The Courtalds reference is a very good example. When that subject was referred, it was one of the major problems of the textile industry. By the time the Commission reported, the whole structure of Courtalds was changing. This happens all the time. We must have something which comes out when the issue is still important.
The interesting thing is that the reason why the I.C.I. bid for Viyella could never have been referred to the Monopolies Commission was that one could not wait several years for that kind of report. One had to take action. So the Monopolies Commission could not be consulted in a large number of issues.
Therefore, we come to the point made by my right hon. Friend the Member for Newton (Mr. Frederick Lee), that one of the major problems today is not so much how to prevent monopolies, because there will be a large increase in monopolies, as industrial concentration gathers weight. Not in all—there are many exceptions—but in a large number of areas, industrial concentration is the logical answer.
If we are to have this, how do we not prevent monopolies—by definition, certain monopolies are advantageous and cannot be prevented—but control them? This is becoming the problem of our time. What worries me about the Bill is that the Department will have responsibility for just one side of the argument—the question of monopolies. When a Department has responsibility for one aspect of the argument, it tends to support that aspect. I hope that this will be carefully examined to ensure that the Department does not become a Department against monopolies and mergers, but that, in some way, it may come to understand the two aspects.
There has been some reference to the statement that the nature of monopolies is changing, because of the lessening of the barriers between countries. I do not think that monopolies in Britain today will be diminished by our entry of Europe. We will not find that international competition will be a substitute for domestic competition. It will not be an answer, because, if international competition starts invading the British market to such an extent that it has a real effect in promoting vigorous competition, at the very instant that it does that, we shall be forced, as a country, as a House of Commons, to legislate to ensure that our industries do not suffer adversely.
The Lancashire textile industry is an example. There can be some marginal effects on competition, but not the effects of competition from overseas that we can see in this country arising from internal competition. As imports affect jobs and the economy, as they will, we cannot let imports pour in to produce the market forces which some people would wish to see. Also, as such imports have their effect, as a result of tariffs reduced to encourage such competition, these might make some of our monopolies economically less viable. This, again, no Government could afford to see. So the Government must involve themselves and must establish certain criteria, which are very difficult, to see how we make the monopolies which we are to have efficient and effective. Competition is the perfect test. Without that perfect test, what does one do? How does one replace it with another test?
In an increasing number of ways now—this is a process which will continue—competition is very much a blunted spur. It is still effective in international trade. Exports from this country compete vigor- ously with exports from Germany, France and elsewhere. There is vigorous and effective international competition, but there is rather less competition in each of the home markets concerned.
The merits of competition are, first, that it is a spur, though a blunted spur now, and second, that it is a yardstick measuring precisely the effectiveness and efficiency of particular industries. What is difficult is to find ways of replacing competition as the yardstick for measuring efficiency
One can say, as my hon. Friend the Member for Tottenham (Mr. Atkinson) did, that there are other methods of one kind and another for judging efficiency, but I am unconvinced by his arguments in this respect, and although I believe that there will have to be much greater attention directed to other methods of establishing and measuring efficiency, I am not hopeful that they will ever be as good as competition. But where we have no choice, where we have a monopoly against which we cannot set the standard of competition, we must make do with rather less adequate methods.
The most precise method is after all to establish the costs of company A against the costs of company B; if A's costs are less, A is more efficient. Similarly, if one can establish the sales of company A against the sales of company B and show that A's sales are greater, A is more efficient. If more customers go to company A than to company B, company A is more efficient. These are absolute standards readily determined—an excellent yardstick, but, unfortunately, there is a diminishing number of situations in which yardsticks can be used. We need, therefore, to search for other tests. It will not be easy, but whatever we can use will have to be used because these will be the only methods available.
In the consultative document from the Department of Employment and Productivity, it is said, in paragraph 6, that
…the Government believes that the growth of large industrial units has weakened competitive forces and made it necessary to widen the area of public scrutiny.
We have in the Bill methods for doing just that. I regard as admirable the way in which the Bill allows certain companies to be subject to scrutiny and
to disclose certain information which may not otherwise be disclosed.
I hope that my right hon. Friend will have something to say about the code of conduct on which she is at present negotiating with the C.B.I. This is a valuable method of securing co-operation with industry, to say that there are limits to how precisely one can form legislation so that the Government can work with industry in a common objective, and it is far better to have a legislative framework as a last resort if there is no agreement in the meantime.
