HC Deb 14 July 1948 vol 453 cc1325-36

10.12 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. Belcher)

I beg to move, That the Leather (Charges) (No. 3) Order, 1948 (S.I. 1948, No. 1312), dated 18th June, 1948, made by the Treasury under Section 2 of the Emergency Powers (Defence) Act, 1939, and Section 5 of the Supplies and Services (Transitional Powers) Act, 1945, a copy of which Order was presented on 22nd June, be approved. I am glad of this opportunity of saying something about this order, in view of the fact that, on an earlier occasion when the same subject came before the House owing to an unfortunate misunderstanding, the order was carried without having been discussed. I want to explain how sorry I am that that should have occurred on that occasion, and that it was not deliberately intended.

The principal order, the Leather (Charges) (No. 1) Order, 1947, imposed a charge due and payable to the Board of Trade on all stocks of cattle hides and skins, raw goatskins, rough-tanned kips, tanned goatskins and sheepskins used for footwear, and tanning materials and tanning extracts held by tanners, dressers and tanning extract manufacturers at the end of 1947. A second order, laid before the House on 19th March, postponed the date of payment of the charges until 1st July, 1948. The principal order was discussed by the House on 13th February, and I do not propose to go over the whole of the ground covered by my right hon. Friend on that occasion. However, I should like very briefly to explain the situation which has given rise to these three orders.

The materials to which I have just referred were sold by the Board of Trade up to the end of 1947 at subsidised prices. As from 1st January, 1948, the subsidies were withdrawn. From that date the Board re-sold native and imported materials without loss, and the leather producers and tanning extract manufacturers were permitted to charge increased prices for their products to cover the increase in the cost of the raw materials to them. This meant that every leather producer's stock of hides, skins, tanning materials and footwear leather, and every tanning extract manufacturer's stock of tanning materials and tanning extracts, appreciated in value to the extent of the increase in price of those materials. Accordingly, when they came to sell the resulting leather or tanning extracts at the new prices, they realised the stock appreciation as an additional profit. As has been said before in this House, this stock appreciation was in the nature of a windfall and accrued, moreover, from the material bought from public money and re-sold at a loss to the Treasury. It was, therefore, decided to collect it for the benefit of the taxpayer by way of the charge imposed under the principal order, which I have mentioned.

It was, however, realised at the time that leather producers and tanning extract manufacturers might need protection against stock losses in the future. My right hon. Friend indicated in the previous Debate that negotiations with the industry were taking place. Discussions with the trade have now been concluded, and it has been decided to give them the measure of protection which they require by collecting only one-third of the charge and by allowing the remaining two-thirds to be held in a special account by the individual tanner and other people concerned.

There is one exception to the arrangement, namely, tanned skins, where the amount to be collected was agreed with the dressers concerned before the principal order was issued and took into account all the relevant factors. The amount in this case is not affected. Except for this case, therefore, only one-third of the charge now becomes payable to the Board on 1st July, 1948, and the balance of two-thirds will be allowed to be credited by the individual tanner and other people concerned to the special account which he must open called the Leather Charges Order stock reserve depreciation account. An undertaking in approved form must first, however, be given to the Board as to the opening, crediting and debiting of this account together with the deduction of the appropriate tax, and it may then be used for meeting future stock losses as and when approved. This arrangement applies only where the total charge is over £1000. Where it is £1,000 or less, two-thirds of the charge is remitted without requiring the creation of any special reserve.

The Leather (Charges) (No. 3) Order, 1948, brings these modifications into effect by amending the principal order where necessary. There are certain other concessions. Long process material, other than tanned skins, where the material is in process for six months or more, is to this extent removed from charge, and the charge is modified in respect of hides used for leather for exports under contracts made before 1948 and executed before 1st October, 1948, where the price realised is less than the corresponding approved maximum footwear leather price ruling on 1st July, 1948. The method of calculating the charge for raw hides and skins in process for bottom leather is revised in favour of those processors who are able to identify the stock while in process. The basis for calculating the amount of process stock is also modified to remove any undue hardship in calculating the process stock for those tanners who do not produce the same number of pinned shoulders and pairs of pinned bellies, as they produce sole leather butts or pairs of bends. Finally, certain minor corrections are made in the First Schedule to the principal order.

I am pleased to say that these arrangements have been discussed at considerable length with the trade and have been accepted by them. It is estimated that the total amount of the charge will be about £8,250,000, of which £2,750,000 will accrue to the Exchequer and the balance of £5,500,000, less tax, will represent either amounts remitted or credited to the stock reserve depreciation account to which I have referred. I believe that this is a substantial concession, and it indicates our desire to be fair to the industry while at the same time meeting our responsibilities to the taxpayers. As such, I hope that the order will meet with the approval of the House.

