might as time went on have developed his ideas or even changed his mind. Adam Smith lived 200 years ago when the economy was far less complex than it is today. Monopoly had not developed, oligopoly had not developed. There are now a hundred and one ways in which competition is restricted by devices difficult to get at through any procedural inquiry. All this makes it a very much more difficult matter to control price through competition plus Government economic policy than the Government apparently are prepared to agree.

Therefore, we do not believe it is adequate just to leave it to the kind of investigation, and the control over investigation, which is proposed in this Bill. Nor, do we think, are the Government paying sufficient attention to the political and social importance of price increases which may occur, for example, through a quite small local monopoly which might not be the kind of thing which would attract attention—and which certainly would not come under the definition in Clause 13 of something "of major public concern"—and which in a particular area or region could be a matter of very great concern to a considerable number of people. Therefore, because of the extremely sensitive, political nature of price rises, even if they cover only a relatively small part of the country, we believe that it is very important that Parliament and Members of Parliament should be able to raise price issues which are of great concern to their constituents.

What we do not like about the Bill is the great difficulty of control over what goes on in the work of the Director General of Fair Trading and in the activities of the Secretary of State. We think that there should be more opportunities for Members of Parliament to challenge what is going on in the whole field of prices. It is not enough to say that you can merely leave it to market forces plus the work of the Monopolies Commission. There will be cases of price rises which cause great concern and which it ought to be possible for elected representatives to challenge and to get proper explanations or to demand that investigation take place. There is nothing in the Bill which makes it possible for a Member of Parliament who is greatly dissatisfied with what is happening over a particular issue in a particular part of the country to see that an investigation takes place.

Further, we are not happy about the procedure when the Director General of Fair Trading has extracted an undertaking from an organisation which, it has been shown, is conducting an anti-competitive practice. An undertaking has been given, and an organisation would be well advised to give an undertaking and thus avoid a competition reference. I have no doubt that will be the line which will be followed in the great majority of cases where an investigation is undertaken.

We believe that where there is a report which leads to an undertaking, that should be made public and that it should be possible for questions to be asked in Parliament about the progress of that undertaking. It is left to the Director General to follow up the undertaking. There are slight sanctions: the sanction I suppose ultimately is a competition reference. Even with the speed-up in the procedure in the Monopolies Commission that can be a pretty long-drawn-out business. We believe that much more publicity should be given to the outcome of undertakings and that there is a strong case for the possibility of action against people who breach their undertakings, and it should cost them something in terms of penalties. A middle way has been discussed between a criminal and civil liability. This is a matter for the lawyers to look into. It was put forward in the Committee stage in another place, and I believe that there should be undesirable consequences for people who treat their undertakings lightly.

If the Government really mean business about getting rid of monopoly and getting rid of uncompetitive practices, I wonder whether they think it is convincing to reduce the number of people employed in this whole area of work. May be it is reasonable to have some reduction in the numbers of people employed in the Price Commission: but I gather there is to be a saving of something between 400 and 500 people. Reference is made to this in the Financial Memorandum. If the Government really want this work done with all the complexity and difficulty of finding cases, of investigating cases, of following up undertakings—which is of the first importance—are the manpower and resources which are being devoted really adequate to this important and complicated work that has to be done? It suggests that the Government believe that it is a relatively uncomplicated matter. In our view, it is a complicated matter and one in which the cutting down of resources for dealing with it is a very false economy indeed.

We are glad that it is proposed that procedures under the Monopolies Commission can be speeded up. That is a long overdue reform. We believe that, while the intentions of this legislation are excellent, it will be a pretty ineffective instrument. In another place, in Committee, again and again the Minister said that this was only a first stage in the Government's anti-monopoly policy and that a further instalment will come later. This, I suppose, can be regarded as something of a confession that the Government themselves recognise the inadequacy of the proposals which are put before us today.

May I ask the Minister when it is intended that the second stage will emerge? Is he going to tell us that we will wait and see how this Act develops, and only when it has been proved to be inadequate will they consider a second stage? Had the Minister some clear plan in mind when she stated repeatedly in another place that this was only a first instalment? If it is the only instalment, then regretfully I do not think it will get us very far.

4.45 p.m.

