HC Deb 19 January 1949 vol 460 cc294-304

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Snow.]

10.12 p.m.

Sir Basil Neven-Spence (Orkney and Shetland)

There are conflicting views about the general social policy which should be followed in the Islands and Highlands. One school thinks that the economic forces should be allowed to have their way and the population allowed to emigrate until it finds its natural level. The other school thinks the policy should be directed to encouraging the growth of industries in the Islands with a view not merely to arresting the decline in population but to reversing that trend. I think all hon. Members of this House, irrespective of party, support the latter view.

Unfortunately, the lack of natural resources in the Highlands and Islands very much restricts the field of possible industrial development there. The key to the solution of the problem lies in fostering those forms of employment which will yield a satisfactory cash income to the people and which will fit in with the general rural background, where most of the people are engaged in crofting or fishing, or activities in connection with the tourist trade. The crying need is to encourage the growth of industries which can provide a whole-time or part-time living for the people in or near their homes.

Furthermore, in order to overcome the severe handicap of high freights, due to the geographical position of this part of the world, it is essential to encourage types of industry which will produce quality goods such as appeal to the high-class market. The woollen industry is pre-eminently an industry of that type, producing quality goods, but it has this additional advantage—it makes use of one of the most important natural resources of the Highlands and Islands. Other industries have grown up in the past and have declined for various reasons, but it looks as if the woollen industry were one which could not merely be established on a permanent basis but which could definitely be expanded in the future.

I am concerned tonight with the hand-woven tweed section of the woollen industry. It is an ancient industry which has declined in many parts of Britain, but it still survives in the Highlands and Islands, where there is a very strong tradition of craftsmanship. In the Highlands and Islands this industry has not only survived, but has undergone quite considerable expansion. In 1939 the Hebrides alone produced well over four million yards of hand-woven tweed. It brought to the islanders something between £750,000 and £1,000,000. The industry has had many difficulties with which to contend during war and in the post-war period owing to the wool quota, restrictions on spinning, and a great shortage of labour, all of which corresponded with exceptional demand both in the home and overseas markets.

In Orkney and Shetland on the other hand, though the weaving industry is an ancient one, it has not developed to anything like the extent it has in the Hebrides, in particular. Nevertheless, before the war it was beginning to undergo rapid expansion. Shetland wool has very distinctive qualities. It is of a far higher price than any Scottish wool. It is these qualities which give the products of the Shetland wool industry their distinctive character, which has always enabled them to command a high price in the market. The Report of the Crofter Woollen Industry Committee, set up by the Scottish Council for Industry and published in 1945, stressed the importance of developing the weaving industry in the Northern Isles because of its capacity to employ large numbers of men and in that way to counteract the prevailing tendency to emigration. It also stressed the need for a spinning mill in Shetland, but doubted whether it would be a business proposition. Nevertheless, a mill has been established there, entirely by local initiative and resources, and that is a great tribute to private enterprise, I think—or, as I prefer to call it, free commercial enterprise—which is having such a hard struggle to exist in this country at present. One object of the mill was to provide wool for the hand weaving industry. This industry is carried on to a lesser extent in Orkney and in various parts of the Scottish mainland.

There is not the slightest doubt it could be expanded, to the immense benefit of the Highlands and Islands, but unless the Government change their policy it is needless to look for expansion or, indeed, even to the survival of the industry, because at present it is moribund. In 1947 and 1948 there were many idle looms and many unemployed men, and that was due to the difficulties of getting yarn. The position gradually righted itself as supplies of yarn became more available and export permits became more easily obtainable, but another difficulty was already beginning at that time to manifest itself—a dwindling demand in the overseas market. So the industry has been forced since then to rely more and more on the home market for the disposal of its produce. Before long it became apparent that the rate of Purchase Tax, which at that time was 33⅓ per cent. but was raised to 50 per cent., was proving a very serious handicap to the industry, and having a very adverse effect on sales.

