§ Mr. Neubertasked the Secretary of State for Prices and Consumer Protection in what way financial targets for return on capital in nationalised industries differ from similar targets in private industry; what special reasons necessitated his exchange of correspondence on 22nd/23rd March with the Chairman of the Price Commission on this subject; and whether the written undertakings secured from the latter will discriminate to the advantage of the State industries contrary to the provisions of the Price Commission Act 1977.
§ Mr. HattersleySection 2 of the Price Commission Act 1977 requires the Price Commission to have regard to all matters which appear to it relevant with a view to restraining prices so far as that appears to it consistent with the making of adequate profits by efficient suppliers of goods and services. The Government therefore drew the attention of the Commission to the policy of setting financial targets for nationalised industries because of their relevance to the discharge by the Commission of its responsibilities under the Act. The White Paper "The Nationalised Industries" (Cmnd. 7131) makes it clear that the targets will reflect the need for the industries to earn returns consistent with the opportunity cost of capital, and will encourage the industries to act commercially but not to abuse their monopoly power. By contrast with normal practice in private industry, these targets will not, therefore, he set to maximise profits. Moreover, the targets are50W set by Government and not by the undertakings themselves, and take account of sectoral and social objectives as well as of counter-inflation policy. The Price Commission Act applies to the nationalised industries as to the private sector, and my exchange of letters with the chairman in no way detracts from this.