Additional Powers of Price Commission to Prevent or Restrict Price Increases

Part of Clause 3 – in the House of Commons at 12:00 am on 12 June 1974.

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Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , Angus South 12:00, 12 June 1974

Amendment No. 11 is a modest proposition and one which I would imagine that the right hon. Lady would be happy to accept. All it asks her to do is, before she accedes to a request, however motivated, from the Price Commission to make a direction under Clause 3, at least to assure herself that such a direction will not have the effect of diverting into export markets goods which are required for the domestic market.

This is not entirely a fanciful proposition. It is my contention that the Price Commission, that worthy body, is contributing hundreds of millions of pounds a year to the balance of payments deficit. I am surprised that the commission, which is not slow to chant its own achievements in the popular journals, has not seen fit to draw attention to this achievement, which is perhaps rather more important than some of the other things to which it lays claim. I have no doubt, and there is no doubt in the minds of people in industry today, that the fact that the profit margin and price controls apply exclusively to the domestic market is having an effect of diverting goods which are required for the domestic market to export markets, whence they have to be purchased back, the sole consequence being an additional burden on the balance of payments in respect of all single and several transactions.

Ministers have frequently appealed for evidence of this practice. I must say quite frankly that I am reluctant to provide evidence because I do not consider it to be anything other than the most proper and patriotic proceeding for companies to maximise their profitability through the export market to sustain future investment. I would not dream of facilitating either the right hon. Lady or the Price Commission in catching companies which are succeeding in evading the snares of the Price Commission by diverting goods to export markets in this way.

Nevertheless we must contemplate the implications of what is going on. From time to time evidence has come to public notice. Perhaps I could refer to one or two of these occasions. There was the case of the warning issued by Shell Chemicals that it would divert supplies of polypropylene and polystyrene, urgently needed for the United Kingdom market, to overseas markets because the commission was treating its application for price increases in such a manner that it would be the height of irresponsibility for it to continue to sell these products to United Kingdom customers.

I remember that the hon. Gentleman at Question Time the other day claimed that there was no supporting evidence for this. I do not know what sort of supporting evidence he wanted. I suppose that he will not be satisfied till he can see an enormous increase in the trade returns for United Kingdom exports of polypropylene and polystyrene and on the other side of the balance sheet a substantially higher figure for imports, once again hitting the balance of payments deficit.

There is an instance which has been drawn to my attention—and I do not intend to give any evidence of any kind which would enable the right hon. Lady or the Price Commission to follow it up—of a company which traditionally supplies raw materials to a United Kingdom customer. It found that those raw materials were being made up into goods which were being exported. The end products were free from the malign attentions of the Price Commission but the raw materials were subject to price and profit margin control.

Understandably the manufacturer felt that this was a mug's game. He has been able, I understand, to identify the overseas customer for the end product He has gone to that customer and said "Look, I will sell the raw material to you direct under a contract by which it is made up by my United Kingdom customer who sells you the end product." This was agreed and arranged. The consequence is that the United Kingdom customer for the raw materials has to pay the real market price for the product and not the price dictated by Sir Arthur Cockfield and the right hon. Lady.

This is of no particular concern to that customer, because if he sells any of the end products in the United Kingdom market, since his raw material price is now an import price, it is an allowable cost and he can get his price increase from the Price Commission. If he sells overseas he is selling in a free market and can sell for the best possible price.

The only sufferer in this circumstance is the balance of trade because the raw material, which is really for internal consumption, has had to be exported at one price and then imported at a higher price to amuse Sir Arthur Cockfield and his admirers. I do not know the precise cost of this manipulation to the balance of payments but I dare say that if it lasts for any length of time it will run into millions, possibly tens of millions, of pounds.

7.15 p.m.

The other day in the House I cited the example of a major manufacturing company which was seeking to obtain an essential chemical from its usual suppliers. It required four tons of this chemical and was eventually offered half a ton from its traditional United Kingdom suppliers. Eventually it was offered all that it needed from a Dutch concern at eight times the United Kingdom market price. When the goods were delivered they turned out to be of United Kingdom manufacture. The cost of that particular item to the balance of payments may well have run into £1 million or so.