Lord TEVIOT

My Lords, Adam Smith or no Adam Smith, I fully endorse the principle behind this Bill, in that competition in general is the essential part of a thriving economy. I can understand also that it is an important safeguard for consumers and that the strengthening of competition policy will benefit many smaller businesses. In the context of business generally, all this is laudable. My brief intervention is to spell out certain misgivings that I have regarding the bus industry. In that context, it seems to me that this Bill, with respect, has been drafted without consideration of the practical need—and indeed the statutory duty—to provide services to the public in that the machinery will become more costly and in some ways counter-productive.

I refer particularly to the duty already imposed on the local government authorities and transport operators to provide a co-ordinated and efficient system of public passenger transport. This duty is imposed by the Transport Acts of 1968 and 1978 and it carries with it the need for agreements and arrangements between county councils, district councils and public passenger transport service operators. As the Bill is worded at present, all such arrangements could be subject to investigation by the Director General of Fair Trading and the Monopolies and Mergers Commission, although the Bill does make provision for the exclusion of a course of conduct, for the purposes of this legislation, by order made by the Secretary of State for Trade. My first question is therefore to ask whether the Government intend to exclude, by this means, all arrangements or agreements made under the Transport Acts 1968 and 1978 for the co-ordination and efficient running of public passenger transport services. That machinery, so far as I can gather, appears to be working adequately.

I should now like to draw attention to a broader issue concerning public road passenger transport. In Clause 11 the Bill provides that the Secretary of State may refer to the Monopolies and Mergers Commission any specified question relating to the activities of any body corporate which provides a bus service. My understanding of the Government's intention was that the larger bus undertakings in the public sector were to be included. As matters stand, any limited liability company or other body corporate which provides a bus service is included (and, as a matter of interest, a partnership which provides a bus service would not be included, I believe). Apparently the net has been cast wider than the Government's original intention. In any case, for reasons which I will give, bus undertakings seem to be out of place in this legislation.

Operators of bus services are already subject to a considerable degree of control. Except for the London Transport Executive (which is responsible to the Greater London Council), they are all subject to investigation by the Traffic Commissioners in the interests of the public, and they will continue to be subject to that control under the new legislation which the Government is debating in another place. In that legislation—namely, the Transport Bill—the Traffic Commissioners will be empowered in Clause 7(3) to attach fares conditions to road service licences—

  1. "(a) to protect the public from unreasonable use by the holder of the licence of his position as such; or
  2. (b) to regulate the terms of competition between stage carriage services on a route or routes".
Each undertaking is also subject to control by its appropriate authority—the passenger transport executives have their passenger transport authorities, the district council undertakings have their councils in terms of the legislation by which they were established and they all, including the independent operators, are subject to "the control of the market place", in that they are subject to competition from other forms of public and private transport. All shire county councils prepare a county public transport plan annually. I have reiterated rather a lot of indigestible sentences and that makes it clear that all the machinery for this Bill makes it even more weighty. Therefore, in all the circumstances, it is illogical and burdensome that bus undertakings should be rendered liable to a further layer of control—particularly bearing in mind the Government's policy of reducing the burden of administration. I therefore ask my noble friend for some assurance that this additional weight will be removed from the shoulders of this vital and energy-efficient industry and that he will look into it again.

I have one final point; that is, that in any case where the competition policy impinges on transport policy it seems right that the consent of the Minister of Transport should be required before any investigation of road passenger transport services is undertaken. As the Bill stands at present, the "relevant Minister" is only brought into the picture after an adverse report has been made by the Monopolies and Mergers Commission. By then much time and effort will have been expended by the Director General of Fair Trading, the Monopolies and Mergers Commission and representatives of the industry in investigating something which, as I have already made clear, seems to be subject to adequate control. Surely the right course is to bring the Minister of Transport into the picture when the Director General of Fair Trading gives the Secretary of State notice of his proposed investigation.

4.52 p.m.

Baroness HORNSBY-SMITH

My Lords, I should like to join in thanking the Minister for the very clear and detailed exposition he gave of the Bill. Overall, I firmly support him in the intention under lying that Bill, but this afternoon I should like to outline some of the real fears of the retail trade—not so much in what we believe the Bill seeks to do, but regarding the manner in which some of the phraseology contained in certain clauses could be interpreted, to the detriment of reasonable trade.

I must confess I have the privilege of being a member of the all-party parliamentary group of the Retail Consortium. The trade, generally, warmly welcomes the abolition of the Price Commission which, as the noble Viscount, Lord Trenchard, said, was largely irrelevant and certainly ineffective in keeping down prices. That, as I say, is warmly welcomed.

