§ Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Royle.]
§ 11.59 p.m.
§ Mr. John Grimston (St. Albans)
At this time of night I do not want to delay the House longer than is necessary, and I will therefore put my points as shortly as possible. They are very important points to the traders of this country, and, in particular, to those who are working in the export trade of all kinds of mechanical apparatus. The point I wish to put arises from a Question I addressed to the Minister of Supply. I asked him why he had increased the premium on copper which is charged to consumers in this country, above the figure previously charged. In other words, the Department had imposed a further charge or levy on British industry. The reply I got was that this charge was necessary to cover the various expenses of the Ministry, and that if I could show a means of reducing this charge without a loss of sterling copper the Minister would be ready to review it.
If I may, I will run over the general arguments which apply in this case, and in many others, against bulk buying of a 1248 commodity as important as copper. I shall not dilate on these, but they should be included in the record. I must disclose my interest in this matter as I am engaged in the metal fabricating trade. That trade in this country has to pay more for its raw material than its foreign competitors have. That is the first charge against bulk buying in general. The second one is that under the present system prices vary more from day to day than they used to under the old free market. The third point is that the taxpayer has to pay for any mistakes made in Government buying, and mistakes have been made. I do not want to detain the House with details, but they are in the Report of the Committee of Public Accounts which I have here. The fourth point is that no provision is available to the manufacturers in respect of future orders. Many kinds of plant may be ordered today but not wanted for one, two or even more years ahead, and the facility of being able to buy raw material and fix its price now, and take delivery many months ahead, is one which the trade considers it is entitled to and used to have in the free market.
The fifth point is that in bad times manufacturers must buy the metal outright, and have no means of hedging it on the Exchange—in other words, of protecting themselves against a loss they foresee in the future. The effect of this—and it should weigh heavily with the present Government—is that in this industry it makes employment much more irregular than if there were a market. 1249 In bad times men must be laid off, whereas if there was a market they could be employed on making for stock. The sixth point is that the averaging of prices throughout the country encourages the siting of factories in uneconomic positions. That is a very serious charge, and will one day come home to roost when costs need to be cut to the finest point possible.
Lastly, the Minister is only able to carry on this method of trading by valuing his stocks at current prices. That is all very well when prices are going up. The Minister himself knows very well that he has today stocks to the tune of tens of millions of pounds. It is very much in all our minds that if prices come down he will be landed with those stocks of metal and be unable to sell them at the prices he has paid for them himself.
Those are general criticisms, but there are two further ones I want to mention, that apply especially to copper. The first is that, under our present system, we are entirely dependent on the American market for our quotations. That is, perhaps, all right in normal times, when the whole world is in step, but, at the moment, there are two reasons which make it highly dangerous. The first is that the Americans are now becoming importers of copper. Previously, they were exporters. It is very much in our interests that we should control the price when we are to be the net sellers, rather than that the Americans should be able to control the price when they are net buyers. But there is one further important qualification. At the end of this month the tariff on copper entering the United States will very probably be re-imposed at a further £16 a ton. Most of us expect the American price will go up by something less than that total amount of £16. Under his present system the Minister will have to charge consumers in this country more for their copper because the Americans have put up their domestic tariff on their own imports.
That is surely the absolute and final absurdity of State trading. If the Americans put up the tariff on motorcars which we export to the United States, no one would dream of assuming that the Minister would want to put up the prices of motor cars in this country. Yet that is what he is doing over copper. He will have to put up copper in this 1250 country because the Americans are imposing a duty on copper imported into their own country. That is what we all expect, and I feel confident that something of that kind will emerge in the next ten days.
I want to leave the Minister plenty of time to reply, and so I shall close soon, but I just want to refer to one basic criticism which, I think, must be made, and that is of the load that this method of buying and selling imposes on our manufacturers. Copper is a craftsman's metal. In Kipling's words:Gold is for the mistress, silver for the maid; Copper for the craftsman cunning at his trade.Copper is a marvellous metal with which to work, and enters into all kinds of mechanical contrivances which are exported from this country. The method for buying it which the Minister imposes on the trade is imposing a load of between £1 million and £1½ million per annum on our export industries—on the mechanical industries which are our basic export industries.
The Financial Secretary, in the Budget Debate a few days ago, talked about 1 per cent. as being a very little imposition to impose on exporters. I strongly suspect that the Financial Secretary has never had to export anything in his life, nor ever had to sell anything, because if he had he must know that it is the last few shillings which get or lose orders. Every little added on or taken off the price makes the buyer at the other end reject or accept the article, when he compares its price with other tenders.