10.21 p.m.

Mr. Odey (Howdenshire)

First of all, let me declare my interest. As a tanner I have a very lively interest in this order, and I should like to thank the Parliamentary Secretary—and, indeed, the Government—for the fact that although a slight misunderstanding, which we were at great pains to prevent recurring tonight, prevented a discussion on the No. 1 Order, the Government provided time for a subsequent discussion.

The Parliamentary Secretary has explained that this order is really an amendment of the No. 1 Order, which was issued on 30th December, 1947 I have no desire to delay or weary the House by repeating the arguments employed on this side of the House when a discussion took place on the No. 1 Order. The short point is that this order is a great improvement on the No. 1 Order, because under the No. 1 Order the Government took to themselves the power to take the whole of this appreciation, whereas under the present order they have reduced their demands to one-third. The President of the Board of Trade, when referring to the No. 1 Order on 13th February, said that it was decided to collect the appreciation in prices"— which arose from the removal of the leather subsidy— by statutory order for the benefit of the taxpayer. We realise that the leather producers and extract manufacturers may need some protection against stock losses in future."—[OFFICIAL REPORT, 13th February, 1948; Vol 447, c. 766.] Since that Debate there have been, as was envisaged, discussions between the Board of Trade and the industry, and I am happy to say that, as the Parliamentary Secretary has already indicated, this order represents an agreement that has been reached as a result of those negotiations. But the most important point I wish to stress is that the two-thirds of this profit which is retained by the industry will, under this order, be set aside as a stock reserve; and that was precisely the point the industry has endeavoured to make throughout all these negotiations.

I want to make it quite clear that any hon. Members opposite who suffer under any sort of delusion that this was some sort of nest-egg, and that the tanning industry were endeavouring to put it into the pockets of their shareholders, can disabuse their minds of that impression immediately. This money is required to see that when prices fall, the advantage of those falling prices is passed on immediately to the general public. This stock reserve which is being created is intended for precisely that object. Under this order, this reserve cannot be expended until the Board of Trade give approval and the President of the Board of Trade says that a fall in hide prices has taken place, a fall which should be passed on to the general public, for which purpose this reserve has been expressly created.

I must reiterate the point that the one-third which the Board of Trade are retaining for the Treasury has no logical basis whatever. In point of fact the whole of this reserve will be needed, and I should like to explain why. When, eventually, either this Government or some more intelligent Government introduce de-control, the tanner will be called upon to take up the risk of the hides in the pipe-line, and bearing in mind that the tanner always sells on replacement value, he will be expected to reduce his prices when any fall takes place in the price of his raw materials. He will be expected to reduce his leather prices simultaneously with any drop in his raw material prices, and he will have to carry the risk for the raw materials in course of shipment.

Today, under control, he is able to take over these hides from the Government at a United Kingdom port, but when de-control arrives, he will have to buy his supplies in South America, South Africa or Australia, and will be called upon to carry the risk of a fall in prices while these goods are on the high seas. Therefore the logical thing would undoubtedly have been to place the whole of this amount to reserve. Members opposite should realise that what is involved in this order is the future financial stability of an industry, and that when an industry comes to bad times it is not only the shareholders but the workers who suffer. I hope, therefore, that no one will look at this matter in any narrow way. It would be churlish and possibly verminous not to say "Thank you" for such concession as we have. We have to say "Thank you" for two-thirds of an appreciation which undoubtedly belongs to the industry, but we say "Thank you" gracefully for what is really our own.

10.24 p.m.

Mr. Attewell (Harborough)

This order was introduced by the Parliamentary Secretary with apologies for the fact that the No. 1 Order had been carried without discussion. The Parliamentary Secretary gave a resumé of the history of the three orders. I also propose to give the history of the three orders, from the point of view of a back bencher on this side. This order raises an exceedingly vital principle, and a fair amount of money is at stake—over £9,500,000 given in subsidies to a single industry under capitalist control. The hon. Member for Howdenshire (Mr. Odey) has declared his interest, and it would be well for me to declare mine. I am a trade union officer in the industry.

I agree with the hon. Member that this matter involves the future stability of the industry, and I would remind him that he should be able to speak with firsthand facts about an industry that was broken after the first world war. As he knows, his own business failed to pay dividends for fifteen years following the first world war. The business lost £1 million. The figures I have given were declared publicly at a meeting by the hon. Member for Howdenshire and therefore he can have no objection to my using them. The position today is that both his own firm and another firm were mentioned in the "Financial Times." as having paid a dividend of 25 per cent. and 50 per cent. respectively.

