§ Mr. Zilliacus
asked the President of the Board of Trade what changes are being made in the method of controlling utility clothing prices.
§ Mr. H. Wilson
During the war, and for some time afterwards the price of most utility clothing was governed by cost-plus, subject to ceiling prices. The method of price control generally known as cost-plus has considerable advantages, particularly where it is necessary to control by means of a simple formula a great range of goods of a similar description and of widely varying quality. It helps to ensure that the benefits of cheaper production are passed on to the consumer and, in so far as quality is a function of price, cost-plus may be said to encourage the maintenance of quality. At the same time, this method of control has the disadvantage, which is of particular importance now, that it may discourage the reduction of costs because the profit allowed is expressed as a percentage of the cost. For this reason we have for some time been trying to find other effective means of control wherever possible, and I have noted that the Working Parties for the Light Clothing, Heavy Clothing and Rubber Proofed Clothing Industries all commented adversely on the use of cost-plus as a means of controlling the price of utility clothing. The search for alternative methods of control had been started even before the Working Parties were set up and about the middle126W of 1946 the cost-plus control was removed from utility knitted goods.
An alternative to the present dual system of control is a system of cash maximum prices only, to be fixed rather lower than the ceiling prices would have been fixed under the old system. Such a system was introduced for knitted goods, and discussions along these lines have been taking place with other sections of the clothing industry during the past year. Cost-plus has now been removed from men's, youths' and boys' utility outerwear; utility waterproofs; utility gaberdine raincoats, and women's utility woven rayon underwear. In all of these cases the old method of control, which limited a manufacturer's price to his cost of production and sale plus a net profit margin or a cash ceiling price, whichever was the lower, has now been replaced by a system of cash maximum prices only. I hope to make a similar change with other utility garments in the near future.
The abolition of cost-plus may admittedly enable manufacturers with particularly low costs of production to charge higher prices and so earn higher profits than in the past, but I hope that any manufacturers who may be in such a position will respond to the appeal made by my right hon. and learned Friend the Chancellor of the Exchequer in February of this year to sell below the legal maximum price whenever they can.