Counter-Inflation (Price and Pay Code) Order 1973

Publication Date:January 01, 1973
 
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1973No. 658

COUNTER-INFLATION

The Counter-Inflation (Price and Pay Code) Order 1973

1stApril1973

1stApril1973

2ndApril1973

The Treasury, in exercise of the powers conferred on them by section 2 of the Counter-Inflation Act 1973(a) and of all other powers enabling them in that behalf, and being satisfied, in accordance with paragraph 7 of Schedule 3 to that Act, that there was consultation before the passing of that Act with representatives of consumers, persons experienced in the supply of goods or services, employers and employees and other persons, which in their opinion was sufficient for the purposes of the said section 2, hereby make the following Order:—

1. (1) This Order may be cited as the Counter-Inflation (Price and Pay Code) Order 1973 and shall come into operation on 1st April 1973.

(2) The Interpretation Act 1889(b) shall apply for the interpretation of this Order as it applies for the interpretation of an Act of Parliament.

2. The Price and Pay Code prepared by the Treasury and set out in the Schedule to this Order shall be the code for the purposes of the Counter-Inflation Act 1973.

Tim Fortescue, V. H. Goodhew, Two of the Lords Commissioners of Her Majesty's Treasury.

1st April 1973.

(a) 1973 c.9.

(b) 1889 c. 63.

SCHEDULE

1. The Code has a dual function. First, the Price Commission and Pay Board are required to exercise their powers so as to ensure that it is implemented. Secondly, all those concerned with the determination of prices and pay should have regard to it.

2. The Code is therefore addressed both to the Commission and the Board and to all those concerned with price and pay determination. Part I deals with prices and Part II with pay.

Part I—Prices

General Principles

3. The general principles relating to prices are:—

(i) to limit the extent to which prices may be increased on account of increased costs, and to secure reductions as a result of reduced costs;

(ii) to reinforce the control of prices by a control on profit margins while safeguarding investment;

(iii) to reinforce the effects of competition, and to secure its full benefits in the general level of prices.

Field of Application

4. With the exceptions specified in paragraphs 5 to 10 below, the prices of goods and services supplied to the United Kingdom home market are within the scope of the control.

5. The prices of goods and services exported (whether directly or through an agent or merchant) are not controlled.

6. The following are not controlled:—

(i) prices paid on first sale into the United Kingdom of imported goods and services;

(ii) prices of goods and services where the application of the control would be inconsistent with an international agreement or arrangement. For this purpose, an international agreement or arrangement is one between states or organisations of states, not between firms;

(iii) prices at sales by auction, where such sales are a normal practice in the particular trade;

(iv) prices of goods at the point of sale on a commodity market in the United Kingdom such as the London Metal Exchange or prices directly determined by reference to such markets;

(v) prices of second-hand goods (other than second-hand road vehicles sold by distributors);

(vi) charges, for the carriage of goods or passengers on international journeys; charges for air navigation, landing and related services and ship, passenger and goods dues, provided that they relate wholly or mainly to such traffic; charges for international mail and telecommunication services;

(vii) prices of ethical medicines supplied to the United Kingdom market to the extent that regulation of their prices is within the scope of any agreement relating to those prices made between the Secretary of State for Social Services and representatives of manufacturers of those medicines; but only so long as such an agreement is in force;

(viii) prices in contracts with the Secretary of State for Defence for warlike stores and services which are within the agreement between Her Majesty's Government and industry governing the pricing of, and control of profit from non-competitive contracts. These prices will be subject to the controls provided in that agreement;

(ix) insurance premiums, which will be subject to restriction by the Secretary of State for Trade and Industry;

(x) taxi fares, where subject to control by the Home Secretary;

(xi) prices determined by a statutory body which, as a result of an order made under section 8 of the Counter-Inflation Act 1973, is required to apply the Code to the determination of those prices;

(xii) subscriptions and certain prices charged by non-profit-making organisations as in paragraphs 98 to 100.

