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Price Commission Bill

Volume 385: debated on Monday 11 July 1977

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2.58 p.m.

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, that the House do now resolve itself into Committee.—( Lord Oram.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 1 [ Alteration of constitution etc. of Commission]:

moved Amendment No. 1:

Page 1, line 8, after ("corporate") insert ("up to 31st July 1978, except that Her Majesty may, by Order in Council, which shall not be made unless a draft of the Order has been approved by a resolution of each House of Parliament, continue the Price Commission in being as a body corporate for a period which begins with the date on which the Commission would otherwise cease and which is not longer than one year.").

The noble Earl said: I beg to move Amendment No. 1 standing in my name and the names of my noble friends Lord Trefgarne and Lord Mottistone. When this matter came before your Lordships on Second Reading I tried to show that, while noble Lords on this side of the House realised, and indeed feel, that there is a case for price control in certain circumstances, so far as time is concerned those circumstances should be strictly limited. I then sought to say that the industry, or a good part of it in general, and certainly the Opposition, have been considerably perturbed by the proposal to set up, in effect, a permanent Price Commission. We feel that such a body will add a new—and dare I suggest it?— bureaucratic level of investigation and of Governmental control, or quasi-Governmental control, in areas where we say the Government should not meddle, except in certain circumstances where it is particularly justified in the public interest.

I suppose that in the Government's view there would be two main justifications for the establishment of such a permanent body as is envisaged in this Bill. First, I suppose that these powers are necessary to enable the Government in effect to ask the trade unions for continued and effective wage restraint. In other words, price control, it could be said, remains a vital weapon in the Government's counter-inflation armoury, and this Commission in a permanent form will go some way to help them in their struggle to keep inflation within reasonable bounds or at a reasonable rate. It is generally conceded that the Price Commission, as they have been up till now, have been singularly ineffective in holding down inflation and price increases. I do not say that in any sense of blame. It would be idle for me to do so. The only way the Commission can help is to hold down prices. Many of the factors which affect inflation come from areas which are totally outwith the control both of firms and indeed the Government; here I am thinking of the prices of raw materials coming in from abroad.

In any event, it is safe to say that, generally speaking, profits have declined over the years—and the Government, to do them credit, have admitted this on a number of occasions—until, at any rate many people complain, and some would concede, they are now at a dangerously low level for the future wellbeing of industry in general and indeed of the whole country. Without reinvestment, there can be no escalation of living standards. So the failure of the Price Commission is not their fault. The reason for escalation lies as much as anything in the general handling of the economy by this Government.

Whatever the reasons, the Social Contract at the present moment of time seems to be in ruins. I hope that is not too contentious a remark for your Lordships' House. If there is to be a Phase 3, it is difficult to see one which is more meaningful than a face-saving formula. Therefore, so far as this part of the argument is concerned, we say that this Commission should exist only so long as there can be some form of effective pay restraint on a yearly basis, and this is one of the matters which this Amendment seeks to redress.

As the Bill went through the other place the emphasis changed, and that is not remarkable when one thinks back. We are now told that the investigatory powers are what justifies the Bill and the permanent establishment of the Commission, that there are powers which the Commission will have which are aimed at monopoly situations and similar abuses, that the powers will promote competition, and, above all, they will act to protect the consumer from the over-mighty battalions of industry.

On Second Reading, the noble Lord, Lord Oram, twitted me gently, I think, in effect for not having used the word "consumer" in my speech, although it is on the record that I laid emphasis on the fact that we on these Benches believe wholeheartedly in powers to prevent abuses, where the position is that there is a monopoly or a similar situation, or where there may be a lack of competition, or where for any other reason an unfair position exists as between the producer and the consumer. Although I think the tenor of my remarks was plain, I did not use the word "consumer". On my aeroplane back up to Scotland, I turned to the Second Reading speech of the Secretary of State to see how often he had used the word. In a speech which was more or less double the length of mine, it is fair to say he had used it infinitely more than I had—twice—but on each occasion it was in very general terms when he was taking what I may be forgiven for calling a "swipe" at the Opposition. I say this only to show how the emphasis of the Bill has changed, and we are concerned that in this change there might not be regard for the fair interests of companies.

