GLASGOW CORPORATION (PETROL CONTRACT). (Hansard, 20 March 1935)

§ Sir ADRIAN BAILLIE
I apologise for detaining the House for a little while longer; I should not have ventured to do so did I not believe that the matter to which I desire to draw attention is one of very great importance. On the 7th March I asked the Secretary of State for Scotland whether his attention had been drawn to the contract for the supply of 3,000,000 gallons of petrol which was placed with Russian Oil Products, Limited, by the Glasgow Corporation on the 1st instant; and, in view of the unsatisfactory nature of the Secretary of State's reply, I gave notice that I would bring the matter up on the Adjournment at the first possible opportunity. I welcome the opportunity which has been afforded me to-night. If it is too late to invalidate this contract, if it is impossible for the Secretary of State to intervene, then I believe that, if attention is drawn to the facts of the case as they have been reported to me, public indignation will be such that not even a Socialist council would have the hardihood in the future to enter upon negotiations involving the expenditure of public money, negotiations which, in my submission, have been profoundly unethical from the very beginning, which have resulted in bad business for the ratepayers of Glasgow, and, finally, have certainly precluded the Glasgow Corporation from affording work to 4,000 shale miners whose interests I represent in this House, and from affording work to hundreds—nay, thousands—of others in ancillary industries in their area. I desire to ventilate this matter in the House of Commons, because I feel that if, as I say again, the facts are as I know them, this is not merely a matter of local concern, but a matter of national importance.
What are the facts? I will try briefly to state them as far as I know them. The Glasgow Corporation issued contract inquiries for their total requirements of fuel during the year—3,000,000 gallons. 1346 They specified in particular Benzol Mixture, Premier, Commercial, and Naphtha, but the overwhelming proportion of the requirements was for Commercial and Naphtha. Nine companies in all submitted sealed tenders, eight of which belonged to what is known as the National Combine, and one out of the nine was Russian Oil Products, Limited—R.O.P. When these tenders were opened they were three in. number, and I will refer to them as (a), (b), and (c). (a) and (b) were alternative tenders from the National Combine, and (c) was the tender from Russian Oil Products, Limited. The first tender, a sealed tender, was an offer from the National Combine to provide 1,250,000 gallons of naphtha and 1,750,000 gallons of spirit at an average price of 11/1.12d. per gallon. Tender (b) from the National Combine was for 3,000,000 gallons of spirit at 11/7.16ths of a penny or an average price of 11.44 d. The offer from Russian Oil Products was for only 1,000,000 gallons of spirit at 11½d.
Obviously, had the sanctity of sealed tenders been observed, the Glasgow Corporation should have taken one of the alternative offers of the National Combine, because both were considerably lower than the offer of Russian Oil Products. The first point, therefore, that I would like to make to the Secretary of State for Scotland is that the sanctity of sealed tenders was not observed on this occasion. It is submitted that the second tender from the National Combine was for 3,000,000 gallons of spirit at 11/7.16ths of a penny, which was cheaper than the original tender of 11½d. from Russian Oil Products. That tender was either wilfully or inadvertently suppressed by the negotiators for the Glasgow Corporation. At least the Glasgow Corporation had not the knowledge of that tender (b) at their disposal when they took their decision to give the whole order to Russian Oil Products.
When the Corporation found that Russian Oil Products had only tendered for 1,000,000 gallons, they went back to Russian Oil Products and said, "Give us a tender for 250,000 gallons," and at the time it was not quite understood why they should have returned at all to Russian Oil Products with this inquiry, but subsequently the reason came to light. I have a cutting from the Glasgow "Forward," containing an article by 1347 Councillor William Reid entitled "A reply to the Combine Dictators." It says: It was essential that the Corporation should not be left entirely at the mercy of a combine who could rig the market at any time they thought fit, and to preserve an open market Russian Oil Products was included. So now we know that, while Councillor Reid and his colleagues, with their professed aversion to the capitalist system and private enterprise, did not wish the Corporation to be entirely under the thumb of the National Combine, at the end of the day he had no particular qualms about putting himself and the entire Glasgow Corporation entirely under the thumb of Russian Oil Products, who are only able to compete with private enterprise because their sources of supply were confiscated from the British companies which had invested in the neighbourhood of £70,000,000 in the exploitation of those sources. What was the next step? The negotiators for the Corporation went to the National Combine and said: "Quote us another price. Make us another tender. We want you to supply only 92½ per cent. or eleven-twelfths of our requirements." The Combine came back with a tender, which was naturally slightly higher in price on account of the smaller gallonage required. If this is what Councillor Reid calls rigging the market, all I can say is that Councillor Reid entirely ignores usual commercial practice, that as quantity goes down price goes up.
