Orders of the Day — Price Commission (Amendment) Bill

Part of the debate – in the House of Commons at 12:00 am on 29th January 1979.

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Photo of Mr Cecil Parkinson Mr Cecil Parkinson , Hertfordshire South 12:00 am, 29th January 1979

It is common for Labour Members to pretend that anyone who speaks out against any aspect of the Price Commission is automatically in favour of high prices. I was not here for the whole of the speech of the hon. Member for Keighley (Mr. Cryer), but I heard the end of it. He was pushing out that entirely predictable line.

However, even the chairman of the Price Commission and the Minister—until today, I might add—admit that in anything but the short term the Price Commission has no effect of any real consequence on the movement of prices. We all remembered the Minister's famous interview—I think that it was with the News of the Worldin which he very frankly said that even if he had had the powers that he was seeking in 1977 he did not expect that the rate of inflation would have been affected.

The chairman of the Price Commission agrees that the name of the Commission is rather misleading. He has proposed—not perhaps as a firm proposal, but he has been quoted as saying it—that to avoid misleading people the name of the Commission should be changed to "The Commission for Imperfect Competition". I do not like the name "Price Commission" much, but there is something even more sinister sounding about the chairman's proposal.

We must be absolutely clear that this debate is not between those in favour of high prices and those against them. As the Secretary of State has confirmed, had this measure been available to him earlier it would have had no effect of any consequence on the price explosion and very little effect on the retail price index.

As the House debates the Bill, thousands of British companies are struggling to maintain production at any sort of level. Millions of pounds worth of exports are delayed at our docks and in the factories where they were produced. Last Thursday I was talking to the sales adviser of a successful, medium-sized British company. He told me that his company had expected to export about £200,000 worth of goods in January. It will now be lucky if it exports £40,000 worth. Many of the goods which have been exported were air freighted, at enormous additional expense to the company, in an attempt to keep faith with the company's customers. The company faces severe competition world-wide from the Japanese and recognises that the present disruption will further improve the long-term prospects of its Japanese rivals and damage its own.

The company's warehouse is crammed with finished goods for which it has orders but which it is unable to dispatch to its customers. It has paid for the raw materials for those goods, but it will be paid by its customers several weeks later than it might reasonably have expected to receive the money. Inevitably, there will be damaging and quite unnecessary pressure on the company's cash position and profitability. Its investment programme will almost certainly have to be cut back this year.

My hon. Friend the Member for Ash-field (Mr. Smith) spoke about this matter and explained just what impact the present crisis will have on the cash position of many British companies. I am sure that many hon. Members could give similar examples, from their own experience in their own constituencies, of companies whose exports prospects are being damaged and whose profitability and cash position are badly affected. In this serious crisis, the Government's only legislative response is to bring forward this poisonous and irrelevant little Bill which adds to industry's problems at a time when it already faces huge problems, many of them caused by the activities of this Government.

My hon. Friend the Member for Gloucester (Mrs. Oppenheim) and others have pointed out that it is not as though there was any evidence of excess profit-making by British industry. The hon. Member for Thurrock (Dr. McDonald) came up with some rather bizarre figures about the excessive profits which British industry was alleged to be making. I refer her to the official magazine of the Department of Trade and Industry, Trade and Industry, of 22 September 1978. One reads in that magazine: The modest increases for 1977 raised the levels of the real rates of return achieved by British industry to about half their level in the early 1970s and barely one-third of the levels in the 1960s. The 1978 outturn is almost exactly the same as the result for 1977. British industry is achieving a historically low rate of return on capital employed. In a statement last week, the Central Statistical Office said: Industry's profits in 1978 increased more slowly than its increased spending on fixed assets and stocks. The truth is that British companies have not been making sufficient profits to sustain their investment programmes and to restock—and this was before they faced the problems and the losses caused by the activities of the pickets.

In 1977, industry faced its biggest financial deficit for several years, and most people expect the 1978 figure to show a bigger deficit. Industry is having to borrow money to cover this deficit at very high rates of interest—higher than they need be, because of this Government's chronic overspending and their need to pay high interest rates to fund their own bloated public sector borrowing requirement.

