TOBACCO (DOLLAR EXPENDITURE) (Hansard, 27 March 1947)

§ Mr. M. Philips Price (Forest of Dean)
I want to raise the question of the way in which our loan from the United States is being spent, particularly in relation to expenditure on tobacco in dollar countries. On 28th January, in reply to a Question from me and two hon. Members opposite, the Chancellor gave certain figures, and he told us that between July and December, 1946, £39 million had been spent on tobacco in the United States, which figure amounted to just over 32 per cent. of the total amount in that period expended from the loan. A note was given, however, that, of course, the purchase of tobacco from America is seasonal and that this rate of expenditure might not be the same throughout the whole year. Nevertheless, I suggest that the figures as my right hon. Friend gave them are distinctly alarming. At a time when we ought to be spending—indeed, I thought this was the only reason the loan was taken—dollars for the purchase of goods to create more goods, in other words, machinery, we are spending that amount, and incurring a debt to that extent, in order to purchase a commodity which only goes up in smoke.
A few days later, I put a Question to the President of the Board of Trade in regard to one particular aspect of the same question, our purchases of tobacco from Turkey, and he told me that we were already buying as much as the market could absorb from that country. I suggest that in these days when the questions of our dollar resources, balance of pay- 1522 ments and general currency difficulties are of the nature which they are, to give a reply of that sort is not satisfactory, because it seems to savour too much of the Manchester school of free trade, that supply and demand are the sole factors which govern the markets and the purchases of the country. I think that in this respect public opinion is possibly in advance of the Government. I saw reported in the "News Chronicle" a day or two ago the figures which have been taken out by the Institute of Public Opinion. A sort of Gallup Poll was taken. In that poll 70 per cent. of the people who were asked considered that the American loan should be expended primarily upon machinery, certainly in preference to expenditure on tobacco or films. Moreover, that percentage of 70 per cent. declared themselves ready to consume less tobacco, if it was a question of that or machinery. Possibly, however, the Board of Trade is more concerned about this matter than the answer to the Question which I put seemed to indicate. I hope that that is so. My object tonight is to ask for information on this matter.
What are the alternative sources? Can we supply our people with tobacco without putting too great a strain upon our dollar resources, or prejudice the purchase of machinery from across the Atlantic? First, to take the Empire, what are the resources upon which we can draw? Can we expand our purchases from that quarter? The Colonial Empire in Africa is now producing a certain amount, particularly Rhodesia. I know there is difficulty in rapid expansion there, because of the labour resources, which are not unlimited. But I understand that it is possible to grow, in Rhodesia, the very same kind of tobacco which is grown in Virginia and the Southern States of the United States, in other words the so-called Orinoco white-stemmed tobacco which makes the famous brands which we get from the United States. They grow in Rhodesia. Possibly, the climate may somewhat affect them and make them not quite so palatable, but there is not a great deal of difference. It is extremely important that we should, as quickly as we can, do all we can to develop this Empire-grown tobacco. If Rhodesia is limited, can my hon. Friend the Secretary for Overseas Trade give us any indication of any alternative sources within the Colonial Empire?
1523 I pass from that to the countries outside the Empire, but which are nondollar countries and which produce tobacco. The greatest sources of tobacco from countries in that category are, of course, those round the sea-board of the Eastern Mediterranean—Greece, Macedonia, Bulgaria, Turkey and Egypt. These are countries of no inconsiderable importance to us, and the possibility of doing trade with any of these countries is one which we ought to explore to the full. I know the difficulties so far as tobacco is concerned. Tobacco from those countries does have a certain taste or aroma which our people do not now like. That is only a recent development. I can remember the time when no one smoked anything else but Turkish and Egyptian cigarettes and tobacco. I know that we have acquired, since the first world war, when Turkey was in the war against us, a taste for American tobacco. I know also that tobacco from many of these countries in the Eastern Mediterranean is difficult to collect. It has a small leaf, it is not so easily handled, and it is grown on small farms and smallholdings, not planted out in large plantations. Yet it was from there we used to draw our main reserves.
