Price Code (Hansard, 22 July 1976)

§ Mrs. Shirley Williams

In considering the representations made to me during the consultative period, which ended on 16th July, I have had principally in mind the urgent need in the coming year to promote investment and to pay for a higher level of production. First, to encourage firms to accelerate their investment plans I propose that the rate of investment relief will be increased to 50 per cent. subject to careful monitoring of that investment. Provisions will be made to phase in the higher rate more quickly. Second, the adjustment factor for depreciation will be raised to 1.4, thus moving some way towards replacement cost. Third, so far as interest is concerned, I propose to give firms the option of being treated under either the rule proposed in the consultative document or the provisions of the existing code. The productivity deduction applicable to escalation and variation of price clauses will now affect increases in labour costs up to but not later than 31st July 1976. The rules for monitoring the treatment of stock will be tightened up. To help reduce the administrative burden on smaller firms, I propose to raise the lower limits of Category III above the limits proposed in the consultative document. These firms will, of course, still be subject to the Price Code.

In the light of the reaction to the consultative document proposals for investment relief where equipment is leased, I propose a new provision. Relief will accrue to the owner, but he will in future be able to assign it to the lessee. Relief will no longer be given on the purchase or leasing of domestic television sets.

A number of proposals for easing the operation of the controls have been made, which I have felt unable to accept. I believe it is necessary to maintain the limitation over the retrospective recovery of costs and to prevent the undue loading of price increases between related product disproportionally to costs. The 541W new provision for price increases to be taken in stages will be clarified to ensure that it does not permit the recovery of profit margin forgone up to now.

I shall be making a number of alterations to the proposals contained in the consultative document designed to deal with particular points of difficulty. These will appear in the Orders that will be laid on 29th July.