HC Deb 02 November 1949 vol 469 cc540-52

10.37 p.m.

Colonel J. R. H. Hutchison (Glasgow, Central)

I beg to move, That an humble Address be presented to His Majesty, praying that the Order, dated 13th September, 1949, entitled the Furniture (Maximum Prices) Order, 1949 (S.I., 1949, No. 1706), a copy of which was laid before this House on 27th September, be annulled. The story which I have to tell to the House is one less lurid than that to which we have just listened, but it is one, nevertheless, which I hope will enlist the sympathy of all hon. Members. It is the story of the "small man" in the furniture trade. I might say at the outset that I am fortified in hoping that I shall have the sympathy of all hon. Members when I read out words from the booklet of the party opposite, "Labour Believes in Britain," which say: Labour's aim is to give a fair chance to all in industry, including the small man. Those are very proper words, and this is a booklet studded with protestations of the same kind.

The group of individuals immediately concerned here are the wholesalers in the furniture trade, represented by the Furniture Traders' Association, of which there is a Scottish branch; they number some 145, and these are people working and employing themselves in this particular way. They, with the Manufacturers' Federation, and the Retail Traders' Association, go to make up the composite whole of the British Furniture Trade Confederation. I apologise for the complications, but it is sufficient to note that there is an association for manufacturers, one for wholesalers, and one for the retailers; that is the position in brief, and these organisations have a national status, each dealing with the President of the Board of Trade, or the other appropriate Minister, and where there is a generic question concerning the whole lot, the Confederation steps in and gives its view.

There is the point of view held in some sections of the House and country that the wholesaler performs, on the whole, a useless function. I think that the acid test of that is that if he did perform a useless task he would not continue to exist. I have often used wholesalers in trades of one kind or another; indeed, they are a commonplace in almost every form of industry in the country. It is true that sometimes they are dispensed with, but what really happens then is that the retailer or manufacturer takes on the duties and obligations, and the costs and expenses, of the wholesaler and does the work himself. It is quite possible that the big concern can undertake these duties as cheaply as the professional wholesaler. But here we are dealing with a conglomeration or agglomeration of small individuals, each with his own commodities to sell, which the wholesaler handles and puts in some central storeroom, which is a function he is likely to be able to perform more cheaply than the individuals themselves. Therefore, we have the small manufacturer with his small workshop and the retailer with his shop and the wholesaler as a link in between.

In order that hon. Members may not think I am exaggerating my argument, let me read what the Working Party on Furniture have to say in their Report. The wholesalers claim that the small manufacturing firms use their services because they have neither the transport or the sales organisation to cope with small orders from isolated parts of the country, nor yet the financial resources to enable them to give the long credit which is often required by small retailers Apart from these functions, some wholesalers buy from small firms 'in the white' which they finish and fit themselves. They also assemble in suites articles made by different firms. … It is also said to be customary in London for a wholesaler to finance partially or wholly a group of a dozen or so small firms, and that there are even occasions in which a wholesaler groups round him in this way as many as fifty small firms. That is the usual role the wholesaler plays in relation to the small manu- facturing firm. The Report goes on to say: The wholesalers' function towards the retail trade relate mainly to supplying small retailers, mainly in country districts. The wholesaler has the advantage of buying in bulk for sale to the small retailers and of acting as a collecting centre for parts of suites bought from different manufacturers. The wholesaler may also run a showroom for the benefit of small retailers, and on occasion for the latter's customers. These are the critical words: The evidence before us suggests that wholesalers perform a useful function towards such small retailers, and that although the usefulness of their activities in other directions is questioned by some, there continues to be scope for a certain amount of business for wholesalers. As I do not want to overgild the lily, let me read another extract: We have no figures to show what proportion of the total trade is handled by the various types of distributors, but as far as we can judge the wholesaler plays a relatively small part. There is the true picture as set forth by the Working Party; that they play a relatively small part and neither I nor my hon. Friends claim that they are a great part of the industry. They play a small part, as shown by the Report, but perform a useful function. In an indirect way the usefulness of the wholesaler has been recognised by the President of the Board of Trade, for they were used as a link for the distribution of furniture under the Import Emergency Association. It is a remarkable fact that this appears to be the only trade which, in the price regulations which have been brought out, ignores the existence of the wholesalers entirely. I have been unable to find any other price regulations which make no provision for a wholesaler to exist at all and in what I am going to ask, I am supported, I understand, by the Working Masters' Association, which is the organisation which represents the small manufacturers.