At a time of rising costs and reduced sales, the retail trade really does not require at this time when many chains and stores are fighting for their existence, any spurs to be driven in to make it competitive. It has probably never been more competitive in trying to seek additional trade. Nevertheless, it is at one with the Government in its desire to seek and stamp out abuses, and it certainly agrees with anti-competitive practices being subject to control. As I understand it, this Bill seeks to fill the gap and to legislate for anti-competitive practices which are not at the moment covered by the Restrictive Trade Practices Act, the Fair Trading Act 1973 and the Resale Prices Act.

However, in relation to this Bill, there is very real concern over the lack of precision in the very, very woolly definition in Clause 2. I have repeatedly said in this House that I am no lawyer; but highly trained legal brains have studied this particular clause and have had quite a field day in suggesting what operations could be caught under it, which I do not think is the Government's intention or indeed would be in the public interest. I believe it is absolutely vital that industry, trade and the public should know what constitutes breaking the law, particularly for the hundreds of smaller trade groups, already overburdened by bureaucracy, who have neither lawyers nor accountants on their payrolls to sort out this latest governmental (as we think in paragraph 2) "lawyers' paradise."

May we take the phrase "restricting, distorting or preventing competition." Under that definition any firm of the permitted size closing down a branch is restricting competition. Within my memory, the International Stores and Woolworths, both of whom started with comparatively small shops when what they sold was more limited than today, over the past 10 years have, as a matter of policy, closed down those original small shops and have gone into larger shops with a larger area, and of course they cover far more brands and commodities among their sales.

If one of those branches is in a village where there is one other shop selling the same type of goods—say, two grocers or two butchers—and if a chain which is within the limits laid down by the Minister closes down one shop, it is not only reducing competition but, by leaving only one village shop, it is positively preventing competition. Under the clause, as we read it, closing a shop for whatever reason could be held to be preventing or limiting competition. Being monopolies, I suppose that British Rail, if they close down a station, or the Post Office, if they close a village sub-post office, would escape this scourge because they do not have any competition anyway.

Also, as Clause 2 reads at present, we believe that it could involve advertising. A firm that advertises could be held to be taking unfair advantage over the firm that does not advertise; at least, that is how we read it. Then there is, for instance, the fabulous sales bargain for which strong-minded men and women will sit up all night outside Selfridges to buy their own or their wife's first-ever fur coat—a fur coat being sold way below its cost. Selling below cost is unfair trading, according to Clause 2.

I now come to the promotion of sales for a new store or a new product. That would be unfair competition. I am old enough to remember that every time Woolworths opened a new store, all its first-day customers who spent a minimum of five shillings (and the maximum then was sixpence for everything) got a free galvanised bucket. I can remember seeing ladies pouring out of Woolworths when they first opened in East Sheen, all with their galvanised buckets and their purchases inside them. That, under this Bill, is unfair trading.

Further, in another sphere—and I refer now to something which the women Members of your Lordships' House will know better than the gentlemen—one cannot go into the cosmetic department of a store or a sizeable chemist's shop where you will not see special offers. There are hundreds of items in cosmetics, pharmacy and household promotions which market a special introductory offer, where you buy an established product you know and at the same time take advantage of a trial offer for a new product, which is thrown in. Many firms think that this method of giving an item to the customer to try as a free sample is better than spending hundreds of thousands of pounds on advertising on the media or on television. Under this clause, those promotion samples, aligned to an established product for which one pays the full price, would be unfair competition according to our reading of this clause. But no one—not even the noble Baroness, Lady Seear—would say that such offers are not to the advantage of the consumer in being able to try something before deciding to buy it.

Going from the sublime to the ridiculous, if little Jimmy goes along to collect his mother's substantial grocery order from the village shop and Mr. Bloggs gives the likely lad an apple or a lollipop, is that unfair competition?—since the child might then be lured to say, "I will go and buy it at Mr. Bloggs' shop, mum".

May I now refer to the question of sales. As your Lordships well know, I am also involved in the textile trade, where fashion is a very wayward mistress. If you over-manufacture or over-buy for stock in the shops and the fashion changes, you cannot recycle the goods. You either clear them out below cost or you shoulder a total capital loss. The demise of the mini-skirt is a classic example. When skirt hems dropped dramatically, the garment industry was lumbered with millions of coats, dresses and slips, all of which were then unacceptably short. As they were prudent traders, these garments were sold, often below cost, as fast as they could be sold.