A number of reasons have been advanced by the Government to justify permanent control of this nature, and if they are trotted out again, as they may be, perhaps I can deal with them later on, but I will not prolong my remarks now. Perhaps I may summarise our objections to this legislation by saying that we believe the Monopolies Commission is the right body to handle matters dealing with competition and abuses of competition, and legislation is needed to make it more flexible and its work more speedy than perhaps it is at the moment. But this is something which, if it were proposed, one would consider on its merits. What we do believe is that a permanent Price Commission in this sphere of competition policy is the wrong body doing the wrong job, and adding a third layer of bureaucratic control, as I have already tried to point out.

This Amendment is a compromise. The spirit of it is the same as has been advanced before; I concede that at once. The detail is different. I would hope that the Government might be in some degree sympathetic to it. From what I read, the Government were to a very large degree sympathetic on previous occasions, but events supervened—and I put it no less politely than that—to make them change their mind. The point of the Amendment will be, in effect, to enable the Government and indeed Parliament to hold an annual review of the whole question of the Price Commission and their continued existence., so that after July 1978 they will be put on a yearly basis and, if matters supervene which would make it undesirable for them to continue, it would not need legislation for them to come to an end. I beg to move.

I accept that this Amendment which the noble Earl has moved reflects what he said on Second Reading, and indeed continues a great deal of discussion in another place on the subject of the permanency or otherwise of the Commission. I accept also the way in which the noble Earl said that the Government's case rests on two legs, so to speak. Obviously I do not accept the comments on the basis of his description of the two legs. But I do accept that we have two purposes in mind in this Bill. The first, as he rightly says, is dealing with inflation in the short-term sense, and this, quite rightly, he explained, has to do with the Government's continuing duty to negotiate pay policy with the trade unions. That is one important element of our case.

The second important element is the need for investigatory powers. The noble Earl suggested that in our presentation the emphasis has changed. I do not think that that is so. Both purposes were in the Bill in its original form and they are both there now. We rest our case on the need for both sets of powers.

I recall that when the Party opposite were in office they were responsible for the Counter-Inflationary Act 1973, which established a permanent Price Commission. However, I at once recognise that the powers there provided were renewable on an annual basis and that that Price Commission were related to pay purposes as well. Therefore, I am not making too much of the fact, but it is a point, that the present Opposition when they were legislating in this area established a Price Commission on a permanent basis.

We believe that the powers, especially the investigatory powers provided by the Bill, are necessary in the long term. The noble Earl, Lord Mansfield, said that the preservation of competition should, in his judgment, rest with the Monopolies Commission. However, I suggest that even outside the area of statutory monopolies, which are governed by the present legislation and the present Monopolies Commission, there is a considerable concentration of industry which makes competition in some sectors more apparent than real. It is in those areas where it is necessary for the Government to have powers of intervention and regulation. There has been a certain amount of discussion in another place, and again during our Second Reading debate, on the question of the machinery necessary for the preservation of competition. There have been various suggestions. I remember that the noble Baroness, Lady Seear, particularly made the point about the ultimate need for some merger between the Price Commission and the Monopolies and Mergers Commission.

As I made clear on Second Reading and as has been made clear on earlier occasions, the Government accept the need for that kind of rationalisation and the possibility of that rationalisation in the long term. However, we consider that it is not possible at this time to have that kind of merger because very considerable and complex alterations in the powers and character of the Monopolies Commission and the Office of Fair Trading would be necessary before they could take over the functions of the Price Commission.

I think that I have answered the main points raised by the noble Earl, Lord Mansfield, although I recognise that this is a matter upon which there is a considerable division of basic philosophy between the two sides of the Committee. However, I think that it is important that the Government's view of this matter should be stated, and, I hope, in the way that I have stated it. For the reasons that I have stated, I hope the Committee will see fit not to accept the Amendment that the noble Earl, Lord Mansfield, has moved.

3.13 p.m.