The Chancellor of the Exchequer chose that moment to deal the industry a death blow by raising the rate of Purchase Tax to 66⅔ per cent. in the Budget last year. I protested very strongly against it at the time, pointing out that it was nothing less than a death sentence to the industry. I am sorry to say my words have been proved to be only too true. In reply to me the Economic Secretary to the Treasury, who is not here I am sorry to say, said that the Government had shown themselves sympathetic to the producers by abolishing Purchase Tax on hand-knitted woollens, which at that time had been reduced through the operation of Purchase Tax to exactly the same state as that of the hand woven tweed industry today. We were grateful enough for that concession, certainly; but it is very cold comfort to unemployed weavers to be told that knitters are able to earn a living, because that the weavers are an entirely different section of the community from the knitters. The Economic Secretary produced a number of other arguments which seemed to me equally unconvincing, and which were mostly based on questions of administrative convenience. He ended by using these words: We do not believe that the effect of paying this tax would be to kill this industry, as some hon. Members have suggested, or anything approaching such a serious effect as that."—[OFFICIAL REPORT, 8th June, 1948; Vol. 451, c. 1982.] To prove how wrong he was I shall quote some letters which I received during December, 1948, and in this month. They are not specially selected. They represent firms of various sizes, situated in various localities, and various types of organisation. Here is one firm in a large way of business which has in fact just completed the erection of what is a very large factory for Shetland for the production of tweed. In April, 1948, that firm sold 359 yards of Shetland tweed at £252 and by October, 1948, sales had shrunk to 35 yards valued at £21. Another firm, in a smaller way of business, state that 18 months ago when the Tax was one-third and even when it was raised to 50 per cent. they were still able to market tweed, but when it was raised to 66⅔ per cent. it killed the trade as dead as the dodo. That firm has now accumulated a stock of 1,500 yards of tweed plus a large supply of yarn and wool which, as they say, will never do anything now but feed the moths. That firm was employing ex-Service men, who were the first to get jobs after the war, and they are all now out of work.

Another small firm, started in January, 1948, with three looms, has now been knocked completely out of business. They have been for some time making tweed for stock, but they cannot continue to pile up stocks for which it seems there is never to be any sale. They have done their best to sell their stocks. Another old established firm in Shetland states: Fifty per cent. of our looms have been idle during the last six months through lack of orders. We have not received any orders for the home market during the last eight or nine months and only small orders for export. This firm has a stock of approximately £1,800 worth of tweed mostly made for orders for the home market which was cancelled after the imposition of the 66⅔ per cent. Purchase Tax and they have got between £6,000 and £7,000 worth of raw wool and yarn lying idle. They said that they had sufficient work to keep one-third of their weavers going for two weeks, and then the mill would be closed down. That letter was written three weeks ago, and the mill is now closed. Another firm in Orkney sold 5,400 yards in April, and sales dropped to 180 yards in the month following the imposition of Purchase Tax. For the last eight months they have only sold a total of 180 yards.

Finally, here is another kind of organization— the Shetland Crofters Weavers Limited—which is surely the kind of organisation which hon. Members opposite ought to encourage. They state: Our establishment has been rendered almost bankrupt by this most unfortunate Tax. We had in operation last spring 30 fully trained weavers and with normal prospects the industry at that time invested in yarn supplies sufficient to maintain full production for nine months. Immediately after the imposition of the Tax our market started to fall and finally came to an abrupt stop. They continued to produce hoping to be able to carry on, but that is not now possible and they are now closed down completely.

It seems to me that the Economic Secretary to the Treasury has been just as bad a prophet for the hand woven tweed industry as he was over the length of time that the American loan was going to last. I want to know what the Government are getting out of this nonsensical procedure. It gathers no Purchase Tax and will not get a penny of Income Tax from any branch of this industry during the curent year.

The employed men have been driven on to unemployment benefit and the self-employed men have got nothing to look forward to but public assistance. If this goes on much longer the country will lose a lot of very good citizens, because these men are not prepared to sit down and twiddle their thumbs while right hon. Gentlemen on the Government Front Bench fiddle with the problem. We want something done about this. It makes nonsense of good Government if the Treasury is with one hand pouring out money for all sorts of excellent purposes. such as education, roads and piers in that part of the country, and is with the other hand destroying the very basis of livelihood of these people.

I asked the Secretary of State for Scotland to be present tonight because, although he is not directly responsible for the imposition of Purchase Tax, he is responsible for policy in the Highlands and Islands. I consider that, with the knowledge he had at his disposal in 1948 he ought to have taken the strongest possible action to prevent this folly being perpetrated by the Treasury. I can only hope, now I have pointed out to him the error of his ways, that he will use the whole weight of his influence to cause the Government to withdraw this oppressive and ruinous tax.

10.27 p.m.