The Secretary of State is having a poorish month. He made a disastrous speech in the House earlier in the month, and now he comes forward with a Bill which has been condemned almost universally. He tried to pretend that it was only the Tory press which was getting at him. Let me read to him a quotation from The Guardian:It is an ambiguous gesture for the sake of making an ambiguous gesture and, in content, it is worse than nothing. There are those right hon. and hon. Members who would say that the troubles of the Secretary of State could not happen to a nicer chap. I think that is rather unfair to him. He makes the worst of it, but I think that he has a rotten job. If prices go up, he is criticised. If they go down, he gets no credit. In fact, as we all know, he deserves neither credit nor blame. He and the Price Commission are irrelevant to the general movement of prices over anything but the shortest term.

The other day, I was thinking of the story of the Yorkshire family business which had a company secretary who was not a member of the family but who had attended board meetings for more than 20 years. After 20 years, he decided to speak. There was a stunned silence, after which the chairman turned to him and said "Just be quiet. Tha's nobbut the scorer." The Secretary of State and the Price Commission simply keep the national prices score. They have little more influence on prices than the scorer in the present test match at Adelaide will have on the result of that match. But the Secretary of State has one power which the scorer does not possess. He has the power to postpone increases, no matter how justified, and the ability, by his actions, to damage industrial confidence.

In the Bill, the right hon. Gentleman is aiming to do the former and, as a number of my hon. Friends have said, he will certainly achieve the latter. He seeks power to remove the safeguards provision, which is section 9 of the Price Commission Act. A number of my hon. Friends have questioned his motives. I also intend to do so. It is worth looking at the background to these safeguards.

The Secretary of State, in a speech to the Marketing Society on 17 January, which has been much quoted today, said: We agreed to write the safeguard provisions into the legislation to meet fears expressed by industry, fears about the then untried powers and procedure of the new Commission. The Secretary of State now claims that he always disliked the safeguards.

My hon. Friends the Members for Pudsey (Mr. Shaw) and Romford (Mr. Neubert) have given a number of quotations from speeches which the Secretary of State made in 1977 in which he certainly did not leave the Committee with that impression. But, under the 1977 Act, the Price Commission and the Minister obtained wide discretionary powers that can be used on the basis of a number of extremely subjective criteria.

I remember the Secretary of State, in his anxiety to reassure us, telling us that socially responsible companies that made socially acceptable profits had nothing to fear. Many industrialists, who might have a different idea about what is socially responsible and socially acceptable, recognised the subjectivity that lay behind those remarks. Industry was alarmed at the extent of the powers being given to a politically ambitious Minister who might appoint a politically motivated chairman to his new Commission. What has changed in the interval? One might argue that industry's fears have been confirmed, not lessened. We have the same Minister, no less ambitious. We have a politically committed chairman. And this Bill, which has no economic justification, is perhaps the best evidence of how right British industry was to demand safeguards.

The right hon. Gentleman argues that the Commission has proved that it is to be trusted. From the representations that we have received, we feel entitled to ask by whom it is trusted. The Secretary of State claims that the Commission feels constrained by the safeguard clause. We draw a different conclusion. In 20 out of 27 investigations—the right hon. Gentleman said 30, but the last figure I saw was 27—the safeguards have proved necessary. Since that fact is resented by the Commission, we are entitled to argue that the existence of safeguards may well have forced the Commission to act more fairly than it would have wished had it not been so constrained.

The Secretary of State may argue, as the CBI points out, that in virtually all the investigations to date the Commission has been less restrictive when it has finished its investigation than the legislation permits it to be. The right hon. Gentleman argued today that in a minority of cases the Commission would have wished not to be bound by the safeguards, but the majority of cases have shown that the safeguards were vital. The right hon. Gentleman tried to reassure us by saying that we could rely on the discretion of the Commission. We and British industry take the view that it is far better off with legal safeguards in the Bill than with any assurance of the Secretary of State.

If the Price Commission has been hampered, if it feels constrained—although, as I said, the safeguards have mostly been justified—that also causes us concern. We see the Bill as evidence that the Commission intends to change its practice in future and that it needs to be constrained perhaps more than in the past and not less.

I have said that there is no economic justification for the Bill as a prices measure. Even the right hon. Gentleman admits that safeguards over the last 16 months have allowed through increases which have had a minute effect on the RPI and the cost of living. We are therefore entitled to ask why the Bill has been introduced. There are three main reasons, I believe. First, in spite of the Minister's assurances, the Bill is intended as a replacement for pay sanctions.

