§ Mr. Oliver Lyttelton (Aldershot)
Few hon. Members who take a special interest in the cotton industry will think that a Debate on the subject of raw cotton prices is out of place today. I fear that it will be necessary for me to be rather critical, and if hon. Members opposite like to think that this is dictated by party reasons, they are welcome to do so. Actually I would much prefer to enjoy the Parliamentary luxury of silence and to see things being better done. However, this afternoon we have thought it opportune to set aside half a day of Opposition time to discuss raw cotton prices.
Let me begin at the beginning and go to the source of Fabian wisdom and there drink a cup of clear, pellucid Socialist doctrine. [HON. MEMBERS: "Hear, hear."] It may not be so agreeable when hon. Members hear what it is. The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton), the former Chancellor of the Exchequer, when acting in the part of Robespierre for which he has cast himself in relation to the Liverpool Cotton Exchange, made some very striking remarks. Here is an extract from them. This is from a speech by the right hon. Gentleman in this House on 28th March, 1946:If we take the so pre-war years and consider the fluctuations "—668 that is, in the price of cotton—over the yearly periods, we find that in no fewer than five out of these so years there was a fluctuation between the highest and the lowest price in the course of the year of 45 to 65 per cent., and in one year the range was even greater than that—it went up to 66 per cent. I venture to say that that is far beyond any fluctuation that can be justified by the weather or the boll weevil."—[OFFICIAL REPORT, 28th March, 1946; Vol. 421, c. 658.]Later in the year we had the right hon. Gentleman the Paymaster-General, that rather mysterious figure. The right hon. oracle from Cardiff added his voice to his friend's thunder. He said that under the assistance of the Raw Cotton Commission:Lancashire spinners will be assured of a long-term stability in the price of their materials unequalled in any other country where their competitors are established."—[OFFICIAL REPORT, 2nd December, 1946; Vol. 431, c. 48.]Earlier in the same Debate, he said:Today we are proposing to make permanently available to the industry the modern method of centralised and large-scale buying."—[OFFICIAL REPORT, 2nd December, 1946; Vol. 431, c. 42.]I am sure that in reading these remarks I shall have had the attention at least of hon. Members opposite who will be shocked again to be reminded that in five out of 10 years between the wars there were fluctuations of from 40 to 60 per cent. in the price of raw cotton. Of course, the Government, according to the Paymaster-General, and the former Chancellor of the Exchequer were going to stop all that kind of nonsense, but what has happened? In less than four months of 1948 under the Government's system of bulk purchase, some cotton prices, that is, the prices for some important growths of cotton, have already risen by over 100 per cent., and in the case of one important growth by 126½ per cent. If this is the Paymaster-General's idea of stability, I wish he would give us a bit of fluctuation.
§ The President of the Board of Trade (Mr. Harold Wilson)
I am sorry to interrupt the right hon. Gentleman, but since he is giving these very interesting statistics in relation to the ten years before the war, is he going to give the figures for 1918, 1919, 1920 and 1921?
§ Mr. Lyttelton
I am only selecting the exact period to which the Chancellor of the Exchequer referred when making his claims about stability. That is all. Of course, at another time I shall be only too glad to go back to 1848 or any other date, but what governs those ten years is that they were the period selected by the former Chancellor of the Exchequer to justify in the cause of stability the abolition of the Liverpool Cotton Exchange.
On this matter I have a few figures here about these fluctuations. The particular growth which varied by 126½ was Karnak. The price on 22nd February, 1948, was 25.25 pence a lb., and on 10th May it was 57.25, at which price it remained at 31st May. However, there is something more in it than these violent fluctuations in price over four months which I ask the Committee to notice. The point is the fantastic alterations which, under the present system of bulk buying and of Government control took place overnight, and that at the behest of, I think, two men.
The spinner of Karnak cotton who left his office on the evening of 21st March, 1948, left it with the price of his raw material quoted at 39.25 pence per lb. When he arrived at the office on the 22nd, he found the price was 55.25d. I could give many other instances but I would not like to weary the Committee with them. The same thing has happened, but not in such an exaggerated way, in regard to American Middlings and Ashmouni. The Ashmouni prices are particularly interesting. On 9th May, Ashmouni was at 33.75d. a lb., on 10th May, 44.75d. a lb. and on 31st May it fell again to 39.75d.
§ Mr. Lyttelton
These are the selling price charged by the Raw Cotton Commission to the spinner in Lancashire.
§ Mr. Lyttelton
Certainly. I will come later to the point whether they are world prices or an attempt—and an ineffective one—to follow the world prices up and down. The point I am making is a more 670 limited one, that instead of these fluctuations for good or bad taking place gradually and enabling everybody in the trade to hedge and protect themselves from day to day, under this system of Government bulk buying and Government selling these changes took place overnight.
I am not trying to be controversial, but how can a successful industry, and particularly an export industry, be founded on such shifting quicksands as this so that no one knows where they are? How can manufacturers make firm forward prices, particularly for finished articles and woven goods, when the whole foundation of their trade is altered arbitrarily in a single night? I would remind the Committee that when the Liverpool Cotton Exchange was open fluctuations of 1d. per lb. in a day were a very rare occurrence. It is not too much to say that stability of the Paymaster-General's variety leads to overnight fluctuations 12 times as great as the maximum reached except on the rarest occasions in the free market.
Of course, it is one of those strange and immutable facts that Governments cannot stabilise market prices, particularly of an agricultural crop, without spending vast sums of the taxpayers' money or, alternatively, without supplying the spinners with cotton at above the world price. So far, the Cotton Commission must have made money on their purchases of cotton. Any tom-fool who bought during the world-wide inflation any basic raw material of this kind must have made money. The private speculator would take this opportunity of getting out; the Government, unfortunately, cannot do so, because they have undertaken the obligation of supplying the industry with the cotton that it needs. It therefore must remain an uncovered "bull," unless it is willing to hedge. I ask the Government, not for the first time, and in the hope of receiving a different answer from that which I received on the last occasion, whether they have been "hedging" against any of their "bull" position in cotton. Surely, we are entitled, when so much of the taxpayers' money is at stake, to an unequivocal answer on that subject? Have the Government sold any cotton for future delivery on the New York Cotton Exchange?
671 At least, I know, and I shall be prepared to produce the evidence, that British firms who bought cotton through their branches abroad have been permitted to "hedge" in New York and have had made available to them dollars to pay both the commission and any difference they may have incurred in putting out that "hedge" in New York, at a time when their own domestic facilities were no longer available to them. I know that that is a fact. Are the Government following their example by "hedging"? If they have "hedged," it shows how necessary it is for the proper working of the cotton industry to have a futures market, and, if they have not, I warn them now, and I believe it is for the last time, that the losses incurred when cotton prices turn downwards, as they certainly will, will not only wipe out any of the quite adventitious gains by the Cotton Commission but formidable sums of the taxpayers' money besides. No doubt the present Government hope they will not be there to tidy up this position, and it may be that high cotton prices will last out the present Government. Of that I am not quite sure.
Following hard upon this record of ridiculous and humiliating failure, the whole intellectual or theoretical foundation for the Government's argument has gone by the board, and it was interesting to note this very afternoon that the President of the Board of Trade was anxious to say so again. Let me explain to the right hon. Gentleman. I challenge anyone to deny that the reason advanced by the Government for the closing of the Liverpool Cotton Exchange was in the main the idea that they wished to have stability of price. That has been repeatedly stated; that was why they were getting rid of the Liverpool Cotton Exchange. I have shown how that has worked out in practice. They said that a wise, skilful and beneficent Government were introducing a Whitehall calm into the troubled seas of cotton prices. A lot of experience has shown that that argument has gone by the board, and that the intellectual basis has also gone, because the Raw Cotton Commission on 23rd February this year announced that in future they would sell cotton at approximately replacement prices; that 672 is, their selling price would be the equivalent of that price at which they would repurchase outside.
The President of the Board of Trade supported this policy very strongly in his remarks recorded in HANSARD of 12th May. Selling cotton at approximate replacement prices means, in fact, following world prices up or down as nearly as possible. Gone, then, for ever is the argument with which we have been previously regaled that a wise British Government were going to have a stable price of their own. Gone are the arguments which condemn the fluctuating element admittedly inherent in the free market. All these are gone. Now, in their place, we have a plain statement that the Raw Cotton Commission must follow the world price up and down as best it can.
I would ask hon. Members to remind themselves of the fact that, once upon a time, it was the Liverpool Cotton Exchange which made the world price. Now, it is New York, and perhaps other less important centres. At the end of a couple of years of this experiment, the verdict to be passed on the Government's policy is this: when Liverpool made world prices, we said it was evil that spinners should have to follow the fluctuations of the market, and for that reason we abolished the Liverpool Cotton Exchange, but, once having abolished it as a market, we consider that it was only wise that spinners should follow the fluctuations of the world market fixed outside our shores. If that is not a bankruptcy of policy, I do not know what it is. Having confessed, and having almost gloried in the confession, that the Raw Cotton Commission must follow the world market, let us now examine how they are doing it, and, again, I must go back to the beginning.
In the past few months, we have been treated to some unctuous and even condescending homilies on the Lancashire industry by the right hon. Gentleman. He has been stressing, and I think rightly, the great part which the Lancashire cotton textile industry is called upon to play in increasing our exports. I quote from a statement which I have selected almost at random from many. It is as reported in the "Financial Times" of 3rd June:If we were to pay our way abroad, all the fextile industries would have to export 673 at a rate considerably above pre-war, and home needs would be far greater than pre-war. Mr. Wilson described the problem of how to reduce costs of production and how to sell textile products abroad as of fundamental importanceI do not think there is anybody in the Committee who does not agree with these sentiments, but they sound hollow to the point of hypocrisy when we come to examine what the Government, who have a stranglehold on cotton prices, since all cotton is bought centrally and distributed centrally, is doing to help the export drive which they are so continuously and so rightly urging.
I must be quite fair in this matter. It is true that over most of the last 2½ years, the cotton spinning industry has bought cotton at below the cost of replacement. This has been happening, that is to say, this subsidy has been given, at a time when the market was entirely a sellers' market, and when it was a matter of production which governed the volume of sales and not a matter of price. Now, when the sellers' market is beginning to fade, and when we are daily told that a buyers' market in textiles is about to supervene, that is the moment which the Government chooses to allow the price of cotton to rise until it has crossed the price at which the foreign competitors of Lancashire spinners are able to buy their raw materials. In all growths, with the exception of some Egyptian and Peruvian styles, the Raw Cotton Commission is charging a differentiation sometimes up to 3d. per lb. above the price at which foreign spinners can secure cotton for immediate shipment.
§ Mr. Rhodes (Ashton-under-Lyme)
Could I ask the right hon. Gentleman to be quite accurate on the types of cotton which are being charged above and those which are being charged below?
§ Mr. Lyttelton
I was coming to this point. I said that the Raw Cotton Commission was charging, in certain growths, up to 3d. a pound to the spinners above the world price, but there is one instance in which they are charging less, and I am going to give the figures. In regard to Egyptian Karnak, on 11th June, and these are the latest figures which I have, the Raw Cotton Commission was selling to spinners at 57.25d. and the market price delivered to the mill was 56,00d. In Ashmouniz, the selling price was 674 40.25d. and the market price 42.50d. In American Middlings, the selling price was 25.50d. and the market price 24.35d. In East Indian, the selling price was 22.80d. and the market price 19.50d. The Brazilian figures were 24.30d. and 21.15d.
I hope that answers as fully as possible the question raised by the hon. Member. These differentials have to be read in the light of the fact, which we all know, that in the old days merchants would have been' fortunate to secure ¼d. per lb. premium on replacement cost. The stated policy, the new policy of following up or down the world price is not being carried out very effectively and these differentials do make—I do not want to be rude—the President of the Board of Trade's resounding sentiments about the need for increasing the export of Lancashire textiles sound rather hypocritical.
I now turn to yet another aspect of the subject; I might term it the chaos concerning the differentials between one grade of cotton and another. Many varieties of cotton have fairly similar spinning values and, therefore, in ordinary conditions, are to some extent interchangeable. The relative spinning merits of any two styles and/or growths was reflected before the war in the price differences between them. The recent changes in the prices charged by the Raw Cotton Commission—for reasons I do not attempt to understand—have made chaos of the relative spinning values and, again, I must give instances if I am to satisfy the hon. Member for Ashton-under-Lyme (Mr. Rhodes).
For instance, for many years low grade Sudan cotton consistently provided an alternative to Egyptian Ashmouni, and the price difference which ruled year in and year out was about ½d. per lb. On this relationship many mills have based their machinery and production plans, but now, suddenly, those using Sudan cotton, which since 1946 had been priced slightly below Ashmouni, have had to pay first 1½d. per lb. more, and then 6½d. a lb. more than equivalent mills using Ashmouni. Another instance occurs in the case of low grade Sudan Sakel, which I think is generally known as Type G.6s, which from October, 1946, to July, 1947, was about ¾d. per lb. below Ashmouni and is today almost 15d. per lb. above Ashmouni. There is no shortage in any of these 675 styles to account for these extraordinary, abnormal fluctuations in the differential.
Again, the Commission encouraged the trade to use Ashmouni and Zagora instead of American, for reasons which we follow. At the time this request was made it was quite a reasonable one, because prices in February, 1948, were—Ashmouni 22¼d. per lb. and American 23d. per lb. Today, however, Ashmouni is 39¾d. per lb. and American 26d. per lb., so that the mills which took the Commission's requests seriously now find themselves in a hopeless competitive position. These chaotic prices within the general price level reduce production plans to absolute futility. No one knows when or how long present differences will last, or by how much they may be altered, or how quickly, and any attempt to produce, for example, further down the industry, "a cloth at a price" must be the purest guesswork.
I now turn to the only other part of the subject with which I can deal within the patience of the Committee and that is the inefficiency, often gross inefficiency, with which cotton is bought. Let me take, as an instance, Egyptian cotton. Let us look for a moment at the Alexandria market. The market in Alexandria keeps very elaborate statistics to show what cotton has been bought from Egypt, and what has been shipped, and so forth, and on the other hand they know what the approximate requirements of Great Britain will be in any given year. From this, it is not very hard to work out—because they are dealing with only one buyer—how much His Majesty's Government must buy and how much they have to cover at any given moment. The market naturally is got ready for them.
I would like to ask His Majesty's Government—and I ask this question as much for their benefit as for mine—is it a fact that, when His Majesty's Government is about to enter the market for Egyptian cotton in Alexandria, that funds are transferred a few days before the purchases are to take place by either the Treasury or the Bank of England to the National Bank of Egypt? Is this widely-believed story true? I would like to know. If it is—and I believe it to be so—would not this transfer advertise in the most unmistakable terms that we were about to buy? If the President of 676 the Board of Trade is not already aware of this fact—and it may be nothing to do with his Department—I suggest that a very speedy investigation should be made. It is widely believed and I believe it to be true, but I cannot be sure.
Let me mention another instance, the purchase of Peruvian cotton. The Government delayed covering their requirements of Peruvian cotton until very late in the year. I do not think it was until the middle of April that they began to make serious purchases. On 1st April the price was 24.86d. per lb.; by 29th April it had risen to 30.40d.; by the end of May it was 31.71d.; and by 10th June it was 33.52d.—which I believe to be far and away an all-time high for this type of Peruvian cotton. I claim that a large part—and I am not going to over-state it, I do not mean all—of this rise has been due to the late entry of the Government into the market, and to the over purchases during a short period, and hurried and inexpert buying.