Now, if I may for a moment refer to the order itself, and particularly to paragraph 6 (b) and the relative Schedule which fixes prices, it will be noticed that in the order the method of fixing the maximum price at which an article can be sold to the public is to take the manufacturers' cost and then add 33⅓ per cent. to that cost for the retailer, a margin which the retailers complain already is insufficient. It must be noted also that the 33⅓ per cent. operates upon what is known as the price paid by the first purchaser. If the retailer goes direct to the manufacturers, he is the first purchaser and I have no complaint, but if we have a small manufacturer who says, "I do not want to go to the cost and trouble of distributing my own goods; I want you the wholesaler to handle them for me and these articles which I would have sold to the retailer for £10, I am willing to sell to you for £10 less 10 per cent. Will you do the distributing for me?" A different situation arises when the wholesaler says, "I will." What happens?

He goes to the retailer, offers him the same article at the same price, and the public in no way suffers: there is neither advantage nor discrimination against the public. But the retailer has to accept 33⅓ per cent. on £10 less 10 per cent., namely, £9 instead of 33⅓ per cent. on £10. So the retailer, already complaining about the margin on which he is asked to work, finds that margin further cut down by using a wholesaler and so he tends to eschew and boycott the wholesaler entirely, and the wholesaler finds his trade prejudiced and even imperilled.

Why is it in this particular trade, and not in other trades, any such Government regulations should aim at the extinction of an individual whose utility is already set forth in the Working Party Report? He existed before in the time of free economy, and the acid test of whether a man is performing a useful function is whether he can continue to exist. There is indeed, if the Board of Trade is not careful, a heaven-sent opportunity for the bigger concerns to squeeze out the small man with perhaps the unwitting connivance of the Board of Trade, by saying, "Let us leave them out of our considerations and make no provision for them to be able to live," and so a competitor would gradually be eliminated.

I do not say that has purposely been done but the tendency is, in particular associations, for the men with the biggest trade to tend to have the strongest voice. It is I know, true that the Confederation, which is the body of the three conjoint members of the whole trade, have expressed no opinion one way or the other. I understand the Board of Trade was anxious to get a considered opinion from the Confederation, whose reply was, "No, there is in this matter a cleavage of opinion and therefore each of these constituent bodies, which are each national bodies and have the right to go to the hon. Gentleman's Department, must argue their own case." That is the position and what I am asking, and what my hon. Friends are asking, is that there shall be a new order. I am not going to ask to divide the House tonight because I realise if, in fact, this order were dropped at present, there would be chaos in the industry.

I am asking the hon. Gentleman to ask his right hon. Friend to examine this very carefully to see if he is really doing justice to a body of trading individuals the Working Party supports in the words I have read and whether some sort of adjustment should not be made in some future order in the near future. I would like to emphasise again, and underline with all the force at my disposal, that what we are asking is permissive. We are asking for nothing mandatory to be put into the order, but that whether a manufacturer or retailer wishes to use a wholesaler he should not be stopped as he is now. If by some deduction in a future price order there is, at some stage of the proceedings, provision made for the wholesaler there would be no obligation on anyone to use him, if he does not perform a useful function; and if nobody uses him at all he will soon cease to exist.

It is said that there is a fear that if this provision were included retailers might form themselves into spurious wholesale companies to get the extra margin of profit. I say this could be easily guarded against. This is a permissive power, and no manufacturer need trade with such wholesaler unless he desires. In any case the wholesaler is provided for in other price control orders, and, therefore, that difficulty has been got over. I close by appealing to the Parliamentary Secretary to examine every facet of this problem and make sure the view is not being imposed by the big men who have an interest in continuing a situation which I think is unjust and unfair. Let him consider the whole of our argument and see whether in fact he is not destroying or tending to destroy the small man who is catering for other small men, who are, after all, the backbone of the country.

10.52 p.m.

Mr. Erroll (Altrincham and Sale)

I beg to second the Motion.