The steel industry is fairly notorious. There was a time last autumn when Dr. Monty Finniston was denouncing the steel stockholders for pushing out to overseas markets in the rest of the Community scarce supplies of steel which they had obtained from the British Steel Corporation. As I understand it, the stockholders were denouncing BSC for doing the same thing. Unfortunately no one could identify who was doing what. What was indisputable was that supplies of steel required for the home market were being exported and then imported again simply because of the distortions imposed by price control.

I know that some steps have been taken, not before time, to reduce the discrepancies between the United Kingdom controlled price and free prices in other parts of the Community, but the aftermath of what has been going on is still with us. I was visiting an offshore service depot in Scotland the other day and was told that the main contractor had been waiting for months for a supply of steel. He eventually managed to track down what he required—again, I think, in Holland. When the steel was delivered it was found that it came from the British Steel Corporation. The process is still very much with us.

Under Clause 3 the Price Commission has to go to the Secretary of State and say "Here is a particularly vulnerable group which will cause you electoral embarrassment if you do not retrospectively restrict the price increase which is perfectly in accord with the provisions of the code by which we are supposed to operate." It is a matter of pure speculation which commodities this sort of direction might affect. We might find the right hon. Lady becoming alarmed about distress signals coming from young married couples so that she would decide that furnishing would be a suitable commodity about which to make a dramatic intervention under Clause 3.

In this context I draw the attention of the House to what happened last year under the more relaxed provisions of the Price Code then in operation. United Kingdom imports of miscellaneous furniture went up in volume terms by 67 per cent. while United Kingdom exports of miscellaneous furniture went up in volume terms by 21 per cent. I challenge the right hon. Lady to argue that there was nothing artificial about the scale of that stimulation of trade and that it had nothing to do with the effect of the antics of the Price Commission in artificially depressing the price at which furniture was allowed to be sold in the United Kingdom market.

Unless the right hon. Lady is prepared to accept my amendment she will be reinforcing the activities of the Price Commission in this respect and she will be enabling it to say that it agrees that an increase in the price of furniture is justified under the terms of the code. But that increase would nevertheless be embarrassing to newly married. It might, for instance, be known that a by-election is due and that newly-married are a high proportion of floating voters. It would be pointed out in such circumstances that the right hon. Lady would slaughter the Price Commission if it were not to take action to stop the price increase. Therefore, the Price Commission would apply for an order and obtain a direction under Clause 3. These are not fanciful projections of the way the clause could be used further to exacerbate the appalling problem of our balance of payments deficit.

I realise that Sir Arthur Cockfield and his chums get an enormous amount of job satisfaction, and, no doubt, the right hon. Lady also enjoys herself rushing from one end of the price dyke to the other sticking her finger in every available hole. I must confess that life would be rather duller if she and the Price Commission were not around.

However, we must at least occasionally consider what I dare to call the broader national interest and I wonder how the Treasury enjoys the prospect of the right hon. Lady's acting under Clause 3 to add an additional £10 million or so per annum to the balance of payments deficit. The right hon. Lady ought to have a word with her right hon. Friend the Chancellor of the Exchequer. I cannot believe that he can be thoroughly grateful for her activities and those of the Price Commission in shoveling out goods needed for the United Kingdom market and then reimporting them at higher prices. It is an odd way to assist in the balance of payments problem and I hope that the right hon. Lady will at least give us the modest assurance of accepting my amendment.

The activity of the Price Commission in adding to our balance of payments deficit will continue, but at least we may have done something to avoid adding a further dimension to the problem if we can have this modest amendment accepted. I hope that the right hon. Lady will be able to accept it—or, better still, let us sweep the clause away. It is a bad Bill, but this is a wholly indefensible clause. If the right hon. Lady really believes that it is not retrospective I hope that she will be able to give a clearer explanation of what the wording means than I have been able to get from subsection (1). No case has been made out for the clause, nor has an explanation been given as to how it would be used. Bad as the Bill is in general, it will be infinitely worse unless we delete the clause.