HC Deb 23 June 1939 vol 348 cc2619-27
Mr. Speaker

With regard to the Amendment in the name of the hon. Member for Chesterfield (Mr. Benson), to leave out Clause 4, I do not propose to call the hon. Member unless he can give me some particular reason for putting it down.

Mr. Benson

In the Committee stage the Minister of Transport was unable to give us entire satisfaction and promised that he would give further information upon the Clause, particularly as to how it would operate, and it was for the purpose of eliciting this further information that the Amendment was put down.

Mr. Speaker

Mr. Benson.

11.20 a.m.

Mr. Benson

I beg to move, to leave out the Clause.

In the Committee stage certain questions were raised, in regard to stocks which it was proposed to arrange to be held in private hands, as to the effect of the fluctuations in values of those stocks. I want to say quite definitely that in this matter I am not concerned with the question of profiteering. I do not think that can possibly arise, because in the event of war one thing is inevitable, and that is that a most rigid system of prices will be introduced. It is not so much what is likely to happen in war time as to the difficulties which are sure to arise if, as we all hope, war does not arise, or if it is long postponed. The difficulty I see is that the Minister may be faced by what I may term a moral claim for depreciation of price. He may find himself in a position in which it will be dfficult for him to resist what is almost a reasonable claim, despite the fact that it might have been made perfectly clear at the outset that these stocks were held at owner's risk. The time factor enters seriously into this matter. How long is it proposed that these stocks shall be held? Are they to be held indefinitely by the owners at the Government's disposal? Are the Government to have a lien on them, or may they be disposed of without the Government's consent.

If the owners are unable to dispose of them without the Government's consent we might very well get this situation, that a serious appreciation in prices would enable the firm holding heavy stocks to dispose of them at a handsome profit but the Government say, "No, we have financed these stocks to a certain extent, we have paid in the insurance and storage and they must be held." There may be a depreciation in price and the owners may be compelled to dispose of them at a lower price than the price at which they were originally purchased. In that case the Government will be in an extremely difficult position if it simply throws the loss on these stores on to the owners of the goods. They will have missed a good market owing to Government control and will have been compelled to dispose of them in a bad market. Frankly the Government will have to face that position. Suppose the firm holding these stocks goes bankrupt. Are the stocks to be protected in any way in that case? That is an example of the difficulties and perplexities which will arise if these stocks are held for any long period, and it was with a view to eliciting answers to difficulties of this kind that we put down the Amendment.

Mr. Watkins

I beg to second the Amendment.

11.24 a.m.

Mr. Burgin

I am grateful to the hon. Member for putting down the Amendment and to you, Mr. Speaker, for calling it, because it enables some explanation to be given of the type of transaction which the Government are contemplating under this Clause. I do not propose to deal with the hypothetical difficulties to which the hon. Member has referred, but I should like to tell the House really what is behind this suggestion. It does not so much matter whether the firm goes bankrupt, as to have the stocks available. The important thing is to have the stock. If there were an emergency of a sudden character there would be powers of requisition, and the Government have to see that stocks of this and that commodity are available in the country, so that there would not be a drain upon the convoy system and the importing capacity of the country at a time when difficulties had supervened. Broadly speaking, we are not concerned with the ownership, but only with the existence of the stocks, because the power to requisition will apply whether they are in warehouse A or warehouse B. Therefore, that type of consideration is not a primary one. I think that if I explain briefly some of the types of transactions which are either in contemplation or have been done, it will perhaps give the House a rather better idea of the ambit of the Clause. The assurance I gave on the Committee stage was that I would look at the extent of the framework and give examples of it rather than worry about justifying the Clause, which I think justifies itself. Every transaction in which the Government are going to pay anything, such as warehouse charges or freight, must obviously be the subject matter of a contract. Consequently, it will be for the two parties to include in the contract the sort of points that have been referred to by hon. Members. The Debate in Committee and on Report will be of great use in showing us some of the points which occur to hon. Members as matters for which provision should be made in the contract.

Mr. A. V. Alexander

With regard to the point raised by my hon. Friend the

Member for Chesterfield (Mr. Benson), 1 should be glad to know whether, in the general question of stocks raised by the Bill, the Minister will follow the same principle as is followed in connection with the flour reserves now held under the schemes of the Food Defence Plans Department. There is an annual rent charge allowed of 2s. 6d. per sack per annum, but almost immediately the stocks have been put in, there is the levy for the quota, and therefore, a fall in the market value of 1s. per sack. There is no provision either for a rise or a fall, and I should like to know whether it is the general attitude of the Government that, if there is no provision for compensation to a holder of stocks for a fall in the market, there is no claim of the Government against the holder for a rise. To use a phrase which the Minister used the other day, is that rough justice to be the basis of such a contract?