I would like to reinforce the remarks which have just been made so ably by my hon. and gallant Friend. I would point out that the order, as it stands at the moment, is a plain discrimination against the wholesaler. It means that if a retailer is using a wholesaler he will get a smaller profit margin than if he deals with the manufacturer. I cannot believe that that was the original intention of the President of the Board of Trade. It is, nevertheless, the fact because in paragraph (6) subparagraph (b) the purchase price paid, or agreed to be paid, by the first purchaser is on the basis on which the retailer gets his percentage of 33⅓ per cent. Our proposal, namely that the wholesaler should get his margin and that the retailer's margin should then be calculated on the basis of the price paid by the wholesaler, disregarding the adjustment given to the wholesaler, does not make furniture any more expensive to the public but ensures that the retailer gets the same margin as if he went straight to the wholesaler.

It is most unreasonable that there should be this discrimination against the wholesaler when it is definite that he has a useful function to perform in certain fields. I know some efforts have been made by the larger and progressive manufacturers to enable shops to obtain furniture in single units or single suites and there is obviously no need for the intervention of the wholesaler. We are thinking of those cases where there is no need for the wholesaler, where the manufacturer is small or has no sales organisation necessary to cover a sufficient number of retailers. There are a number of retailers, particularly those in country districts who prefer to have contact with a wholesaler, who very often maintains a local showroom where furniture can be seen, rather than have to depend on the catalogue and to order furniture without having had an opportunity of looking at it first.

It is most important to emphasise that the price to the public would be in no way increased if our suggestion were adopted. By being fairer to the wholesaler it will not cost the public any more. This is in sharp contrast to what the Government are proposing in regard even to the purchases of furniture. Under paragraph 1 (2, ii), we learned that the Government may buy furniture above the controlled price. They are only using public money so they can afford to be extravagant.

I think it is quite intolerable that there should be one law for the public in this matter, and no law at all for Government Departments. Why should they be able to escape the control laid down by this order? Why should they be able to come into a market, which may be rather a tight market, and outbid everybody else in the country, including business organisations, which may require office furniture in order that their businesses may be more efficient. It is really a form of priority, for these Departments can come into the market and say, "We are not paying the controlled price. We can give 10 per cent. over the controlled price because we want it quickly."

We have learned recently about Government motor cars. We are told that Government Departments have no priority. I am not saying that they buy cars above the officially controlled price, because there are no controlled prices, but what is possible is for a Government Department to come along and offer more than the usual price for quick delivery. The order does not say that the furniture will be used by a Government Department. It does not say who will be the ultimate user. It does not mean either that such purchases are going to be limited to Government Departments themselves.

The nationalised industries have been given the benefit of Government purchasing facilities. For example, in the early days of the National Coal Board the facilities of the Stationery Office were made available to it. The bargaining powers of the Stationery Office were brought in to get supplies for the Board at the expense of other claimants equally deserving of support. Here we have another instrument, under which, as usual, Government Departments get one over on the rest of the public, and they have the advantage of public money, too. This is all the more ludicrous when we are constantly being told that Government buying and bulk buying are much cheaper than the other way of buying things. When then do Government Departments have to have exemption from price control in the matter of furniture? I hope the Parliamentary Secretary will give us a satisfactory answer to a situation which on the surface appears to be thoroughly unsound in view of the most unfair discrimination against a small but useful class of furniture wholesalers.

11.0 p.m.

Mr. Austin (Stretford)

I propose intervening very briefly in this Debate mainly because I have been associated with wood working or furniture in some form or the other ever since I was 14. I have enjoyed the honour of sweeping the workshop floor and making the glue, as well as securing an eminent seat in the boardroom as a director of a company. I understand that my services are to be dispensed with by my company next week, but that is beside the point.

The hon. and gallant Gentleman the Member for Central Glasgow (Colonel Hutchison), in moving the Prayer, and the hon. Member for Altrincham and Sale (Mr. Erroll), in seconding, used very reasonable language. There is some considerable merit in what they say. But on the first point made by the hon. and gallant Member in regard to our protecting the small man, and our avowed intention to do so as laid down in "Labour Believes in Britain," there are many fewer bankruptcies today among small men than ever before.

This industry before the war was, without doubt, a sweat-shop industry, and it has been saved and preserved by the instrument of utility furniture and by orders such as this in the post-war years. It was an industry of the most intense competition with workshops of a character which I am sure hon. Members opposite would not have approved. We have gone a long way from those conditions and the industry has been regulated on a basis which provides both a good product and excellent conditions for the workers.

