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Rpi Increases And The Nationalised Industries

Volume 414: debated on Monday 27 October 1980

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My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what, during the last 12 months, has been the percentage rise in the retail price index in wholesale prices and in nationalised industry prices.

My Lords, in the 12 months to September the retail price index rose by 15·9 per cent. and wholesale prices rose by 14·8 per cent. Nationalised industry prices included in the RPI have risen by 25·1 per cent. over the same period.

My Lords, do not those figures illustrate the fact that the private sector, through better use of manpower and higher productivity, has been substantially more successful in keeping prices down than the public sector?

My Lords, my noble friend draws attention to a point of great importance. Many of the nationalised industries are not subject to the same pressures of the market place as are industries in the private sector, and too often this has meant that their costs have increased and their prices have increased to a far greater extent than has occurred in the private sector.

My Lords, does not this show how very badly indeed the Government have looked after the nationalised industries during the last 12 months?

My Lords, I do not know whether the noble Lord is suggesting that the Government should intervene in the conduct of the nationalised industries. That is not our policy. We believe that the nationalised industries ought to be conducted efficiently and well, and it should be possible—indeed, there is a very heavy duty resting upon them—greatly to moderate the level of their price increases.

My Lords, is it not something of a contradiction in the Government's anti-inflation policy that monopoly industries should be allowed to pass on prices, which accentuate the squeeze on the private sector, where most people would think that they have gone far enough already?

My Lords, there is a great deal in what the noble Lord says. Many of the nationalised industries are in a monopoly position and, as with all monopolies, this enables them to pass on excessive cost increases and excessive price increases. It is the Government's policy to reduce the monopoly of the nationalised industries wherever this can sensibly be done; where the monopoly continues, it has been the Government's policy to refer some of these monopolies to the Monopolies and Mergers Commission for a report.

My Lords, will the noble Lord say that it is because of the Government's policy of non-intervention in nationalised industries that they have lost two highly capable chairmen of nationalised industries in the last few months?

My Lords, the present Question relates to the prices charged by the nationalised industries. I do not know whether the noble Lord is trying to suggest that the high level of these price increases is due to the loss of the two chairmen in question.

My Lords, does my noble friend recall that when the post-war Government nationalised these industries they did so on the grounds that they alleged that they were failing the nation? Do not the figures which my noble friend has just given to the House suggest that, applying that logic, they had better be very speedily de-nationalised?

My Lords, I would not go quite as far as my noble friend suggests, but where they can sensibly be privatised we are following that policy. But there may always be a residual core of industries which remain in the public sector, and we believe that it is in the interests of everybody—not least in the interests of the nationalised industries themselves—that they should be conducted efficiently, that they should restrain their cost increases, and that they should keep their price increases down to more reasonable levels.

My Lords, nevertheless, will the noble Lord accept that, in requiring the British Gas Corporation to bring the level of gas prices up to the price of oil, the Government are interfering in the conduct of a nationalised industry, and would they cease to do so?

My Lords, in regard to gas prices the noble Lord is not entirely on a good point. For the period covered by the Question and the reply, gas prices rose by just over 16 per cent., which is substantially less than the increase in other nationalised industry prices. Therefore, if we excluded gas prices the position would look worse and not better.

My Lords, can the noble Lord say what instructions the Government gave to the Gas Corporation on prices?

My Lords, can my noble friend say by how much the prices of household goods, particularly those of food and clothing, supplied by the private sector have risen?

My Lords, food prices have risen by about 11 per cent. compared with an increase of 15.9 per cent. in the RPI. Clothing and footwear prices have risen by 8 per cent. and household durables have risen by about 9 per cent. The position is that shop prices generally have risen substantially less than the RPI.

My Lords, is the noble Lord aware that some of his replies went very wide of the original Question that was asked? Is he further aware that the main price rises which have already taken place and which are due to come have been due to the results of direct Government intervention?

No, my Lords, that is not true. There are of course some price increases which are due to factors outside the control of the individual nationalised industry. This is particularly true in the case of energy prices. But far too often the excessive rise in nationalised industry prices is due to the fact that their pay settlements have run at a significantly higher level than pay settlements in the private sector.

My Lords, will the Government intensify their references to the Office of Fair Trading to investigate the price of monopolies in general, and also in particular of the nationalised industries?

My Lords, does the Minister agree that the directive that the Government have issued to the water industry to use current cost accounting next year will increase prices to the water user?

My Lords, current cost accounting itself goes somewhat wide of this Question but it represents a sensible advance in accounting methods.