COTTON SPINNING COMPANIES. (Hansard, 19 June 1912)

§ Mr. HARWOOD

I beg to move, "That leave be given to introduce a Bill to better regulate the formation of Companies for Cotton Spinning."

1679 May I offer a few words of explanation in asking leave to introduce this Bill? As the House will probably know, in the cotton industry no sooner has a lean period passed than a fat period follows. Then down comes the company promoter and starts these companies, which everyone must acknowledge to be on a most unsound basis. No large proportion of shares is allotted. He gets together the architect, the builder, the engineer, the machine maker and the rest of them, and they do not take up any material number of shares. The promoter gets a certain quantity of them, and then he floats a company. Many of these companies have a preposterously small share capital. In one the capital is £7,500, and they depend on loans to the amount of £150,000. All those companies, I find, have borrowed capital which is three and a half times the amount of the nominal shares. There is not 10 per cent. of the people who take shares who are real, genuine investors. No sooner is the mill started than they unload the few shares they have. They do all this depending on the thrift of the working classes, who in Manchester are accustomed to put their savings into these companies. They do that in perfect good faith, and I say that this House is bound to see that they have proper security, and such as they may reasonably expect. Those companies are floated one after another, and they soon become derelicts and endanger the whole trade navigation of the district. The whole normal increase in the cotton trade is reckoned to be about 2í per cent. per annum, while by this system it has gone up sometimes to 20 per cent. The consequence is that that is beyond the requirements of the trade, dislocates it, and brings misfortune upon poor people.

What is the remedy suggested? We suggest that the share capital shall be equal to the amount required of fixed capital, and that 50 per cent. of the share capital shall be paid up within two years. At present many pay 10 per cent. and never pay any more. This Bill lays down that there shall be 10 per cent. on application, 15 per cent. on allotment, and 25 per cent. within two years. We propose that none of those shares are to be disposed of within a period of two years except under certain conditions stated in the Bill. In industrial companies on the Stock Exchange, with over £200,000,000 of capital I find that they have rather more than 50 per cent. It may be said in objection to this Bill that it is in restraint of trade, 1680 and that in Lancashire we are asking something to be done which looks like restraint of trade. That is not so at all. What we wish is that trade shall be developed in the natural way, and that there shall be the utmost encouragement instead of discouragement. It will be far better for our trade that we should obtain safeguards to prevent this extravagant and dangerous introduction of companies. I am asked to bring in this Bill by two classes concerned, the employers and the workmen. Eighty-three per cent. of the employers have joined in the request that I should bring this Bill forward. I am not so much concerned about them, as capital can generally take care of itself. The workpeople unanimously asked pie to bring forward this Bill. You may say that that seems rather odd because this extension would seem to be in favour of the working classes by maintaining a larger demand for labour. Experience has shown the contrary. I have not time to dwell on all the reasons, but first of all this leads to an enormous amount of short time. The working classes are convinced that the present arrangement is bad for the trade of the country, bad for this particular trade, and what is bad for the trade is always bad for wages. The third reason is that these companies are promoted at extravagant cost. I find that they are 25 per cent. above the ordinary cost, and that has to be paid by some one. The trade is burdened with the capital cost of that kind which has to be got back some way or other. The working classes find that that has a great influence in cutting down wages. Members of this House can hardly realise how much the working classes in Lancashire put their money into this business. They do it in perfect trust. They have no knowledge of finance, and could not understand it if it were put before them. They think they will be properly treated and they find they are wrong, and that they have no security for their money. I am sure it is the desire of the House to encourage the thrift of these people, and therefore I ask permission to introduce the Bill.