Mr. Burgin

The right hon. Gentleman the Member for Hillsborough (Mr. Alexander) has cited an instance that has already been put into effect in the holding of flour by bakers. Broadly speaking, I want the House to understand that if, in my view, a parcel of a particular commodity is a good purchase, I buy it under Clause 2 and not stock it under Clause 4. The right hon. Gentleman has said correctly that if. there was nothing in the contract to deal with either a rise in price or a fall in price, it would be right, as part of the consideration for the firm making no claim against the Government, that as a counterpart the Government should make no claim against the firm. This would be a natural corollary for that set of circumstances. If there were a purchase on Government account, it would not be under Clause 4, but under Clause 2. I think these matters must be dealt with by the terms of the contract providing for the storage in each individual case.

A good deal was said in Committee which rather suggested that the sort of transaction that would be carried out would be mainly with people operating on the market. While I might wish in certain cases to enter into such a transaction, the majority of cases would relate to the accumulation of additional reserves of raw materials at manufacturers' works. It is much more a question of manufacturers building up supplies than it is a question of brokerage and operating on the markets and exchanges. The idea is that the manufacturer would accumulate at his works a sufficient additional stock to safeguard the productive capacity of the country against interruption of supply in time of war. That is the sort of principle behind the Clause. Anxiety has been expressed as to whether, when commercial firms had stocks, there would be either no safeguard that the stocks would be forthcoming, or that the firm would take advantage by withholding supplies for higher prices. The provision with regard to the supply being forthcoming is a matter for the contract, and there must be a proper notice about the termination of the contract. These stocks, wherever they were, would in the event of an emergency at all times be subject both to price control and requisition, which means actual power to seize.

Examples are not very easy to give. The transactions that have been undertaken so far have been largely under the Essential Commodities Reserves Act, which has a much more limited sphere of operation than the transactions contemplated in Clause 4. Arrangements are being made with a firm which produces a certain metal in another part of the Empire to keep a stock of that metal in this country in order to save haul and to avoid a drain on importing capacity. Arrangements have been considered for the storage of a certain kind of raw material for fertilisers, stocks of which vary very considerably according to the season of the year, going down to almost nothing in the Spring and rising again to the full amount in the late Autumn. In that case, short-term loans might enable manufacturers to stock up earlier in the year than would normally be the case, so that at the time of the year when the stocks are normally low they would be ample for emergency purposes. I might wish to encourage a manufacturer to hold increased stocks of raw materials at his works rather than in the port areas. There might be a great deal of pressure on any warehouse accommodation near a port and it might be a very good arrangement that all storage near the port should be kept available for overside discharge and that the manufacturer's stocks should be kept intact. In such a case there would be a handling charge. It might be prudent to encourage warehouse keepers in particular areas where increased transport work was anticipated in time of emergency to duplicate storage accommodation. Those are some examples of what I have in mind.

I should like the House to realise that it is intended that the powers should He extremely wide, and that the object is to ensure that within our own shores, without straining the convoy system or our importing capacity, there should be stored the greatest amount of these stocks that can be held. I hope that with this explanation I have helped the House to realise sóme of the provisions that I have in mind.

Mr. A. Edwards

In the Second Reading Debate, I raised the question of the Minister's power, and whether he. would exercise that power, to encourage manufacturers to keep blast furnaces in this country going at full speed and to store the pig-iron at their own works, or if necessary, at other places. In my remarks, I referred to the system of warrants that was formerly in operation, and pointed out some of the difficulties that were encountered with regard to the gambling in warrants that took place. I should be glad if the Minister would refer to this matter.

Mr. Burgin

I speak again by leave of the House. This Clause is wide enough to cover stocks of pig-iron. If the stocks were held not by the Government but by the steel makers as raw material, it would be done under Clause 4, and there would be the appropriate storage and financial arrangements.

11.34 a.m.

Mr. Lewis

I have always regarded this Clause as being one of the most valuable parts of the Bill, but one of the observations made by the Minister filled me with apprehension. I understood him to say that if he saw a parcel of goods which he regarded as a good purchase, he would buy it under Clause 2, rather than provide for storing it under Clause 4. I hope very much that will not be the Minister's attitude to this matter. In this country, we are in the forefront of commercial and industrial practice. We have unrivalled experience and facilities in trades of all kinds, and I hope that in the first instance the Minister is going to see whether he cannot avail himself of the existing machinery of trade and industry before, as a last resort, he himself enters into operations as a buyer. It seems to me that the more we can provide protection for ourselves by inducing those whose business it is to deal in certain commodities, either for sale or for processing purposes, to increase their normal stocks and to anticipate purchases which in any case they would have made, the more easily and the more satisfactorily we shall assist ourselves by increasing our available supply. I hope the Minister did not wish it to be understood that his approach to the problem would be, first, to see whether it was possible for him to make purchases himself and then to utilise the provisions of Clause 4, by which the trade can help him, only as a second line of defence. I would rather see the process reversed. I would prefer the Minister to resort to Clause 4 first, and then only, if he finds that it is not going to help him in any given case, to operate under Clause 2.

