HC Deb 20 February 1978 vol 944 cc437-8W
Mr. George Rodgers

asked the Secretary of State for Prices and Consumer Protection if he will make a statement about the report of the Price Commission on the prices, costs and margins in the importation, blending, packaging and distribution of tea including the causes and effects of movements in world prices of tea.

Mr. Maclennan

The Price Commission has inquired into the reasons for the steep increase in the price of tea during 1977 and the way in which this increase and the subsequent decline in world prices have been reflected in the retail price of tea in the shops. The Commission's report has been published today, and I have arranged for copies to be placed in the Library of each House.

The Commission's main finding is concerned with the prices and profits of the four major blenders who blend 85 per cent. of the tea sold; it points out that the blender's price effectively sets retail prices. It finds that while the price that the blenders had to pay for tea more than doubled in the first quarter of 1977, their selling prices rose by 85 per cent. between January and July of that year. Since the blenders held their gross percentage margins steady despite the increase in prices, their net percentage profit margin during the first nine months of 1977 was almost double the 1976 level, and their aggregate net profit in cash terms during the same period was almost twice as high as for the whole of 1976.

The Commission concludes that having quickly followed the world price of tea upwards, the blenders have not yet reduced their selling prices in line with the fall in the world price of tea. It accordingly recommends that if by the time the report is published the average retail price of a ¼ 1b. packet of medium priced tea has not failed from the December 1977 level of 27.3p to 21p to 22p, further price reductions should be made by the blenders without delay to achieve that level of retail prices.

Although prices vary from shop to shop, they have not fallen overall to the level suggested by the Commission. In January, a medium-priced ¼ lb. packet of tea was still costing, on average, 27.2p, against the 27.3p in December. The Commission's findings give cause for concern. I am anxious that the prices charged by the blenders should, as the Commission recommends, be reduced forthwith and that the reductions should be fully reflected in prices in the shops without delay. My Department has accordingly started urgent discussions with the blenders and retailers on the implementation of the Commission's recommendation. It is my hope that formal action on my part to achieve the price reductions proposed by the Commission will be unnecessary.