As I understand Clause 2, sales below cost would be unfair competition. May I therefore beg the Government to take another look at this clause. Could we have some definition. May the trade know when and how they are going to be "hooked" for breaking the law—if necessary, by an appendix to the Bill which sets out what constitutes an unlawful and uncompetitive practice.

Another aspect of the Bill which is somewhat alarming is the apparently unchallengeable power of the Director General of Fair Trading who, following a preliminary investigation, can order a competition reference which may involve the defending company in enormous expense without the Director General of Fair Trading having to show reasonable grounds as to why he believes the uncompetitive practice to be contrary to the public interest. If one is charged and brought before the courts, one has to know what the charges are. Is it justifiable that a company should have to go through all the problems of this investigation without clearly knowing what is alleged to be the uncompetitive practice? We feel that the Director General should be required to state the grounds upon which he is making the reference.

Also in Clause 2, the Government appear to be reintroducing the price control which both the noble Lord and I were so pleased to see abolished by the demise of the Price Commission. The Bill gives to the Secretary of State the power to make an order following a finding by the Monopolies and Mergers Commission prohibiting the offending practice. It is acceptable for him to prohibit the practice, but he is also given the power, by virtue of paragraphs 8 to 11 of Schedule 8 to the Fair Trading Act 1973, to put a control on the price. If the abuse is removed, we believe that prices should then be left to find their natural level. The introduction by the back door, as it were, of price control would, we believe, distort the free market economy and appears to be contrary to the declared policy of this Government.

Finally, may I refer to the practice by which our courts frequently endeavour to relieve persons wrongfully charged of the burden of their legal costs. Under this legislation, an investigation may involve highly-paid staff in weeks of work and, possibly, even in expensive legal representation. If at the end of the day the undertaking is absolved from having operated any uncompetitive practice, we consider it to be grossly unfair that the innocent party should have to bear the cost as well as the waste of time of this operation.

The retail trade therefore believes in the aim that the noble Viscount, Lord Trenchard, has set out in the Bill; namely, to curb abuses, but it is concerned with the interpretations which it believes could be put upon Clause 2 and which, in its opinion, could bedevil legitimate and prudent trading. I hope that, before we come to the Committee stage, the noble Viscount will study these points and see whether we can have something more definitive about what Clause 2 really means.

5.5 p.m.

Lord MOTTISTONE

My Lords, I must apologise for only just getting here in time to address your Lordships. I shall not keep the House long. I have just one point to make in relation to the Bill. First, may I thank the Government for the very understanding way in which they have listened to representations while the Bill has gone through another place in relation to one particular point; namely, the need for an opportunity to be given to those companies which are being investigated at various levels of the Bill, whether by the Director General of Fair Trading or by the Monopolies and Mergers Commission, to see the reports before they are made public. I think that this point has been taken care of in a very satisfactory way by an amendment that was made in another place just before the Bill left it so far as the Monopolies and Mergers Commission is concerned and so far as reports which are laid before Parliament are concerned.

What does concern us, however—and this is based upon experience with the Price Commision—is that when any public bodies like the Price Commission, the Director General of Fair Trading or the Monopolies and Mergers Commission have to investigate a company in any way, they obviously find it very difficult, in a relatively short period of time, to get a real grasp of how the company works. They were certainly required by the Price Commission legislation and, by implication, they are required by this Bill—although time is not specifically mentioned —to carry out these investigations quickly so as not to keep companies waiting, thus putting them in the position of not knowing what is going to happen for too long. If, however, they carry out these investigations quickly, they do not have time really to understand what is going on.

I am not concerned in this case with companies which are trying deliberately to adopt an anti-competitive measure. I am concerned with companies that on the whole are trying to do the right thing but which, for one reason or another, become subject to this inquiry system. It is very easy for the investigating body to jump to wrong conclusions when they are trying to carry out these investigations quickly, conclusions which people who have been working with the company for years can see at once are wrong. In the case of the Price Commission, to my certain knowledge this happened on more than one occasion. Therefore, we are concerned to find out whether it would be possible further to amend the Bill in order to give opportunities for companies to see reports that are made about them before they are passed on to the next stage.

