§ (1) The power to determine forms of contract shall be exercised as follows, that is to say:—
- (a) there shall be one or more main forms of contract according as the determination may provide, for use according to the option of the producer;
- (b) in the case of each of those main forms of contract there shall be the five variants mentioned in the next succeeding Sub-section.
§ (2) The said variants are as follows, that is to say:—
- (a) a variant, in this Act referred to as "the nominated buyer variant," to be used in the case of pigs sold to a curer whom the seller has nominated as the person to whom he wishes those pigs to be sold.
- (b) a variant, in this Act referred to as "the open offer variant," to be used where the seller has not so nominated a curer and does not desire to avail himself of the group contract arrangements mentioned in the next succeeding paragraph;
- (c) a variant, in this Act referred to as "the group contract variant," to be used where a producer has not so nominated a curer as aforesaid and desires to avail himself of any arrangements made by or under authority of the Pigs Marketing Board (in this Act referred to as "group contract arrangements") under which two or more sellers are to employ the same agent for the purpose of arranging the deliveries under their respective contracts;
- (d) a variant, in this Act referred to as "the transferred pig variant," to be used where a registered producer of pigs has exercised his right of nomination aforesaid but the pigs are nevertheless being sold to another curer; and
- (e) a variant, in this Act referred to as "the transferred pig (producer-curers) variant," to be used in the circumstances specified in the provisions of this Act relating to curers who produce pigs.
§ (3) In the case of each main form of contract all the said variants shall be identical except for the differences specified in the following provisions of this Section.
§ (4) The open offer variant shall be identical with the nominated buyer variant except that it must provide—
- (a) for the addition to the price of each pig delivered thereunder of a specified sum, hereinafter referred to as "the allocation premium"; and
- (b) for the Pigs Marketing Board guaranteeing to the seller in a specified manner and subject to specified conditions the performance of all the obligations of the purchaser.
§ (5) The group contract variant shall be identical with the open offer variant, except that it may contain—
- (a) provisions relating to the identity, powers, rights and duties of the agent;
- (b) provisions designed to secure that, as between the various producers who employ that agent, the burden of any particular class of risk or expense is shared in a specified manner;
- (c) provisions designed to secure that where several producers who employ the same agent enter into contracts with one curer, that curer is, as nearly as may be, in the same position as respects deliveries under those contracts as he would be in if all the pigs to which those contracts relate were being sold to him under one contract in the open offer variant of the main form of contract in question.
(6) The transferred pig variant shall be identical with the open offer variant except that the allocation premium must be one shilling of which sixpence must be made payable to the Pigs Marketing Board.
The said sum of sixpence shall be so payable for the benefit of the curer nominated by the seller as the person to whom he wished the pigs to be sold.
§ (7) The transferred pig (producer-curers) variant shall be identical with the open offer variant, except that the allocation premium must be one shilling.
§ (8) If no factory rationalisation scheme has come into force by the expiration of two years from the passing of this Act or such lesser period as the Minister may order, or if such a scheme which comes into force ceases to have effect by reason of an order for the revocation thereof, there shall be determined, in relation to each of the main forms of contract, the following three variants only, that is to say, the nominated buyer variant, the open offer variant and the group contract variant.—[Mr. W. S. Morrison.]
§ Brought up, and read the First time.
§ 4.30 p.m.
§ The Minister of Agriculture (Mr. W. S. Morrison)
I beg to move, "That the Clause be read a Second time.
This new Clause looks formidable in its length, but I can assure the House that it really contains no change in principle, and is a redraft of certain provisions made necessary by Amendments that have been made in Committee. This Clause and the following two new Clauses on the Paper are really attempts to redraft Clause 20 of the Bill and take the place of Subsections (2), (3), (4), (5) and (6) of that Clause. Hon. Members will see upon 1949 the Paper a consequential Amendment moving the omission of these Sub-sections from the Clause as it now stands on the Paper. The changes that were made in Committee which necessitated this redraft are as follow. When the Clause went to Standing Committee it contemplated three options only for producers in making their contracts. One was the open contract, when the producer of pigs specified no particular destination for his pigs; the second was the group contract wherein a number of small producers might combine together and sell their pigs through an agent; and the third was the nominated buyer where the producer specified the curer to whom he wished to send his pigs.