Our present price is not 1 per cent. different from the world price, but over 3 per cent., which, again, is imposed by the Ministry on the price of the raw material. This 3 per cent. is further increased in the process of manufacturing metal, because there are certain unavoidable losses to be taken into account, and also manufacturing losses, which are very high in the metal trade. All this is cumulative, and adds up to a further increase in the prices of our export products.
If the Minister continues as at present the effect will be that we shall lose a large part of our export trade, particularly in the sale of manufactured metals, to the Germans, whose trade is coming 1251 back by leaps and bounds. I gave an example in the House only last week. They are going as hard as they can for this trade, which they want to capture for themselves. In this country we are working under an impossible load represented by the premium the Ministry are charging. If the Minister says that the trade is not very important, I suggest that he goes to Swansea, for example, where 300 men were dismissed only a month or so ago from a very important metal working plant because the export trade in their product had evaporated.
The particular difficulties which the Minister faces boil down to two; first, the currency difficulty, and second, what he calls, the sterling copper difficulty. I am advised that there is no currency problem in this matter at all. The European Payments Union agreement seems to be well advanced. The rubber and tin markets have considerable experience already, and I believe it is a fact that the Bank of England itself no longer objects to the opening of the copper market now. One thing is certain however and that is that there is no such thing as sterling copper, or dollar copper. Copper is an element. It is Cu in chemistry, and not Cu with a little dollar sign below it, or a pound sign in front of it.
If the Minister tries to prevent one molecule of copper, mined perchance in Rhodesia, from going to America, he will find himself in an impossible difficulty. Can he not look at it in this way? So long as the dollar area as a whole is buying copper, and the sterling area as a whole is selling copper, then there can be no leak either of copper or of money by the opening of the copper metal market under the normal provisions of payment through approved sterling accounts, which would undoubtedly be made. The urgency of this arises under two heads: first, the probability of the American duty coming on in the next few days; and, second, the fact that the Minister's last chance of getting out of the basic copper market is with him today. Unless he gets out on a rising market, he will never get out without being faced with enormous losses. Minor problems will certainly remain, such as the disposal of stocks, currency dealings, and how to make the 1252 special shapes needed available; but all these can be overcome.
What we want is a statement by the Minister that the objections which formerly prevented the re-opening of the London Metal Exchange, particularly the currency objection, now no longer operate; that the traditional London market, which was itself a considerable dollar earner before the war, will be allowed to re-open, and will be helped by the Minister to start. This will be to the great advantage of the whole range of mechanical export industries, all of which use copper.
§ 12.14 a.m.
§ Mr. Charles Ian Orr-Ewing (Hendon, North)
I will be brief, and not keep the House, but I wish to make one small point about copper as it concerns cable makers. I know of a case in which 1,000 tons of copper were offered to a cable firm at £100 a ton. Of course, that could not be accepted on the present bulk buying scheme. It has to be bought at the prices laid down by the Ministry of Supply, which have varied from £107 a ton to about £140 after devaluation. The current price is £180. We are being undersold in this trade by the Germans by no less than 30 per cent. We cannot compete if we have to pay for raw materials prices which are above the absolute minimum.
I urge the Minister to consider seriously whether he cannot reintroduce the efficiency which has already shown itself in the tin market. There, I know, prices have gone up and down, but in copper buying they have shown a tendency to go constantly and steadily up. I hope that the Minister will consider whether we cannot introduce a commodity market in copper again into this country. That, as my hon. Friend has said, would gain for us cheaper prices which would put us back into the export market and enable us to compete on fairer terms. It would also bring us valuable invisible exports.
§ 12.15 a.m.
§ The Parliamentary Secretary to the Ministry of Supply (Mr. John Freeman)
I cannot complain about the manner in which the two hon. Members who have spoken have raised this matter. There has been quite a friendly exchange between the hon. Member for St. Albans (Mr. J. Grimston) and myself and I invited 1253 him, in reply to a question which he put to me some weeks ago, to go into this matter further and see if he could help us out of the difficulty in which we find ourselves, and which I will now state frankly to the House. The hon. Member has not so far shown me the way out. The major part of his speech was devoted to the general question of whether the bulk-buying of copper was, on the whole, advantageous.