I hope that there will be an opportunity to suggest amendments along these lines when the Bill reaches its next stage. If we find a reasonable way of putting forward our proposals, I trust that when it comes to that point the Government will be as understanding about them as they have been about representations during the earlier stages of this Bill in another place.

5.9 p.m.

Lord WALLACE of COSLANY

My Lords, the noble Lord, Lord Mottistone, robbed me of a little personal pleasure in that he robbed me of the opportunity of following the noble Baroness, Lady Hornsby-Smith. Members of this House may know that in the past we were very old rivals. She kicked me out of Chislehurst. Now we are together again. We are very good friends, apart from the fact that we do not agree politically except on the question of bargain offers. We ought to do something about the ridiculous situation which exists over bargain offers.

I welcome the fact that the noble Lord, Lord Trefgarne, is to wind up in his usual very efficient manner. The noble Lord bobs up in every conceivable debate and I am seriously wondering whether we shall have to refer this fact to the Monopolies Commission!

In winding up the debate for the Opposition, I speak as a consumer who has no direct involvement in investment or otherwise with any large company that is concerned with price fixing. I feel that I should declare my interest as one member of a large section of the population with a very modest income to whom the Government's income tax cuts are irritating and to whom rising prices, costs of services and cuts in social services constitute a constant factor of concern and anxiety. To us, the Prime Minister's election pledge to put more money into the pockets of people to spend as they choose is just a sick joke. To the average housewife the price of essentials—food, clothing, fuel, transport, social benefits and services—is the battleground of balancing the family budget and in abolishing the Price Commission the Government have committed a serious psychological error in their attempts to reduce inflation. I said "reduce inflation" whereas in fact their financial policies so far are adding to inflation.

The Price Commission was in fact set up by a Tory Government and was used by a Labour Government to provide a check and deterrent against price increases in a period of wage restraint. VAT was introduced by a Tory Government and by doubling the rate to 15 per cent. the present Government wilfully inflated a wide range of prices. So, my Lords, we have a situation where a Government pledged to reduce inflation virtually abolish any semblance of price control without a mandate to do so. True, there was a pledge to review the work of the Price Commission. In fact there was no review, only a short sharp statement by the Prime Minister shortly after the election, during the debate on the Queen's Speech.

Similarly with VAT, Labour's claim during the election that the Tories would double VAT was strongly denied by the Member who became the Chancellor of the Exchequer. The truth is that they came quite close to doubling VAT. Labour's legacy of 8 per cent. VAT was not multiplied by two but by one and seven-eighths—a pretty close call.

If I may, I should like to give a simple example of consumer choice. We talk about freedom and competition and the consumer deciding, but I want to talk about the question of VAT. Just before Christmas my wife and I went Christmas shopping in Woolwich High Street. It was rather cold at the time so we decided that before we started shopping we would have a cup of coffee. The only emporium available was one of those widely advertised on television—I will not mention the name—and we went inside. It was all very hygienic, neat, orderly and very attractive. I went up to the counter and I said "Two cups of coffee, please". The girl looked at me and she said "Are you drinking it outside?" I said "I beg your pardon? "She said "Well, if you drinks it here you pays VAT; if you drinks it outside, you don't".The difference was that the cost was 20p inside and 17p out, amounting to 6p extra for the two of us. My Lords, hearing in mind the necessity for main-taming the dignity of your Lordships' House and considering the spectacle of a noble Lord sitting on the pavement out-side to drink his coffee in order to save 3p. we gave up that idea and we preserved the dignity of the House. It is a small matter but it is six pence for two small cups of coffee—talk about consumer choice! You drink it here or you drink it there. It is a ridiculous situation and that applies in many other fields as well.

The main purpose of this Bill is the abolition of price controls. The only reference to the Government's capacity to control unjustified price increases appears in Clause 13. That gives powers to the Secretary of State to refer to the Director General of Fair Trading an unjustified price increase which he may investigate. But this is hedged about with qualifications. It has to be a matter of major public concern. It must be of general economic importance; an easy way out for the Secretary of State to avoid a reference, if I may say so. Even if he did decide to make a reference, there is little he can do if an unjustified price increase is discovered. True, publicity would be given to the finding of the Director General but in fact any power of the Government to control unjustified price increases is wiped out to a great extent.

