Orders of the Day — Commission for Industry and Manpower Bill

Part of the debate – in the House of Commons at 12:00 am on 8th April 1970.

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Photo of Mrs Barbara Castle Mrs Barbara Castle , Blackburn 12:00 am, 8th April 1970

The hon. Gentleman's intervention is a little early. I am coming to that point.

Size in itself conveys power in a modern industrial society. Large firms have often substantial independence of action in fixing prices, determining wage increases, setting the pattern of production and investment. They have large financial resources and can cross-subsidise to support weak sectors of their business. Twenty-five per cent. of the market in a broad range of related products will afford far greater market power than a third of the market in a single line. Vertical integration confers market power quite as much as monopolies in particular products. The provisions in the present monopolies legislation simply do not cover all the cases where market power can be exercised contrary to the public interest.

That is why, in Clause 2, we have extended the possibility of reference to all firms with net assets of £10 million or more. But, of course, this does not mean that all such firms will be referred. The C.B.I. has tried to give the impression that there will be an immense extension of the power of the Government to interfere in the commercial affairs of industry. A picture has been drawn of the managing director of every large firm in the country entering his office with trepidation each morning to see if a fatal letter has arrived from my Department referring him to the C.I.M.

Clearly, this is all nonsense. References will be made only where there is some cause for concern that the use of its market power by a firm may be in conflict with the public interest. Indeed, one intention of this Clause is to avoid the need for probing the conduct of every firm, large or small, as was usually the case when a price rise was referred to the P.I.B. In future, we will be able to concentrate scrutiny on those firms which may be exercising their market power to the detriment of the public interest.

It may be helpful to the House if I set out broadly what will guide us in deciding whether to make references under Clauses 2 and 3. In most cases a reference will spring from concern about some specific aspect of a firm's behaviour or performance. For example, we may be concerned at the level of prices being charged—prices may have increased faster than those in industry generally, or they may not have been reduced when they might have been expected to decline as a result of technological developments.

There may be concern at the level of profits where these are substantially above the general level for industry. There may be evidence of discriminatory practice or discount structures. There may be companies pursuing a policy of growth by acquisition not accompanied by a clear improvement in performance. We believe that we should be concerned not only with the traditional abuses of monopoly—exploitation and harmful discrimination—but also with the damage to the public interest which tends to flow from the lack of challenge in non-competitive situations—the "sleeping giant" problem.

In addition, there will be cases where firms possess a complete monopoly in an important product or an extremely high share of the United Kingdom market. Obviously, the possibility of harm to the public interest in these cases of dominant market power is so much greater than where the market is shared between several firms that the consequences for the public interest of such high degrees of monopoly power ought to be impartially examined by an independent tribunal.

The power to make references will apply equally to publicly-owned undertakings as to private firms. As the P.I.B. has shown, there is a strong case for having a body which can examine some aspects of the conduct of nationalised industries. Of course, the boards of these industries are given objectives which should not involve a basic clash between interests pursued by the boards and the public interest. But price increases and pay settlements in these sectors of the economy may require examination, and other matters may arise which should be referred.

In addition, the Bill provides for the C.I.M. to carry out efficency studies of the nationalised industries where Ministers think that this will be helpful. The P.I.B. has begun to develop this work and the C.I.M. will continue it. But, as sub-section (2) of Clause 2 makes clear, such general studies of efficiency will be confined to the public sector where Ministers have a specific responsibility. It will not be possible to make general efficiency references of private firms. Of course, this does not mean that efficiency in the private sector will not be the concern of the Commission. Like the P.I.B., the Commission will always be seeking to make a positive contribution to increasing efficiency, not just looking for conduct to criticise.

Clauses 5 to 9 of the Bill reproduce the provisions of the present legislation with regard to the examination of mergers. These Clauses are taken over almost without change from the 1965 Act, except that in Clause 7 we have added one new provision; the right to refer the results of past mergers to the Commission, whether it originally approved the merger or not, after an interval of two years.

This is something for which a number of people have pressed; and it seems eminently sensible that we should take stock from time to time of the results of these great mergers, to find out what has really happened and to make sure that the expected benefits really have flowed from them.

Among the references which may be made to the C.I.M. are questions relating to salaries, wages or other forms of income. In other words, the Commission will continue the probing, proselytising work of the P.I.B. which has had a remarkable success in elevating the efficient use of manpower to a new level of importance in the minds of management and of trade unions alike.

No doubt we shall hear a great deal during the debate of the allegation that the Bill does nothing to deal with the "monopoly power" of the trade unions, whatever that may mean. Hon. Gentlemen opposite are becoming obsessed with the trade unions: union-baiting has become their last "white hope", though the more they talk about the need to do something about the unions the clearer it becomes how out of touch they are with the real world of collective bargaining.

For there is one simple fact that they refuse to face, and that is that management gets the unions it deserves. The prime responsibility for industrial relations rests with management. And so does the prime responsibility for negotiating pay settlements.

During the last few years the Government have done more than any previous Administration to hammer home to management and trade unions alike the need to link wage increases to productivity and to get rid of obsolete restrictive practices, if we are ever to curb inflation.

It was this Government, not the party opposite, who set up the P.I.B. to overhaul inflationary pay structures and set up the C.I.R. to reform out-of-date negotiating procedures, believing that we shall never realise our full economic potential unless we revolutionise the use of manpower to match the technological revolution being promoted by Ministry of Technology and the I.R.C.

Precious little help we have had in all this from hon. Gentlemen opposite. They have done everything in their power to "crib, cabin and confine" the work of the P.I.B. Only the other day, on T.V., in a debate on these proposals with my right hon. Friend the Minister of State, the right hon. Member for Mitcham was indulging in one of his all-too-familiar schoolboy sneers. "We've had C.I.R.s, I.R.C.s and P.I.B.s," he said, "all three-letter word commissions and the only three letters that I think matches them all is N.B.G.'". Good for a giggle, but no good at all as a constructive contribution to one of the most important issues facing the country.

The right hon. Gentleman went on to say that the C.I.M. should be able to investigate restrictive practices by trade unions. What does he think the P.I.B. has been doing all these years? What does he think has been the purpose of the 150 investigations it has carried out but to highlight the inescapable relationship between high prices and the inefficient use of labour, of which the failure to link pay increases to productivity is such an important symbol?

These investigations will continue under the new Commission. Under Clause 26, it will be possible to ask the Commission to report on productivity questions in any industry or firm, in exactly the same way as the P.I.B. has done. It will be able to look at wage structures, the way manpower is employed and deployed and at any barrier to optimum efficiency. Industrial relations practices are, of course, a matter for the C.I.R. So it is absurd to suggest that the references under the Bill will be one-sided.

As for powers, is the right hon. Gentleman complaining that we are dropping the statutory control of incomes which he has attacked so often in the House? Or does he want us to drop the right to regulate prices where the Commission has found that a firm is abusing its market power, a right which is an integral part of the present legislation against monopolies?

The fact is that it is impossible to separate prices and incomes policy from competition policy—just as the P.I.B. found it impossible to discuss price increases or pay settlements intelligently except in the context of the general efficiency of a company. That is one of the major reasons for merging the P.I.B. with the Monopolies Commission in this new body.

When hon. Gentlemen opposite complain about the market power of trade unions, they are really complaining about the market power of the firms which negotiate with them. When a firm or group of firms command a dominant position in the market, they have little incentive to be tough in negotiations, to insist on a soundly-based productivity bargain instead of the old-type inflationary pay settlement, because they know that they can always pass on their increased costs in higher prices.