In Committee there was a controversy as to the question of transferring pigs from one curer nominated in the contract to another not so nominated, and after a lot of discussion a compromise was arrived at—I am sorry to say not nemine contradicente—by which this romantic attachment to the curer of his choice was rewarded by a premium of is., that is, 6d. to go to the curer and 6d. to the producer of the pigs. That was one added variant to the form of direct contract. A second was introduced by a series of Amendments moved by my hon. and learned Friend the Member for Ashford (Mr. Spens). He brought up in Committee the position of yet another category of contract, namely, contracts entered into by producer-curers, that is curers who also produce pigs. As a result of his Amendments it became necessary to provide that the producer-curer should offer all his pigs for sale in the ordinary way to the Pigs Board. Those two new variants of forms of contract have necessitated this redrafting.
If Members will look at the new Clause they will see that these divergencies from the normal contract are expressed as variants, and in Sub-section (2) of the new Clause the five variants are all set out, that is to say, the three originally contemplated to which I have drawn attention, plus the other two added by the Committee. That is the main purpose of the drafting of the new Clause. It will be seen that the succeeding Subsections of the Clause introduce no new matter at all beyond what was recited in the Bill when it left the Committee, but we hope that this form of drafting will be more apt to express the purpose of the Bill with regard to these contracts.
§ 4.35 P.m.
§ Mr. A. V. Alexander
Before any Amendment is moved to the Clause I would like to ask for a little more information. I agree with the right hon. Gentleman that, in the main, this Clause is a redraft of the position as it was elucidated in the Standing Committee upstairs. As the right hon. Gentleman has referred to the question of the special premium to be paid in the case of pigs transferred from curers who have made a direct contract, I should like a little more information as to what other classes of the variants now set out in this Clause will carry a premium in a particular contract. I have specially in mind the variant referred to as the open offer contract. I have had a little experience of this matter in the past, and I heard reference made in the Standing Committee to the premium usually paid in respect of an open offer contract. Having regard to the relevations which were made in the Standing Committee concerning the extremely narrow margin which is accorded to the bacon curers under the formula attached to the subsidy arrangement, and if the figure has been properly arrived at under compromise as set out in the Clause in the case of the transferred variant contract, that is, 1s. per pig, I should like an assurance that there will be no higher rate of premium charged in respect of any other variant in the Clause.
§ 4.37 P.m.
§ Mr. W. S. Morrison
By leave of the House, I would like to reply to the right hon. Gentleman's very natural enquiry. The only variant for which a premium is prescribed in the Clause is that of the transferred pig, that is to say, Is. per pig. In Sub-section (4) of the new Clause all that is said is that the open contract will be rewarded by what is called an allocation premium. No attempt is made in the Clause to say what that premium should be. It is a question for discussion and negotiation when the contract comes to be established between the hoards. I am aware of the point at the back of the mind of the right hon. Gentleman, but on consideration I feel that the allocation premium was not a matter which could with profit be fixed by this House, and that it was the best course to define it as an allocation premium and leave the matter for negotiation by those interested, so that a fair result might be obtained.
§ 4.38 p.m.
§ Mr. Alexander
I do not understand how it is incumbent upon the Minister, whether by agreement with the interests or not, to insert a maximum premium in the case of one class of variant contract without fixing some maximum in respect of other contracts. I cannot understand the general argument with regard to leaving X, Y or Z matters for discussion or settlement in a general contract negotiation. If it is found necessary to put a limit on the premium to be paid in any one of the five variants in this long contract Clause, surely it is necessary that it should be so in the case of each one of them. The matter is of fundamental importance.
§ 4.39 p.m.
§ Mr. Price
I am sure that in connection with the group contract variant we are all in agreement with the much better grouping of the terms of contract than that which we had in the original Bill. Can the Minister say whether those who contract under the group contract variant will be able, if they desire, to select a factory for the cure of their pigs? Will they become eligible for the bonus or the premium which is apportioned for the others, or will they have to take the factory provided for them by the board? It is a matter upon which we should be clear, as I can conceive that that position might arise in some circumstances.
§ 4.40 p.m.
§ Mr. W. S. Morrison
In reply to the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) I recognise that possibly there is a logical case for saying that, if we give a specified premium in the case of the transferred pig, we ought to place a maximum upon the premium for the allocated pig. There was a discussion about this matter, and it was thought that some premium ought to be given. It was too low in the opinion of some hon. Members of the Committee, but we felt that the open contract, which is the most valuable form of contract from the point of view of the boards and the scheme, is not so easy to fix as this particular narrow class of transferred pig, and this matter is best left in suspense for proper discussion between the boards concerned. In answer to the hon. Member for the Forest of Dean (Mr. Price) who asked a question as to group contracts, the position is that group contracts will all be open contracts, and, of 1952 course, they will attract the allocation premium.