What is more revealing—and here I touch on a point made by the noble Baroness, Lady Seear—is the statement of the Minister for Consumer Affairs at the end of the Third Reading of the Bill in another place. She stated: As a result of the abolition of the Price Commission, the distribution of responsibility among Ministers for issues concerning prices is affected".—[Official Report, Commons, 22/1/80; col. 355.] She further stated that it meant that her right honourable friend had no responsibility for prices in future and she added— Prices issues will normally be handled by the Ministers responsible for the policies to which they relate". What an admission! What do we want a Minister of Consumer Affairs for? Responsibility for issues—who is going to decide? Where is the poor Member of Parliament, duly elected by the people, to find out who to challenge in the House on a question of a price increase? Responsibility for price issues is so widespread that the puzzle will be to ascertain who does what and who is responsible for what. Now, my Lords, we know why it is called the Competition Bill.

In abolishing the Price Commission for doctrinaire reasons, the Government claim that prices can be magically controlled by returning to competition within an unbridled free market economy. They claim that price control is irrelevant in the battle against inflation. What has competition within a free market economy achieved as regards the growth of monopoly? In 1950 the top 100 manufacturing companies in this country represented about 20 per cent. of the output. Twenty years later the top one hundred manufacturing companies represented about half of the output and the trend is increasing. There is also a deliberate price fixing mechanism within companies and groups of companies. We all know this without having any association in any way with big business, and the Bill will have little effect on that situation.

The Government's monetary policy is fuelling inflation. High interest rates, penal VAT, deliberately inflated gas prices, increased prices for school meals and school transport, abandonment of price control and many other acts all increase inflationary pressures and wage demands. That view, in a general way, is held by no less a person than President Carter, because in his 1980 economic report to Congress he confirms my view. I quote from the Guardian of 31st January: The British economy is heading for a sharp and bitter recession, with a 2 per cent. drop in gross domestic product according to the forecast. This will be the worst performance among the Western industrial economies and is even more damaging in that inflation is forecast at least 15.5 per cent.—the worst in the West with the exception of Italy". He continues: Blame for Britain's sharp recession is put fairly and squarely on the tight financial policy being pursued by Mrs. Thatcher and Sir Geoffrey Howe. The report says: 'The UK's fall in output does not derive principally from the rise in oil prices but from the very sharp shift towards restrictive monetary and fiscal policies instituted by the new government'. It is a good job that Mrs. Thatcher has friends!

The Government place absolute faith in what they term the benefits of competition and its effect on reducing inflation but frankly admit that there will be no short-term effect—and, my Lords, short-term effects are urgently needed if we are to survive economically. Even if we had full, free and unfettered competition in industry, nationally and internationally, which we have not in the modern world, competition in a shortage situation leads to massive price increases. Furthermore, as I know full well from past experience, speculation in commodities for import into Britain is involved in the selling of shipping documents time and time again before even the ship arrives in this country, each time a margin of profit taken, not necessarily even in a time of shortage.

No, my Lords, this Bill enshrines a sacred cow of very doubtful parentage. In accordance with the customary practice of this House, we shall not call for a Division on Second Reading, but will deal with points of principle in Committee and at Report stage, when opportunities will arise to examine vigorously and in detail the Government's proposals. We shall, of course, when we feel it necessary, divide the House, possibly in a forlorn hope due to the overwhelming majority of Government supporters here, but nevertheless, a gesture of principle will be made, because we must preserve the right of the housewife to have some degree of protection. Under this Bill she has not.

5.22 p.m.

Lord TREFGARNE

My Lords, I was intending to open my remarks by saying that the quality of all the speeches in your Lordships' House tonight has reflected the importance of the Bill before us. I must confess, on reflection, that I liked some more than others. As my noble friend Lord Trenchard said earlier, this Bill lies at the heart of our proposals for restoring the health of British industry and hence the wellbeing of our economy. It cannot be stressed too strongly that improvement in social services and improvement in wage levels and standards of living, to which this Government are, of course, fully committed, depend absolutely for the fulfilment upon the success, the profitability, of British industry. There is simply no other way of finding the necessary resources. Our predecessors apparently took the view that unlimited public expenditure could be financed by borrowing on any scale and that the inevitable inflation which followed could be contained by policies which proved to be about as effective as those of King Canute in relation to the waves of the sea.