Let me give a final instance, the case of J. & P. Coats. The Chairman in his speech used these words and I must trouble the Committee with quite a long extract from the report of this great cotton spinning firm. It was 20th May when he made these remarks:Last Autumn, when it would have been possible to purchase high grade Karnak of suitable quality for our requirements at about 29d. per lb., we made repeated requests to the Control Authorities to purchase for us approximately two years' requirements. We do not know why they did not do so, but towards the end of last year the supply position was such that it was only with difficulty that the home mills were kept running on this high grade Karnak cotton. … I can offer no explanation as to why we were kept in such short supply.Of course, it is not his business to offer an explanation. But it is the business of the President of the Board of Trade to do so, and I hope he will do so later in the day. I hope he is not going to say the reason prices were allowed to go up before the purchase was made was because of the idea that it must be fairly shared out. This most ridiculous reason has been advanced in official circles.
The Chairman went on:I can say, however, that had we been free agents, we would have made sure of an adequate supply of cotton at a time when market prices were much more favourable than they are now.677 He implies by that they would have bought when it was 29d. per lb.We have now, it is true, received sufficient cotton to keep us going for the time being but at prices up to 60d. Our experience has undoubtedly strengthened the conviction we already held that hulk buying, at least in the special high grades of cotton, cannot efficiently replace private purchasing.To sum up, I claim that I have shown, first, that the idea that bulk purchase made for stability has been publicly demonstrated to be utterly false. Secondly, that the theoretical idea that bulk purchase could replace the machinery of free markets has publicly been confessed to be nonsense both by the Raw Cotton Commission and by the President of the Board of Trade himself. It is now agreed that the correct policy is to follow world prices, but only when they are fixed by markets outside these islands in which we have no participation and only when dealings in those markets take place in currencies other than our own. Thirdly, that production plans are made hazardous always and often impossible by the arbitrary fixing of unheard of and incalculable margins between what used to be considered similar growths of cotton. Fourthly, that bulk buying can be shown to be inefficient by many instances, and the longer it goes on the more instances there will be.
Of course, it is conceded that during an inflation any buyer or "bull" must make money, but what counts is to cover requirements without unduly raising market prices. In this the Raw Cotton Commission has signally failed, not because of lack of skill or lack of attention to their business on the part of the gentlemen who are on the Raw Cotton Commission, but because, in our submission, they have been entrusted with a task which was impossible from the very outset, because the policy on which all this is founded is unsound nonsense.
§ 4.30 p.m.
§ Mr. Bottomley (Secretary for Overseas Trade)
The right hon. Gentleman on an earlier occasion was particularly kind to me. He had great knowledge of the subject he was talking about, and I confess that my own knowledge of it was somewhat limited. For that reason, because of his kindness in the past, I should like to believe him today when he says he has put this case forward without political or party prejudice. However, I really cannot 678 accept that. I cannot accept it because he knows as well as I do that conditions today are extraordinary. Primary products—not only cotton, but all primary products—are at prices out of proportion to what we knew as competitive prices before the war. Indeed, one of the difficulties confronting this country today is that we have to give so many skilled man-hours in exchange for what might be termed unskilled labour in producing primary products.
I shall tell the right hon. Gentleman in a moment what we propose to do about developing the Empire in such a way that even our cotton supplies will improve. Were it not that I do not want to indulge in party conflict, I should say we can find an example of how we have been miserably led in the past in this very instance of primary products in the Empire that are costing us so much. It is our common purpose to try to organise our society in such a way that we are able once again to have the stability which will enable us to get far bigger returns for the labour and the management put into British industry.
The right hon. Gentleman talked about fluctuations in prices, particularly cotton prices, and contrasted them with those of five years out of the 10 before the war. He avoided the very pertinent question put by my right hon. Friend, as to why he did not quote the years immediately following 1918. If he had contrasted present conditions with those of the years after the first Great War his case could not have been presented in the way in which he was able to present it. We are, I think, rightly concerned to compare the circumstances following the 1914–18 war with those of an equal period after this last war. If we make that comparison, I am bound to say that if we left the method of buying to the old system, in which in a period of scarcity we had the merchant coming between the grower of the cotton and the manufacturer and the spinner, there would have been gambling of a kind so extreme that prices would have been higher today than they are.
The dispute between us is really whether it is better or not to allow many individual merchants to carry stock and thus speculate continuously on whether they can continue to get the stock—which is extremely unlikely in view of the fact that there are short supplies of cotton.
§ Mr. Walter Fletcher (Bury)
The hon. Gentleman used a curious expression. He said we should let merchants carry stock and thereby speculate. Does he not realise that what the merchants did was to carry stock and buy ahead, and to avoid speculation?
§ Mr. Bottomley
Very often stock was carried, but more often than not merchants failed to carry it and speculation went on whether supplies would be available. We think the merchant should carry stock for the manufacturer and the spinner. That is the difference between our organisation and private enterprise. Instead of having a large number of operators in a competitive manner carrying on business we are trying to organise collective buying by agents, observers and experts throughout the world, and to establish at home an organisation that serves the spinner to the best possible advantage. I know that that is not in accord with the views of the Conservative Party, but we do know that it is primarily as a result of their mismanagement in the past that we are in the awkward position in which we find ourselves today.
In this connection I may add that, in trying to sell our goods overseas we are meeting precisely the same difficulties that we encountered as a result of leaving cotton to this private enterprise. We have just sent a business man, Mr. Neville Blond, to America, and I see from reports in the Press that he says:One of the difficulties in connection with our exports is that the middleman"—that is, the equivalent to the merchants—charges as much as 25 per cent., the retailer marks it up 40 per cent., and the prices are thus too high. It might be worth while considering a central distribution agency.Let us look at some of the points the right hon. Gentleman made with regard to stability. Let us examine what are the causes that have led to the increase in prices. Our principal supplies come from the British Colonies, the Sudan, the Belgian Congo, the United States, India, Pakistan, Brazil, Peru, and Egypt. From the British Colonies, the Sudan and the Belgian Congo we buy in bulk. I do not think anybody can say, in the case of bulk buying, that the policy has not been successful, particularly in the Colonies. We buy in bulk in order to stimulate the market, to encourage more growing, not 680 merely for our own needs but in order that the peoples in those territories can, as a result of the labour they put in, get some social services, increased education, better possibilities for development, with ultimate benefit to them and to us because we shall get more cotton supplies in due course. In fact it is only in those countries that we do indulge in the method of bulk contracts.
With regard to United States of America cotton, I notice there was no criticism. With regard to India and Pakistan we know that one of the causes of the rise in price was the communal strife in the Punjaub where most of the Indian cotton is grown. With regard to Brazil and Peru, we get purchases through staff or agents overseas. If the right hon. Gentleman can show to me that merchants can assist in the buying with advantage I am sure that later on in the Debate my right hon. Friend will be prepared to look at his suggestions, from the point of view of principle, and I know that the Raw Cotton Commission will be similarly influenced. I think it is fair to say that the steepest increase in price is due to three or four causes.
§ Mr. Lyttelton
Is the argument the hon. Gentleman is adducing designed to show that the ideas of producing stability in cotton are impossible, and is he now going into the causes which make nonsense of all those arguments previously advanced by his right hon. Friend? Is that the purpose of the present phase of the hon. Gentleman's speech?
§ Mr. Bottomley
I should say no. I will go on to give reasons which I think have influenced the tremendous rise in price, particularly in connection with the Egyptian market. I think that the right hon. Gentleman said that stabilisation is possible when conditions remain normal. I tried to show earlier, that we are living in an abnormal period. If that were not so, we should not be in the desperate economic position in which we find ourselves today. I think that the rise in cotton prices is due to several factors. There is a smaller cotton exportable surplus. It only amounts to about two-thirds of that exported before the war. That is due to the fact that the Egyptians themselves are using very much more of their own land for growing foodstuffs. In 681 addition, many European countries, which before the war went to the United States to buy because they were conversant with that cotton, are now making a call upon the Egyptian cotton market, because they are faced with the dollar shortage, as we are.
There is no doubt that we in the United Kingdom are making a greater demand than hitherto, and perhaps I might recall to hon. Members on the other side of the House that we are also making a greater call on stocks that were accumulated mainly during the war. If the industry had paid proper attention, as it should have done before the war, to this matter, we might have started the last war with greater stocks than we did, and be living today in much better conditions. Russia has also come into the Egyptian market. They are buying cotton in Egypt, and we find that with all these conflicting interests struggling against each other prices rise. The law of supply and demand must operate. I think, however, that I can claim that the Raw Cotton Commission have bought at more reasonable prices than would have been possible had the merchants operated under the old system, as suggested by the right hon. Gentleman.
With regard to selling prices generally for spinners, the right hon. Gentleman said that the Government had controlled them since the Liverpool market was closed. During the war years, the Government were the chief buyers, and as the right hon. Gentleman had a lot to do with that, I am surprised that he is not claiming more credit for it. During the war, prices were kept down, and after the war the Cotton Control fixed their selling prices roughly at replacement cost. There were discounts for abnormal freight and other costs, but they fixed the prices for individual varieties on the basis of their relative spinning value. During those six and a half years, there were only six changes in price. That was stability. I do not think that the right hon. Gentleman would dispute that.
The same system that operated during the whole of that time, when there were those few changes, is the system that operates today. There is no change. That fortifies my comment that there are abnormal circumstances. Had it not been for that, no doubt, hon. Members on this side who claimed earlier that it 682 would have brought stability would have been right. I am certain that if hon. Members opposite had had their way, prices would have been higher than we find them at present. We are finding that the selling prices relatively are reasonable in comparison with those of our competitors. The right hon. Gentleman did not make reference to prices elsewhere.
§ Mr. Lyttelton
I think the hon. Gentleman has forgotten that I read out a list of a number of grades of cotton and the selling prices of the Raw Cotton Commission compared with world market prices.
§ Mr. Bottomley
I think that examination will show that the prices are comparable, and that the Raw Cotton Commission have been able to buy at prices which I think are of advantage to the British public, as compared with what might have been possible by other methods. The right hon. Gentleman is, in fact, saying that we should not follow the world price by selling approximately—
§ Mr. Bottomley
Therefore, the right hon. Gentleman accepts the view that to use replacement cost is right. I was not sure whether he did or not. I think that we can say, with regard to the Raw Cotton Commission and its work, that they have as far as possible bought in a way which is of advantage to the community as a whole. I think that the quotation which the right hon. Gentleman gave of the remarks of the chairman of J. P. Coats was perhaps appropriate, and I should like to take an extract from the same gentleman's speech. He said:I welcome the Raw Cotton Commission's announcement that, in future, they intend to sell raw cotton at approximately replacement prices.The President of the Board of Trade has strongly supported this policy with sound arguments. If the right hon. Gentleman accepts that, it will be useful for my right hon. Friend to make a note of it, because he was going to take up that point.
§ Mr. Lyttelton
We have always claimed that the only way to sell cotton is to sell it every day at the world price. That is entirely different to the principle—
§ Mr. Lyttelton
That has always been our point of view. The Liverpool Cotton Exchange every day fixed world prices, and those were the prices on which the spinners and weavers as well could cover their requirements.
§ Mr. Bottomley
I readily accept that explanation. I was wondering where the right hon. Gentleman was going to take us if the point of view which I thought he had expressed earlier was the one which he follows, but he has now corrected my impression. It would have meant that we should have had to sell cheaper and thus subsidised the cotton industry, or else to increase our selling price, which would, of course, interfere with the export drive.
I think that I have dealt with some of the points which the right hon. Gentleman mentioned. There are others that I could handle, but in view of the fact that time is short, and that the right hon. Gentleman said that he was making his speech short deliberately to allow as many as possible to take part in the Debate, it would be fitting if I ended at this stage, and left my right hon. Friend, who is to wind up, to answer other points raised.
§ Mr. David Eccles (Chippenham)
I gather that the policy now is to charge the replacement cost; in other words, to follow the world prices. Does that mean that that is going to be done whenever the world prices change, or at arbitrary intervals when the Raw Cotton Commission feel that a certain movement is likely to show? Surely, the logical thing would be, if stability has been abandoned, to follow the world prices every night?
§ Mr. Harrison (Nottingham, East)
The hon. Member for Chippenham (Mr. Eccles) suggested that arbitrary intervals should take place.
§ Mr. Harrison
Is it the policy of the Commission to have reasonable intervals or to rationalise the change of prices according to world prices?
§ Mr. Anthony Greenwood (Heywood and Radcliffe)
Will my hon. Friend bear in mind the fact that the Raw Cotton Commission was complimented in "The Economist" last week on the fact that the recent reduction in price of Ashmouni cotton was immediately handed on to the consumer?
§ Mr. Bottomley
Stability has not been dropped. It is still the Government's policy. I mean that in the sense that if prices rise that will be the charge, and if they come down that will be the charge. With a view to getting stability over a period there is the cover which gives the spinner an opportunity of keeping the charge on a fixed basis. The Raw Cotton Commission is the body which concerns itself with the details, and I have not the least doubt that my right hon. Friend will be able to deal with that matter later in the Debate.
§ 4.50 p.m.
§ Mr. Walter Fletcher (Bury)
It has been a little difficult to follow the speech of the hon. Gentleman, and I do not want to be in any way unkind to him. He has progressed since the last time he spoke, when he told us that he really did not know much about this, and I compliment him on his wisdom in sticking closely to his brief, rather than relying on his knowledge of the question that we are now discussing. It really is a curious argument to say, "Our target was stability, but we have found that unless there is stability in the rest of the world we cannot achieve it." That is a complete abandonment of the main plank of his argument.
§ Mr. Fletcher
Because it proves that one cannot contract out of world fluctuations in a large commodity of which one is not the main grower.
§ Mr. Silverman
Surely the hon. Gentleman is missing the point entirely. In the time that he calls "normal," under the system that we had before the war, and which we abandoned during the war, there was never any attempt to reach stability at all. The manufacturers were at the mercy of the markets whose fluctuations were regarded as the normal, happy and healthy thing. That is one principle. Surely the other principle, of attempting to reach stability, may remain valid even if world conditions prevent one doing it.
§ Mr. Fletcher
The manufacturer was not at the mercy of the market in any way; the market, therefore, would allow him to fix the price of the cotton he wished to buy against the contract, and he was able to do it on the day. That is what prevails in those countries where there are open markets which can be used.
We must try to bring this Debate back to some sense of reality. The points the hon. Gentleman made were rather petty, delving back into the past, trying to show that under the bad old system no Empire cotton could be produced. That is just nonsense. I had something to do with drawing up the Uganda Cotton Rules in 1920, and the Secretary for Overseas Trade ought to be grateful today that under that wicked rule, and in the wicked spirit which prevailed, Uganda cotton was produced in very considerable quantities, which is of great use to us. The only thing we can say about Uganda cotton is that under the system which he and his friends have inauguraed, the position today is that India can buy Uganda cotton £11 cheaper than that supplied by the Cotton Commission to the spinners here; so instead of reviling the system which produced cotton in Uganda in an orderly fashion, with great benefit to the country, he might explain to us how it is that under his beneficent system the spinner here has to pay £ more. I hope that the President of the Board of Trade will take up that point when he replies.