The other difficulty is that the price is higher. I suggest that at a time like this that should not play a very important role. In order to save dollars, it may be necessary that this higher price, this extra tax, should be paid because our national income, on paper at least, is £1,000 million a year greater than the actual material wealth which we are producing. That might be one of the means by which we deal with inflation. In any case, I do not think that the Chancellor would be much concerned by a small loss through the higher price, if, on the other side, he was able to say that he was spending less of the dollar loan, which to him is a most important consideration.
I suggest that it is better to take action now than to wait until a dollar crisis is upon us. I am certain that we are not in a position to go on spending at the rate of £39 million every six months from this source. I see that in the Economic Survey for 1947 a sum of £50 million is foreshadowed as expenditure on imported tobacco from all countries. I do not know what percentage of that will come from the dollar or non-dollar countries. It 1524 does not appear that there will be much change in that respect for 1947. I admit, of course, that this difficulty in regard to taste and aroma of tobacco from the Eastern Mediterranean does exist, but I know that there are people who are still able to smoke tobacco from this region. If it is put to them that it is a patriotic duty to do so, and that they are saving dollars in the process, I am sure that such a request would meet with a good response.
There are many people who literally cannot smoke this tobacco because it would cause discomfort owing to the fact that they are so used to smoking American tobacco. For them, I suggest that blending would meet the case. Experiments have shown that if 5 per cent. of Turkish or Egyptian tobacco is mixed, it is very difficult to detect the presence of it except in the case of those people who have a very sensitive taste. If a higher percentage is used, there is a slight aroma, but it is a fact that in the United States there are brands of tobacco and cigarettes, such as "Chesterfields" and "Lucky Strikes" which contain up to 15 per cent. of tobacco from other countries and they are very widely smoked.
What is the position in regard to the country where possibly we would do the most business, namely, Turkey? During the war we had a sort of gentleman's agreement that we should mix up to two per cent. of Turkish tobacco in our blends. This was done throughout the war. Also, we have another arrangement with Turkey based on a loan which we gave to that country in 1937. The arrangement is that that loan is being repaid to us gradually—the interest and sinking fund—by our taking so much every year of Turkish tobacco. The gentleman's agreement lapsed at the end of the war, but the credit arrangement with Turkey continues. I understand that there is in bonded store in this country a very large quantity of Turkish tobacco which is not blended. It appears that with the lapsing of this gentleman's agreement the two per cent. blending which went on during the war has stopped. We could very easily go up to five per cent. and still not make any real difference to the effect on the palate of the smoker. I have heard reported in the Turkish Press recently that 12 million cigarettes from that country have been ordered to go to the West. I hope that that is the beginning of a 1525 change in policy which will enable us to do something to meet the demand which, I think, is imperative. I realise, of course, the public taste being what it is, that we cannot take an unlimited amount from this area, but I ask that what we can take we should take to the full. I am not satisfied that that amount is really being taken. After all, we have also to consider our export trade. At the moment there is no great necessity to expand our export trade to the soft currency countries and we ought to try to sell everything we can to the hard currency countries, so the export trade with Turkey is of less consequence perhaps than that with the dollar countries. Nevertheless we ought now to be thinking of building up good will in those countries with a view to export trade with them as soon as we possibly can. It therefore boils down to this. An important contribution can be made to our balance of payments and our dollar resources by adopting the slogan, "Buy Empire tobacco and take as big a percentage of Turkish and Eastern Mediterranean tobacco as is possible in our blends." The public has a right to know what the Government are thinking and prepared to do in this matter.