§ 4.41 p.m.
I should like to ask the Minister whether it is the intention, if this Clause is passed, that this wording should appear on the contract forms which have to be signed by the producers of pigs. I hope that it will be possible to find something rather simpler. Otherwise it will be a definite deterrent to those who like really to understand what they are signing.
§ Mr. Morrison
There is no necessity why the contract should follow the terms of the Bill. I agree that perhaps it is not easy at first sight to understand the phraseology of the new Clause, but those who will be considering these matters of the new Clause will be those who will be advising the board, and they can draw up their contracts as they please. I share the view of my hon. and gallant Friend, and hope that they will draw them up in language which can easily be understood.
§ 4.43 P.m.
§ Mr. Turton
I beg to move, as an Amendment to the proposed Clause, in line 51, to leave out "one shilling, of which sixpence," and to insert:not less than two shillings, of which not less than eightpence.There are on the Order Paper three Amendments to this Clause with which, with your permission, Mr. Speaker, I will deal together, as they are really consequential and form one framework. They are based upon a long history of equitable distribution, which has been discussed both within and without Parliament. The measure of equitable distribution proposed by the Minister in this Bill has met with a great deal of disfavour in many parts of the country. Farmers who live near a bacon factory, and who, in some cases, are members of a co-operative bacon factory, dislike the principle of their contracts being broken and their pigs being sent to distant parts of the country, where farmers have not the same confidence and where in the past they were not satisfied with the grading system. For that reason we have contrived to secure, if it is absolutely necessary for the contract to be broken and for the pig to be transferred, that the farmer and the factory whose 1953 contract is broken shall receive fair compensation for what has occurred. The Minister earlier said that he attached great importance to the open contract, and I would like to deal with that matter on this Amendment in so far as it is relevant. If we are to have regard to what has happened in the past, most of the long contracts that are entered into under this Bill will not be open contracts, but will be what are described as nominated buyer contracts. The number of open contracts decreased during the contract periods of 1935, 1936 and 1937, and in 1937 out of 1,800,000 direct contracts there were only 21,000 open contracts.
The Minister of Agriculture said that the shilling which he is offering is a solace to wounded feelings. I hope that on reconsideration he will say that it is something more than that, because when he moved the shilling in Committee he said:It may be asked why, in such circumstances, anything should be given to the curer at all, but clearly that is necessary, because the curers have in the past put themselves to some expense in securing pigs by canvassing for contracts, and, if that amount of their labour is entirely wasted, they are, of course, entitled to some compensation."—[OFFICIAL REPORT (Standing Committee C), 24th May, 1938, col. 222.]May I deal first with the question whether the curer should receive 6d. or 8d. per pig? The Minister suggests that the curers are entitled to canvass for pigs, and that is the generally accepted method throughout the country. The curers appoint agents to canvass and they pay them so much for each contract obtained. As that is the method, I should have thought that it would have been fair to have given the deprived curer adequate compensation, in fact as much as he has to pay the canvassing agent for each pig contracted for. At present, of the factories that pay agents the Yorkshire factory pays the least to the agent. They pay 9d. for each contract that is ratified and 6d. for each contract that does not go through. If through no fault of the agent the contract does not go through, he receives 6d., but if the contract goes through, he receives 9d.
If the Bill goes through in its present form, with the provision of is. per pig compensation, that is, 6d. for the curer and 6d. for the producer, the result will be that even the Yorkshire factory, which pays the least to its canvassing agents, will be losing 3d. per pig on every trans- 1954 ferred pig. That does not seem to me to be quite equitable, and I hardly think that Parliament would consent to that loss being incurred by the deprived factory. There are factories which pay as much as 4s. per pig to the canvassers. The majority of the Midland factories, which appoint agents to come round Yorkshire, pay 2s. for every pig contracted for. When one considers these large figures that are paid at the present time, and which have been paid in the past, one comes to the conclusion that the Minister's suggested compromise of 1s. per pig is quite inadequate.