One thing we have to establish once and for all is that the consideration whether, at the end of big rises in a "bull" market, his scheme has made money or not is not important. If in his reply the President of the Board of Trade says that we have done very well out of it, I can only hope that somebody will later on point out that that is a very poor argument. Anybody who buys shares which go up, so that he makes money, is very apt to pat himself on the back and say: "I am very clever. My shrewdness has brought me this money." Anybody who has bought cotton, or any commodity, and holds a stock, can write it up to a level showing an enormous profit; but he could not take that as being a complete answer as to how well he has bought, as I will try to show. The object of this Debate is to probe this question. Under this new system will all those engaged in the process of the textile 686 industry not only be better off than they would have been under the open market system, but in a position to meet the competition which will come from those who still have the privilege of working in the world cotton markets? That is the hub of this business. I believe that they are in a much worse position.
Let me take just one aspect. We are now going on the basis of replacement; but are we going on the full basis of replacement? Is the spinner to have—which he is not allowed to have at the present moment—the opportunity to buy cotton forward when there is a forward discount? Spinners in Italy and in every country which can use the open market can buy forward cotton at the discount which prevails in the open market; but that privilege and that essential right is not given to the spinner in this country at the present moment, which is a very heavy handicap.
We are told by the President of the Board of Trade and by everybody else—and it is accepted—that we are at the end of the sellers' market; anybody who exports textiles, as I do, and knows something about this subject, knows the increasing difficulty of selling. If the spinner is unable to take advantage of the forward discount on cotton, and can buy only on a practically spot basis, then the spinner and everybody the whole way through the industry will be most seriously handicapped. Will the President of the Board of Trade say whether he will restore the right for spinners to take advantage of the forward discount in other markets? Or, if he is going to do it himself, will he pass it on? That is a very important point.
The reason for the forward discount, of course, gives the clue, to a considerable extent, to the secret of buying almost any commodity. Any commodity which is an annual crop must have two periods: first, when the new crop is overshadowing the price, and people are beginning to try to estimate, as they do through the Bureau of Statements in America, what the crop will be; but when the crop is low the secondary period interests them. The failure of the Government in their Egyptian cotton buying policy is due to a lack of realisation of that factor. That 687 they should revile the Egyptian Government because they have made this calculated £24 million profit out of their selling is the most magnificent answer I have ever heard on the question of bulk buying. Bulk buying produces and provokes bulk selling, and if bulk selling is, as it is to a considerable extent, in the hands of a very strong, solid and well financed body such as the Egyptian Government in various phases, then that form of purchase is foredoomed to failure.
§ Mr. Fletcher
I have 25 years' experience of buying commodities, and I should have thought that the "not necessarily" part was less than 1 per cent.
§ Mr. Fairhurst
Will the hon. Gentleman say that he has had 25 years' experience of the bulk buying of cotton?
§ Mr. Fletcher
I am not saying that I am talking about what happens in markets in their various phases.
Let me turn to one of the reasons why our Egyptian cotton has been so badly bought. I have seen a document, which I have shown to various friends and which gives the secret away. The cotton buying in Germany is done by the Joint Import-Export Agency, for which we are 50 per cent. responsible with America. A letter is sent out—and this is typical of the Government methods of buying—to the Alexandra Cotton Association saying, "Next Wednesday we are going to buy so many thousand bales of cotton. Will you please circulate this letter to all your members so that, on the egalitarian thesis that runs through everything, we may be in the same position as everybody else." Then, to the astonishment of the sender of that letter—and we pay 50 per cent. of the cost—the market goes up about 7d. Of course, that is due to the wicked attitude of those who run cotton in Egypt.
The failure of bulk buying is that the bulk buyer can be seen coming from miles off; whereas if the buying is spread among the hands of those who really could do it, and are fully qualified to do it, the mere spreading would lessen the impact of the buying.
§ Mr. Bottomley
Surely, if there is a scarcity of an important commodity, does not the presence of more potential buyers send up the price?
§ Mr. Fletcher
Speaking as one who has dealt quite largely in all these commodities, I can say that that is not the case. Spreading it around a great many people is infinitely less heavy in its impact than having one buyer. That really is so in the experience of anybody who has had to do it.
To come back to the question of how this trade is being treated, I ask shall we be able to be in as good a position in the textile exports, as our trade revives? That is really the most important thing of all. There are certain signs which make it quite certain that, more and more, Lancashire is becoming a quality producing market; we are being driven into an ever-narrowing band of manufacture, but because of lower forms of manufacture we shall not be able to compete with labour conditions prevailing in India, Egypt, and other countries. More and more we must specialise in quality goods. One of the failures of the Cotton Commission is that they have not provided proper conditions for the processor to have a wide range from which to select.
What happened in the old days? The spinner went to Liverpool or Manchester to look at the counters of the brokers and merchants; he had a huge range of cotton of every sort and grade from which to make a selection. He was able to say exactly what cotton he wanted, and it was probably from the same producing area as he had had it before. That is not possible now. One of the sins of this business is that the variety offered by the Cotton Commission is too small; it does not begin to fit what the trade wants in any way whatever. Would the President admit that his buying now is not sufficiently wide to provide for all these grades, or that they are bought in such a way that they are no longer sorted out, as in the old days? Will he see that a much wider range is provided for the man who wants to manufacture the goods which will keep up his reputation and market? It is a distinct failure of the Commission that they have not provided a sufficient range of selection. Quality is very important.
I was in America recently, discussing with the American cotton people their 689 view of the action of the Government in closing the Liverpool Cotton Exchange. This has done America a great disservice, at a time when we are not anxious to do that. They say that because Liverpool was the balance wheel between the producer and the consumer throughout the world it was a market which was absolutely trusted. Now the New York market is considered to be too much under the influence of the textile market, and the Southern market is too much under the influence of the grower. By withdrawing Liverpool we have done a great disservice to the Americans. They say that the selection and shipping of cotton is not carried out nearly so well as it was when the livelihood of those who handled it was directly concerned.
This runs through every phase of nationalisation. There is a slackening. I have no doubt that I am laying myself open to the charge, "This is the old sordid theme of the profit motive," but as this business is being carried out now the result is nothing like so good. I took a plebiscite in my own constituency, and I found that the claim that the quality of cotton is not fully up to standard was well substantiated. I believe there is a danger that we, who have to compete in the face of the most bitter winds of competition which are blowing around us now, will deprive the spinner of the vital rights of selecting exactly what he wants, of buying his forward cotton at a discount and gradually losing the certainty of getting quality cotton.
I should like to get replies from the President on these points. Why can Italy buy her cotton so much better than this Government? At present, there are signs that Italy is buying in certain markets at an infinitely cheaper price than we can buy. Why should a country which has not the advantages which we enjoy be able to buy various grades of cotton so much better than we can? Why is Italy selling certain forms of yarn at a noticeably lower price than we are? It is not only due to the lower cost of labour; it is due, I believe, to the fact that they have more rapid access to the open market.
§ Mr. Harrison
This is an important point. Would the hon. Gentleman be more specific about the markets in which the Italians are purchasing so advantageously?
§ Mr. Fletcher
I cannot give them to the hon. Gentleman now, but I will let him have them with great pleasure. It is a fact that in certain markets the Italians are operating at a figure substantially below ours.
I believe we are at a turning-point in the cotton industry. The Government have already abandoned stability and have turned to replacement. If we are to work on replacement let us work on the basis that we are getting full advantage in forward purchasing and access to open markets. The set up of the Cotton Commission has forced two men, who are responsible for cotton buying, into being the largest speculators in cotton. For a Socialist Government to create these Napoleons of cotton buying is very curious. They have put into the hands of these two men an impossible task. I do not blame the men so much as the system. Just as the spread of buying produces a much more even price, so concentration of the power of buying must inevitably lead to mistakes which, when they do occur, are so big that there can hardly be a recovery.
I urge the Government to reconsider this matter. They have shifted their ground; let them shift a little more. Let them say, "We will restore gradually, on an experimental basis, in certain growths at any rate, the ability of the spinner and the buyer to have access to markets through merchants, and we will see, by competition, whether our bulk buying is doing better or not." There is now the end of the sellers' market. There will be a drop in everything including cotton and piece goods values. This is the moment when the Government, if they wish to show real wisdom, and have the real interests of the textile industry at heart, will give it confidence to go ahead. They should abandon replacement and allow the spread of individual buying to take its place.
§ Mr. Fairhurst
Will the hon. Gentleman define a stabilised period? Will he say that there has been a stabilised period in the industry since 1944? Will he give the Committee an illustration where present fluctuations have vitally affected any spinning mill or manufacturing company?
§ Mr. Fletcher
I do not quite understand what the hon. Gentleman means by "a 691 stabilised period." If he means that a vacuum has been created, which has given a false appearance of stability inside the industry, there has been such a period.
§ Mr. Fairhurst
The right hon. Member for Aldershot (Mr. Lyttelton) dealt with fluctuations and referred to a 10-year period. There cannot have been a 10-year period since 1944. How can a stabilised period be defined when the world is upset? We can only look forward to a stabilised period in another three, four or five years.
§ Mr. Fletcher
The hon. Gentleman is arguing that it is all nonsense for the Government to say that they would be able to achieve stability, because there is no standardised period and there never has been. There I agree with him.
§ 5.10 p.m.
§ Mr. Rhodes (Ashton-under-Lyne)
Up to now the Debate has rather missed the point. As I see it, the Debate should follow the line, first, whether the Raw Cotton Commission and its purchasers have made it possible for Lancashire to sell its products overseas; then, as a second point, whether we are of opinion that in a buyer's market it will succeed in buying cotton at prices which will enable Lancashire to maintain its trade.
The right hon. Member for Aldershot (Mr. Lyttelton) began his speech by talking about fluctuations in price. He made out that fluctuations in price had only occurred in so far as they applied to the British market. I have in my hand a table showing the ups and downs of the New York market during the month of May—the same period of which he was speaking—and also of the Bombay market, which is rather more speculative than the New York market. It shows daily upward movements of 40 and 45 points and falls of 61 and 54 points. That was in New York, while in Bombay the largest advance was 19½ rupees per kandy and the largest fall was 24 rupees per kandy. This information appears in the "Manchester Guardian," which comments thatthese are uncomfortably big changes and there is much to be said for an arrangement which makes it unnecessary for the textile industries to make daily adjustments of their prices in conformity with them692 That is reasonable. I have a letter from a friend of mine who is a cotton spinner in America, and an extract from his letter, also written in the month of May, says:I sure envy your cotton spinners in Lancashire who are able to buy without much change in price. I have sold on three prices today.The right hon. Member for Aldershot mentioned low-grade Sudan cotton, and the differentiation of ½d. per lb. below Ashmouni. These differentiations have their repercussions in the Sudan. I was in the Sudan in the early part of this year, and I had a look at the Report of the Gezira Advisory Committee, one of the minutes of which referred to the visit of a grower to this country. They are only small growers in the Gezira; a grower there has 40 acres and no more. He was expressing his indignation that on a recent visit to Lancashire he went into a cotton mill where he saw his own marks, and he said to the manager of that mill, "Sudan?" to which the manager replied, "No, Egyptian." Of course, the grower was very irate and went back to the Sudan where he made a lot of fuss. Another thing which has irritated the growers in the Sudan was that during September last the Cotton Commission increased the price of Sudan cotton by 6d. per lb., and, naturally enough, the Sudanese said, "You are making a profit of 6d. per lb. at our expense."
During the last two years we have seen changes in another market—the wool market. In July, 1946, control was taken off wool and the market was organised so that it could get back to a normal system of trading in competition for grade, staple and so on, one country with another. This wool side of the textile trade had huge stocks behind it. In fact, two years ago certain experts were saying that we had 12 years' supplies. Therefore, the United Kingdom and the Dominions were very nervous as to whether they would be able to dispose of the wool stocks of the world at a reasonable price. An organisation was set up—the U.K.Dominions Joint Organisation—to dispose of the stocks. They immediately began to offer stocks by auction—in a free market. What happened? Despite this enormous weight of stocks behind the wool trade, the price began to rise, and it has risen steadily from two years ago until now. These sales reproduced, as near 693 as it is possible to do so, the circumstances under which wool was offered before the war.
§ Mr. W. Fletcher
I am certain the hon. Gentleman is trying to be fair, but he should point out that before the war there was a system of free exchange, and that what makes the whole difference to this market is that a great many people have not got and could not have access to markets, owing to the system of exchange control.
§ Mr. Rhodes
Exactly. I am very glad the hon. Gentleman made that point, because it strengthens my case. It throws into relief the extraordinary situation existing at present, but it does not alter my case that the Joint Organisation was trying to bring in as near as possible the same type of trading as existed before the war. At present, on high-class Merinos the prices have risen to 2½ times their value in 1946. The price of lower qualities has risen by 55 per cent. Let us see how that compares with the cotton market. The price of American cotton has risen by approximately 55 per cent. compared with the price two years ago, and in the case of Egyptian cotton the figure has practically trebled. Egyptian cotton represents the fine end of the trade and American cotton the medium to the low end. It will be seen that the two sets of price rises are almost synonymous. How can it be claimed, therefore, that the action of the Raw Cotton Commission has made any difference in the increasing of prices?
§ Mr. Rhodes
I will not take the case of rubber because I do not know anything about it. I am a wool manufacturer, and I have been a student of the cotton trade for some time. With regard to the allegations of the chairman of J. and P. Coats, it may be that in all probability a big organisation like that were able to buy two years ahead before the war. But it is quite unfair to expect the Raw Cotton Commission to buy enough cotton for J. and P. Coats' requirements if there is not enough cotton available to supply all the needs of other spinners as well. What was wrong with that transaction was that the Raw Cotton Commission had not the wit to take advantage of J. and P. Coats' knowledge and buy as much as they could.
694 In regard to selection, if the hon. Member for Bury (Mr. W. Fletcher) reads the Debates which took place during the various stages of the centralised buying Measure, he will find that no one was more concerned than myself about this point. I was aware of what might happen, and I was very much concerned at that time about the possibilities of a buyers' market and our Lancashire spinners not being able to select the cotton they wanted. I put the point to the hon. Member that with the shortage of labour in the cotton trade spinners are continually wanting more and better qualities of cotton to keep their machines going, which is a reasonable thing to do. But we know that spinners of that type do not comprise the whole of the spinners of Lancashire. Let me quote on the other side the case of a very large spinner who is not so concerned about what happens to his workers when working on the cotton he buys. That it is due to the weakness of the present system of cover there is no doubt. Under the present system of cover the price changes take place on a Monday, but the returns are not sent in until Saturday. At the moment it is quite possible for a firm to be paid on shorts, and if it is short of Egyptian cotton, there is nothing to prevent it from substituting Brazilian cotton for Egyptian cotton, and that has been done not once but many times in Lancashire. It shows the defect in the system. The two sets of returns should be correlated.