I had hoped, and indeed expected, that noble Lords opposite, and indeed noble Lords and Ladies speaking from the Liberal Benches, would have exhibited a little more humility today, having regard to the appalling legacy which we were bequeathed last year, but instead we have had a catalogue of complaints, which I will deal with in a moment, but which will not, I think, dissuade your Lordships from giving this Bill a Second Reading. I must confess that I remember only too well when the Price Commission legislation was going through your Lordships' House my noble friend Lord Mansfield was then leading from that Dispatch Box and I was assisting him—we did not enjoy the support of the Liberal Benches on those occasions. The Lib-Lab pact was in full cry, and indeed the majority which the noble Lord, Lord Wallace of Coslany, derided so strongly just now did not exist on those occasions, and we were unable to persuade your Lordships of the merit of our proposals. But Heaven knows! we have been proved right.

Let me now come to some of the points that have been put to me. First of all, on the general principles of price control, I think it is naïve to imagine that competition is of no account in relation to prices and profits. The truth of the matter is that both here and elsewhere in the world profits are a good deal lower just now than they need to be for industrial and commercial health, and I think in some cases this is very much in the consumers' interests, but in the long term adequate profits are absolutely essential. Although it is true that Adam Smith was with us 200 years ago at least, I do not think that his arguments have been entirely disproved by the passage of all those years.

Turning now to the Bill itself and to some of the points that have been put to me, I want first, if I may, to deal with an important point put to me by the noble Baroness, Lady Hornsby-Smith, which goes to the heart of some of the criticisms of other noble Lords about the question of anti-competitive practices and how in general we seek to deal with them. There are two main possible lines of approach to this question. On the one hand, one can attempt a legal definition of particular practices which are felt to be normally both anti-competitive and against the public interest, and we could prohibit them. Resale price maintenance is a practice of that sort, which is prohibited except in carefully defined circumstances by the Resale Price Act, and enforcement of such prohibition is then essentially a matter for the courts. The central arguments are legal ones as to whether the practice being followed is in fact a prohibited one. Some other systems of competition legislation, for example the French, allow firms to be fined for breaches of the prohibition. Such an approach is acceptable if you are reasonably certain that the practice is normally, or indeed invariably, harmful. The approach in this Bill, however, following the pattern set by the monopoly provisions of the Fair Trading Act, does not assume that any named practice is invariably harmful, that is to say, that it is both anti-competitive and against the public interest.

This is the double test in the legislation. Whether any particular practice is harmful will depend upon the circumstances in which it is practised, and the example given by my noble friend Lady Hornsby-Smith, about the little boy who gets a lollipop when he buys groceries at a shop for his mother, is one which I would say was clearly not harmful. These circumstances will vary from case to case and will depend upon the economic, as opposed to the legal, effect or intention of the practice. The approach in the Bill is thus essentially agnostic a priori about any particular practice; the effect of a practice will tend to depend on whether the firm who pursues it has real market power. This requires a case by case approach, the corollary of which is that there should be no sanction against a firm for having in the past pursued a harmful course of conduct. On the other hand, it is right that, following an appropriate report from the Commission, it should be required to stop a practice or otherwise to remedy the adverse effects.

It is obviously inconsistent with this approach to set out in the Bill a list of anti-competitive practices, as I think my noble friend was suggesting, since whether they are anti-competitive will depend on the circumstances in which they operate. But the sort of conduct which the Director General might be expected to investigate is conduct designed to raise, or which has the effect of raising, barriers to new entrants to markets. Powerful firms may try to exploit their power by, for example, insisting that wholesalers or retailers stock the full range of their products, which may mean that the wholesaler is unable to afford to stock some rival product; a manufacturer might try to insist that a stockist does not sell the products of a competing manufacturer; a manufacturer or importer may not allow a retailer to advertise his products except at a minimum price specified by the manufacturers. It will be up to the Director General to decide what practices to investigate, and anyone who feels that their interests, whether as businessmen or consumers, are adversely affected by what they regard as anti-competitive behaviour will be able to take their complaint to the Director General.

The noble Lord, Lord Ponsonby of Shulbrede, asked me about the people who would be displaced from their jobs as a result of running down the Price Commission. It is true that 200 of the former staff have not so far been found jobs through the Commission's resettlement unit, but that is not to say that they are still unemployed, for a good many of them have in fact found jobs through other channels. Lord Ponsonby also asked me about estate agents and he was disappointed that they were not covered by the provisions of the Bill. I can tell him that that is unnecessary because the difficulties of which he complained can be remedied by means of a monopoly reference under the Fair Trading Act. I can also say that the anti-competitive practice powers do apply equally to both the private and public sectors.