Let me deal with the position of the producer of the pig who, the Minister says, should be compensated to the extent of 6d. per pig. The right hon. Gentleman is trying to persuade producers to go in for the open contract. In the case of the open contract he will get what is called the allocated premium. My right hon. Friend did not tell the right hon. Member for Hillsborough (Mr. Alexander) what exactly the allocated premium would be, but I do not think I should be far wrong if I suggested that many farmers in this country, and many who are in the bacon industry, believe that the allocated premium will amount to 2s. per pig. In other words, it will be a similar bonus to the bonus offered in the last contract. As the farmer under an open contract is to get 2s. per pig bonus, surely in justice he ought to receive the same or very nearly the same if, through no fault of his own, the nominated buyer contract is transformed into an open contract, because the effect of transferring a pig from one factory to another is that the farmer is put into the same position as if he had nominated no curer.
The sum that I am suggesting is that the registered producer should receive for each transferred pig a sum of is. 4d., to make the whole amount given for transferred pigs the same as we anticipate will be given for the open contract pig, namely, 2s. I suggest that that is a reasonable sum. We had a discussion on this matter in Committee as to what would be the proper compensation, and I think what weighed with a good many hon. Members was the very clear and authoritative statement made by my hon. and learned Friend the Member for Ashford (Mr. Spens) as to how the Bill will work out for the curers and how much money they will make per pig. He told us that, 1955 taking a seven-score pig, the amount paid to the producer would be 87s. 6d., and that the amount obtained by the bacon factory for the dead pig would be 94s. 9d., excluding the offals. He remarked: "What a small margin we are making; we are only making a margin of 7s. 3d., and the offals." But my hon. and learned Friend did not tell us what they expect to make on the offals. The amount they will expect to make on the offals is 12s. 6d. to 12s. 9d. Therefore, the profit that the curer expects to make per pig under the Bill is 20s. I can assure the House that if the farmer was going to make as much profit as that he would be feeling far differently about the terms of this Bill.
Out of that margin of 20s. profit per pig that the curers will make, according to my hon. and learned Friend's figures, is it unreasonable to suggest that 2s. per pig should be given in the case of the transferred pig? I agree that out of the 20s. one or two items which were mentioned by my hon. and learned Friend in the Committee stage have to be taken, amounting to 5s.—carriage of the pig 2s. 6d., insurance 6d. and levies 2s. I take his figures as he gave them. There is, therefore, 15s. profit on each of these pigs. Is it unreasonable that from that net profit of 15s., 2s. should be paid for each of the pigs that is transferred? Hon. Members may think that this is a very small matter, but I can assure them that on the question of bacon production and pig production the shilling looms very large in the minds of the farmers. There is a disinclination to transfer pigs, but if they are to be transferred, then it is only reasonable that the farmer should not lose by having his pigs transferred.
§ 4.56 p.m.
§ Commander Bower
I beg to second the Amendment, and I would ask my right hon. Friend to bear in mind that this is not only a question of pigs, but there is also a human problem involved. I would underline the last remark of my hon. Friend, namely, that the farmers attach tremendous importance to the shilling. It seems to me only right that they should have this benefit when, possibly at great inconvenience to themselves, they consent to this transfer of pigs. It is a small matter when compared with the large sums which are made 1956 in other directions, but I can assure my right hon. Friend that the farmers, at any rate the farmers in the North of England, would be more than grateful to him if he would give them what is asked for in this Amendment.
§ 4.57 P.m.
§ Mr. T. Williams
I hope the right hon. Gentleman will reject the Amendment. From my point of view, and particularly in view of the fact that we are dealing with a so-called marketing scheme, I regard the submission of the hon. Member for Thirsk and Malton (Mr. Turton) as being more or less humbug. It is more related to the past, to the pre-marketing scheme days, than to the present or the future of any marketing schemes which ought to be effective and efficient if we want the producers of pigs or of other agricultural products to get that to which they are entitled. It is the old policy of grasping the last penny from any source so long as it can be obtained for the producer in the initial stages. It is on the cards that these initial payments ultimately rob the producer of his real heritage, if the marketing schemes are to be permitted to carry on.
The hon. Member is arguing ostensibly for a certain increased premium over and above that offered by the right hon. Gentleman and he asks it for the so-called canvasser, not for the producer of the pig. He based the whole of his case on the sum of money paid by the curers to canvassers to ensure that an adequate number of pigs is available for them. He spoke of some canvassers being paid as much as 4s. per pig. He did not tell the full story. He did not tell the story of what happened in Yorkshire in 1936, when the Yorkshire bacon factory was without any pigs and it was ready to pay anybody any price almost to get pigs from anywhere, not contract pigs, but pigs from anywhere, for that factory. If he had made out that case he would perhaps have been able to put a better case than he did.