Hon. Members opposite are concerned with the wholesaler and the question was put: Why is it that, whereas in other trades provision has been made for wholesalers, there is no provision as yet in this industry? The answer, so far as I cc see, is that in this industry a single item of furniture can be transported and delivered from manufacturers in any part of the country to retailers in any part of the country. Obviously, therefore, on the merits of that particular issue, there is no need for the retailer.

Colonel Hutchison

Who then in fact will do the transporting from the small manufacturer to the small retailer?

Mr. Austin

There are contractors available who undertake the transport of furniture from the manufacturer to the retailer. I have myself, when I was a lad, often loaded on to a van a single item of furniture for delivery to a distant part of the country; and there are also facilities for the delivery of furniture by rail.

The point was made that the small manufacturer who cannot supply a retailer direct goes to a wholesaler, who in fact may buy the products of something like 50 firms, and he offers him a discount. Does it not occur to the hon. Members that if the small manufacturer offered that discount to the retailer he would likewise sell his product direct to the retailer at a cheaper price? If he was prepared to give a 10 per cent. margin to wholesalers for the purpose of distribution from the wholesaler to the retailer, likewise he could offer that 10 per cent. or perhaps 5 per cent., to the retailer below the established price.

Colonel Hutchison

The point is that the small manufacturer and the small retailer never get into touch with one another. Perhaps they could indeed, but the medium for putting them into touch and stocking the goods and showing a range of goods is in fact the wholesaler.

Mr. Austin

That would be the case if there was not the well known enterprise which is in evidence in the industry. I can assure hon. Members there is no lack of enterprise on the part of either the small or the large manufacturer. It is the easiest thing in the world for the small manufacturer to get into touch with the retailer if he desired. And if he offered the special discount he is prepared to offer the wholesaler he would be assured of a ready sale.

There is this factor to be considered when we examine the merits of any industry and its distribution. The middleman, in this case the wholesaler, is, after all, occupying valuable space. He is employing valuable staff and taking up certain valuable resources in the nature of his task as middleman. It may well be that in our examination of the role of middlemen in industry we may have to decide ultimately that in our state of economic stringency we can no longer afford middlemen of this character, and these resources, whether men or materials, ought to be used elsewhere in the national interest.

If everything that hon. Gentlemen have said is valid, and can be proved, then I do not see what answer is to be given by my hon. Friend. There may be some merits in not disorganising at this stage a small group of manufacturers who say they can find no outlet, and perhaps my hon. Friend will give some consideration to this aspect. May I make this suggestion to him? There is in the furniture trade one of the most admirable trade unions in the country known as N.U.F.T.O. It employs the service of some very excellent men who know a great deal about the industry. Before my hon. Friend and his Department come to a conclusion on this matter I want to suggest that he consults with those representatives of the trade union, who will, I am sure, be very well prepared to provide him with whatever information they have available. As I know from my own intimate knowledge of the trade union element of the industry they have an intimate knowledge and can well advise him on this issue. I hope that when he replies he may also consider the point relating to consultation with the trade union interests.

11.7 p.m.

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

This discussion is in some ways a little strange because we have an order of 1948 which has been amended one or twice and which has been replaced by this order. As far as I know not a single change that is being made in the order we are now discussing is challenged. That is to say the differences between this order and the old one are not in dispute at all. The two points of difference which have been put up are first, that in this order, as in all the other orders, with the one exception of non-utility furniture many years ago, there is nothing which covers the wholesaler; and, secondly, that this order does continue the provision, which has been in all the orders hitheto, excluding Government Departments from its operation.

When the 1948 order was before the House no one raised any objection to it. It was not contested in any way, and as far as I can see we are doing nothing here which we were not doing in the 1948 order and previous orders.

Mr. Erroll

We know much more about the Government now.

Mr. Edwards

Characteristically, the hon. Gentleman would like to involve me in party controversy. I thought it was a pity he did not follow the excellent lead of the hon. and gallant Gentleman who opened the discussion. Certainly on this matter I do not see why I should—and I would be doing a profound disservice to the traders concerned if I did—respond to the hon. Gentleman's invitation. When he throws down this suggestion that much more is known now about the Government he is inviting me to tilt a lance with him on party lines.