I have read a few specious arguments—and I am not entirely sure that the Secretary of State has not been swayed by them—to the effect that after all the National Combine should have been satisfied with eleven-twelfths, that they should not have been greedy. The National Combine were satisfied with eleven-twelfths, but at a slightly higher price. It was the negotiators of the Glasgow Corporation who were not satisfied. It is unreasonable that the National Combine should have to sit down under the dictation of the Glasgow Corporation as to what price they should charge for eleven-twelfths of the supply. Again, it has been suggested by Councillor Reid that the National Combine were out for a monopoly. In the same article he says that the eleventh hour 1348 attempt at a satisfactory settlement failed because of the anxiety of the Combine to have a complete monopoly for the supply of motor spirit. That is not the case, because I am informed that in a letter which was addressed 60 the negotiators on 14th February it was definitely stated by the Combine: "We will try substantially to meet the point which you raise and instead of 92½ per cent. will offer you 95 per cent. of your requirements at our original price." What could be fairer than that? That, incidentally, would have effected a considerable saving to the ratepayers of Glasgow. Once more—and then I will leave Councillor Reid alone—he goes on to say: It will be observed that at our interview with the Combine we made it quite clear that, although there might be a deadlock regarding the price, we were prepared to pay for petrol; we were prepared to take our whole supply of Scottish naphtha spirit from Scottish Oils and Shell-Mex, Limited. We were politely informed—no petrol, no naphtha. These are the correct facts. Readers of the "Forward" will now be able to draw their own conclusions. The facts are that in the same letter of 14th February, which was, incidentally, suppressed or at least never reported to the Corporation, the National Combine made an offer for the supply of 1,250,000 gallons of naphtha without any relation to spirit. I do hope, without much confidence, that the Editor of the "Forward" will give some space also to the facts of the case as I have put them. These facts may be open to correction, but if they are correct, as I believe them to be, I submit that no amount of explanation, no ingenuity of argument, can possibly justify the negotiators of the Glasgow Corporation in this pandering to their political bias. The negotiations have been unethical at every turn. In the result they have let their countrymen down. They have let down the ratepayers of Glasgow and the 4,000 shale miners whose interests I am here to represent in this House. Those are the people who profess to have an exclusive right of interest in the workers of this country.

Marquess of CLYDESDALE
It is very unpleasant to have to censure a local authority and particularly so when one has to censure a local authority which happens to be the Glasgow Corporation, 1349 but I rise to support my hon. Friend the Member for Linlithgow (Sir A. Baillie) in what he has said. The Glasgow Corporation called for sealed tenders and I submit that they have violated the sanctity of them. If the tenders had not been sealed one would have expected the local authority, who presumably had the welfare of the unemployed at heart, had the price been the same, to choose the national companies, who employ a large number of workers in Scotland. Actually the price was not the same, the national companies' price was cheaper, and yet the first thing they did was to carry out negotiations, and I believe that they approached first the Russian firm. My hon. Friend has gone into these negotiations and I will merely say that the methods by which these negotiations have been carried out are highly unsatisfactory. There is one point upon which I disagree with my hon. Friend, and that is in regard to the reply of the Secretary of State for Scotland on the 7th. I do not think it was altogether unsatisfactory, for he said that he was making further inquiries into the question. In view of the grave concern which has been caused in Scotland as regards the way in which these negotiations have been carried out, will the Secretary of State institute an inquiry into this case?

§ The SECRETARY of STATE for SCOTLAND (Sir Godfrey Collins)
The hon. Member for Linlithgow (Sir A. Baillie) asked me if it is possible to intervene in this matter. It is quite impossible for the Secretary of State to intervene, but I think it is only right that I should state the facts to the House. Although they are in great detail, I hope that the House will bear with me. The corporation were in the market for 3,000,000 gallons of motor spirit for their municipal transport service. Tenders were received from the following firms: Scottish Oils and Shell-Mex, Limited, Gow and McCulloch, Anglo-American Oil Company, Limited, Redline-Glico, Limited, Clarkson and Co. (Glasgow), Limited, Russian Oil Products, Limited. The first five firms, who are all in the same combine, quoted for 1,250,000 gallons Scottish naphtha at 10 11/16d. per gallon and 1,750,000 gallons motor spirit at 11 7/16d. per gallon. It is estimated that probably two-thirds of the whole suppply would have been 1350 Scottish. Russian Oil Products, Limited, quoted for 1,000,000 gallons motor spirit at 11½d. The tenders were received by the Town Clerk and in accordance with the usual practice were opened and initialled by the convener of the Municipal Transport Committee and thereafter sent to the manager for examination and report to the committee. On 16th January the offers received were submitted to a meeting of the Transport Committee with a recommendation by the manager that the whole contracts be placed with the national companies. The Transport Committee, however, decided by a majority of six to five to recommend that the combine offer be accepted, less 290,000 gallons of motor spirit which was to be placed at a price of 11 7/16d. with the Russian Oil Products. On 24th January the Transport Committee's proposals were approved on a division at a meeting of the corporation. An amendment that the whole contracts be placed with the national companies was defeated by 42 votes to 28. No objection was made to the Transport Committee's proposal to give the whole supply of naphtha spirit to Scottish Oils and Shell-Mex, Limited. If effect had been given to the corporation's desire the contracts would have been placed as follows: Scottish Oils and Combine Firms, 1,250,000 gallons Scottish naphtha at 10 11/16d. and 1,460,000 gallons motor spirit at 11 7/16d.; and Russian Oil Products, Limited, 290,000 gallons motor spirit at 11 7/16d.
