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Bakers (Profit Margins)

Volume 888: debated on Monday 17 March 1975

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14.

asked the Secretary of State for Prices and Consumer Protection if she will review the operation of margin control for bakers.

The only controls over bakers' margins are those contained in the general provisions of the Price Code. This has recently been reviewed, and a number of amendments were made which should be of special benefit to the baking industry.

Is the hon. Gentleman aware that the relaxations to which he refers do not include recovering past increases in costs? Is he further aware that the operation of the back marker system is such that many bakeries throughout the country are being driven out of business? Finally, is he aware that the Secretary of State gave a firm assurance exactly a year ago that the whole system would be reviewed? When may we expect the review to be announced?

The whole system is being reviewed at present.

With regard to the back marker principle, it is a recognised feature of the bread market that none of the major firms can move its prices very much out of line with another, particularly on the large standard loaf. Since the subsidy has been injected to offset price increases which would otherwise have taken place, it has naturally reflected this pattern of pricing. Just as in the market, therefore, the firm with the lowest justifiable price increase in Price Code terms sets the pace.

Does the hon. Gentleman agree that the baking industry's problem is not the definition which he has quoted but the fact that it made substantial losses in 1974 and forecasts for the current year very inadequate profits? What does the hon. Gentleman propose to do to help the baking industry in these difficult times?

The hon. Gentleman should be aware that the losses to which he has referred were incurred under the Conservative Government's stage 3 policy and that since then we have made three important modifications of the code which I believe will help—indeed, they are helping—the industry to attain profitability. We have improved safeguards for profit margins. We have given a choice of base dates where margins were eroded during stage 1 of the Conservative Government's counter-inflation programme and have reduced the normal productivity deduction from 50 per cent. to 20 per cent.