The Secretary of State knows that sanctions were resented by some of his hon. Friends below the Gangway, as well as by all parties on this side of the House. We all know that he has a fairly low opinion of his hon. Friends and is convinced that if he dresses up pay sanctions as a prices measure he may get away with it. Unfortunately, the chairman of the Price Commission has blown the gaff. In The Economist of 20 January he was reported as saying that he would be concerned if large wage increases were used to jack up prices but that an increase above the 5 per cent. guideline would not trigger an automatic investigation.

One of the Bill's principal aims is to replace the sanctions that the House rejected with a further pay sanction dressed up as an attack on prices. Employers who resist excessive wage demands and eventually lose the struggle can be clobbered under this legislation. The union which gets the increase will be left alone. That was one of the most unacceptable features of the original pay sanctions. The possibility of such action will exist again if the Bill is passed.

The Minister's action in the present dispute shows once again that the ability of the union in question to cause trouble will be one of the principal price rise criteria. The Minister's announcement after the House had risen at the end of the week before last that the road hauliers had nothing to fear, that any price increase they applied for would go through, was a measure of this. He had seen how much trouble the unions in the industry could cause, and that was the basic criterion on which he decided to let through the price rise.

It is ironic that, on the Tuesday of the week in question, the Prime Minister made a strong statement about the Government's position. On the Thursday he said that the worst thing that could happen to the nation would be to have a Government that used strong words and took weak action. On Friday he set up the right hon. Gentleman to take the weak action that went with his strong words—precisely the recipe that he had been deploring only a few hours earlier.

The second reason for the Bill is that the present Government, better than any other, know the value of being able to rig the retail price index in the run-up to a general election. The Chancellor did it in 1974 and was, as a result, able to make his infamous and misleading claim about the rate of inflation being 8·4 per cent. The Bill will enable the Secretary of State to play his part in this election year in rigging the index. The right hon. Gentleman rose rather ingenuously this afternoon and asked how that could possibly be. He knows as well as I know, and as well as everyone in the House knows, that under the Bill, once the safeguards are removed, it is within the power of the Price Commission to delay any increase applied for by a pre-notifying firm by up to four months. What a bonus for a political operator such as the Secretary of State to be able to help in rigging the price index in the months ahead!

In the House on Thursday the Chancellor made a tough speech, on which he was rightly congratulated by my hon. Friend the Member for St. Ives (Mr. Nott) in his excellent speech. On Friday the Chancellor of the Exchequer led a team of Ministers—they were described as senior Ministers—the sell-out squad, round to TUC headquarters to try to cobble together a new social contract. Mr. Len Murray has made it clear that he is prepared to talk about anything but pay. He is prepared to discuss the Government's responsibilities but not his own.

The Chancellor of the Exchequer must realise that most of the many mistakes which he and his Government have made stem from the social contract mark 1—the wage explosion of 1974: the battery of trade union privilege legislation, which is at least a partial cause of many of today's problems; and the Government's reckless and continued overspending, which has doubled the national debt in five years, forced up interest rates and crowded out private investment. The employment protection measures have made the employment of people an unattractive proposition at a time of high unemployment. Even critics of the present Government accept that they delivered their side of the social contract, but many of us feel that the nation has paid a high price as a result.

The question that many people are now rightly asking is what the Government gained in return. Until recently it was fashionable to pretend that the Government had obtained great wage restraint. Until recently scarcely a day passed without a tribute from some Minister or other to the unions for their self-sacrifice and a promise that the good times were coming when the sacrifice would be rewarded. Ten days ago I saw the Chancellor being interviewed on the programme "TV Eye" by three trade union leaders, Mr. Moss Evans, Mr. David Basnett and Mr. John Boyd. His trade union colleagues made the claim that they had made their sacrifice and were now claiming their reward, repeating to the Chancellor the remarks that he and the Prime Minister have made to them many times. The Chancellor's answer was short and to the point. In effect, he said that the trade unions had made no real sacrifice. He told the trade union leaders that they must not believe everything that they heard, especially if it came from him and the Prime Minister.

The measures that I mentioned earlier, and many others introduced by the Government, have pleased the trade union leaders but have been damaging to their members and to the rest of us, the majority who are not trade union members. This measure is another example. It will have no real impact on prices but, because it further damages industrial confidence, it will undermine the job security of some of those at work today and the employment prospects of some of the 1½ million unemployed. It is evidence to those in industry that even in a time of crisis the wishes of the TUC, and not the will of the nation, will come first with the present Government. The very irrelevance of the Bill to the country's real needs is perhaps its most damaging and depressing aspect. That is why we shall vote against it.