On the question of the Raw Cotton Commission, I say quite frankly that I would not have voted for the centralised buying Measure had I known what sort of a job was to be made of the selection of personnel for the Commission. I expected that the best men would be put on the job, and it was on that basis that I voted for the Measure. I am confident that the Commission can serve Lancashire well, and that with the correct personnel it can serve Lancashire even better than the Liverpool Cotton Market did years ago. The Commission operates in the American and Indian cotton markets through Liverpool merchants who receive offers on their behalf. The American cotton is bought by description and samples can be seen but there is no arbitration clause. I suggest that an arbitration clause and purchase by sample should be included very speedily for future transaction. Brazilian cotton 695 is bought by an employee of the Commission and is sold to spinners on description, and samples cannot be seen.
An agent buys cotton in bulk for the Commission in the Sudan, and it does not need sampling or description to the Lancashire buyer, because the Sudan plantation syndicate has got the grading and stapling of cotton to such perfection that their work can be relied upon throughout the world. Egyptian and Uganda cotton is bought on the spot by an employee of the Commission. Egyptian cotton is bought by description, and sample and if necessary an individual bale can be sampled. Where merchants have been employed as a go-between in the Indian and American markets the results have been fairly satisfactory. True, they have bought on a rigid specification as laid down by the Raw Cotton Commission, but there is room for improvement in the buying of American cotton. Too much rigidity in method has lost us many chances of buying cheap cotton. By and large, Indian cotton has been bought well, and I do not know whether the export tax on Indian cotton was foreseen or not, but contracts on a F.O.B. basis were made, so that the Lancashire spinners had advantage of that purchase.
fSo much for the buying of American cotton. In Egypt, where merchants are not employed, the picture was not so good. During the war and until last year a very able man bought cotton from the Egyptians. He was withdrawn to take the position of independent member on the Raw Cotton Commission. This is a very serious statement to make, but I am going to make it—between November and January, when the new buyer was taken out, there was nobody in Egypt qualified to buy cotton for the Commission. Indeed, it was during this time that Russia came into the picture. Why on earth this man was withdrawn when prices were beginning to move up a I cannot understand, unless it was that the chairman of the Commission was so lost that he wanted a practical man at home to make decisions for him.
It must be remembered that there was an excellent man at the Cotton Control who served this country well for two years. He knew his job and when the changeover was made, and, indeed, in the months leading up to the time when 696 the change was going to take place, it was never mentioned to him that he was going to be superseded, nor was he given the opportunity to apply for the job. Whether the appointment of the present chairman of the Raw Cotton Commission was Civil Service nepotism or nepotism of another kind I do not know. Suffice it to say that the position is that the Raw Cotton Commission has a chairman who has no background of cotton at all, one single full-time independent member, whose experience has been mainly on the fine cotton trade and in Egypt—he is an admirable man—and the remaining seven are part-time members who have been drawn from various parts of the industry. The part-time members comprise two cotton mill directors, one cotton manager, one manufacturer, the late cotton controller, and two trade unionists. I am perfectly sure that a few of those seven would be better employed about their own business and in their places people brought in who really know the job. I am sure the two trade unionists would be better employed in spreading the gospel of redeployment in Lancashire. I am not criticising the chairman. I sympathise with him. As a man he is a first-class administrator, but he is out of his element in this job.
I should like to have answers from the President of the Board of Trade, when he winds up the Debate tonight, to the questions which I am now going to put. Will he see to it that the system which allows a spinner to make money out of the cover scheme will be altered forthwith? I should like to strengthen the arguments of the hon. Member for Bury about the forward discounts on cotton. I do not see why this cannot be arranged. It might need a little thinking out but I think it could be arranged. I ask the President of the Board of Trade to say whether he will see to it that merchants are brought back again into the Egyptian market. If they are and if they do the services they are already doing satisfactorily, within limits, in the Indian and American markets, we can remove quite a lot of the causes for complaint.
While I am on this subject there is another thing I would suggest. Will the President of the Board of Trade make it quite clear to the Raw Cotton Commission that their action in buying cotton in the Colonies and Dependencies has 697 political repercussions in those countries? That does not apply to Uganda and Tanganyika only but it applies to the condominium of the Sudan as well. If there could be a close relationship between the Foreign Office and the Colonial Office—I do not mean cluttering it up with slow-moving Civil Service meetings—it would be a good thing. I still affirm that the Raw Cotton Commission is necessary and that it can do a good job for Lancashire but if it is to operate to the best advantage we must strengthen the personnel.
§ 5.34 p.m.
§ Sir John Barlow (Eddisbury)
I am very glad to follow the hon. Member for Ashton-under-Lyne (Mr. Rhodes) because undoubtedly he speaks with some authority on this subject. He referred to the drawbacks and weaknesses of the present Raw Cotton Commission and emphasised the fact that if there is a weak member or a change of membership, it makes for weakness, itself a colossal fact when one organisation is doing the whole of the cotton buying for this country. Undoubtedly our people in Lancashire, who are first-class cotton buyers, are not properly placed in the Cotton Buying Commission. Only the very best buyers in Lancashire at the present time are good enough to serve on this Commission, and where there is a set-up, as in the present case, in which so much emphasis is placed on the independence of members, the expert knowledge which is required in markets of this kind cannot be obtained.
It is one of the most difficult things to buy raw commodities on the best basis. There are very few skilled people who can buy to the best advantage in any raw commodity markets, whether wool, cotton, rubber, tea or anything else. There is no doubt that the present method of independence means ignorance at the top, I feel sure that the hon. Member for Ashton-under-Lyne would agree with me on that. There is one point where I do not agree with him. He suggested that there had been a tremendous increase in value in the wool market because it has been made a free market.
§ Mr. Rhodes
Oh no. It was not because it was made a free market. That was incidental to what I was saying. What I was explaining was that by making it a free market, it could not be made a cheap market.
§ Sir J. Barlow
The hon. Member emphasised that it had had some measure of freedom and that the prices had gone up very considerably. I would give an instance of another free market in which prices have remained stationary. The rubber market was mentioned, and the hon. Member quite rightly said that he was not familiar with the commodity. If he looks at the facts I think he will find that the pre-war value of rubber was about 1s. per lb. and that it is now about thirteen pence per lb. This market is one of the freest in the world, and rubber is one of the few commodities which have not gone up substantially with the general post-war increase in values.
Now I should like to refer briefly to one or two things that were said by the Secretary for Overseas Trade. He made frequent reference to pre-war hedging and he hinted that hedging was usually gambling. There is a great misconception on the part of hon. Members opposite. They think that hedging and gambling are synonymous terms. I am as much against gambling in raw commodities as they are and against people taking undue profits by speculation in raw commodities, but I can assure them that hedging was a very real necessity in order to prevent losses and to prevent speculation. Hedging in itself is not gambling. Hedging prevents gigantic profits or losses and stabilises markets. That is one thing which many hon. Members on the other side do not recognise.
§ Mr. Harrison
Would the hon. Member accept this illustration of the facts about hedging? I go to a bookmaker and put upon a horse a considerable sum of money, which is a little bit more than the bookmaker thinks he can stand. What does he do? He hedges. Is that not a form of betting?
§ Sir J. Barlow
I do not think that the hon. Member's simile is at all accurate. What I mean by hedging is this. Suppose I were a spinner—which I am not—if I made a contract today to sell a lot of yarn over the period September-December, I should immediately cover that contract. Similarly if I were a weaver and if I made a contract for six months or a year ahead, as is often done, I should immediately cover. That is hedging in the ordinary sense of the word and it is not 699 speculation. It is done in order to prevent high profits or undue losses and to stabilise the position. Undoubtedly there was a little speculation, but it did not amount to anything like as much as hon. Members opposite suppose.
The Raw Cotton Commission has been working for some time, generally on a rising market when it has been very easy for the Commission to buy, provided that they bought sufficient. If they bought a little too much, they made a very nice unearned profit. The real test of this buying Commission will come when prices begin to go down. Then it will be much more difficult. I do not think that the Commission have acquitted themselves very well up to date. We hear of tremendous increases in prices in the Egyptian market. We have knowledge of Egyptian firms making vast profits because of British Government buying, which profits were in the past quite un-hoped for, unlooked for and unexpected. When a single large buyer comes on to a market, he is like an elephant coming in. Everyone sees him and they all take advantage of the situation. If a large number of small organisations are buying they are not so noticeable, and it is very much easier to keep a steady market. Undoubtedly the Raw Cotton Commission have paid much higher prices than were necessary, because it was known that they were buyers. When the British Government goes in to buy, everyone helps himself as much as he possibly can.
When the decision was originally made to impose Government buying, no adequate inquiry was made whether it would be beneficial or not to the trade. It will be remembered that Sir George Schuster made a very detailed examination into the cotton industry as a whole, when his fact-finding commission was set up, but it was expressly laid down that the Liverpool Cotton Exchange should not be investigated. That would have been an admirable opportunity for a most experienced outside man to collect evidence and to give what would probably have been a most valuable opinion. I believe that the Raw Cotton Commission was originally imposed because of a political theory which was unsoundly based. Time alone will show what will happen to the Commission, but I believe it was one of the commercial tragedies of this country that 700 the scheme was imposed without adequate investigation. It works very well in theory before it is put into practice, but we already see many signs that its results are most disappointing, to say the least.
Naturally, the raw cotton merchants of Liverpool were opposed to such a change. I do not attach great importance to that fact. We know that the vast majority of spinners were very much opposed to this change. Some of those who thought it would be a good thing for the trade have changed their opinions since that time. They find that the scheme is not working out very satisfactorily. In many cases it has been impossible for spinners to get the cotton they required. It has already been said in the Debate that our trade in Lancashire is a quality trade. A very big spinner told me not many days ago that he used to make a particular type of yarn from Peruvian cotton. He was suddenly told that no such cotton was available and that he would have to use Egyptian cotton. This cotton became increasingly expensive and less desirable for his purpose. He has no other method of getting exactly what he wants. In the old days he would have gone round from one merchant to another until he got pretty exactly the type of staple he required for his purpose. It is not so easy today.
In closing, I emphasise what I said at the beginning. The great danger of the present set-up of the cotton Commission is in the inefficient people at the top. This is a specialised trade. There are few first-class people. We cannot afford to have anyone but the very best at the top. According to the Bill, there must be a certain number of independent people. There is no place for them in such an organisation as this. I therefore urge the President of the Board of Trade to look again at the matter. If he insists upon continuing the present method of buying, let him try, at any rate, to achieve greater efficiency.
§ 5.50 p.m.
§ Mr. Harrison (Nottingham, East)
The hon. Member for Bury (Mr. W. Fletcher) gave us a lead as to the best method of approaching this subject today when he said that the touchstone should be the effect on the industry generally of the Cotton Commission's buying policy. I do not think we ought to place our- 701 selves in a position where we could not change our policy completely, as far as the Cotton Commission is concerned, if it could be proved that the Commission was militating against the success—and it has to be an overwhelming success—of the textile industry in the coming months. We ought to keep an open eye on such matters as that, in view of the grave consequences to our future textile industry, and the development and expansion of it which is so urgently needed. That is the note by which we should judge any suggestions made here today.
We ought also to thank the Opposition for promoting this Debate at this time. The Adjournment Debate on this subject on 12th May was a lucky one because we had one hour and ten minutes for discussion. I made a statement then to the effect that the present phenomenal rise in the cost of cotton fibres since January of this year was so serious that it threatened the very substance of our textile industry throughout the country.
I want to make a contribution to this Debate not from the angle of the cotton spinners but from the angle of the cotton yarn consumers. It would be well for our people to recognise the vast number of trades coming within that category, such as rubber tyres, gloves, shirts, all forms of clothing, lace, and nearly every kind of textile. They are all affected seriously by that terrific rise in price which took place in cotton fibres between January and a month ago. Before submitting my main argument, I would like to mention two or three things that have happened since the Adjournment Debate on 12th May. These things have happened not because of that Debate but since that date, and they should be of considerable comfort to the textile industry generally. For instance, recently there have been two substantial reductions in price of certain Egyptian types of cotton. While the reductions are nowhere near the amount by which the price had risen previously, nevertheless they are substantial and indicate to some of us that the price ceiling of cotton fibres has definitely been reached.
A letter appeared in "The Times" of 4th June from an Alexandrian cotton fibre exporter in which the writer mentioned the fact, which was quoted 702 pointedly by the Secretary for Overseas Trade, that the Egyptian cotton surplus for export purposes today has been reduced two-thirds in bulk in comparison with the figure available before the war. That is the dominant factor to be considered in all questions relating to Egyptian price movements at present—the terrific decrease in the amount of export fibre available. The writer mentions also that the recent policy of the Egyptian Government has contributed considerably to the increased price of that commodity on the Alexandria market, and points out that stocks of Ashmouni Egyptian types are non-existent at present in Egypt. That is true, because we have been able to confirm it.
If we accept that position, we can understand something about the recent price movements. I am quite sure that had the Egyptian Government sent to the market rather larger quantities of the Karnak type, as they could have done, the price would not have risen so spectacularly as it did a month ago because, from what we are told, there are considerable stocks of the Karnak type still to hand in Egypt. I believe that we have there the answer to the recent price rise, and it is unfair to blame the Cotton Commission for any fault in that direction.
With regard to the mechanism of the Raw Cotton Commission, I think that under the present conditions of the cotton fibre market, that is, under the post-war shortages and the phenomenal remand for this commodity, it would be ruinous to the textile industry of this country if we reverted to the old system of the Liverpool Cotton Exchange. I do not think the cotton yarn consuming industries could stand the additional weight on the present high price that would ensue if we returned to the old practice of the Liverpol brokers buying cotton in a speculative manner, because that would certainly increase the over-all price.
Another factor which has seriously affected the position in recent months is the increased and substantial buying by countries which have been out of the market for a considerable time. There has been substantial buying by France and the entry into the market of Russia and Switzerland as two big buyers. These are factors for which the Cotton Commission are in no way responsible. The 703 claim is made that, had the cotton brokers in the Liverpool Market continued in existence, they could have straddled the present price fluctuations. From January to the end of May the price has increased to the extent of 4s. 6d. for some of the better class Egyptian types. Before the war the customary rise in price might have been one-eighth of a penny, a farthing or halfpenny. It was extraordinary if it was ever as high as a penny. The Liverpool Cotton Market never could have straddled a price variation of 4s. 6d., even if they were successful in straddling a variation of up to 1d. The position today would be impossible if we had still to depend on the Liverpool Cotton Exchange. What would have happened?
§ Mr. W. Fletcher
May I ask what the hon. Member really means? Does he mean a penny a day, or what? Fluctuations before the war were very much more than 1d. Is he talking of the daily fluctuations?
§ Mr. Harrison
I am talking of a daily fluctuation or a fluctuation under any circumstances. If, before the war, there had been a halfpenny per lb. fluctuation—
§ Mr. Harrison
Yes, in a day. With such a fluctuation yarn prices would have risen and consumers would have claimed that the rise of a halfpenny was sufficiently high to be ruinous. That was the claim in the cotton yarn consuming industries before the war when a rise of 1d. was phenomenal. Such price variations as that could have been simply and easily straddled by the Liverpool brokers, but with an increase of 4s. 6d. on a continuously rising market the contribution of the Liverpool Cotton Exchange would have tended to increase still further the rising cost of cotton fibres.