§ Mr. Harold Wilson (Secretary for Overseas Trade)
In the time I have left I would like to try to answer as many as possible of the points raised by my hon. Friend. In the first place, he would be wrong in thinking, if he does, that we do not regard this subject with some concern. He quoted some figures on the amount of tobacco bought with dollars in the second half of 1946. I should like' to correct the impression which might be obtained from those figures—though I know my hon. Friend is aware of the difficulty in this' connection—the impression that we are importing American tobacco at the rate of £39 million in every six months, that is, about £80 million a year. As my right hon. Friend the Chancellor of the Exchequer said in the reply which my hon. Friend quoted, there is a heavy seasonal element in the latter part of the year. Our imports from the United States for 1946 amounted not to £78 million or £80 million, but to £55 million, against imports from all sources of £65 million, but against that figure—

§ Sir Frank Sanderson (Ealing, East)
Can the hon. Gentleman say whether it is 1526 correct or not that we have expended 32 per cent. of the dollars up to date on tobacco?

§ Mr. Wilson
I am just coming to that. Before I deal with that point, I was saying that we can set against that figure of £65 million the re-export of cigarettes and other tobacco manufactures of £18 million. Whereas in the second six months of 1946 it was true that 32 per cent. of dollar expenditure was on tobacco, that was in the period of high seasonal purchases, and the figure for the year as a whole was 25 percent.—which is a very high figure, I agree. However, it would be wrong to think from this that this represents our idea of priorities—tobacco versus the machinery to which my hon. Friend referred.
As I explained to the House on Monday evening, expenditure on such things as machinery, foodstuffs and so on which we would like to be getting in larger quantities and in larger proportions is as low as it has been, not because we have been giving priority to tobacco and films but simply because of the sheer inability to procure machinery in the face of very great domestic competition in the United States.
Taking these very high figures, how can they be reduced? The first idea might be that of restricting overall consumption. In this connection I repeat what the President of the Board of Trade said on 10th March, that the Government have no intention of introducing tobacco rationing, at least for 1947. Another alternative which was stressed by my hon Friend was that of substituting more Turkish or Greek tobacco or, indeed, Rhodesian tobacco, to which he made some reference. It is important to get the figures from these sources of supply in some perspective. Our total requirements of imported tobacco leaf, including, of course; requirements for re-export in manufactured form, are over 300 million lbs. a year. Against this, our imports from Turkey in the immediate prewar years were- only between 500,000 lbs. and 1 million lbs. Last year, 1946, we took 3 million lbs. from Turkey, and it is a fact that, even during the periods of severe shortage of Virginia cigarettes, it has been difficult to persuade people to take the Oriental types and they have, as we all know, gone without cigarettes and have left Oriental cigarettes in the shops.
1527 With regard to the proposal about blending, I started with some strong prejudice in favour of the maximum possible blending of Oriental tobacco. I am fond of American blends of cigarettes myself, and I know a lot of my friends are, though I have many friends who do not like them at all. The question was whether we could follow the American habits in this respect. We have made a number of inquiries into this. The possibility of blending is certainly there; it is possible, but it reduces considerably the output of cigarettes while changing over, and at the present time the difficulty of getting cigarettes manufactured would make that rather a serious thing. It involves extra processes, and I am afraid it would mean having to introduce new machinery into the cigarette factories.
My hon. Friend's figure of 15 per cent. admixture of Oriental tobacco in the American blend is not quite correct; I think it is more true to say, from the kind of brands he was mentioning, that it is between 3 and 5 per cent., and the sweet flavour which he and I like is due not so much to the Oriental tobacco but to the inclusion of a number of other things such as molasses, honey, glycerine, apple juice, sliced apple, and various other things. So far, the inclusion of such substances in cigarettes is forbidden in this country by the adulteration laws, and in any case a number of the things which I have mentioned are not very easily obtainable at present.
My hon. Friend referred to the gentleman's agreement to introduce a 2 per cent. blend of Oriental tobaccos in wartime, and I think it is true to say that the public hardly noticed this. It is true that, as he said, this lapsed at the end of the war, but discussions are now proceeding whereby the tobacco manufacturers are taking over the Government's stocks of Turkish tobacco to which he referred, and they are going to put them into use and restore the wartime proportion of 2 per cent. So, looking at the Oriental tobaccos, I am afraid that in the case of Turkish, at least at present, it is a question of the unwillingness of the public to take even the present figure, which represents only one per cent. of the total tobacco imports. As for the Greek tobacco, we are very keen to have this and in fact we made a special purchase of 10 million lbs. last year, but 1528 I am afraid the Greeks are having the greatest difficulty in delivering even this small amount.
Turning briefly to Rhodesia, there is theoretically more scope for, substituting Rhodesian tobacco than the Oriental tobacco, because the Rhodesian crop amounts at present to about 40 million lbs. a year. We have been considering the question of trying to develop it, and to try to step up our purchases, but there are considerable technical difficulties about this which we are studying all the time. The existing high prices are an inducement to the Rhodesian producers to increase their production, but we have to go rather carefully because the effect of that under present conditions is to reduce food production in that country, which we are greatly anxious to avoid.
The purchases of all these tobaccos, of course, are made by the tobacco manufacturers in this country, they are not made on direct Government account. Rhodesian tobacco enjoys a considerable margin of preference, and therefore manufacturers have every inducement to get all they can, subject to getting reasonable terms as to quality and price, and I think the point of quality wants to be stressed no less than that of price. We are just as concerned as my hon. Friend at the outflow of dollars, and we have great sympathy with the general arguments he put up—they have been much in our minds in recent months. I can assure him that we shall continue to keep the subject under close review and to do everything possible to deal with it, but I am afraid that so long as the public smoke as much as the public is at present smoking—and, as I have said, we are not proposing to introduce rationing—there is a limit to what can be done on the lines which we have been discussing tonight.

§ Mr. Christopher Shawcross (Widnes)
My hon. Friend referred to re-exports. Are not these largely represented by sales in British ships duty free, and exports to our Armies abroad and so on?

§ Mr. Wilson
They are partly represented by that. A considerable number are going to N.A.A.F.I. stores abroad and for sale on ships, but by far the larger proportion are going in the form of genuine exports to both, hard currency areas, and soft currency areas.