Mr. Speaker

The hon. Member must not deal with individual firms, but must get back to the order. We are discussing the order and not matters outside that.

Mr. Attewell

I was attempting to reply to the statement made by the hon. Member for Howdenshire. I am sorry if it is not in Order. The Leather Charges Order was the principal order, and then a second and a third order came along. It is a serious thing that three orders covering the same situation should be introduced within six months. The second and third were introduced because of the pressure of the tanners both inside this House and outside. I do not say that is not permissible.

When we last discussed this matter, the sum at stake was estimated at £8,250,000. What are the actual facts? May I draw the attention of hon. Members to the accounts published on 11th May, 1948? On page 13, under item 32, it says: "Trade Accounts and Balance Sheet, 1946–47—"and this fact has not been mentioned either by the Parliamentary Secretary or by the hon. Member for Howdenshire, and it is important— The loss of £9,624,403 on trading represents the subsidy incurred under the war-time stabilisation policy, after taking into account a profit of £617,000 on native hides purchased from the Ministry of Food below the prices for imported hides. This is very relevant, Mr. Speaker, because unless one grasps the whole of this matter one will be led away by the case which has been put here tonight in justification. I maintain that there is no justification. I say that the words which I am going to read show that it was taxpayers' money which was handed to these people. The document says: Under the scheme for stabilising leather prices adopted in 1942, hides and skins were sold to the trade at prices fixed quarterly in lieu of trading results with a view to allowing tanners and dressers a profit of 8 per cent. on capital employed. These periodical adjustments failed to restrict profits to the target figure, and during the first three years of the scheme the excess, by agreement with the trade, was partially recouped by means of retrospective surcharges. If I can interpose again, that adjustment goes to prove that the policy has been to pay back this extra—that is, the large surplus of profit above the 8 per cent. allowed. The document goes on: In 1945"— Note the date, and how smartly they got off the mark when the war was about to finish— the tanners gave notice to terminate the scheme, stating that it was inappropriate for peace time. This was agreed to by the Government Department, but the trading results continued to rise. Notwithstanding the steady increase in the prices of issued hides, and the increase in overheads, the profit was much above 8 per cent. The profits made by leather tanners at 31st May, 1947, reached 30 per cent. on capital employed. Discussions with the trade took place with a view to reducing drastically the profit margin so that it should conform more closely to the figure of 8 per cent. This is actually in the auditor's report and therefore, although I accept your Ruling, Mr. Speaker, you can see why I was led to take the profits which have been made as some justification, in the face of this particular document issued to this House.

Mr. Odey

Does the hon. Member appreciate that the profits to which he has been referring have nothing to do with the profits which arise under this Charges Order?

Mr. Attewell

I am coming to that. I made it clear that the industry lost nothing whatever up to that date. What is more, I am able to prove that firms were able to form their own private funds. The hon. Member's own firm did. It put £100,000 into a special fund.

Mr. Speaker

The question of a private fund has nothing whatever to do with the order.

Mr. Attewell

May I read from HANSARD the report of the speech of the hon. Member for Howdenshire, because it gives his case, the case of the tanners. Hon. Members can then compare that case with the case put forward by the Parliamentary Secretary. This is the case which I hope to destroy in a few moments. This speech was made by the hon. Member for Howdenshire on 13th February, 1948. He said: If, however, this subsidy is paid over by the trade as a result of this order, the industry will, in effect, cease to sell on replacement but will be forced, with the agreement of the Government, on to a cost-plus basis. The net result of this would be that these dear stocks, which stand at an all-time high record for price, would have to be consumed before leather prices were lowered. There is every indication in the United States that the price will fall and that the unfortunate general public of this country will be continuing to pay high prices for leather when they would, in the normal way, have received immediate relief as, and when, the raw hide market declined."—[OFFICIAL REPORT, 13th February,1948; vol. 447, c. 760.] Has the raw hide market declined? It certainly has not and the hon. Member for Howdenshire knows that the "Shoe and Leather Record" has a report of his speech given to a caucus of the Conservative Party only last week or the week before, in which he proved to the hilt that the high prices had not sunk and they were still as high as they were before. Therefore, the fears that the stuff would fall have not materialised, which is vital to remember. Why is it vital to remember? Because this—9½ million, two-thirds of which is to be put into a special fund, is to act as a buffer when the price falls. This was decided on 1st January, and six months have now passed. Almost without exception, every bit of hide that was in at that particular time has now passed through. If we take seven months as the period through which we have to pass, there is only one month remaining before the traders can claim a legitimate right to use this sum as a buffer.