11.36 a.m.

Mr. Tinker

I am glad that my hon. Friend the Member for Chesterfield (Mr. Benson) has drawn attention to this Clause. What is in our minds is that in every case where the Government propose to take over these business matters, the private contractor attempts to make something out of the Government's difficulty. Because of that, we want some assurance from the Minister that steps will be taken to see that those who axe called upon to hold these reserves will not look upon this as an El Dorado. Statements have been made to the effect that they must be left with a big percentage. That is where the trouble arises. Every Government contract seems to give the people who get the contracts, the idea that they must make enormous profits out of the trouble of the Government. I want these people to know that Parliament in dealing with these questions, is watching very closely any attempt to make profits out of the country's dilemma. For that reason, I am glad that my hon. Friend has called the attention of the Minister to this matter, and I hope he will get an assurance that the Minister's Department will keep a very special watch over this and see that the Government is not fleeced when the question of settlement and the disposal of the reserves, comes up for consideration.

11.38 a.m.

Mr. David Adams

I wish to ask at what stage will the goods which are to be stored under Clause 4, become the property of the Government? Will they remain the property of the individuals owning or producing them, until such time as the Government acquire them? In that case clearly the Government are not concerned with the question of rises and falls in the market. May I further inquire whether, at some stage, the Minister should not consider the actual outright purchase of these stocks, as being desirable in view of the state of the market? Should he not exercise his authority to take outright possession, in cases where it would be an advantage in view of a possible rise in the market?

11.39 a.m.

Sir George Schuster

Looking at this matter from a business point of view, I think it is a very good thing that this question has been raised, and I am grateful to the right hon. Gentleman for the explanation which he has given of the sort of cases in which he will require these powers. What he has said, has made it clear that it is necessary that the Minister should have elastic powers of this kind. But certain things which have been said require, I think, further elucidation, and the point which I put to the right hon. Gentleman is this. I fully appreciate the fact that he may use these powers with great advantage in cases of the sort indicated by him, but if an occasion arises, when he considers it to be in the public interest that certain stocks should be held in excess of what people engaged in manufacture or trade would require for their normal business purposes, then I put it to him that it would be wise that those stocks should be held on Government account, and that there should be no mixing up of Government purchases with private business.

If the Government go to a firm and say, "We would like you, in the public interest, to increase your stocks of a certain commodity," the managers of that business may say, "We are prepared to use our machinery in the market for buying these stocks, but we would rather that you held them on your own account. We will buy them and hold them for you, but, as far as our own business; is concerned, we do not want to increase our stocks." If that situation arises, I think it will be right that the Government should take over and hold those stocks for its own account. Otherwise if large market fluctuations occur, difficulties are bound to be created. If there is a substantial rise, then there is bound to be the feeling that large profits are being made on stocks financed by the Government. If there is a heavy fall, the Government will be put in an undesirable and uncomfortable position. I put that suggestion to the Minister and I believe that it represents his intention. It is not a question of the Minister coming into the market when he thinks the price is favourable. This sort of Clause will be used when, in the public interest, it is thought desirable to hold stocks above the normal, of certain commodities. Where that involves going outside ordinary business requirements, I suggest that the Government should come in for 100 per cent, on its own account and, thus, any possible conflict of interest, or any uncertainty as to what the equities demand, would be avoided.

11.43 a.m.

Mr. Alexander

I hope that the Minister, in dealing with the obviously important point raised by the hon. Member for Colchester (Mr. Lewis) will retain a free hand. The whole question arises out of the variety of commodities which must, of necessity, be held from time to time for emergency purposes, either through the trade or directly on behalf of the nation. Some of these commodities are more perishable than others; some are more subject to world fluctuations in price than others, and some are much more difficult to store on private account than others. The essential thing is that, the powers being there, the Minister should have freedom to act, and the only warning that I would utter about it is that in a fluctuating world market for important commodities, there is often the possibility of artificial inflations of price if the normal market channels are open. That must be borne in mind even though you still adhere to the principle put by the hon. Member for Walsall(Sir G. Schuster) of the total storage commodities on Government account for the nation's purposes.

Amendment, by leave, withdrawn.