It happens that the Federation covering the wholesalers have been asked to come and have a talk with me about this whole matter. That being so—and I hope the hon. Gentleman in spite of his retort would agree—it would be wrong in these circumstances to put forward such a hard and fast line as would makes it virtually useless for them to come and see me in the course of the next week or so. They have already been invited to come, and I do not want to say anything which would prejudice the discussions, nor appear to have taken a final view on a matter which, I agree, is not an easy one.

But since the point has been raised, I must say a few words in justification of the view we have taken hitherto. Furniture price orders have never, with one exception governing non-utility furniture, provided for wholesalers' margins. We have not distinguished between wholesalers and retailers, but have merely provided for distributors. I would accept the view that it might be possible to prescribe wholesale margins without increasing the price of furniture. My doubt is that I am not really satisfied that the intervention of a wholesaler might not lead to furniture being sold less cheaply than it otherwise would be. That is one of the things I am hoping to discuss with the wholesalers in due course. It is common ground between us that the vast majority of furniture, even before the war, reached the public directly from manufacturer to retailer, and the amount handled by the wholesaler is very small.

It is important in present circumstances that we should not encourage the introduction or maintenance of more stages in distribution than are strictly necessary. It is important that we should have the utmost economy and efficiency not only in our productive enterprises but in our distributive enterprises as well. Therefore I am reluctant to take a view that would seem to encourage the use of wholesalers in circumstances where it does not seem to be necessary for the distribution of the bulk of the furniture. I doubt whether 10 per cent. of furniture involves a wholesaler in present circumstances. These are the kind of considerations I had in mind in the earlier discussions I had about this, which led to no inclusion in the present order on the lines suggested. But since there are to be discussions, and I have been at pains to show that I do not wish to close my mind to representations that will be made, I trust that the hon. Member who raised this matter will feel that it can be left there until those discussions have taken place.

The other point raised was about the provision which excludes Government Departments from its operation. It is only a few months since we had a considerable discussion about this point on another order fixing prices in respect of pottery. All I wish to say about that matter is that our price orders are designed to ensure that the shopping public does not pay excessive prices. That is what we are concerned to do. There is no need, it seems to us, to give such protection to Government Departments, which should be well able to look after themselves, and which are in as good a position as we at the Board of Trade in determining what prices are reasonable and what are not. Having said that, I would go this far to meet the hon. Gentleman.

There are some cases, I am convinced—and I tried to demonstrate it on the pottery order—where the structure of the order makes it essential that we should put Government Departments on the same basis as other bulk purchasers. There are other cases where we are in a position to reconsider our attitude on the need of the continuance of the common form provision which, I have explained, is to be found in all these orders going back to about 1942. The time has come when that common form provision can well be reconsidered. I would be prepared to go so far to meet the hon. Gentleman tonight as to say that in subsequent orders, and in particular if any question of amendment of this order arises, I will look closely at the merits of the case to see whether in all circumstances such provision is desirable. I trust I have been as conciliatory as one can be in the circumstances, and I hope that the hon. Member for Altrincham (Mr. Erroll) will not mind if I do not respond to his provocation.

Mr. Austin

Will the hon. Gentleman say a word about the matter which I raised? That was, if an important matter is involved, whether he would consult the trade unions.

Mr. Edwards

I am sorry that I did not take up that point. Let me say that I would be happy to receive any representation from trade unions on this or any other matter.

Colonel Hutchison

I understand that with the leave of the House I may speak a second time. I only wish to do so for a very short time. First, I would like to thank the hon. Gentleman for his reasonable reply. There are two comments I would like to make. The first is that it must be fallacious to imagine that because a previous order has not been challenged everything is all right for all time if the same line is followed. That would make no provision for change coming about anywhere.

Mr. Edwards

The important thing is that the only point which the hon. and gallant Member himself raised is not in the order at all. He was arguing that something which was not there ought to be in the order.

Colonel Hutchison

I do not want to split hairs. I know that the hon. Gentleman knows quite well what I mean. The second comment I wish to make is regarding the suggestion that a middleman does not necessarily pull his weight. Provided that the price to the public is not increased, and provided the facilities are permissive, then a middleman, I can assure the hon. Gentleman, will not continue to exist unless he performs a useful function. Having said that, may I now ask leave to withdraw the Motion.

Motion, by leave, withdrawn.