We should consider some of the Government's deliberate contributions towards assisting the trade generally to meet the threatening price levels during the last three months. On 20th May, to ease the position of the textile industry, the Government concluded an agreement with the Argentine to permit cotton piece goods to the extent of £3 million to enter that country. That was a considerable 704 help to textile industries. On 24th May the Government reported the cessation of certain duties on cotton piece goods entering Canada. In addition, the French markets have been reopened for this particular commodity. With those reopened markets, and the present downward indication of prices, we in the cotton consuming yarn sections of the textile trades have some cause for comfort in Government policy. I urge the Government to adhere to the policy of bulk buying for cotton fibre. If any concession is made the yarn consuming trades will suffer considerably from any looseness shown by the Government. If they can follow out their present policy as successfully as they have done in the last three months, we in the trade will be very pleased.
The Secretary for Overseas Trade quoted from a speech by Mr. Neville Blond, the United Kingdom Trade adviser in Washington. It was stated that after his inquiry into the position of individual and piecemeal selling in America, Mr. Blond felt that the position should be examined; there seemed to be a need for some form of central distribution agency to handle the products of small British manufacturers in the United States. This representative, operating in the U.S.A., is apparently perturbed by the difficulties of some of our small traders in disposing of their products in that country.
If Press reports are to be accepted, Mr. Blond seems to recommend that the Government should take the necessary steps not only for bulk buying but also for bulk selling, because there appears to be a weakness of policy regarding multiple traders who sell in small quantities. Most of our small manufacturers, who are now compelled by force of circumstances to manufacture for foreign markets, have not the opportunity or the organisation necessary to sell their products. The Government would be well advised to keep to the policy of bulk buying. It is to the advantage of the trade in general. The statement of Mr. Blond should be examined, particularly when he tells us that we are suffering severe disadvantages by the multiple small sellers operating in the American market.
§ 6.10 p.m.
§ Mr. Fairhurst (Oldham)
I was pleased to hear the right hon. Member for Aldershot (Mr. Lyttelton) say that this 705 was a matter which should not be approached in a partisan spirit. All of us must be seriously concerned with the way in which we are to fashion the Lancashire cotton textile industry in the next few years. If we or the trade itself cannot fashion it successfully, the outlook for our future economic prosperity will be a bad one.
The buying of cotton is obviously a very important factor. When discussing the Cotton (Centralised Buying) Bill, I asked what was the best system on which to buy cotton. The right hon. Member for Aldershot made five points. He said that the Bill would destroy the international market and damage the trading position of Great Britain. Then he said there was no proper consultation with the trade and that we were certain to incur heavy trading losses and could not provide the necessary mechanism to ensure against risks and could not give the industry the exact qualities to suit each individual mill. I suggest that this afternoon we have had the crossing of the t's and dotting of the i's so far as the right hon. Gentleman is concerned.
We cannot look at the question of buying cotton as altogether a separate matter. It is only one section of the cotton trade. We have established a cotton buying Commission, and charged it with certain responsibilities. It is inadvisable to criticise it, because it has not been in operation long enough, and it is also inadvisable to criticise the personnel at present. It has not had a chance to justify itself. The old system had grown up from the very inception of the cotton industry in Lancashire; it fashioned itself to meet certain conditions in our trade and became part and parcel of the cotton spinning industry. Can we say that that portion of the cotton spinning industry, which is Lancashire's staple industry, as fashioned in those days, was bound to begin with something which was ever changing? No one can deny that the cotton spinning industry in Lancashire has been compelled, and is compelled today, to reorganise itself if it is to be an efficient unit and to meet international competition.
I well remember the present Chancellor of the Exchequer coming to my constituency and saying that the Government wantedreform of distribution arrangements so as to secure longer runs of production, amalgama- 706 tions particularly in the spinning section, and reorganisation of mills.The Government were prepared to nurse the industry, but not to nationalise the industry. At that meeting there were representatives of all sections of the cotton industry, and it was a unanimous decision that as far as possible each section would do what it could to try to put the industry back on its feet and give it the preeminent position which it held 40 or 50 years ago. But the fact remains that the industry 40 or 50 years ago was comprised of hundreds of small units and the buying side of the industry fitted in with the building up of the cotton industry in those days.
What is likely to happen in the industry, if in our amalgamating process we find that in building up economic units we have to say that this shall be done in one section, and something else in another? How is that going to react on the buying and what was formerly the Liverpool side of the industry? Would that fit in at all? I suggest to the right hon. Member for Aldershot that if the cotton brokers who were in the job 10 years ago had tried to fit in with something which has to be built up and which would probably become an effective unit in five years' time, at least half of them would be forced out. New conditions on the other side of the industry would have that effect. What would be the use of 200 brokers in Liverpool buying and selling cotton if they were not required? They would become redundant.
The industry must face the fact that if it is to become an effective and economic unit and to face American and other competition we must refashion our trade. We should bring in new machinery and new ideas and build up economic units. In years gone by the trade was forcing inefficient units out of existence by amalgamation of progressive factors in the industry throughout its length and breadth. It was bound to react on Liverpool. As a business proposition Liverpool would have had to do what it suggested before we brought in the Cotton (Centralised Buying) Bill. They said, "Leave it to us to reorganise ourselves and to put forward a reasonable proposition." They realised that the new conditions on the other side of the industry would force them to look at the way in which they were buying and selling cotton.
707 I believe dollars have had some effect on prices recently. Rising prices in the West have had some effect on the prices at which we have had to buy cotton and circumstances seem to be forcing us to look more to Alexandria than to New York whether we like it or not. In my opinion a buying commission can do a successful job for Lancashire and can do it better than the old Liverpool Board could, especially having in mind the tendency of the future. An inefficient board can bring chaos and that is a factor which the President of the Board of Trade must watch seriously.
We all recognise that it is not an easy job for the Commission, which is charged with the responsibility of giving cotton to every mill in Lancashire at a price at which it can manufacture and sell in the world market. I remember the time in the industry when a manager would probably sell 100,000 pieces of cloth and the price would be so-and-so. The markets would be closed and on the following day the price of cotton would have changed overnight before he could buy cotton to cover himself. Thus he would find himself unable to fulfil his contract because cotton prices had gone up. [An HON. MEMBER: "He cannot hedge now."] He could not hedge in those days—
§ Mr. Lyttelton
Perhaps he could not hedge that day but he could certainly hedge the following morning and his risk was only for 24 hours. Now, if he is a weaver, he cannot cover at all.
§ Mr. Fairhurst
I have seen in Lancashire whole sheds stopped with beams in them half woven because of that factor. I have seen beams taken out of the looms because of that factor. I have seen weaving sheds with half of their looms empty because the buying price of cotton and the selling price of cloth have varied so much that those concerned have not known what to do. As a result the work has had to be stopped. That has happened many times in Lancashire.
The President of the Board of Trade cannot escape his responsibility at the present time, which extends back to the buying Commission responsible for buying cotton. We know that the prices that are obtaining in Lancashire at present and which obtained during the war are not and were not economic prices. Even now, 708 when the world is just beginning to make an attempt to get back to normal, we cannot expect prices to stabilise themselves and operate in an ordinary routine as they did in the past. The fact that other countries are coming into the market as bulk buyers would sooner or later compel us to organise ourselves and come into the market as bulk buyers.
An hon. Member has said that the bulk buyer is like an elephant coming along, and that because a man comes along to buy a tremendous amount of cotton at one time the seller says, "I intend to get my price." It has not always worked out in that way. I can remember the time when the cotton planters were disturbed because they could see ruin facing them. They never knew whether they would be able to sell the cotton that they grew. Today, bulk buying can give to the cotton planters a security which they never had before. After all, that is organisation, it is planning, and hon. Members opposite cannot argue against organisation and planning.
§ 6.24 p.m.
§ Mr. Dryden Brook (Halifax)
I am interested in this Debate because it has brought out three factors which are today uppermost in the minds of most businessmen in all industries. What has been said applies not only to cotton but to all other industries. The three factors I have in mind and to which I should like to address myself briefly are, firstly, the technical efficiency of the machinery of the Cotton Marketing Board and the Commission; secondly, the extraordinary intermingling of politics and economics in most parts of the world at the present time; and, thirdly, the extraordinary rise in prices and the fluctuations which are occurring in respect of the prices of most raw materials.
With regard to the technical efficiency of the machinery of the Cotton Board, I would like to draw the attention of hon. and right hon. Gentlemen opposite to the fact that there is all the difference in the world between the principle which underlies the organisation of this machinery and the competence and efficiency of the machinery itself. If there is technical inefficiency, as was illustrated by my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes), it is the business of the President of the Board of Trade to 709 get rid of it. I would like to disagree with my hon. Friend in one instance. I consider that the part-time employment of merchants who are already interested in the industry holds grave dangers for any form of control which is instituted by a Government Department. I speak from a lifelong experience in the kindred industry of wool, in which I have spent the whole of my working life.
The hon. Member for Eddisbury (Sir J. Barlow), who spoke of the machinery of the organisation of this control, said that hedging does not mean gambling. I agree, so long as it is used in a legitimate way, which is to cover the requirements of those people who are engaged in manufacture and whose income depends upon technical efficiency and organisation. There is no man either in Lancashire or Yorkshire who can state that the futures markets in cotton and wool have been used solely for their legitimate purposes. The condemnation of hedging on the Liverpool futures market as in the wool futures market was that it lent itself to gambling so long as there was no control over the machinery of the organisation. Therefore, I say from experience that there is no alternative to the principle of organised control in the marketing of raw materials if we desire eventually to maintain stability of prices. That does not mean that we will achieve the end we have in view in the short space of time of one, two or three years, particularly if the machinery is to be open to the complaint and criticism, as has been illustrated by arguments of hon. Members opposite and the trade generally, that if the organisation attempts to control and stabilise prices it is thereby engaged in gambling.
I turn to the extraordinary intermingling of politics and economics at the present time. The right hon. Member for Aldershot (Mr. Lyttelton), the hon. Member for Bury (Mr. W. Fletcher) and the hon. Member for Eddisbury, all spoke of the difficulties in different parts of the world. I wish to put this point of view: surely there is a tendency throughout the world, in those countries which are devoted to the growing and producing of raw materials, towards the organisation of marketing? That means that there is a tendency in the direction of having one seller of those particular commodities. Is 710 that not true today in respect of Egyptian cotton? Does the Egyptian Government exert no control over the marketing of Egyptian cotton? It seems to me, therefore, that Members of the Opposition are hamstrung by their own argument. If it be true that one buyer as against a number of sellers is at a disadvantage, surely the converse must be true in the case of one seller as against a number of buyers?
§ Mr. Maclay (Montrose Burghs)
May I put it to the hon. Member that one of the reasons for single sellers beginning to appear is that they area natural reaction to single buyers?
§ Mr. Brook
The hon. Member's opinion is as good as mine, and mine is as good as his. In regard to the extraordinary rise in prices which has taken place, the tendency of both the right hon. Member for Aldershot and all other Opposition speakers has been to suggest that there is some peculiarity about the rise in prices which links it up with bulk buying and Government control. The suggestion is that if we had not had bulk buying in the cotton industry, there would have been no extraordinary rise in prices. That is completely at variance with our experience in other industries.
§ Mr. Lyttelton
If the hon. Member will forgive me, I am sure he does not wish to misrepresent me. None of us used that argument. We say that fluctuations have been exaggerated and that claims that bulk buying—which I think he admits—would induce stability have been proved to be false. That is quite a different argument from the one he is trying to put into my mouth.
§ Mr. S. Silverman
If my hon. Friend will permit me, I heard the speech of the right hon. Member for Aldershot, too, and I think he said that not all the increase in prices was due to that, but that the bulk of it was.
§ Mr. Brook
If we link industries together, we see there has been the same extraordinary rise in prices in all similar industries which deal in similar raw materials, I think we have done something to undermine the basis of the right hon. Gentleman's argument. As I said earlier, the whole of my life has been spent in the wool textile industry, and the raw material side of that industry. I can remember the control during 1914–1918 and the extraordinary rise in prices at the end of that war. I remember in the business in which I was then engaged wool which cost 6d. per lb. in 1920 being sold at 1s. in 1921. There has been nothing in the control under organised buying which has led to such a catastrophe as that in the industry, and even during recent months there has been the same extraordinary rise in the price of the raw material, wool.
As was said by my hon. Friend the Member for Ashton-under-Lyne, the control of raw wool was taken off in 1946. We have a free market and the result of that free market has been that although there is an extraordinary surplus of wool in the world at the present time, there has been in some qualities a rise of 250 per cent. The hon. Member for Bury said that although we had a free market in wool that was vitiated to some extent by the fact that we had not freedom of exchanges, but that is an argument which can cut both ways, because if one does not have freedom of exchanges obviously that is a limitation on some countries in respect of their buying ability. It may affect the issue in the other way. They may value raw materials more than they value their own currency. I admit that argument, but the other argument I have used is equally legitimate. The hon. Member for Bury and the hon. Member for Eddisbury tried to vitiate the argument by referring to rubber, although rubber is an entirely different commodity from cotton or wool; but has there been no 712 attempt to even out the price of rubber indirectly by organising in America the amount of synthetic rubber which could be used and thereby operating some kind of control over raw material?
Considering the points which have been raised, in my judgment we come to this—that we have in the most extraordinary circumstances, when the world is mixed up between different motives in respect of politics and economics, built up the machinery of the organisation. There can be no doubt in my mind, from a lifelong experience, that organised buying is more effective than competitive buying, if by competitive buying we mean that a number of individuals will be independently working competitively against one another.
I ask my right hon. Friend, in his reply to devote some attention at any rate to the technical efficiency of the machinery which is being created, and if he does that, and can build up a technically efficient machine, I believe that the principle on which that machine is based will, in the long run, make for stability in price in the cotton industry from the raw material point of view. Without that stability in raw materials, there is no manufacturing industry which can be run for long on a really technically efficient basis, because once we get to the point where those people who are dependent on manufacturing tend to depend more on fluctuations in the price of raw materials than on their technical efficiency and their technical organisation, it seems to me that we are near the end of prosperity as far as that particular industry is concerned.
§ 6.35 p.m.
§ Mr. Selwyn Lloyd (Wirral)
It is my duty to conclude the Debate as far as this side of the House is concerned, and I beg the indulgence which the House usually gives to a person who is doing something for the first time.
Might I comment on the versatility of the members of the Government upon this subject? We have had four major Debates on the purchase of raw cotton. The first time the Government spokesmen were the Lord President of the Council and the present Chancellor of the Duchy; on the second occasion the Government spokesman was the present Chancellor of the Exchequer; on the third occasion the 713 Government spokesman was the present Paymaster-General; and we are glad to welcome into this Debate tonight the President of the Board of Trade. One possible explanation of these changes may be that when a case is a really bad one it is not fair to put up the same man to argue it twice.
However that may be, the point we wish to make from this side is that this is not an ideological debate. Attempts have been made to bring into the discussions today wide issues of political principles and political differences. I think it was the present Chancellor of the Exchequer who made a somewhat unfortunate remark in the early stages of the controversy when he said the problem had a political content. I do not accept that for one moment. I think the issue which this Committee has to consider and which the country has to consider is the most efficient method of buying our necessary raw material for one of our great exporting industries. That is the point, and not a wide ideological question.