The noble Lord, Lord Ponsonby, and the noble Lord, Lord Wallace of Coslany, were highly critical of the present rate of inflation. However, I do not think that the situation is quite as black as they painted it. I think that the noble Lord, Lord Ponsonby, said that it was pushing 20 per cent.—it is actually 17.2 per cent. We inherited a rate of 14 per cent. and the once and for all increase in VAT added 3.5 per cent. to that. So, inflation—while I do not for one moment want to be—complacent—is in fact—

Lord WALLACE of COSLANY

My Lords, forgive me for interrupting, but did the noble Lord say that the Government inherited a rate of 14 per cent.?

Lord TREFGARNE

I did, indeed, my Lords. The figure in front of me is 13 per cent. to 14 per cent. If the noble Lord wishes I shall take the lower figure of 13 per cent. but certainly not the 8 per cent. or 9 per cent. that was bandied about at the time.

I turn to the speech of the noble Baroness, Lady Seear. I fancy that the tone changed somewhat with the demise of the Lib-Lab pact. I do not complain of that; I am grateful for it. However, the noble Baroness asked me some important points to which I shall endeavour to reply. She was particularly anxious about the undertakings that are a feature of the Act and about why there are no sanctions, for example, for a breach of an undertaking. There will be a sanction in the sense that, if an undertaking is broken, the firm can, of course, be quickly referred to the Monopolies and Mergers Commission. However, we think that to impose any other penalty for the breach of a purely voluntary undertaking would be going too far, especially as there would not at that stage be any finding that the practice is against the public interest. Undertakings will be published—and that is provided for under Clause 4(4)(a) of the Bill—so that any default can quickly be identified.

I was also asked about whether there was to be a further phase in our competition policy. I can say quite clearly that the main bulk of our policy is contained in this Bill and there is certainly no intention of producing any further major alterations to the framework in this important measure. Various inquiries and consultations will, of course, continue and your Lordships will no doubt be asking and hearing about those in due course.

I should perhaps have referred earlier to another point mentioned by the noble Baroness, Lady Hornsby-Smith. However, I did deal, at some length, with the point she raised earlier. She was asking whether a number of practices, which she outlined, would be unlawful under the Bill. As has already been stated, and as your Lordships will have seen from the Bill, it is our intention to provide an exemption for small firms. We are also considering exemptions for areas such as international shipping where investigations under the Bill might raise problems of extra-territorial jurisdiction. But, in general, bearing in mind that the procedures under the Bill will be selective, and that investigations can be vetoed by the Government, we do not believe that there will be a need for extensive exemptions.

My noble friend Lord Teviot raised some points about the bus industry. I can say that the industry, as was intended, will not be exempt from investigation because there are a number of local areas where some firms have a monopoly, or near monopoly, and it is certainly our intention that those operations should be subject to scrutiny, if necessary. However, I can also say that we do not intend to use those powers particularly widely.

Those, I think, are all the important points that have been put to me. I shall certainly study Hansard and take up with noble Lords any points which I have failed to cover at this stage. But I wish to say finally that the last Government sought to contain inflation by trying to impose an iron grip on prices, at the same time ignoring the rise in costs, particularly wages. In other words, they sought to treat the symptoms of the disease without regard for the cause. This Bill, by contrast, strikes at the roots of our industrial malaise in the way described by my noble friend. Of course, the Bill will not by itself restore prosperity and success, but it is a vital and urgent step and I commend it to your Lordships with confidence.

Lord WELLS-PESTELL

My Lords, before the noble Lord sits down, will he allow me to make the following observation? If he were to look at the tape in the hallway this afternoon he would see that it says that the Retail Price Index has increased by 17.2 per cent. over the last 12 months, compared with a figure of 10.3 per cent. when the present Government took over.

Lord TREFGARNE

My Lords, I do not think that the noble Lord is comparing like figures with like. However, I shall certainly look at what has been said and if it will satisfy the noble Lord I shall write to him with some adjusted figure. As I have said, the fact of the matter is that the increase in inflation, since we took office, has been largely caused by the once and for all increase in the VAT rate.

On Question, Bill read 2a, and committed to a Committee of the Whole House.