Mr. Odey

The hon. Gentleman must bear in mind that there is not the slightest prospect of the price falling while the Government operate bulk purchasing conditions.

Mr. Attewell

If that is so, there is not the slightest necessity to give this two-thirds, and that is precisely my case. But let us see what the President of the Board of Trade said in the same Debate. I can understand the President of the Board of Trade not being here tonight, but I think I am entitled to quote what was the opinion of the Board of Trade at that time. Let us see what has caused the change since the last time we discussed this matter here. The President of the Board of Trade said: These matters have been fully gone into by our officials and have been discussed on many occasions with the hon. Member and other representatives of the industry. As an aside, I might say that the hon. Member referred to is the hon. Member for Howdenshire. My right hon. Friend goes on: These subsidies, as the House knows, were introduced for hide, skins, tanning materials and leather at various times from 1941 onwards to keep down the price of leather for footwear and repairs as part of the general policy of stabilising the cost of living … Since January, 1948, … the leather producers have correspondingly been allowed to charge increased prices for their leather to cover the increase in cost of the raw materials to them. What did happen? On 1st January the tanners put up the price of their leather to the whole of the boot and shoe manufacturers and repairers throughout the country. When it is remembered that up to 80 per cent. of the leather was subsidised, from 1st January up to now that particular stock has passed out into use with the extra price being charged on it, which, of course, gives an increased profit. That is the point about which I am concerned. It is those six months about which I am talking. What did the President of the Board of Trade have to say about who owned this money. He had no doubt as to who owned it. This is what he said: This means that every leather producer's stock of hides, skins, etc., will appreciate in value to the extent of the increase in the price of those hides, etc., compared with the previous period. When he comes to sell the resulting leather at the new prices, assuming they are still above those of the earlier period, and these new prices are in course of being checked and are operating at the moment on a provisional basis, this stock appreciation will be realised as an additional profit. I do not think that the hon. Member would disagree when I say that this stock appreciation is very much in the nature of a windfall."— That is, a windfall of over £100,000. Then he goes on: I am quite sure the House will agree that I should not be discharging my duty to the taxpayer if I allowed these windfall profits to be retained without question—profits which have been made at the expense of the taxpayer. I think I have made it clear that the money was raised as a result of the appreciation in value of stock paid for with public money."—[OFFICIAL REPORT, 13th February, 1948; Vol. 447, c. 763–7.] I now turn to the third order, to which I object, as I have said, because it takes away two-thirds of the £9,500,000. They have no right to it: they cannot claim it to be used as a "buffer" fund. This is taxpayers' money which is being given to an industry without justification. Moreover, there is another point relating to the question of Income Tax. Here I may be wrong or at fault—if so, I shall be willing to withdraw—but as I see it, the position is that instead of their deducting the amount which should be payable as Income Tax before charging the profits, I understand they will take all Income Tax demands away from the fund before it is split up. If this is so, I think it is wrong; but in any case, I should like the point to be made clear.

Mr. Belcher

Perhaps I might interrupt my hon. Friend, to say that that is the case.

Mr. Attewell

If so, it does not look right to me. It ought to have been deducted as Income Tax in the first place. I appreciate the tolerance of the House and agree that I may have spoken with a little heat and not made myself clear on certain points, but in this particular matter, I feel that the Department have fallen down and I sincerely feel that they have been too generous to the industry and have done more for it than it had a right to expect; for, after all, £9,500,000 is a lot of money.

Mr. Lennox-Boyd (Mid-Bedford)

It is not for me to defend the Parliamentary Secretary against the attacks of his back benchers, nor to explain why it has taken three orders to enable the Government to arrive at a sensible decision. After all, we have 2,000 orders a year, and for the Government to have reached a sensible decision in three is quite good for them. They have said—and we agree with them—that this sum will go to a stock reserve to be available for use when hide prices fall, and it will, therefore, be of advantage to the tanners, of advantage to their workers, and eventually to the advantage of the consuming public as a whole. We wish that the whole sum had been allowed to be put into the stock reserve. As the Government are only taking one-third of private citizens' profits, we think the trade has not been too bady treated and we do not propose to divide against this order.

Resolved: That the Leather (Charges) (No. 3) Order, 1948 (S.I., 1948, No. 1312), dated 18th June, 1948, made by the Treasury under Section 2 of the Emergency Powers (Defence) Act, 1939, and Section 5 of the Supplies and Services (Transitional Powers) Act, 1945, a copy of which Order was presented on 22nd June, be approved.

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