§ Mr. Turton
That allegation requires substantiation. Will the hon. Member tell me when the Yorkshire bacon factory was without pigs?
§ Mr. Williams
If the hon. Member will contain his soul in patience, the A B C of the transaction will be given to him and the House. This Bacon Bill is 1957 designed to help the producers of pigs and the bacon industry and, incidentally, certain concessions are made to those who produce pigs, and that concession is in the sh-ape of a subsidy. They are given guarantees that in certain circumstances restrictions of imports of bacon will be applied. As a quid pro quo for these two concessions to the pig-producing and the bacon industry those people are expected to organise the industry. Therefore, it is not a question of providing excess payments for canvassers for pigs for curing purposes. What the House should really consider is the best possible means of marketing this commodity; remove these canvassers between the pig producer and the bacon factory and allow the marketing board to do its job so that the production of pigs and bacon can become really an economic proposition.
If the producer of a number of pigs has entered into a bargain with certain curers that they shall be sent to a particular factory, and it is then found, for the convenience of the industry as a whole having regard to transport and output, that the pigs should be sent to other factories, I do not see why the producer of the pigs should receive an excess payment because they have gone to B factory instead of A factory. I do not see any justification for that, and I feel that the premium imported into the new Clause is a step in the wrong direction. The right hon. Gentleman has made one concession; I hope he is not going to make a second concession, and that he will stand by the new Clause, which we should prefer to see without any premium at all. The reason for the uneconomic bacon industry was not referred to by the hon. Member for Thirsk and Malton at all. When he talked about a canvasser receiving is. 3d. and 2s. per pig he was living in an age when there was but a very small bacon output, when there was a large surplus bacon-producing capacity and when curers were obliged to adopt artificial means to get the maximum number of pigs for a factory to make it economic.
§ Mr. Turton
The hon. Member cannot have heard my speech. I said that some had been paid and that some were in fact being paid right up to the end of 1937 and the beginning of 1938. I think the hon. Member should keep these facts in mind. Is he going to substantiate his allegation that the Yorkshire Bacon 1958 Factory was without pigs in 1936? He has ridden away. I challenge him to substantiate the allegation.
§ Mr. Williams
If the hon. Member will contain his soul in patience for a few minutes he will be given the date, but not by me. I want to repeat what I have said. The hon. Member made out a case based upon the situation in the past, when the factory capacity was nearly double the output of pigs. If the major intentions and purposes of this Bill are going to fructify, all the arguments of the hon. Member go by the board, and no premiums will become necessary. I hope the Minister will resist the Amendment and express regret that he has gone so far as he has in embodying a premium in the new Clause.
§ 5.5 P.m.
§ The Minister of Pensions (Mr. Ramsbotham)
The hon. Member for Thirsk and Malton (Mr. Turton) referred to the long history of this matter. We certainly had a long battle upstairs in Committee about it, and as a result his Amendment was not accepted by the Committee. His proposal to-day differs slightly from that in Committee and is even less attractive. He no longer wants to increase the premium from 1s. to 2s. but asks that it shall not be less than 2s.; that curers should not get less than 8d., and the producer is to have whatever is left. I am afraid that we cannot accept the proposal for the reasons given by the hon. Member for the Don Valley (Mr. T. Williams), to which I also want to add one or two others. There are two main positions to be secured by the Bill. The first is that open contract shall become as far as possible the normal form of contract. The second is that the financial structure of the Bill shall be preserved, because it is based upon a compromise between the pig producing and bacon curing side of the industry. A balance has been struck between a bacon price of 94s. 9d. per cwt. and a pig price of 12s. 6d. per score. The matter has been agreed to by the two industries, and the 1s. bonus proposed in the new Clause has also been agreed. Any addition would at once upset the balance.