As we made clear on Second Reading, we, on these Benches, sympathise with the movers of the Amendment to the extent that we do not believe that indefinitely there should be a Price Commission separated from the Monopolies Commission. However, we disagree with the movers, in that we believe that the institution should not be permanent but that the investigatory powers should be permanent. It is disappointing that the Amendment from the Opposition Front Bench still fails to differentiate between the institution and the investigatory powers, and because it does not differentiate between them we cannot support the Amendment. We believe that the investigatory powers must continue because, as the Minister has said, it is not only in cases of monopoly that investigations are needed. There are a great many situations that arise in the economy today where there is sluggish competition for a variety of reasons which could not appropriately be described as monopolistic. It is in the wider range that we need to have continuing powers of investigation if we are to sharpen competition, and the sharpening of competition is part of what is badly needed if the economy is to make any permanent improvement.

We also want to keep the investigatory powers because they can be used inside the public sector, and to this we attach considerable importance. That would not happen if there was not a body with powers of this kind. At present, the public sector is not affected by the Monopolies Commission or by any other piece of machinery and it should certainly be covered by a body of some kind.

With regard to the question of pay negotiations and the type of pay negotiations we are to have, it will be of the highest importance that the rank and file trade unionist, who will have considerable impact on the deals which are ultimately made, should be satisfied that, while he is being asked to exercise control and moderation in pay claims, there is a mechanism which can supervise price rises and that this is a continuing and essential part of the total number of institutions of the country. The need to have moderation in pay claims will not go away in 12 months, 24 months or 36 months. I regret that we cannot support the Amendment.

I should like to ask the noble Baroness, Lady Seear, whether she does not agree that a differentiation can be made between the institution and the investigatory powers. We have tabled no Amendments to take away the investigatory powers. All we are saying is that we think it right that there should be a "review"—my noble friend Lord Mansfield used that very word—on an annual basis to see whether it is necessary to continue the Price Commission in the form set out in the Bill. Surely, if it turned out, as we hope, that there should be an earlier move year by year—it may not happen in one year, but that is a good interval to aim for—towards what the noble Baroness, Lady Seear, the noble Lord, Lord Oram, and the Minister of State in another place have said concerning controlling monopolies, and if we saw ourselves with a way to go towards controlling monopolies in the shorter term, so much the better. We would do this under circumstances in which it was not necessary to have too rigid a control, which, in its turn, would mean that the country was prospering rather sooner than the Bill seems to anticipate.

Therefore, I suggest to both the noble Baroness and the Government that this is not a wicked Amendment. It is an Amendment that merely seeks to give Parliament the opportunity to look on an annual basis—and that is a reasonable time-scale, because we look at many matters on an annual basis—at how we can improve matters if we want to do so. I am sure that we on these Benches would entirely agree with the noble Baroness, Lady Seear, that the important point is to control the monopolistic situation. We would go also with the Government, in saying that there are activities which are nearly monopolistic without immediately appearing to be so. We do not wish to have, in the longer term, elaborate machinery for enabling Governments to look at those businesses for which there is a strong competitive situation, which do not need this and for which such machinery is not necessary. Therefore, let us have an arrangement to look at the situation once a year. There is no more to it than that. Surely this is reasonable both in terms of what the noble Lords on the Liberal Benches think and in terms of what the noble Lords on the Government Benches think. That, I think, is an entirely reasonable situation.

When there is a monopoly situation the Monopolies Commission can investigate it. Obviously, one of the matters on which it has to report is whether the present state of affairs is in the public interest. If the prices are excessively high due to a monopoly, it will obviously report accordingly. Noble Lords will remember that the original monopolies and restrictive practices legislation was divided into two. We have restrictive practices legislation which indirectly serves to restrict exploitation by way of price. It is said that there are other unspecified ways in which prices can be unduly raised.