In the speeches which have been made we have had from one or two Members the customary abuse of the Liverpool Cotton Market and it was suggested, I think in an interjection, that that market was nothing but a gamble and that nothing but gambling took place upon it. It is obvious that there may be a certain amount of speculation in such a market. But in fact, speculators usually lose money and they help to make a market, but if there is an undue amount of speculation steps can be taken to check it. To put a market down altogether on the grounds that there is some speculation in it, seems to me like sending a boy with a squint to a home for incurables. This is a matter which could easily have been settled, and, as the right hon. Gentleman knows, there were proposals available to deal with the matter.
The next point which was made was the expression of some sort of hatred of the merchant. I think one speaker from the other benches definitely suggested that in connection with raw cotton the merchant was an evil person. I think he had his complete answer from the hon. Member for Ashton-under-Lyne (Mr. Rhodes), who spoke of the valuable services rendered by the merchants and, in fact, pleaded for greater use of merchants.
We want to discuss this evening the practical method of helping the textile 714 trade. I think it was in that spirit that the hon. Member for East Nottingham (Mr. Harrison), the hon. Member for Oldham (Mr. Fairhurst) and the hon. Member for Ashton - under - Lyne approached this matter. We have had a useful Debate against a rather sombre background of approaching trade difficulties. The object of the Commission as put before the House was to achieve stability and to save the trade money. In answer to hon. Members who have spoken from the opposite side of the Committee, I at once make the point that under stable conditions anybody can achieve stability. The claim which was made for this Commission was that under unstable conditions it could achieve stability. That was really the reason for its advocacy. Mention has been made of the alibi of world shortage. After all, there is a carry-over of 14,250,000 bales which bears the same proportion to consumption as did the carryover in prewar years. Therefore, this factor of world shortage is not so very important as has been suggested.
It has appeared to me throughout the Debate that almost everything that has been mentioned has forwarded the argument for an international market. The matter of the grower in Uganda not getting enough and the grower in Egypt getting too much, and all the discrepancies and differences—all these have pointed out the necessity for a world market; but that is the one thing which we have not got now Liverpool is shut down. Liverpool had the great advantage, owing to geography and time, that it could fulfil the function of an international market. When the whole desire on all sides is to bring the world closer together, it is a great pity that the only effective world barometer no longer continues to exist.
Having said that with regard to the general situation, may I attempt to bring back the right hon. Gentleman to the arguments put forward by my right hon. Friend the Member for Aldershot (Mr. Lyttelton)? I should like to ask the right hon. Gentleman certain questions in order that we can see how far we get agreement between the two sides of the Committee as to the facts of this matter. Does the right hon. Gentleman agree that there have been wide fluctuations? The right hon. Member for Aldershot spoke of a range of 125 per cent. Reference was 715 made to a rise in one day of 11d. per lb. in Ashmouni Type 4, and a fall on another day of 5d. per lb. in the same type of cotton. Not only is the range of the fluctuations so wide, but also the individual fluctuations themselves are abrupt and violent. The hon. Member for East Nottingham said that he did not consider that the Liverpool market before the war would have straddled a rise of 4s. 6d. He said that the rise in those days would have been 1d. a day at a maximum, and there would have been a great deal of uproar if the rise had been as much as that. That is precisely our case. It is that the Liverpool market before the war evened out the fluctuations and kept them close. That was its main advantage. I agree that a violent fluctuation of this sort would certainly not have been experienced in the past.
§ Mr. Harrison
I am sure that the hon. and learned Gentleman would not like to misconstrue the argument which I attempted to put forward. I suggest that before the war the Liverpol figures could straddle 1d. change in price comfortably, but today a 4s. 6d. change in price could not be straddled in those circumstances.
§ Mr. Lloyd
If I had not understood the hon. Gentleman, he has not understood me either. My point is that, had the Liverpool market been in existence, we could not have had a variation of 4s. 6d. in a day. I think the hon. Gentleman will agree that a variation in the order of 1d. was a huge variation in the course of a day. Now we get a variation of 11d. a lb. in one night. One would imagine that some pestilence had befallen a part of the world, that there had been some great geographical disaster, or something of that sort, for the spinner to wake up next morning and find that his cotton had risen in price by 11d. a lb. I imagine that all that has happened in fact has been that the accountant of the Raw Cotton Commission has telephoned Mr. Hindley and suggested that the price should go up and a decision has been taken. The whole case for the abolition of the Liverpool market was in order to introduce the smooth orderly working of this science of bulk buying.
The first question upon which I want the right hon. Gentleman to state his views is whether he agrees as to the range 716 of these fluctuations and as to the violence of them. The second matter upon which I want to ask for his opinion is whether he agrees with what my right hon. Friend said about the varieties of cotton with similar spinning values getting out of proportion. I do not want to go through the details again because my right hon. Friend gave full particulars about low grade Sudan, Sakel and Ashmouni, East African Buroga and B.P.52, and Ashmouni and American. He gave figures to show that the relative prices had got into a state of complete disparity. The importance of this is that if one is the purchaser of a raw material and one has available a certain interchangeability one's position is tremendously strengthened. As soon as one loses the capacity to interchange, owing to these wide price variations, then one's position as a buyer immensely deteriorates. We are in the position in this country of having to buy 10 per cent. of the world product of cotton, not producing any of it ourselves. Therefore, to some extent, we are at the mercy of the sellers, particularly if bulk sellers are by our actions set up against us. It is vital that we should preserve parity so far as we can, or a very small margin of difference between interchangeable types of cotton.
In fact, what has happened about the operations of this Commission is that, suggestions having been made to spinners that they should change from American to Ashmouni, they alter their machinery and then they find three months later that there is a difference of 13d. in the price. In other words, the cotton to which they have been asked to change has gone up in price by 13d. That puts them and the purchasers of the yarn which they spin in a very much worse position. On that matter, may I ask the right hon. Gentleman whether he will agree with these facts, because if we get those facts agreed then it may be possible later to draw certain inferences.
The next subject which I wish to discuss is the policy of the Commission towards its sales of cotton. Are we quite clear about this matter? I would invite the attention of the right hon. Gentleman to the most interesting speech which he made on 12th May of this year on an Adjournment Debate. He made certain statements then which I asked him to 717 clarify this evening. Referring to Egyptian cotton he said:The Commission have so far been able to sell below cost because they have had very large stocks of cotton bought at a period when the price was considerably lower than in the last year or so. It would be most unreasonable to ask the Cotton Commission … to incur heavy trading losses for the sake of subsidising the industries using raw cotton.Having said that—in other words, that the Commission is selling below cost—he went on to say that the Commission proposed in the future to follow prices very quickly as they fell. Of course, if it is intended to continue to sell below cost at a time when prices are falling, it really does need the intelligence and the luck of a superman. A great many people who have thought that they could buy below world prices on a falling market have got into very serious trouble.
The third matter is this. On the same page he says:The Commission are selling at the replacement price and not at the price when it got in before the market rose last Autumn."—[OFFICIAL REPORT, 12th May, 1948; Vol. 150, c. 2255.]That would appear to mean that the Commission definitely intends to sell at the replacement price as near as it can. That is what I understood from the speech of the Parliamentary Secretary this afternoon. However, the right hon. Gentleman went on to say:It has been the policy of the Cotton Commission to charge according to replacement price. In other words, if they bought cotton at a certain price and the price has risen in the market since that time, they based the new price on the original buying price."—[OFFICIAL REPORT, 12th May, 1948; Vol. 450, c. 2260.]That brings us back to where we were before, and I cannot think that the right hon. Gentleman meant to say that. In view of that statement, it would be helpful if we could have a perfectly clear statement of policy that it is the Commission's intention to endeavour to sell at the present replacement price.
§ Mr. H. Wilson
I am sorry to interrupt. That was a point where I regret to say that my regrettable habit of speaking rather quickly defeated the reporters. What I actually said was that they base their price on the replacement price and not on the original buying price.
§ Mr. Selwyn Lloyd
I thought that was probably the explanation, but I thought that, in view of the ambiguity, it was right that the right hon. Gentleman should be able to make the matter quite clear. I would point out what has already been pointed out, that if the policy is to sell according to the replacement cost, there is no real stability because the replacement costs are going to fluctuate so that the stability we were told we would have by the smooth orderly science of bulk purchase cannot possibly eventuate.
Taking the record of the Commission and putting its actions to that test, let us examine for a moment what has happened between 10th May and 31st May this year. So far as Karnak is concerned, the Commission's price to the spinner has remained unchanged but the replacement price has dropped by 7d. As to Ashmouni, the Commission's price to the spinner has dropped by 5d. and the replacement price has dropped 6d. It can be said in that instance that the two prices were following each other reasonably closely. As to Zagora, the Commission's price to the spinner dropped 9d. but the replacement price increased by 1d. It would not appear that within three weeks or so after the right hon. Gentleman's statement of policy his policy was in fact being carried out. My right hon. Friend referred to the three other cases of Karnak, Fine 4F Punjab and San Paulo 5 where at the present time, on 11th June, the Commission have been selling to the spinner at above the replacement cost, with obvious disadvantages to the spinner who feels that his foreign competitor can buy at a cheaper price than he can.
The lesson to be learnt from these figures is that the Commission cannot follow the market as closely as it thought and that it is quite impossible, whatever its intention is, for the Commission to keep up with the fluctuations of the market. Again, on that matter I should be interested to know whether the right hon. Gentleman agrees or disagrees with what I have been saying.
The next question is whether it is his contention that the Commission evens out the fluctuations. If that is his contention, may I yet invite his attention to some figures for recent periods because, as I understand it we are discussing the most effective way of enabling this industry to buy raw materials? He should direct his 719 attention to what has actually been happening under the operations of the Commission during the past few months. Take the Egyptian example between 5th February and 10th June. The replacement cost varied in the case of Karnak by 19½d., Ashmouni 12d., and Zagora 11½d., but the Commission's price to the spinner varied in the case of Karnak by 33d., Ashmouni 22½d. and Zagora 21½d. Is that smooth orderly bulk buying? In fact, the fluctuations of those selling prices are much greater than the fluctuations of the replacement markets. I would again ask the right hon. Gentleman to say whether or not he agrees with what I have been saying, and, if he agrees, whether he thinks it is satisfactory.
The plain fact of the matter is that here we are dealing with a natural crop which varies in bulk and quality from country to country and district to district. It has a great number of independent growers. There are also the added complications of embargoes and restrictions, and it is impossible to get protection unless we also have a futures market. A futures market will not prevent variations but it will protect the individual against the effect of variations. I would draw the right hon. Gentleman's attention to what is complete proof of what I have been saying, in the movement of the American Middling prices and the Indian 4F Punjab prices during the equivalent period. In both those instances, futures markets are operating. At the time of the huge variations between the various Egyptian types of which I spoke, the variation in American Middling was only 4½d. and in the Indian only 3d., because a futures market was in operation for both.
If the right hon. Gentleman concedes that point and agrees with me, which I think he must, that the effect of the futures market has been to narrow the fluctuations, then why not have the futures market in Liverpool? If we are to have a futures market and to rely on it, what is the point of letting futures markets be established outside this country? I ask the right hon. Gentleman to answer a question which he promised me he would answer during the Adjournment Debate. I do not blame him for not answering it then—I should have reminded him at the end of his speech—but I should like him to say whether the 720 Commission is hedging these purchases of cotton.
I suggest that the matters about which I have asked him are matters of fact, and I do not suggest that they are due to the incompetence of the Commission. I heard what has been said and I express no opinion about that at all because I think that the Commission has been asked to operate under impossible circumstances. The result of what I have been saying is price chaos. Price chaos is what the spinners of the Lancashire cotton trade have had over the past four months. What has been the effect of that? Let us take the first case of the spinner. The spinner is temporarily all right on paper because he has the cover scheme and also has his profit margins fixed. He is all right and can go on as long as the sellers' market goes on, but that will not last for ever and he must sell his yarn. I believe that the more far-sighted spinners are already desperately uneasy about the situation.
We come to the next category, the weavers, the converters and the merchants. They are not covered by the cover scheme. Whereas before the war they could fix the price two years ahead in some cases if they wanted to, now they cannot make a firm offer because, except during the very narrow period of the allocations of yarn, they do not know the price that their yarn will cost. Therefore, for a considerable portion of the time they are unable to make a firm offer to their customers; they have to make an offer which is declared to be subject to the price ruling at the date of the next allocation, or whatever the technical terms are. One could get away with that on a sellers' market, but in the case of a buyers' market it is ridiculous to expect customers overseas to put up with complete uncertainty as to price.
I suggest that the further effect of what I call this price chaos is that we shall have to pay more for our cotton. My right hon. Friend the Member for Aldershot (Mr. Lyttelton) mentioned the case of J. and P. Coats, which was a classic case. I should like the right hon. Gentleman to say whether or not it is true that the fine spinning section, even at this time, is considering stopping overtime work because they are finding themselves undercut by foreign producers who have bought more cheaply and who are able to sell 721 their yarn at between 11d. and 16d. a pound cheaper. If that is so, it should be stated and realised, because it is another warning signal of the commencement of the buyers' market.
Another point to which reference has been made is that the spinner can get no forecast of prices from the Commission. The Commission gives no forecast of prices, which means that the spinner cannot take advantage of discounts. To give a concrete example, on 11th June the price of American middling for immediate shipment was 24.35d., and for October shipment it was 21.10d. Under the present operation of the Commission the spinner cannot take any advantage of that discount.
Those are the points with which I would like the right hon. Gentleman to deal. I hope he will appreciate the fact that we desire to focus attention upon that necessity for the efficient working of this machine to purchase the necessary raw materials. Everybody knows where the Opposition stand in this matter, but that is not the point of this Debate. The point of the Debate is to concentrate attention upon the operation of the Raw Cotton Commission, and I ask the right hon. Gentleman to say whether he is satisfied with it. If he says he is satisfied, then I say Heaven help him. If he is not satisfied, what is he going to do about it?
§ 7.3 p.m.
§ The President of the Board of Trade (Mr. Harold Wilson)
First, I should like to thank the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) for the welcome he has given to me in entering this series of Debates. I do not contest his view that on this side of the Committee there has been quite a range of speakers on this extremely important subject, although, in thanking him for that welcome, I would remind him that I did speak on this subject on 12th May in the brief Adjournment Debate that we had then. As he knows, I am not entirely new to this subject, as I lived in his constituency for several years before the war. I had the opportunity then of seeing some of the effects—including the less pleasant effects—of the free market in cotton which are not so often quoted from the other side, particularly the undignified form of life to which those who had to work for the Liverpool Cotton Association 722 merchants were subjected in the handling of the cotton—a state of affairs which is only too well known to my hon. Friends on this side of the Committee who represent Liverpool constituencies.
I should like to thank the hon. and learned Gentleman for the very constructive way in which he summed up the Debate for the Opposition. I think this has been an extremely useful Debate. No one would deny either the importance of the subject or the concern which is felt on this subject, especially in the spinning and weaving districts of Lancashire, and also in some of the other districts which use cotton, such as those represented by my hon. Friends who spoke on 12th May. I think that most hon. Members who have listened to the Debate will agree that it has also been the occasion for a most remarkable speech by my hon. Friend the Member for Halifax (Mr. Brook) who approached this subject from his detailed knowledge of the sister industry of wool, but who was able, nevertheless, to bring a very clear Yorkshire common sense into this matter and to sum up the case for bulk buying in a way which leaves very little for me to say of such a general character.