As regards open contracts, the Bill leaves the bonus open for negotiation. A sum of 2s. has been suggested as an in- 1959 ducement to producers to offer pigs on open contract, but one thing is quite clear, that at any rate it should be more than the bonus for contracts which the hon. Member for Thirsk and Malton has in mind. If his contracts are to attract 2s. it is quite clear that more desirable contracts should attract more, and that would upset the whole balance of the arrangement and destroy the two main positions on which the Bill is built. The producer who nominates a curer does no service at all if his nomination is accepted. His only possible claim will be for some compensation for the less favourable treatment he receives compared with the producer who is allowed to contract with the curer of his choice. In fact, however, there is no reason why he should be financially worse off because his pigs are transferred. The hon. Member for Thirsk and Malton has still in mind the old situation and does not realise the reforms we are attempting to make by the Bill. Under Clause 31 a uniform system of grading will now take place and will remove certain abuses which in past times have deterred pig producers from contracting with this or that factory. There is also a Clause which provides that a pig producer may receive an additional price for loss of weight in transport. These considerations effectively dispose of the suggestions of the hon. Member for Thirsk and Malton. I am sure that if a bonus on the scale he suggests was permitted it would tend to discourage producers going in for open contracts; and that is the last thing we want. Undoubtedly a premium of 2s. on transferred pigs would place a very heavy burden on curers to which they have not agreed. If they have to pay this on a transferred contract they would obviously have to pay a higher bonus still on an open contract. For these reasons we are unable to accept the Amendment.
§ 5.10 p.m.
§ Mr. Spens
In view of the personal reference by the hon. Member for Thirsk and Malton (Mr. Turton) to me, may I say one word? I am not going into the figures I gave in Committee, but when the hon. Member talks about a curer relying on a price for offals of over 12s. and being able to add that to the margin between the price of a seven-score pig, and gets up to a figure of 20s. as being the profit, I must enter my protest. The 1960 whole success of this Bill depends on good will between farmers and curers, and to let it go out from this House that under this arrangement curers are going to make a profit of 20s. per pig is more calculated to cause dissatisfaction between producers and curers than anything else that could possible have been said. I should like to remind the hon. Member of the figures I gave in Committee, which showed clearly that the 7s. 3d. difference between the price per cwt. of bacon and the price of a seven-score pig would go in the extras which curers will have to pay. What they will get for the offal is much nearer 9s. than 12s., and that is all they are going to have left to carry on their factories, to pay their rent, their overhead charges and their distributive costs, and if this is going to be written down many curers will be left with no profits at all. In every single case the profit will be something very much less than Is. per pig, and to talk of curers getting a profit of 20s. per pig out of this scheme is a suggestion which should be contradicted, and contradicted at once.
§ Amendment to the proposed Clause negatived.
§ 5.13 p.m.
§ Mr. Alexander
I beg to move, as an Amendment to the proposed Clause, at the end of line 54, to add:The allocation premium in respect of group contracts or open offer contracts shall not exceed one shilling per pig.I support with very great good will the general conclusion arrived at in the speech of the hon. and learned Member for Ashford (Mr. Spens) with regard to what the margins are in respect of bacon curing. During the last six months there is no question at all that bacon curers in this country have been losing instead of making considerable sums of money. Under the bargain which the Minister has been able to secure, the margin left to the bacon curers is so exceedingly small that if there are any further raids upon bacon curers' funds up to the time the pig reaches the factory, we shall in all probability turn what is possibly a small estimated profit into an actual loss. According to calculations which have been submitted to me, and I understand have been sent to the Minister, the actual deficit on each pig under the present arrangement will be about 1s. 6d., and that deficit is to come out of any profit 1961 which may be made out of the handling of the offals. It means that the proceeds from offals will be the only fund on which the factory overhead charges and administrative and other expenses can be met and therefore, the figures which are in the mind of the hon. Member for Thirsk and Malton (Mr. Turton) are very much exaggerated.
While I believe that my hon. Friend the Member for Don Valley (Mr. T. Williams) is right in principle in saying that there ought to be no premium in respect of these pigs contracts, I think that, having regard to the fact that the Minister has compromised in the case of the transferred pig at the figure of 1s. a pig, we ought to be assured in the House that there will be no higher premium than that in respect of any other class of pigs contract which is entered into under the scheme. I think that our case on that is unanswerable. With regard to the premiums specified in the Clause in connection with the allocation of the transferred pig, surely the curer who loses the pig suffers some loss owing to the fact that he will have a lower throughput, but I cannot see that it makes any difference to the pig producer. It might be that there would be some loss to him in respect of the taking of the pig over a certain distance from the farm to the factory if it were not for the fact that a sum is laid down for the transit shrinkage allowance. Therefore, from that point of view, there is no case for the pig producer having an extra sum. If that applies to that class of contracts, it applies equally to the open allocation contract. In fact, all that is being done with regard to the transferred pig is to adopt the allocation principle. The pigs are being taken away from the tied factory and put on the open allocation plane, and whatever premium the Minister considers to be the right one for that class must be the right premium for the other. Therefore, I maintain that there is no case for a higher premium, which ultimately would have to come out of the losses of the bacon curer or the price which the consumer pays for the bacon.