Mr. Malcolm MacMillan (Western Isles)

I rise to give general support to the request that the Treasury should reconsider this question of the level of Purchase Tax on handwoven tweed, and to give my general support to the remarks of the hon. Member for Orkney and Shetland (Sir B. Neven-Spence), with reservations. I have seen the Harris tweed industry in a much worse position than it is in today. I have seen the crofter producer driven down to the level of having to sell his Harris tweed to middlemen—who, presumably, would have the support of hon. Members opposite—at 1 s. 9d. and 2s. a yard—in other words, at a loss: the worst example of exploitation I have ever seen. We have not yet reached that level on this occasion, in spite of Purchase Tax.

I am not for one minute supporting the application of Purchase Tax to this industry, because, as the hon. Member for Orkney and Shetland has said, there was already a slackening of demand in the American market before the Purchase Tax level was increased; it was becoming increasingly difficult for the larger producer, with established contacts in the dollar area, to sell his product there and to get repeat orders for the coming years. When it is difficult for the established larger producer and the experienced importer in the industry to maintain orders on the other side of the Atlantic, how much more difficult is it for the newcomer, the smaller man without any of these export facilities, experience or contacts to come afresh into that difficult market and try to sell in America or Canada. Their experience has been that it is quite impossible. No small crofter is able to make his contacts and establish himself today in the American or Canadian market; it is virtually impossible for them to do so; their experience teaches them that. They have tried, and some of the medium-sized producers have also tried.

Let us consider the actual effect of the tax in the Western Isles, in the Harris tweed area. First of all, it has not in any way made new dollar markets in Canada, the United States or the South Americas. It has not helped in that way at all. It has not brought in any dollars to the Treasury or to this country. In the home market, which was the only market these smaller producers had experience of and had an outlet in, and in which there was any demand, the tax has throttled that demand, and the producers find themselves unable to sell in the home market without having the compensation of being able to sell in the dollar market. The result is that there are bales of tweed, finished articles, lying in the homes of the people there; the looms are idle and the people unemployed, without even the consolation of being registered as unemployed people and able to draw unemployment benefit; they are self-employed people and therefore outside the scope of unemployment insurance.

I ask the Parliamentary Secretary to have regard to the representations which I have made especially to him, and to the Chancellor, through the Press. personally by letter, and in every other possible way. I would remind him that the Highlands and Islands Advisory Bureau, the Government's own agency in that area, made a strong recommendation some months ago that they should reduce or abolish the tax on hand woven products if they were not to see the industry brought to a standstill altogether in that area. I appeal to them to reduce the tax, if they cannot abolish it altogether.

10.30 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)

I think the hon. and gallant Member for Orkney and Shetland (Sir Basil Neven-Spence) rather overstated his case. This is a small industry. I understand that in the Orkneys about 37 are employed and in the Shetlands about 114. Although it is a small industry, it is an important one to the people who live in that area and invest their lives in this industry. I am here tonight to say that the Government are sympathetic to the decline which has undoubtedly taken place in the hand-loom weaving industry in the Highlands and Islands, including the Hebrides, represented by my hon. Friend behind me.

Mr. Hector Hughes (Aberdeen, North)

Does the right hon. gentleman realise that there are some hand-loom weavers in other parts of Scotland besides the Highlands and Islands, for instance, in the city of Aberdeen and near Paisley? They would be entitled to just as much relief as the others.

Mr. Glenvil Hall

I fully realise that and, if there had been time, I would have made reference to the fact, because it is part of the case I hope to deploy in the House tonight. The Government are sympathetic to the fact that there has been a decline in this industry. Indeed, my right hon. Friend the Secretary of State for Scotland, who sits beside me, and those associated with him have done all they can to encourage and foster the industry in Scotland.

The Government does know something about this matter. The Board of Trade have sent representatives to the Highland and Islands to investigate this particular industry, to see exactly what the trouble was and what, if anything, the Government could do to assist the producers. That investigation took place as recently as two months ago. Therefore, we are not unacquainted with the facts of the situation.

The hon. and gallant Gentleman asserted that the decline in the industry in these two Islands—he speaks for them and not for Aberdeen—is entirely due to the incidence of the Purchase Tax. It is quite likely that the incidence of the Purchase Tax has had some effect on the sales that have taken place, but I am here to tell the hon. and gallant Gentleman that the decline is not strictly due to this cause. I am sorry to say that, whether the Purchase Tax were there or not, there would still have been a decline in the industry in that area.

Mr. MacLeod (Ross and Cromarty)

Why impose this further burden, then?