After all, it is somewhat akin to our Guillotine procedure, under which we have a Business Committee which tries to organise matters amicably, but, at the end of the day, failing agreement there is resort to another method. If we can find this sort of relationship with the C.B.I. and with industry so that there is an understanding about what should be disclosed, even though one cannot frame legislative words to fit exactly, and if we can find this way of extending the area of consultation, the outcome will be wholly admirable.
I should like to see that sort of attention applied particularly to conglomerates, a subject of great concern now, as they are bound to be. One of the most important aspect of conglomerates is that one should be able to identify the various parts of such a company so that one may compare not only the conglomerate with another—for that is meaningless—but parts of the conglomerate with other industries making only that product or those parts of another conglomerate making that product. This kind of comparison is of great importance.
We still have some way to go, but I am encouraged to see the use of business ratios developing. I looked forward to this when we discussed the original Bill, and I am glad that it is now becoming more widely used, with such ratios as sales as a proportion of total assets or profits as a proportion of total assets being taken for the purpose of comparison between different industries. At last, investment analysts are making use of this method and showing the efficiency of one company as against another.
Now, the prices and incomes side of it. I have always believed, and still do, that this is an area in which the Government are unable to do much. I think that we have at times over-emphasised what is ever likely to be possible, though I have always believed that this is a method by which we should slowly, step by step, be able to achieve a greater understanding of how the shares should be taken by different sectors of employees. We are still in the same position, and, unless we can find some way of determining the shares, inflation will always be the answer.
We can, however, operate only within what is possible. I hope that we are here laying the foundations for a later stage. While we should not go beyond what is possible now, at least the educative part of it will be of value. The hope which we had in 1965 may be rekindled, and with, perhaps, some of the dedication which a number of people had then, it may be possible to start again almost from scratch.
Now, the level of prices and the question of inflation. I believe that there are many misconceptions about the effects of inflation and the inefficiencies arising from inflation. Many of the consequences of inflation are felt because we are relatively unused to it. We are not really familiar with how to adjust to inflation as a more permanent state of affairs, as it is likely to be.
Do those who talk about current high rates of interest, for example, remember that they are not so high when the inflationary element is deducted from them? So long as there is inflation in the Western world, incorporated in the rate of interest must be the rate of inflation, so that, for example, if there is an 8 per cent. rate of interest and a 5 per cent. rate of inflation, one has, in effect, a 3 per cent. rate of interest. This is the kind of sophistication which is beginning to seep through, and, obviously, it will go a lot further.
Despite all that, it can be held that inflation is far preferable to several other possibilities, among which I single out unemployment as not the least of them. I wholly accept that, but we must not be blind to the inefficiencies of inflation itself.
Adjustment for inflation can be made in respect of savings; there is no difficulty there. As regards costing and investment, as people adopt a more sophisticated attitude to inflation, they will come to work on the basis of constant money, as we do in the Ministry of Defence and our Estimates generally. There are countries today which have got used to this. When it comes to questions of money, people rapidly learn where their interests lie. These are matters which industry can encounter and overcome.
But the great inefficiency which can never be overcome is the damage that inflation can do to productivity. Inflation does not cause much damage to savings. People can learn to live with it, though they have not learned to do so yet. We cannot assume that inflation is purely temporary and will go away, nor do I think that hon. Members opposite think in quite those terms. If inflation stays for any length of time, people will learn to live with it. They will want some money for their old age, or for some particular venture, aim or ambition, and inflation does not stop them doing so. What stops them is not understanding inflation: the thought that if one has £100 now it will be worth only £20 some time later.
The most important aspect of inflation, and one which cannot be overcome, is its impact on productivity. Once we have rates of inflation of 5, 6, or 7 per cent. and rates of productivity of only 3 per cent.—and the rate of inflation is not assured in advance—the rate of productivity becomes rather less important to the manufacturer and the industrialist. If the manufacturer faces at the beginning of the year a possible rate of productivity of, say, 3 per cent.—which is roughly what it is at present—and then finds himself facing a rate of inflation of any-where between 4 per cent. and 7 per cent., productivity becomes less important to him. That is what countries which have inflated very seriously have found. It has been found that all the other matters can be disposed of by making various corrections. It is just a question of an increasing sophistication which is bound to come about.
But this is one more argument against increasing inflation in order to achieve certain other desirable objectives. I hope that the Government will be able to find a way of diminishing it—curing it, no one can do. But to keep some sort of check on it is a worthy and desirable objective, and I look forward not to the Bill having much impact on that aspect, but, at least, to further ideas which will come to the Department and which it may be able later to use.