The hon. Member for Thirsk and Malton challenged my hon. Friend the Member for Don Valley, and as I whispered to my hon. Friend a word or two about the situation, I feel that I ought to accept the responsibility for his answer to the hon. Member's question. I 1962 am informed, on what I think, from my own inquiries, is probably good authority, that in 1936, when there was a shortage of pigs to certain bacon factories, a company which was very short of pigs had to enter into an arrangement with what was really a finance company. I believe it was known as the Counties Pig Finance Company, Limited. In my view, that company certainly was not able to offer a whole range of pigs that had been duly contracted for. The pigs were really "paper pigs," if I may use that term.
The company undertook, for a commission of 4s. a pig, to supply the factories that were short of pigs. In my view, having regard to all the circumstances then obtaining, the only way that could have been done was for the finance company to interpose itself between the pig producer and the bacon curers concerned, and then go round the auction market, buy as many pigs as possible, and transfer them to the curers who were short for the very nice little commission of 4s. a pig. To use such an illustration as an argument for putting into the Bill a permanent imposition on the industry seems to me to be altogether unreasonable. I do not say that it was the Yorkshire bacon factory which was responsible for that, but I understand that the Counties Pig Finance Company had some Yorkshire connection. Therefore, I think that on the basis of the general case, we can well ask the Minister, if in the interests of the financing of the industry he limits the premium to 1s. in the case of the pig which is allocated away from bacon curers who obtain pigs on a tied contract, he has no case for leaving it to negotiation and for having a larger premium in respect of other classes of pig. On those grounds. I think that the right hon. Gentleman will do a very great deal for the industry in general if he will accept the Amendment which I have moved.
§ 5.21 p.m.
§ Mr. Turton
The Labour party are coming out in a new realm—they want protection for big business and they want to secure that the business shall make large profits in turning out bacon. That is a very curious realm for them to enter. A little time ago I read a paper which promised guaranteed prices for foodstuffs, but now we know that guaranteed prices are not to be guaranteed prices for the producers, but for the processors. That 1963 can only be because it happens that a section of the Socialist party has its money in the bacon business.
§ Mr. T. Williams
The hon. Member cannot carry that argument very far, because it is only about To minutes ago that he was arguing, not for the producer of the pigs, but for the canvasser who sends them to the markets.
§ Mr. Turton
The hon. Member cannot have listened to my last speech; if he had, he would not have fallen into that error. What I said in support of the first Amendment was that when a curing factory has paid 8d. for a pig, it is unjust that another curing factory—for instance, the Co-operative factory at Hitchin, which may sometimes be short of pigs—should get them without paying 8d. a pig. That seems to me to be common justice. Before coming to the point as to whether rich curers can afford 2s. or 1s., I wish to deal with the point made by the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) about the Yorkshire factory. The hon. Member for Don Valley (Mr. T. Williams) said that there was a time in 1936 when the Yorkshire factory was very short of pigs. I asked the hon. Gentleman either to withdraw that statement or to justify it, and quite rightly he put the burden on his commander-in-chief, the right hon. Gentleman the Member for Hillsborough. I listened carefully to the remarks of the right hon. Member for Hillsborough, and at no time did he say that the Yorkshire factory was short of pigs; but he said that in 1936 a company in Yorkshire was securing pigs for the bacon factories all over the country at a cost of 4s. a pig. In reply to the right hon. Gentleman, who does not regard that method of finance as being very desirable, I would point out that other companies, such as hire-purchase companies, charge not 4s., but a very much larger sum.
The Counties Pig Finance Company is, in fact, had the right hon. Gentleman but known it, a subsidiary company of the Farmers' Co-operative Yorkshire factory, and it lends money cheaply to farmers in order to enable them to buy feeding-stuffs for their pigs. By that means, pig production in Yorkshire was assisted to such an extent that the Yorkshire factory was always full and Yorkshire provided the 1964 Minister with a large quota of the pig contracts all over the country. I should like to hear from the Minister, when he replies, whether he takes the same view as the right hon. Member for Hillsborough about the activities of the Counties Pig Finance Company, because it is by means of such finance companies that we can secure that these contracts are fulfilled. Can the curers pay 2s. for an open contract pig? I hope I did not do my hon. and learned Friend the Member for Ashford (Mr. Spens) an injustice when I quoted the figures which he gave to the Committee regarding the costings of this bacon. I said that, on my hon. and learned Friend's figures, taking offals at from 12s. 6d. to 12s. 9d.—which I am told is the regular price for offals—that leaves a profit of £1, from which there has to be deducted one or two items amounting to 5s. That means a profit of 15s. a pig.