The right hon. Member for Aldershot (Mr. Lyttelton) began his very fair-minded speech with quotations from a speech made some time ago by my right hon. Friend the Chancellor of the Duchy of Lancaster. The right hon. Gentleman said that on that occasion my right hon. Friend had declared that before the war in the raw cotton market there were fluctuations far wider than could be justified by the boll weevil or by variations in the weather. The right hon. Gentleman went on to say that in the past few months the variations have been considerably wider than in the period of 10 years taken by my right hon. Friend the Chancellor of the Duchy of Lancaster. I do not in any sense attempt to deny the figures quoted by the right hon. Gentleman, but of course, as he well knows, and as my hon. Friend the Member for Halifax said, the conditions now are very different from what they were in the 10 years immediately preceding the war.
It may be that it is true that to achieve stability in such unstable world conditions is proving extremely difficult. It certainly is. But what the free market 723 did, of course, was to achieve instability in a stable world, which, one would have thought, was even more deplorable. It will be interesting to see what the true comparison will be after 10 years of bulk buying in reasonably stable world conditions, and I hope the right hon. Gentleman and I are both in the House to debate this when the time comes. We shall then see whether, in fact, we have had the stability which my right hon. Friend the Chancellor of the Duchy of Lancaster said would be the result of bulk buying.
I would like to ask the right hon. Gentleman whether he sincerely believes that the Liverpool cotton market, if it had been restored in say 1946 or 1947, would have brought greater stability of prices in the field of Egyptian cotton than has actually been achieved in the course of the last few months. It appears that he does believe that. If so, I think he is capable of believing anything. He gave details of the fluctuations in the figures for certain karnak varieties and other varieties. I do not for a moment attempt to disagree with the figures quoted by the right hon. Gentleman. In fact, I quoted a number of these figures myself in the previous Debate.
As the right hon. Gentleman said, and as everybody ha, said, the Raw Cotton Commission is at present following a policy of charging the replacement price within broad margins. I will come to that point in a moment. I gather that the right hon. Gentleman does not condemn the Raw Cotton Commission for doing that. He joins with the chairman of J. and P. Coats, Ltd., whom he quoted, in saying that that is a reasonable and realistic policy to follow. Therefore, if he does not condemn the Raw Cotton Commission for its replacement price policy, what he must be saying is not that its price-charging policy is wrong but that its operating policy in buying is wrong. He must be blaming them either for excessive variations in buying or he must be admitting that those wide variations are, in fact, resulting from world conditions in the markets about which we are speaking. He said a few moments ago that before the war Liverpool made world prices, and now it is New York. That is a gross over-simplification of the story. In fact, it is completely wrong. We were debating 724 the price principally of Egyptian cotton, and most of the figures quoted by the right hon. Gentleman—certainly all the figures which supported his statement about the wide variations—are Egyptian prices, and not American prices.
I know the right hon. Gentleman would not suggest that Egyptian prices are made in New York. Egyptian prices are made where one would expect them to be made—Egypt—under conditions such as we have in Egypt at the present time. I do not think there will be much dispute about many of the factors operating in Egypt at the present time. There has been a short crop, particularly in varieties referred to by the right hon. Gentleman, and there has been the policy in Egypt of cutting and withholding supplies and letting them trickle on to the market at the rate the Egyptians desire. There have been the activities of the Egyptian speculators, of whom I had something to say on the last occasion when we debated this matter. But, above all, there has been the pressure or demand of a considerable number of countries who, like ourselves, are short of dollars and have been buying Egyptian cotton to a much greater extent than ever before, many of them almost regardless of the price which they have had to pay.
I am sure that the right hon. Gentleman would not contend for a moment that the Liverpool Cotton Association, if we had had a free market, could have countered that situation any more successfully, or even as well, as our Cotton Commission. After all, we are living in a different kind of world from the one the right hon. Gentleman used to perform in. We are having to deal at the moment with conditions of bulk selling on the part of many people abroad. We are having to deal with the activities of Governments abroad who themselves flood supplies on to the market at the rate they consider desirable. We cannot send a great mass of unco-ordinated merchants loose into the world bidding the price up against one another like that. The hon. Member for Ashton-under-Lyne and the hon. Member for Halifax have explained very clearly what has happened in the supply and price of wool, where there has been a free market for the last two years, and where there has been far less pressure than we have experienced in the matter of cotton.
725 There have been fantastic rises in the price of wool on the free market, even though there were two factors operating in wool that do not operate in cotton. In the first place, there has not been that big swing of demand away from the dollar areas into the non-dollar areas for wool as there has been in the case of cotton. Secondly, we began the period with very large stocks of wool held by the Government. My hon. Friend said that many experts in the trade assessed these stocks as being equivalent to a 12 years' supply. That being so, if there have been such wide variations in wool on a free market with those two favourable stabilising factors, how does the right hon. Gentleman think, if we had a free market in cotton with these much more difficult conditions, we could have prevented even wider variations in price?
§ Mr. Lyttelton
The right hon. Gentleman is addressing himself to the argument that we produced, which was that the Government claimed that bulk buying would produce stability. They now confess that it does not. We do not claim that a free market is necessarily stable, but that it is more stable than what we have now.
§ Mr. Wilson
I was addressing myself to my argument, and if the right hon. Gentleman would follow it he would see that I was not claiming that we have been securing stability in conditions of world shortage. What I am saying is that we could have had far less stability if we had had a free market.
§ Mr. Selwyn Lloyd
May I ask the right hon. Gentleman whether there is a futures market in wool, and, secondly, what proportion of the stocks of wool are held by the Government organisation?
§ Mr. W. Fletcher
May I suggest that if the right hon. Gentleman is going to produce arguments based on markets, the least he can do is to come to the Committee with the two essential points within his knowledge, because otherwise it makes complete nonsense. I quoted the case of rubber. Will he devote himself a little to that, or possibly to cocoa, which the Government know a great deal about, in New York.
§ Mr. Wilson
I thought we were debating cotton, and not wool. I am sorry, but I do not know the figures of the stocks held, but what I do know and what, I think, is common knowledge, is that the stocks held by the Government at the beginning of this year were far greater in relation to current consumption for wool than for cotton.
§ Mr. Dryden Brook
In respect of wool our production now is equal to pre-war production, and in addition to that, it has been estimated that if the control were taken off it would take about 13 years to liquidate the accumulated stock that was built up during the war. In relation to that, we have the normal supply of raw wool coming round every year.
§ Mr. Wilson
If the right hon. Gentleman is trying to use an argument against Government control in the matter of wool—
§ Mr. Lyttelton
I really must interrupt the right hon. Gentleman. He used the instance of wool, saying there had been a very large rise in the price in the free market. Everybody knows that this stock is held by a Government controlled organisation. Therefore, if in the face of 12 years' supply the price has gone up sharply, it seems to be a poor argument to adduce against a free market.
§ Mr. Wilson
The right hon. Gentleman is running right away from the facts. I will ask him to face them. If it is a fact that by the release on to the market by the Government of a large quantity which trade experts put at 12 years' supply, though I do not associate myself with that figure—it has in fact been proved wrong—but if the Government had released on to the market such a large quantity of wool in addition to the large supplies coming forward, and if, nevertheless, there has been a very big increase in the price of wool, as it is suggested, then if we had cotton on a free market, without that favourable factor, we would clearly have had a very much bigger increase in the price.
§ Mr. Wilson
I am always prepared to listen to the noble Lord when he speaks, with his great experience.
§ Earl Winterton
I have greater knowledge of production in various parts of the world than the right hon. Gentleman has ever had. His knowledge is purely academic, as is proved by his speech.
§ Mr. Wilson
I know that the noble Lord has a very great knowledge of production in various fields. When the noble Lord talks about a free market in wool I would like him to come and see some effects of the free market in wool in the area where I lived for some 15 or 16 years. I think it has been agreed by all sides that the replacement price basis of the Raw Cotton Commission is a reasonable one, and the chairman of J. and P. Coats, quoted by the right hon. Gentleman supported that. I would like to deal with the special case of J. and P. Coats, as quoted. The hon. and learned Member for Wirral said that they came to the Raw Cotton Commission asking to be covered for two years, to be given a contract of supply for two years, and they said that they would have bought this if they had been free agents and there had been a free market so to buy.
If it is the fact—as it is the fact, in my view—that the relatively limited purchases of cotton in Egypt by this country and other countries in the last two months have pushed up prices so remarkably, how much more does the right hon. Gentleman think prices would have been pushed up if they had been buying for two years ahead? If the Raw Cotton Commission had agreed to this proposition of J. and P. Coats, which was a very reasonable one for Coats to make, then they would have had to do likewise for everybody else who wanted to be covered for as long a, period ahead; and I am certain that on that cover they would have had to pay very much more than two years' prices. In fact, purchases by this country and other countries have pushed up the price to such fantastic heights, and if the Raw Cotton Commission had done what Coats asked, the price rise would have been all the greater.
The right hon. Gentleman asked one or two questions, and I should like to deal with them as quickly as I can. One was about hedging. He wanted to know whether it is to be the policy of the Raw Cotton Commission to indulge in hedging. I will give him an answer to that quite plainly. Although this is, of course, a matter for the Raw Cotton Commission, 728 I am informed by the Commission that it is not to be their policy. The Commission have a very large organisation. A smaller organisation has to cover its risks by hedging. A larger organisation can cover those risks over a period without hedging.
§ Mr. Wilson
It has nothing to do with the taxpayer. The Government, as the right hon. Gentleman well knows, do not undertake fire insurance on their buildings, because the Government have so many buildings that they can assume the risk and spread it over the lot of them. A private householder, however, in all prudence, should undertake fire insurance on his own buildings.
§ Mr. W. Fletcher
Does the right hon. Gentleman's argument mean that a small man has to insure his house because he cannot afford to pay the loss? If the Government lose on an infinitely greater scale without hedging, who will bear the loss?
§ Mr. Wilson
The case I was taking was the case of Government buildings. The Government, over a long period of time, have abstained from insuring their buildings. They have never suffered a loss on that, because the risk is spread over such a large field that there has not been loss over the whole field. Similarly, the Commission, dealing on such a large scale and over a long period of time, are able to balance the losses of one year against the gains of another, and the Raw Cotton Commission can do this without having to hedge. I understand it to be the fact, though I speak subject to correction on this, that some of the larger organisations in the Lancashire Cotton Association before the war did not hedge their purchases because they were buying on a scale large enough to cover the risk.
§ Mr. E. P. Smith (Ashford)
Does the right hon. Gentleman mean to say there is any analogy at all between the risk of fire in buildings and the risk of the market going against one?
§ Mr. Wilson
I agree that the analogy is very far from complete, but I do maintain that if one is operating on a sufficiently large scale, and if one has enough capital to cover one's losses or to 729 balance against them over a sufficiently long period, one can afford to do without insurance.
§ Mr. W. Fletcher
Let us get this quite clear. The right hon. Gentleman and others have talked about a 46d. drop. That is the sort of thing to have in mind. If on the whole Government stock there is over a period of two years a drop of something like 40d. and no reserves are held against it, that will wipe out any reserves they may have and the whole of the capital. Who is going to bear that loss?
§ Mr. Wilson
The right hon. Gentleman was speaking of the probability of two years continued high prices. [HON. MEMBERS: "No."] The right hon. Gentleman certainly was, earlier on. Let it not be forgotten that the Commission, and the Control which preceded it, have already made very considerable gains. [HON. MEMBERS: "Answer the question."] These gains are available to cover a risk of that kind.
§ Mr. Wilson
The noble Lord the Member for Horsham (Earl Winterton) is, no doubt, looking forward to an altercation with his right hon. Friend the Member for Aldershot on films, and is being carried away with excitement.
§ Earl Winterton
I much admire the Government's smart habit of banter, but occasionally banter is rather offensive. I take the opportunity of telling the right hon. Gentleman that I have not a scintilla of disagreement with my right hon. Friend. The President had better follow the example of the Lord President of the Council, who recently had to apologise to my right hon. Friend the Leader of the Opposition, and apologise to me.
§ Mr. Wilson
As I have not yet heard what the right hon. Gentleman is to say, I do not want to prejudge the forthcoming Debate, but having heard the noble Lord on this subject before, and having some idea of what the right hon. Gentleman will say, I am looking forward to that Debate.
730 The right hon. Gentleman also raised the question of the stability of the spinner. He referred—and I agree with him—to the wide variations which must follow a policy of replacement; but, as he well knows, there is for the protection of spinners a "cover scheme" which is operated by the Raw Cotton Commission, and which, in the view of very many people in Lancashire, gives much better protection to the spinner than did the old futures market, which gave that cover on a limited range. The right hon. Gentleman says it does not give protection to the weavers. I agree with him, and I can tell him that the Raw Cotton Commission are willing to examine any scheme the weavers and converters can put up, and are ready to go into discussion with them to give them the same cover that is provided for the spinners. In addition to that, the Commission are working out at the moment and are discussing deferred delivery contracts. That will meet some other criticisms of the right hon. Gentleman.
The right hon. Gentleman referred to some story circulating in some of the less reputable quarters of Liverpool about the movement of funds to Alexandria and the effect this has on purchase prices. I am quite sure that my hon. Friend the Member for the Exchange Division of Liverpool (Mrs. Braddock) has heard the story in some of the less desirable parts of her Division. If that story gives comfort to anyone, I am quite prepared to let him go on believing it, but I can tell the right hon. Gentleman that that story is not true. The funds are moved after purchase and not before purchase.
The hon. Member for Bury raised a number of points, many of which I should like to go into, and I should like to get the answers in detail from the Commission and let him have them. He made one point, in particular, that he has made before in this Chamber. He said that the spinners in his constituency—or, at any rate, spinners he has met—complain about the lack of choice of grades, that the range and selection has not been as good as it used to be since the Commission came into being. I accept that criticism right away. It is true. However, the lack of choice and, to some extent, the deterioration in the quality of raw cotton is due not to the activities of the Commission as such, but to the 731 effect of Government instructions concerning economy in dollars. It is certainly true that if the L.C.E. had been functioning at the present time, they would have had to be rationed similarly in dollars, and exactly the same result would have applied.
§ Mr. W. Fletcher
Is that not a half-truth? Is not there the other side, that it arrives so mixed and muddled up that there can be no proper separation and sampling, and no proper display of samples, and when the spinner asks for these, he is ridden off every time by the Commission?
§ Mr. Wilson
I cannot accept that. I accept the proposition that from the end of the war there has been a number of things which the Raw Cotton Commission have been trying to get back to peacetime conditions, and they are not yet complete. The main reason is the one which I have given to the hon. Gentleman.
§ Mr. W. Fletcher
Would the right hon. Gentleman answer the question about forward buying? He is aware that the trade has to be given the opportunity of buying forward to take advantage of the discounts. It is agreed on both sides of the House that this is a very vital question.