Application to Food, Farming and Forestry Products

7. The prices of manufactured food and drink, like those of manufactured products generally, are within the scope of the control as are those of semi-processed foodstuffs such as butter, cheese, sugar and quick-frozen vegetables.

8. The prices paid to United Kingdom producers or producers' organisations or to overseas suppliers for fresh foods and similar products, which are subject to fluctuations on world and United Kingdom markets because of seasonal factors or changes in the relationship between supply and demand, are not controlled. This applies in particular to meat, including bacon and poultry, fish, eggs, fruit and vegetables. However, enterprises which resell these products, whether home-produced or imported, at any subsequent stage will be subject to control.

9. The retail price of milk for liquid consumption and the margins of milk distributors will continue to be subject to the existing controls by the Minister of Agriculture, Fisheries and Food and the Secretary of State for Scotland. So long as these controls apply, the price of milk for liquid consumption will not be subject to the Code. The price of milk for manufacture is not exempt under paragraph 8 and will be subject to the Code.

10. What is said in paragraph 8 in relation to prices paid for fresh foods applies also to prices of other primary products of animal or vegetable origin which are subject to similar fluctuations.

Charges

11. References in the Code to prices include references to charges, unless there is explicit provision to the contrary.

Goods and Services

12. References in the Code to goods include references to services, unless there is explicit provision to the contrary.

Definition of Enterprise for the purposes of the Code

13. For the purposes of the Code an enterprise means either an enterprise as a whole or a separate constituent company or sub-division provided that in the latter case separate accounts for such sub-divisions:—

(i) are or can be made available for all relevant periods;

(ii) are not materially distorted by transactions conducted otherwise than on arms length terms;

(iii) would, if combined with one another and with the accounts of all other activities or transactions of the enterprise, produce results consistent with those shown by the accounts of the enterprise taken as a whole.

14. Where the activities of an enterprise are not confined to manufacturing, distribution, or the provision of services, but include more than one of these, each of these activities may be treated separately for the purpose of the Code provided that adequate accounts satisfying paragraph 13 are or can be made available for each of them. Where these activities are not treated separately, the main activity of the enterprise will determine whether the provisions of the Code relating to manufacturing, distribution or services apply.

15. Any reference in the Code to an enterprise includes a reference to a separate constituent company or sub-division as defined in paragraph 13 or in paragraph 14.

Costs and Prices

16. Prices which are within the control may not be increased unless there is an increase in total costs per unit of output. No increase may exceed the increase in total costs per unit.

17. Where there is an increase in total costs per unit, only certain increases, referred to in the Code as "allowable cost increases", may be taken into account in arriving at the permitted price increase, and they will be subject to a productivity deduction.

Price Reduction

18. Prices should be reduced whenever possible. Where there is a fall in raw material prices or other allowable costs, this should be fully reflected in price reductions. Reductions are however not required to exceed the fall in total costs per unit of output. In addition prices should be reduced as required in paragraph 50 where an enterprise exceeds, or is likely to exceed, its profit margin reference level.

Base Date

19. The starting point for the calculation of permitted price increases is the level of costs per unit of output at 30 September 1972. In calculating permitted price increases, cost increases first incurred after 30 September 1972 may be taken into account, to the extent that they have not already been reflected in prices. However, except as in paragraph 20, the permitted price increase may not include any element of retrospective recovery of costs incurred before the date on which the price increase takes effect.

20. A permitted price increase made after 30 April 1973 may include an element of recovery of costs incurred between 30 April 1973 and the date of the permitted price increase provided that:—

(i) the amount included in respect of such costs does not exceed what would be necessary to recover the costs over a period of 12 months beginning with the date of implementation of the permitted price increase; and

(ii) in the calculation of any subsequent price increase under the Code, the "selling price" referred to in paragraph 21(iii) should exclude any element which represents a recovery of costs under this paragraph.

Calculation of Permitted Price Increase

21. The maximum permitted price increase should be arrived at as follows:—

(i) calculate the change in total costs per unit and allowable cost increases per...

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