Fuel and Materials: Manufacturers' Costs (Hansard, 7 April 1986)

§ The Earl of Lauderdale
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, the price index for materials and fuel purchased by manufacturing industry in February of this year was 9.5 per cent. lower than at the same time last year.

§ The Earl of Lauderdale
My Lords, I thank my noble friend for that reply. To what extent does he attribute that decline to the collapse in the price of oil?

§ Lord Lucas of Chilworth
My Lords, fuel accounts for 37 per cent. of the total manufacturing costs; that is, fuel both bought from abroad and home produced.

Lord Bruce of Donington
My Lords, in view of those more favourable developments, does the noble Lord anticipate, particularly in regard to food manufacturers, that there is likely to be a lowering of the price? In regard to the capital goods industries, can the noble Lord say whether, in view of the fact that profitability will increase, there will now be more capital investment in those industries? It is currently running at some 17 per cent. to 18 per cent. below what it was in 1979.

§ Lord Lucas of Chilworth
My Lords, investment in British manufacturing industry has improved by 6 per cent. in the past 12 months and is on course to continue this increase.

§ The Earl of Lauderdale
My Lords, can my noble friend say how the Government view the prospect of further investment on the Continental Shelf in view of the collapse in oil prices? Does he believe the companies expect that over the long term prices will recover?

§ Lord Lucas of Chilworth
My Lords, I very much regret that I cannot give my noble friend an answer to that question, since it is a little wide of the original Question on the Order Paper.

§ Lord Stoddart of Swindon
My Lords, are the Government satisfied that the petrol companies have brought the price of petrol at the pumps sufficiently in line with world oil prices?

§ Lord Lucas of Chilworth
My Lords, bearing in mind that there are considerable stocks of refined products, particularly in the United Kingdom, which are still awaiting disposal it is a little early for me to anticipate any kind of answer.

§ Lord Stoddart of Swindon
My Lords, in the light of that will the noble Lord forecast when we can expect to see a significant drop in petrol prices at the pumps?

§ Lord Lucas of Chilworth
My Lords, I certainly cannot give any kind of forecast, but there have been marked reductions in the retail prices of refined oil throughout the country.

§ Lord Mellish
My Lords, the Minister must surely be aware of the fact that millions—

§ Lord Diamond
My Lords, in relation to the noble Lord's comment about stocks, the policies of the companies in regard to stocks and prices, and therefore the likely prices at the pumps, can he say whether this information was available to the Prime Minister and the Chancellor of the Exchequer when they made their statement about the possibility of prices falling at the pumps?

§ Lord Lucas of Chilworth
No, my Lords, I cannot tell the noble Lord, Lord Diamond, what information was available to my right honourable friends at the time they made their statement. I was asked whether I could forecast. I cannot forecast; neither can I comment on the policies of the individual oil companies.

§ Lord Mellish
My Lords, is the Minister aware—as surely he must be—that as a result of the oil price reduction millions of pounds must have been made by the oil companies by having, in many cases, maintained their earlier prices? For example, the Automobile Association said that today the price should be about £1.55 per gallon, but where in London can you purchase petrol under £1.67, 1.68 or £1.69? Frankly, the Minister must give a better reply than that; it shows an ineptitude that is not worthy of him.

§ Lord Lucas of Chilworth
My Lords, there are lower prices than that around the country. It depends on the arrangements between the supplying company and the retailing company. I was asked whether I could forecast. I cannot forecast, but I can anticipate, like other noble Lords in your Lordships' House.

§ Viscount Trenchard
My Lords, does my noble friend have readily to mind the total tax per gallon that is paid in this country at present? Is it of the order of 80 pence a gallon?

§ Lord Lucas of Chilworth
I am sorry, my Lords, I do not have the complete breakdown. However, I remember seeing a graph in one of the weekend newspapers which showed that from, I think, 150 pence there was 22 pence retail profit, with 5 per cent. distribution costs and 80 pence in taxation, and the remainder was crude oil costs.

The Earl of Halsbury
My Lords, for the sake of the record can the noble Lord elucidate the precise period which he interprets as the past year? Does it include or exclude the recent catastrophic fall in oil prices?

§ Lord Lucas of Chilworth
My Lords, the date I gave was the end of February 1986 on the end of February 1985.

§ Lord Williams of Elvel
My Lords, if, as the noble Lord says, the index has declined by 9.5 per cent. of input costs, why is it that manufacturers' output costs are still rising?

§ Lord Lucas of Chilworth
My Lords, in fact, output costs for the 12 months ending February 1986 on February 1985 declined by 1.1 per cent.; that is, they were 6.1 per cent. in 1985 and 5 per cent. in 1986. The large majority of the difference is made up in earnings, which rose by 8 per cent., though the output per unit rose by only 3 per cent.