§ Mr. Wilson
I do not think the hon. Gentleman could have heard what I said. The Raw Cotton Commission are at the moment going into the question of deferred contracts to cover that very point. I agree that there are difficulties, but I hope that what is worked out will give the hon. Gentleman every satisfaction. The hon. and learned Member for Wirral, in his concluding remarks, gave some details, the effect of which I do not contest, about replacement prices and the difference charged for individual grades. The right hon. Member for Aldershot also gave some figures about that. He suggested that the margin between them was too wide. That is a question, I would suggest, to be taken up and further discussed in Lancashire. It is now being discussed in Lancashire with the Raw Cotton Commission by the users, and the Commission can then go into the matter. I suggest that if the hon. and learned Gentleman is going to conclude his argument by saying that on one or two grades which he mentioned the price is slightly above replacement costs, that destroys or weakens his argument about narrowing 732 the margin between them. If we narrow the margin, we inevitably get away from the policy of exact replacement cost grade by grade.
In conclusion, he referred to the competition which the Lancashire cotton industry is meeting. I agree with everything that he said on that matter. The Lancashire cotton industry is faced with growing competition abroad. We are entering—and in some markets we have been there for some time—conditions of a buyers' market, but I would put this to the hon. and learned Gentleman, that the competition which we are facing there, so far as the production of European countries is concerned, other than the United States, is not in any sense due to the high prices following purchases by the Raw Cotton Commission. The European countries, like ourselves, are faced with very high costs, because they, like ourselves, are operating in the Egyptian market, driven there by shortage of dollars, and it is the case that the Raw Cotton Commission have been more successful than probably a number of private buyers in other European countries. We have heard nothing from the right hon. Gentleman about the not unsuccessful policy of the Commission in the Sudan, which has put our cotton mills in a position of greater advantage compared with the cotton mills of other European countries.
§ Mr. Wilson
On the question of India, the hon. Gentleman knows only too well the difficulties of getting cotton from that sub-continent at the present time. If we were able to get it much more easily, he knows what the position would be.
§ Mr. Selwyn Lloyd
Does the right hon. Gentleman dispute that the Commission are now charging the spinner here something like 12d. per lb. more than the Indian spinner is having to pay for the same type of cotton?
§ Mr. Wilson
I would not deny that that is happening for certain grades, but, equally, for other grades our mills have a very strong competitive advantage, not only over the Indian producer but any other producer who is unable to buy all his free cotton supplies on the American market.
733 We have had, quite apart from the note that has crept in during the last few minutes, a very useful and constructive Debate, but nothing that has been said from the benches opposite in any way diminishes the feeling which we on this side of the Committee have, and which was expressed so clearly by he hon. Member for Halifax in his speech, that bulk buying, in these unstable conditions particularly, is the only possible policy for this country to follow. I grant willingly the point made by the right hon. Member for Aldershot that we have not achieved stability. We have seen great instability, but that instability, I would put to the
§ Committee, has resulted from world conditions, and, above all, from the world dollar shortage. If we had attempted to meet these cataclysmic world conditions with any other system but that of bulk purchase, the position of our Lancashire cotton industry would have been very much worse than it is today.
§ Question put
§ The Committee divided: Ayes, 105; Noes, 239.735
|Division No. 228.]||AYES.||[7.38 p.m.|
|Astor, Hon. M.||Grimston, R. V.||Orr-Ewing, I. L.|
|Baldwin, A. E.||Hare, Hon. J. H. (Woodbridge)||Peto, Brig, C. H. M.|
|Beechman, N. A.||Harris, F. W. (Croydon, N.)||Pitman, I. J.|
|Bennett, Sir P.||Henderson, John (Cathcart)||Ponsonby, Col. C. E.|
|Birch, Nigel||Hogg, Hon. Q.||Prescott, Stanley|
|Boles, Lt.-Col. D. C. (Wells)||Hollis, M. C.||Prior-Palmer, Brig. O.|
|Bossom, A. C.||Holmes, Sir J. Stanley (Harwich)||Raikes, H. V.|
|Bower, N.||Howard, Hon. A.||Ramsay, Maj. S.|
|Boyd-Carpenter, J. A.||Hudson, Rt. Hon. R. S. (Southport)||Robinson, Roland|
|Braithwaite, Lt.-Comdr. J. G.||Hutchison, Col. J. R. (Glasgow, C.)||Ropner, Col. L.|
|Buchan-Hepburn, P. G. T.||Jeffreys, General Sir G.||Sanderson, Sir F.|
|Bullock, Capt. M.||Jennings, R.||Savory, Prof. D. L.|
|Butcher, H. W.||Langford-Holt, J.||Scott, Lord W.|
|Byers, Frank||Lennox-Boyd, A. T.||Shepherd, W. S. (Bucklow)|
|Challen, C.||Lindsay, M. (Solihull)||Smith, E. P. (Ashford)|
|Clifton-Brown, Lt.-Col. G.||Linstead, H. N.||Snadden, W. M.|
|Conant, Maj. R. J. E.||Lloyd, Selwyn (Wirral)||Spearman, A. C. M.|
|Cooper-Key, E. M.||Lyttelton, Rt. Hon. O.||Stanley, Rt. Hon. O.|
|Crosthwaite-Eyre, Col. O. E.||McCallum, Maj. D.||Strauss, H. G. (English Universities)|
|Crowder, Capt. John E.||Macdonald, Sir P. (I. of Wight)||Sutcliffe, H.|
|Darling, Sir W. Y.||McFarlane, C. S.||Taylor, C. S. (Eastbourne)|
|Davidson, Viscountess||Mackeson, Brig. H. R.||Teeling, William|
|Davies, Rt. Hn. Clement (Montgomery)||Maclay, Hon. J. S.||Thomas, J. P. L. (Hereford)|
|Dodds-Parker, A. D.||Maclean, F. H. R. (Lancaster)||Turton, R. H.|
|Donner, P. W.||Macmillan, Rt. Hon. Harold (Bromley)||Vane, W. M. F.|
|Drewe, C.||Macpherson., N. (Dumfries)||Wakefield., Sir W. W.|
|Dugdale, Maj. Sir T. (Richmond)||Maitland, Comdr. J. W.||Walker-Smith, D.|
|Duthie, W. S.||Manningham-Buller, R. E.||Watt, Sir G. S. Harvie|
|Eden, Rt. Hon. A.||Marlowe, A. A. H.||Wheatley, Colonel M. J. (Dorset, E.)|
|Elliot, Lieut.-Col. Rt. Hon. W.||Marples, A. E.||White, J. B. (Canterbury)|
|Fletcher, W. (Bury)||Marshall, S. H. (Sutton)||Williams, C. (Torquay)|
|Foster, J. G. (Northwich)||Maude, J. C.||Winterton, Rt. Hon. Earl|
|Fraser, Sir I. (Lonsdale)||Molson, A. H. E.||Young, Sir A. S. L. (Partick)|
|Galbraith, Cmdr. T. D.||Morris-Jones, Sir H.|
|Gammans, L. D.||Neven-Spence, Sir B.||TELLERS FOR THE AYES:|
|Gomme-Duncan, Col. A.||Odey, G. W.||Commander Agnew and|
|Acland, Sir Richard||Beswick, F.||Castle, Mrs. B. A.|
|Adams, Richard (Balham)||Binns, J.||Champion, A. J.|
|Adams, W. T. (Hammersmith, South)||Blackburn, A. R.||Chater, D.|
|Anderson, A. (Motherwell)||Blenkinsop, A.||Chetwynd, G. R.|
|Anderson, F. (Whitehaven)||Blyton, W. R.||Cocks, F. S.|
|Attewell, H. C.||Bottomley, A. G.||Collins, V. J.|
|Austin, H. Lewis||Bowles, F. C. (Nuneaton)||Colman, Miss G. M.|
|Awbery, S. S.||Braddock, Mrs. E. M. (L'pl, Exch'ge)||Comyns, Dr. L.|
|Ayles, W. H.||Braddock, T. (Mitcham)||Cooper, Wing-Comdr. G.|
|Ayrton Gould, Mrs. B.||Bramall, E. A.||Corbet, Mrs. F. K. (Camb'well, N.W.)|
|Bacon, Miss A.||Brook, D. (Halifax)||Daines, P.|
|Barstow, P. G.||Brooks, T. J. (Rothwell)||Dalton, Rt. Hon. H.|
|Barton, C.||Brown, George (Belper)||Davies, Edward (Burslem)|
|Battley, J. R.||Brown, T. J. (Ince)||Davies, Harold (Leek)|
|Beattie, J. (Belfast, W.)||Bruce, Maj. D. W. T.||Davies, Haydn (St. Pancras., S.W.)|
|Bechervaise, A. E.||Buchanan, Rt. Hon. G.||Davies, R. J. (Westhoughton)|
|Bellenger, Rt. Hon. F. J.||Burden, T. W.||Davies, S. O. (Merthyr)|
|Benson, G.||Burke, W. A.||de Freitas, Geoffrey|
|Delargy, H. J.||Jones, P. Asterley (Hitchin)||Roberts, Emrys (Merioneth)|
|Diamond, J.||King, E. M.||Roberts, Goronwy (Caernarvonshire)|
|Dobbie, W.||Kinley, J.||Robertson, J. J. (Berwick)|
|Dodds, N. N.||Lawson, Rt. Hon. J. J.||Rogers, G. H. R.|
|Donovan, T.||Lee, F. (Hulme)||Royle, C.|
|Driberg, T. E. N.||Lee, Miss J. (Cannock)||Segal, Dr. S.|
|Dumpleton, C. W.||Leslie, J. R.||Sharp, Granville|
|Durbin, E. F. M.||Levy, B. W.||Shawcross, Rt. Hn. Sir H. (St. Helens)|
|Ede, Rt. Hon. J. C.||Lipton, Lt.-Col. M.||Silkin, Rt. Hon. L.|
|Edelman, M.||McAdam, W.||Silverman, J. (Erdington)|
|Edwards, N. (Caerphilly)||McAllister, G.||Silverman, S. S. (Nelson)|
|Evans, Albert (Islington, W.)||McEntee, V. La T.||Simmons, C. J.|
|Evans, E. (Lowestoft)||McGhee, H. G.||Skeffington, A. M.|
|Evans, John (Ogmore)||McKay, J. (Wallsend)||Skeffington-Lodge, T. C.|
|Evans, S. N. (Wednesbury)||McKinlay, A. S.||Skinnard, F. W.|
|Ewart, R.||Maclean, N. (Govan)||Smith, C. (Colchester)|
|Fairhurst, F.||McLeavy, F.||Smith, Ellis (Stoke)|
|Farthing, W. J.||Macpherson, T. (Romford)||Smith, H. N. (Nottingham. S.)|
|Fernyhough, E.||Mallalieu, J. P. W. (Huddersfield)||Snow, J. W.|
|Fletcher, E. G. M. (Islington, E.)||Mann, Mrs. J.||Sorensen, R. W.|
|Follick, M.||Manning, C. (Camberwell, N.)||Soskice, Sir Frank|
|Foot, M. M.||Marquand, H. A.||Sparks, J. A.|
|Forman, J. C.||Mathers, Rt. Hon. George||Steele, T.|
|Fraser, T. (Hamilton)||Medland, H. M.||Strauss, Rt. Hon. G. R. (Lambeth, N.)|
|Freeman, J. (Watford)||Mellish, R. J.||Sylvester, G. O.|
|Gaitskell, Rt. Hon. H. T. N.||Middleton, Mrs. L.||Taylor, H. B. (Mansfield)|
|Gallacher, W.||Millington, Wing-Comdr. E. R.||Taylor, Dr. S. (Barnet)|
|Ganley, Mrs. C. S.||Monslow, W.||Thomas, I. O. (Wrekin)|
|Gibson, C. W.||Morgan, Dr. H. B.||Thorneycroft, Harry (Clayton)|
|Gilzean, A.||Morris, P. (Swansea, W.)||Thurtle, Ernest|
|Glanville, J. E. (Consett)||Moyle, A.||Tiffany, S.|
|Goodrich, H. E.||Murray, J. D.||Timmons, J.|
|Granville, E. (Eye)||Nally, W.||Titterington, M. F.|
|Greenwood, A. W. J. (Heywood)||Naylor, T. E.||Ungoed-Thomas, L.|
|Grey, C. F.||Neal, H. (Claycross)||Vernon, Maj. W. F.|
|Griffiths, W. D. (Moss Side)||Nichol, Mrs. M. E. (Bradford, N.)||Viant, S. P.|
|Guest, Dr. L. Haden||Nicholls, H. R. (Stratford)||Walkden, E.|
|Gunter, R. J.||Noel-Baker, Rt. Hon. P. J. (Derby)||Walker, G. H.|
|Guy, W. H.||Noel-Buxton, Lady||Wallace, G. D. (Chislehurst)|
|Haire, John E. (Wycombe)||O'Brien, T.||Wallace, H. W. (Walthamstow, E.)|
|Hall, Rt. Hon. Glenvil||Orbach, M.||Warbey, W. N.|
|Hamilton, Lieut.-Col. R.||Paling, Rt. Hon. Wilfred (Wentworth)||Watson, W. M.|
|Hannan, W. (Maryhill)||Palmer, A. M. F.||Westwood, Rt. Hon. J.|
|Harrison, J.||Parkin, B. T.||Whiteley, Rt. Hon. W.|
|Hastings, Dr. Somerville||Paton, Mrs. F. (Rushcliffe)||Wilcock, Group-Capt. C. A. B.|
|Henderson, Rt. Hn. A. (Kingswinford)||Paton, J. (Norwich)||Wilkes, L.|
|Henderson, Joseph (Ardwick)||Pearson, A.||Willey, F. T. (Sunderland)|
|Herbison, Miss M.||Peart, T. F.||Willey, O. G. (Cleveland)|
|Holman, P.||Perrins, W.||Williams, R. W. (Wigan)|
|Holmes, H. E. (Hemsworth)||Platts-Mills, J. F. F.||Williams, Rt. Hon. T. (Don Valley)|
|Hughes, Emrys (S. Ayr)||Poole, Cecil (Lichfield)||Williams, W. R. (Heston)|
|Hughes, Hector (Aberdeen, N.)||Popplewell, E.||Willis, E.|
|Hughes, H. D. (W'lverh'pton, W.)||Porter, E. (Warrington)||Wills, Mrs. E. A.|
|Hynd, H. (Hackney, C.)||Price, M. Philips||Wilson, Rt. Hon. J. H.|
|Hynd, J. B. (Attercliffe)||Pritt, D. N.||Woodburn, Rt. Hon A.|
|Irving, W. J. (Tottenham, N.)||Pursey, Cmdr. H.||Woods, G. S.|
|Janner, B.||Randall, H. E.||Wyatt, W.|
|Jay, D. P. T.||Ranger, J.||Yates, V. F.|
|Jeger, G. (Winchester)||Rankin, J.|
|Jenkins, R. H.||Rees-Williams, D. R.||TELLERS FOR THE NOES:|
|Johnston, Douglas||Reid, T. (Swindon)||Mr. Collindridge and|
|Jones, D. T. (Hartlepool)||Rhodes, H.||Mr. Wilkins.|
|Jones, J. H. (Bolton)||Richards, R.|
That, for the purposes of any Act of the present Session to establish a national corporation for securing the development and exploitation of inventions it is expedient to authorise—
Resolution agreed to.