Following on this decision by the Corporation to place a share of the contract with Russian Oil Products Limited the National Companies intimated, as the hon. Member stated, that their original offers were based on obtaining the contracts for the whole supply, and by letter dated 4th February submitted amended offers, namely, 1,250,000 gallons naphtha spirit at 10¾d. per gallon and 1,500,000 gallons motor spirit at 11½d. per gallon. The Russian Oil Products Limited, by telephone, on 6th February, quoted for the whole supplies as follows: 1,000,000 gallons motor spirit at 11 7/16d. per gallon and 2,000,000 gallons motor spirit at 11½d. per gallon.
This position was considered by the Transport Committee at a meeting on 6th February, and it was agreed by the committee on a division to remit the whole question to the Convener, the Sub- 1351 convener and the Manager for consideration and report. On 8th February, the Russian Oil Products Limited wrote to the General Manager offering to supply the whole or any part of the Corporation's requirements at 11 7/16d. per gallon.
On 14th February an offer by the National Companies to supply approximately 1,250,000 gallons naphtha spirit at 10 11/16d. and approximately 1,600,000 gallons motor spirit at 11 7/16d., leaving approximately 150,000 gallons to be placed out-with the National Companies, was received by the General Manager and communicated by him to the Convener and Sub-convener of the committee. This offer was not submitted to the Corporation at its meeting on 21st February, but reference was made to it in a question addressed to the Convener at that meeting. The recommendation by the committee that the whole matter be remitted to the Convener and Sub-convener along with the Manager came before the Corporation at a meeting on the 21st February. The Corporation by 54 votes to 32 decided to re-affirm the decision reached at their previous meeting that the contracts for 1,750,000 gallons motor spirit be divided—that is eleven-twelfths to the National Combine and one-twelfth to Russian Oil Products—between the five National Companies and the Russian Oil Products Limited at the original price of 11 7/16d. per gallon, and that the contract for 1,250,000 gallons naphtha spirit be placed with Scottish Oils and Shell-Mex Limited at the price of 10 11/16d. previously quoted by them. They also resolved that in the event of the Scottish Oils and Shell-Mex Limited and the other Combine firms refusing to abide by the original prices quoted by them and to accept the contracts accordingly, to place the contract for the whole supply of approximately 3,000,000 gallons of motor spirit with Russian Oil Products Limited at the price of 11 7/16d. per gallon. The National Companies did not see their way to accept the first alternative and the contract for the whole supply of motor spirit was placed, in accordance with the other alternative, with Russian Oil Products Limited.
1352 Such are the facts so far as I have been able to ascertain them from the minutes of the Glasgow Corporation. I think that the House will agree, however, that it is to be regretted that before the whole contract was placed by the corporation with the foreign firm further efforts were not made by both parties to reach an agreement which would have enabled over nine-tenths of the contract to be supplied by the national companies.
While it has been the policy of the Government to encourage the placing of contracts in this country wherever practicable, the arrangements made by local authorities and private firms for the letting of contracts are not subject to Government control. Whether the corporation should have placed the whole of the contract when the lowest tender was first received is a matter which does not fall within my control. The negotiations, as far as I can gather, between the combine and the corporation broke down on a small matter of 140,000 gallons. On the general question, Parliament has delegated certain powers to local authorities and it is a principle inherent in popularly elected representative bodies that they should be responsible to those who elected them. The circumstances of the present case would not, I think, justify any diminution of the powers possessed by local authorities in these matters and I trust that the public interest which has been taken in the case will be useful in helping to prevent a similar occurrence in future. The hon. Member who spoke last asked me a specific question. I have made inquiries into this case, and I think that any further inquiry is unnecessary. I have given the House very rapidly the whole story of this contract. I think the facts speak for themselves, and I have endeavoured to state the case as fairly as I can.