§ Mr. Spens
What does my hon. Friend mean by "profit"? Does he mean a profit which the curers can expend in dividends? I would point out to him that they still have to pay the whole of the factory, labour and distribution expenses. I assure my hon. Friend that I am speaking with knowledge when I say that there is nothing by way of profit; it is all taken in overhead expenses.
§ Mr. Turton
It may be that we should call it a gross profit and not a net profit, but according to these figures, they have 15s. a pig. Cannot they afford to pay the extra 2s. for an open contract pig? As my hon. and learned Friend knows very well, a large factory which has a turnover of 2,000 or more pigs a week needs a smaller gross profit per pig than a small factory does, and these figures, with the 2s., will be adequate for any large and efficient factory. The position at the present time is this. In England, farmers are receiving some 2s. less per score than farmers in Denmark are receiving for similar pigs, and the reason they are receiving less is that we have in this country a great number of factories which are less efficient than they should be. By rationalisation we hope to remedy that position. If the curing businesses are to be assured large profits, as is suggested in the Amendment, there will never be that rationalisation, and for that reason I hope the Minister will not accept the Amendment.
§ 5.28 p.m.
§ Mr. W. S. Morrison
The right hon. Gentleman the Member for Hillsborough (Mr. Alexander), in speaking on an earlier Amendment, alluded to his desire to place a limit on the allocation premium, and he has now put forward a manuscript Amendment to that effect. I am afraid I cannot ask the House to accept that Amendment at this stage, because I believe that the original reason which I gave for preferring that this matter should be left to bargaining is a sound one. After all, we have heard speeches in the House which show that hon. Members on all sides are well aware that the best hope for the prosperity of this industry lies in an increase in efficiency on the curing side as well as on the producing side. In order to get that, it is necessary to get a throughput of pigs which is suited to the premises in question, so that their operations can be conducted economically. For that purpose, the most valuable form of contract is undoubtedly an open contract where no curer is suggested by name. The Marketing Board can allot, out of the contracts available to them, the appropriate number to each factory, so as to secure that the scheme shall work to the best advantage. That being so, I do not see that there is a case for saying here and now what the limit on the premium for the allocated contract should be. I think that matter should be left to bargaining between the two boards.
The right hon. Gentleman has given some interesting facts about the expenses of the factories and how narrow, in his view, is the margin of profit. The hon. Member for Thirsk and Malton (Mr. Turton) seems to hold a contrary view as to the gains which are likely to accrue to the bacon factories. I was at first greatly struck by the figures which he gave showing a certain profit but my amazement was cured when I learned that he was referring to gross and not net profits. A gross profit does not impress me much, if I know that a large number of deductions have to be made from it before anything is realised as gain by those who run the business. My duty, as I conceive it, is to try to strike a fair balance in this matter between the interests of the producers and those of the curers. I resisted a previous Amendment because I thought it would work unfairly to the curers. I cannot advise the House to accept this Amendment because I do 1966 not think it would work out fairly in every case to the producers.
I agree with the hon. Member for Don Valley (Mr. T. Williams) that in the new state of affairs to which we are looking forward it would be desirable that all contracts should be open contracts but we have to remember that we are not living in that world yet. We have to deal, in the first instance, with a transition stage. Commerce, in this as in other cases, has settled in certain channels and it may be found necessary at first to offer some inducements having regard to the existing state of affairs and the normal methods of business which are followed at the present time. If the case for the curer is as strong as the right hon. Gentleman has made it out to be, the Bacon Marketing Board can put all these considerations forcibly before the Pigs Marketing Board when it comes to discussion of the question of what size the allocation premium should be. If, as a result of their negotiations, they fail to come to a satisfactory conclusion the Bill contains, in Clause 22, provisions for arbitration on a matter of this sort, so that a fair settlement between the contending claims can be reached. I see the case for fixing the premium on the transfer pigs contract because, as I say, we are still in a state of transition where that is desirable, but I would rather leave the question of the allocation premium for the open contract to be discussed as a matter of bargaining between the two Boards concerned, with ultimate resort to arbitration should they fail to compose their differences by the ordinary methods of negotiation.
§ Question, "That those words be there inserted in the proposed Clause," put, and negatived.
§ Clause added to the Bill.