Mr. Glenvil Hall

It is due to a change in fashion. The production of woollens in the United Kingdom has reached. I will not say, saturation point, but a point at which it has greatly exceeded the production of worsteds. There is at present a great demand for worsteds. The export market for these goods—and this particular industry has gone into the export market where the Purchase Tax is not charged—has unfortunately declined. In America, three plants making woollens have had to close down during 1948 because of the contraction in demand, the change of fashion, and the desire of people not to take woollens but to take worsteds instead. Therefore, you have to take into account the fact that the decline in selling is largely due to the fact that people now are looking not to tweeds, but to worsteds—[An HON. MEMBER: "Not in the home market."] Oh, yes.

It is rather difficult to know what the extent of the decline has been because, in these islands, the work is carried out in small units, mostly in homes and small factories. But what has become apparent to those who have made an investigation is, that those who came latest into the industry have suffered most; that is those who were in the industry before the war and not those who came into it later to take advantage of the boom in the early post-war years, when almost anything could be sold—and certainly good wool cloth of this kind could be sold, because it is, of its kind, perhaps, the finest in the world. But times are changing and we shall eventually reach a buyers' market.

That being so, we get a decline in demand and those who came latest into the industry are the first to suffer. Many of them, in spite of what the hon. and gallant Gentleman has said, have turned to hand knitting. As the House knows the Government has done what it can to help those who go in for hand-knit weaving by taking Purchase Tax off their products.

Sir B. Neven-Spence

Can the right hon. Gentleman give a single instance of a hand weaver who has turned over to hand knitting?

Mr. Glenvil Hall

My information is that many of them have had it as a second string to their bow. That is my information. If I am wrong, I freely admit the error. But in any case, it does not affect the argument which I am putting forward. The hon. Member and others who interjected tonight say that, if we have recognised that there has been a contraction in the demand for the industry's goods, we should help it by making a Purchase Tax concession. The reasons were deployed by the Economic Secretary when we debated this matter on the Finance Bill some months ago. They are that, if a Purchase Tax concession were made to the hand-loom weaving industry in the Highlands and Islands, we could not stop there. We would have to make it to the people referred to by my hon. and learned Friend who sits for Aberdeen, North (Mr. Hector Hughes); we would have to make it to those people who make the same kind of cloth in other parts of Scotland, and to those who do similar weaving in various parts of England. We could not stop by confining the Purchase Tax concession to the people in one particular area.

Mr. Hector Hughes

Does my right hon. Friend realise that the tax, as imposed, defeats itself by driving out of business the small hand-loom weaver? Cannot he discriminate between the small and the large weavers?

Mr. Glenvil Hall

No, we cannot discriminate; we should like to do so, but it is not possible. If we take off the tax for one individual, we must take it off for all those who make a similar article, wherever they live. People in, say, the Bristol area, and in the South of England, have the same rights as those who live in the North of Scotland.

We are asked why we cannot take it off in the case of the small hand-loom weaver, and not in the case of the larger producer. The answer is that it is impossible to distinguish between their products; if it were always possible to distinguish between cloth woven on a hand loom and that woven on a machine, then our troubles would be over. But it is not possible. If it were, it is very likely that my right hon. and learned Friend the Chancellor of the Exchequer could meet hon. Members on both sides of the House in the abolition of the Purchase Tax on this type of cloth. But it is not always possible to distinguish between a piece of cloth woven on a hand loom and a piece of cloth woven on a machine.

Lieut.-Colonel Elliot (Scottish Universities)

Does not the right hon. Gentleman know that the whole administrative history of Scotland is built up on the differentiation of the seven crofting counties?

Mr. Glenvil Hall

Purchase Tax is levied on the cloth, not as it leaves the loom, but when it reaches the wholesale stage. When it reaches that stage, it will be a long way from the seven crofting counties, and an argument like that only discloses the ignorance of the right hon. and gallant Gentleman on this matter. Another reason—

Lieut.-Colonel Elliot

The right hon. Gentleman knows—

Hon. Members


Mr. Deputy-Speaker (Major Milner)

The right hon. and gallant Gentleman knows quite well that he is not entitled to speak unless the right hon. Gentleman in possession of the Floor gives way.

Lieut.-Colonel Elliot

I am asking the right hon. Gentleman, who, if I might say so, made a rather boorish answer to a perfectly simple question, whether his right hon. Friend the Secretary of State for Scotland who is sitting beside him, will bear out that statement that it is impossible to distinguish between the seven crofting counties in this and other respects?

Mr. Glenvil Hall

That was not—

The Question having been proposed after Ten o'Clock and the Debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Eighteen Minutes to Eleven o'Clock.