Competition is present to see that that does not happen. It is worth noting that competition is greater nowadays than it used to be because of our entry into the EEC. The EEC itself is concerned to ensure that there is the greatest freedom of trade and competition within the Community. That being so, it is a little difficult to understand how it can be argued that there is a permanent need for a Price Commission of the kind that is at present proposed. We already have the framework for the control of prices. There were special circumstances in 1973 and for that reason the Price Commission was created. The noble Lord, Lord Oram, said that the Price Commission was not specifically meant to be temporary, but those who were concerned with its creation certainly intended that it would not be permanent—if permanent means anything at all. We are sometimes told that the provisional is the permanent; that there is nothing more permanent than the provisional.

The noble Lord seeks to create a permanent institution here. We really do not have sufficient experience in changing circumstances of the need to create a permanent institution of this kind. The circumstances are changing rapidly. We are obviously approaching a period of adjustment of wage negotiations and their relationship with the State. Surely we should have a statutory opportunity to review each year how the Price Commission are getting along. This Amendment would do that. I find the greatest difficulty in understanding why the Government resist this Amendment. I ask them to consider the matter further. There is no harm whatever in providing for an annual review; it would be entirely salutary and I believe that they should do so.

I entirely agree with my noble friend Lord Drumalbyn that this Amendment is a fair compromise. On the one hand, it gives the Government what they want and, on the other, it makes the Price Commission subject to review so that any doubts there may be can be resolved in a year's time when the review takes place and when any improvements can be made.

I have heard it suggested that the fact that the Price Commission would be subject to review in a year's time would create lack of confidence in producers, which would be damaging to their efficiency. I suggest that the reverse would be the case. The very fact that they knew that the Price Commission would be reviewed by Parliament every 12 months, thus bringing it up to date with changing circumstances—for example, changing the amount of grants—would in itself give confidence rather than remove confidence.

Whatever institution is established, I imagine that all of us—I certainly do—want it to be as efficient as possible. That being so, we want the most excellent people to be members of the Commission and to manage it. To me a permanent organisation suggests permanent careers. Presumably we must have people seconded from industry to run this organisation because they alone are the people who understand, from first-hand experience, the operation of prices, quotations and so on. If people are to be permanently seconded from industry, what will happen? They will not be the very best people; they will be the second-rank people who may not be able to make a good go of things in industry. However, if we have an annual review, which suggests that people can be seconded from industry to the organisation for short periods, I believe that we may get the tip-top people for a period—people who really know and want this additional experience in a different walk of life. Therefore, from the point of view of confidence and getting the best people as members of the Commission, I suggest that there is value in having the Commission subject to a review every 12 months.

I should like to raise one other matter. I believe that the noble Lord, Lord Oram, quite rightly said that he was anxious to make competition as effective as possible and that the method of doing so was by price control. However, price control in itself does not necessarily make a company more efficient and more competitive. What makes a company more efficient and competitive is a change in organisation, a change in methods or a change in equipment. Merely by affecting prices the Price Commission will have no opportunity or ability whatever to improve organisation. That must still rest with the management. Therefore, merely to control prices may have the opposite effect; it may reduce the amount of profit available for investment and therefore reduce the very thing that is wanted to increase the competitive nature of the business. I believe that this Amendment is a very sensible and fair one as between the points of view of the Government and of the Opposition. I very much hope that, even now, the noble Lord, Lord Oram, will have second thoughts.

From listening to the remarks made by the noble Lord, Lord Oram, a few moments ago I wondered whether he did not think that our Amendment is a wrecking Amendment or some such Amendment, because he was arguing in favour of the general proposals and provisions of the Bill, which in this Amendment at least we do not seek fundamentally to question. The Amendment seeks only that the powers of the Price Commission should be reviewed annually by Parliament. It may be asked: Why at this particular moment in time do we seek to move an Amendment such as this? Because we believe that some of the defects in the Bill, not to say the injustices, should be subject to regular Parliamentary scrutiny.

