THE IRON AND STEEL BOARD AND STEEL PRICING, 1953–19671
| Author | M. Howe |
| DOI | http://doi.org/10.1111/j.1467-9485.1969.tb00030.x |
| Published date | 01 June 1969 |
| Date | 01 June 1969 |
THE IRON
AND
STEEL BOARD AND STEEL
PRICING,
1953-1967l
M.
Horn
WITH
the nationalisation of the major British iron and steel companies
by the Iron and Steel Act of
1967,
ended fourteen years of supervision
of the industry by the Iron and Steel Board. This Board was
an
inde-
pendent agency established under the Iron and Steel Act of
1953,
which terminated the short, earlier period of nationalisation, with the
general duty
'
to exercise a general supervision over the iron and steel
industry
. .
.
with a view to promoting the efficient, economic and
adequate supply under competitive conditions of iron and steel pro-
ducts
'.z
The Act empowered the Board to
~IX
maximum home prices
of iron and steel products other than castings and forgingsS and the
Board chose to exercise this authority from its inception until its
disbandment in July,
1967.
It
is with pricing methods in the steel
industry during the period of the Board's supervision that this paper
is
concerned.
Not
only
is
this a topic for investigation interesting in its
own right in view of the importance of the industry and since the role
of
the Board in supervising a privately-owned industry
was
quite
unique in British experience, but, also, pricing lessons useful to the
incoming British Steel Corporation may be drawn4 The
1967
Act has
virtually nothing to say about pricing, the main references being to
the publication of the prices to be charged by the public sector of the
industry and to the avoidance of unfair price discrimination. Shortly
before vesting day, the Corporation published its first notice of prices.'
For the
most
part this required the public sector companies normally
to charge the maximum prices of the Iron and Steel Board then
in
force (though not in every case actually being charged). It also, how-
ever, announced
its
intention
to
undertake a complete review of pricing
policy in the future.
Dr.
L.
C. Hunter and Mr. A. Silberston kindly commented upon an
earlier
draft
of
this paper.
Iron and Steel Act, 1953,
S.
3
(1).
SThese products were probably excluded because the output
of
these sec-
tions
of
the industry
is
both more heterogeneous and less concentrated than
that
of
other sections.
lThe name
of
the National Steel Corporation established by the Iron and
Steel
Act
of
1967 was subsequently changed to the British Steel Corporation
by
statutory
order.
National Steel Corporation,
Notice
of
Prices
No.
I,
July 14, 1967.
43
44
M.
HOWE
Origins
of
the Zron and Steel Board's Pricing Methods
The
Iron
and Steel Board took over the task of pricing in 1953
from the Ministry of Supply. Prices had been fixed by the Ministry
since the outbreak of war in 1939 with advice
on
general price policy
from the first
Iron
and Steel Board between 1946 and 1948 and from
the Iron and Steel Corporation of Great Britain during the brief
months of effective nationalisation
in
1951." The Ministry had
employed a cost-based pricing system, the foundations
of
which had
been laid before
the
outbreak
of
war by the Import Duties Advisory
Committee, the first
of
the bodies with responsibilities
for
supervising
the industry, and the British Iron and Steel Federation, the central
trade organisation
of
the iron
and
steel industry. The ad hoc cost
investigations instituted by the Committee and Federation
as
a
check
on
the reasonableness of proposed price increases had developed by
1939 into
a
formal system based
on
quarterly cost returns submitted
on
a largely uniform basis to the Federation by the major producers.
Costs were averaged, after excluding a band of the higher cost
producers,
and
a standard margin to cover depreciation and profit,
related to the capital
costs
of the two most modem British works
(Cardiff and Corby), a~plied.~ The results of these calculations were
compared
with
existing prices by the IDAC in deciding whether price
changes were required. Except that
no
high cost producers were
excluded in calculating the average cost, this was the system operated
by the Ministry of Supply when price control passed to the Govern-
ment during the war.8
After the war, the Government asked the first
Iron
and Steel Board
'
to examine afresh the principles according to which prices and costs
had been related to each other, to decide whether they were still valid
and
if
so
in what ways their. application needed revision
'.
The Board
concluded, after a two year study, that the existing principles were
still valid and needed revision only
in
minor
respect^.^
Four years
later, in 1953, the second
Iron
and Steel Board therefore inherited a
price-fixing system which to
all
intents and purposes had been estab-
lished before the war, and it immediately set in motion
its
own
study
of the contemporary relevance
of
that system.
In
its first report the
For a detailed discussion
of
the activities of these bodies, see
D.
Bum,
The
Steel
.Zndustry,
1939-1959
(C.U.P., Cambridge),
1961,
Ch.
5
and Ch.
6.
Again,
see
Bum,
op.
cit.,
pp.
52-73
for
more detail.
From the end
of
1940
until the end
of
1945
there was
no
increase
in
the
prices of the main products.
This
was deliberate Government policy and pro-
ducers were compensated for increases
in
costs, subject to a
limit
on
the
size
of
profits, out
of
a specially instituted
Prices
Fund.
See
Burn,
op. cit., pp.
30-50.
@Bum, op. cit.,
p.
201.
The
Board specified
the
way in which standard
margins
should be calculated (but not the size
of
the margins) but
m
other
respects was not forthcoming
on
the detail of
the
system it was proposing.
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