asked the Secretary of State for Prices and Consumer Protection what assessment she has made of the impact of the Price Code on the level of the retail price index in the light of the recent trends in raw material and other costs.
The Price Code continues to exert a useful influence on the RPI. Precise quantification is not possible.
Even so, is there not now ample evidence to the Price Commission and the right hon. Lady's Department to suggest that margins in both industry and commerce are narrow and competitive? In those circumstances, does she not agree that to call for a freeze on prices, or, for that matter, on wages, is misconceived and nonsensical?
There has been a substantial fall in profit margins in the past 12 months, and profits are not now contributing to the rise in prices, but I do not think that the abolition of the Price Code, which the present Government inherited from their predecessors, would be a very helpful prelude to a major national attack on inflation.
In view of the British Steel Corporation's reduction in the price of certain steels, how soon can my right hon. Friend give an estimate of the effect that that will have on the price of refrigerators and other household items?
I would need a little time to consider that question from my right hon. Friend because it takes about four to five months for the prices of raw materials and of processing materials to work their way through to the retail level. As I have said, the Price Commission is already under instructions to follow through all falls in raw material and industrial material prices to the point of the retail trade.
asked the Secretary of State for Prices and Consumer Protection whether she will review the Price Code in the light of the latest CBI industrial trends survey.
I have just amended the code to help exporting firms and reinforce the investment relief. I have no plans for further changes at present.
Does the right hon. Lady accept that the recent survey showing a reduction of investment intentions highlights the fact that investment relief, as it is called, is a restriction, and that 45 per cent. of investment is supported by retained profits and that for income tax purposes 100 per cent. is written off? Surely investment relief should not be substantially increased if it is an impediment rather than an assistance to investment.
If it is an impediment, it is surprising that industry welcomed its introduction and also pressed for its increase from 17½ per cent. to 20 per cent. It is a basic part of the Government's philosophy that where policies can be undertaken to increase investment which itself will create new jobs, it is very much in the national interest for that to be done. It is still a surprise to me that the previous administration had no investment relief of any kind in its price code.
Is it not a statistical fact that price increases have been at their steepest since we appointed a Secretary of State for Prices and Consumer Protection? Is it not possible that that is not wholly coincidental and that the more profit margins are restricted the more capital investment is restricted, and the more capital investment is restricted, the more expensive things become?
The hon. Gentleman's argument would be stronger if he would recognise that in the last two years there have been massive increases in both oil prices and world commodity prices, which, it is generally accepted, have been the main forces behind inflation until the last few months. In the last few months, in consequence of thresholds and other claims, there has been a take-over by the cost of income from the cost of commodities. But there is no doubt that the cost of commodities was the original engine behind the rate of inflation that we now have.
In view of that answer, will my right hon. Friend guarantee that she will resist any further relaxation in the Price Code in foreseeable economic changes that may be coming in the near future?
No, I could not give that guarantee, because in certain circumstances a relaxation of the Price Code, like the recent investment relief relaxation, is directly related to the employment position. Representations have been made to me by trade unions, for instance, with a view to making such a relaxation. There must always be a balance between trying to keep prices down and keeping employment up.
Is the right hon. Lady aware that one of the most depressing and significant aspects of Question Time today has been her unwillingness to rebut suggestions that we might have a statutory prices freeze? Will she take this opportunity here and now to hold out relief and hope to the industrial and commercial community by saying that she would not countenance a prices freeze because of the bankruptcy that it would inevitably involve for British industry and commerce?
The hon. Member will appreciate that, as my hon. Friend the Minister said earlier, it is the first responsibility of the Government to leave all possibilities open in dealing with the rate of inflation.