As we all know, the Government's wages policy is in not a particularly happy state just now. I know of no policy that will be in force after the date when this Bill is expected to come into force. Phase 3 has yet to be agreed. I hope it will be, but the Government certainly have an uphill struggle ahead of them in the next week or so. Furthermore, the control of prices inevitably contains a certain element of injustice. For example, there are massive cost increases which, unhappily, sometimes affect producers and which, in our view at least, are not adequately provided for in this Bill. I agree that the Commission, when they freeze prices, can award interim increases and that the worst effects of the Commission's powers may, some might say, be mitigated by the effects of the Bill, but that is a matter that we shall come to later. With legislation like this in which inherent injustices may be inevitable, surely these powers ought to be reviewed annually. For that reason, I and my noble friends hope that the noble Lord will be able to look at this matter again and to consider it with a little more care than we have been led to believe has been the case so far.

3.31 p.m.

A number of your Lordships have appealed to me to think again about this point on behalf of the Government, but I am afraid that we feel that it is a fundamental part of our approach to this whole question. Although I have listened with interest to the points that have been made, I am afraid that I still cannot recommend the Committee to accept this Amendment. The noble Lords, Lord Mottistone and Lord Trefgarne, almost sought to put words into my mouth. I did not say that it was a wicked Amendment; I did not say that it was a wrecking Amendment. I would say that it is a genuine matter of judgment as to what is the best approach. We have to assess whether we should have legislation for permanency—although I shall have a word to say in a moment about what one has in mind in using the word "permanency" —or, as a number of noble Lords have emphasised, should adopt the approach of this Amendment, which provides for renewal once a year if an order is made.

I would suggest that those who have said that this Amendment would enable a review to be made of the Price Commission's working are a little wide of the mark. This Amendment and the procedure recommended by noble Lords opposite would not allow for any changes to be made: it would be a case of making an order annually to renew the Bill, not to change it in any way. Therefore, "review" is scarcely an appropriate way of describing what would be brought about by this Amendment.

Would the noble Lord allow me to intervene? As I see it, if I may be so bold as to put it to the Government in this way, if this Amendment were in the Bill, it would mean that, in the ordinary course of administration during, say, the six months before the key date of July 1978 came up, the Government would start to look at it and decide whether they wanted to have new legislation, to renew the Bill in its present form, or whatever. Without this provision, there is no incentive for the Government to take what one might almost call natural reviewing action on a regular basis.

In the event of the Government deciding that this Bill was a bit too rough and feeling that the moment had come to make special new legislation to accommodate, for example, the Monopolies Commission situation, they would get on and do it. The important thing is that it puts a marker up for the Government. With the greatest possible respect to this Government, the Government will not always be of the Party of noble Lords opposite: sometimes we in this Chamber shift over and, when that happens, it happens to us too. However, there is a great deal to be said for looking purely at the administrators and not at the politics, or anything like that. It is a good thing to have markers up for administrators so that they get down to things and start thinking about them ahead of time. That is all that this Amendment does. Of course there will not be a case of this Bill being thrown out out of hand just because there happens to be an adverse vote on an order. That is not the way things happen. I suggest that we need to see this as a marker, and that that is all that it is.

I cannot accept that description of the effect of this Amendment. It would require an order to be made annually in order to renew the Price Commission, and that renewal would be in the form of the present Bill. Failure to make an order would have the effect of removing the powers, or letting them lapse entirely, so it is a much blunter instrument than that described by the noble Lord, Lord Mottistone.

Other points that were made, particularly by the noble Viscount, Lord Rochdale, concerned the question of confidence in industry. Here again it is a matter of judgment. I can see his point of view but I take the opposite view. I believe that, if this were up for decision year by year, that would be too short a time in which to establish any sort of confidence in those whom we ask to serve as members of, or as staff for, the Commission. It would not be the way to engender confidence in industry if, almost before the year had begun, it was looking towards the end of the year for a possible complete change in the procedures.

I believe that the Amendment would lead to uncertainty, a lack of confidence, and less ability to recruit, even on a secondment basis, the right kind of people with the right kind of independence of mind, competence and experience. Therefore, although I have listened with interest to what has been said, there is nothing that can begin to make me change my mind about the advice that I have given to the Committee.

I beg to move that the House do now resume in order to hear the Statement on Grunwick that is presently being made in another place.

Moved accordingly and, on Question, Motion agreed to.

House resumed.