I think it will be helpful to the House if I give an up-to-date statement of the Government views on this matter which have not been stated for some time; and if I become pressed for time the matter can be debated further on a subsequent occasion. The Government are not doctrinally wedded to the bulk-purchase of base metals. We inherited the system at the end of the war and have continued it, except in the case of tin, because we considered it, on balance, to be substantially advantageous. The advantages which we claim have been manifested so far have been these: first, it secured the maximum supply of much-needed metals at a time of shortage, which has been the position, on the whole, during the post-war period; second, it minimised the hard currency cost to this country; third, it facilitated, in time of shortage, the allocation of metal to those consumers Whose need was the greatest in the public interest.
In the early post-war years all those advantages, I think even hon. Members opposite will agree, were of paramount importance; and they were secured at moderate cost. Hon. Members who were not present at the Debate which took place on 26th May last year, may care to refer to the record of that Debate. I think that an unbiased reader of HANSARD would say that, on the whole, at any rate up to that time, the Government had established their case. The disadvantages have also been perfectly clear. The hon. Members for St. Albans and Hendon, North (Mr. C. I. Orr-Ewing) mentioned some of them, but I think that some of those they mentioned were of relatively less importance. In the main I should have thought the particular difficulties were the inability of the United Kingdom consumer to hedge and the risk of heavy losses by the United Kingdom Government on their trading account when the market begins to fall.
1254 I think that hon. Members opposite will agree that I have stated these difficulties frankly and fairly. In the early post-war years these disadvantages were minimised owing to the scarcity of copper and pressure on the market. The House will remember that some months ago, I believe it may have been a year ago, the United Kingdom price differential, as against the United States price, became a serious handicap to United Kingdom manufacturers. The Government brought its price into line with the U.S.A. price and accepted the loss of income involved.
The present situation is that, as copper production increases, the advantages of Government buying become less, and the disadvantages become greater. But copper is not yet plentiful, and the price remains high; and the salient advantage, I should say, now is specifically the dollar saving. The disadvantage is the probability—not, I emphasise, a certainty—that, as supply and demand balance and the market begins to fall, the Government will face heavy accounting losses. It would suit the Ministry of Supply very well if we could get out of copper trading now, on the top of the market, and take to ourselves the credit and the profit of successful trading over the last five years without the odium of losses which may be incurred in the future. Unfortunately, we cannot see any way of doing this without the serious risk of a substantial loss of sterling copper and a corresponding increase in dollar expenditure.
Let me explain to the hon. Member for St. Albans why I say that. What are our sources of copper supply at present? First of all, practically the whole of the output of Northern Rhodesia, and that is about 200,000 tons in the year; second about 60,000 tons of special shapes and sizes from Canada and the United States; third, some 7,000 tons from miscellaneous sources all of which, I think, have already for this year been purchased in the first six months, and I believe I am right in saying we shall have no more of this; fourth, approximately 20,000 tons from unuseable scrap, which is refined on behalf of the Ministry of Supply abroad.
The 60,000 tons of special shapes and sizes which come mainly from Canada are shapes and sizes which cannot be supplied from Northern Rhodesia before 1952; but, in addition to this, the electrolytic 1255 refining capacity of the Northern Rhodesian companies is still too small for a sufficient quantity of electrolytic copper to be supplied from this source, so the Ministry of Supply is responsible for the electrolytic refining of 60,000 tons of Northern Rhodesian blister copper. This refining is put to tender in France, Belgium, Western Germany and the United States, and it is mostly done in the United States. The cost of that is of the order of half a million pounds a year, probably in dollars.
The success of this plan hinges on our taking the whole output of Northern Rhodesia, and if that arrangement were altered there would be the likelihood of the Rhodesians selling part of their output on the Continent of Europe, and quite possibly—a matter which may be put to the test shortly—at higher prices. We should still need the electrolytic copper and we should have to pick it up where we could. There might be a real difficulty of supply, because electrolytic copper is still relatively scarce, and certainly we should have the risk of having to purchase up to 60,000 tons in hard currency—that is to say 60,000 tons of electrolytic copper, not merely refined in a hard currency country, but coming from hard currency mines and, at the same time, allowing 60,000 tons of sterling copper to go elsewhere.
The cost of this at today's prices would be about £11 million, presumably in dollars. That is a risk which the Government are not prepared to take. If the hon. Member or his friends can put forward a scheme to overcome this difficulty—and I say this in all seriousness, because on other metals we have put similar points to the London Metal Exchange—we will consider it with sympathy and with a desire to meet the point which he is making. At present, I do not see how we can free the market either until our dollar balance is a great deal more secure than it is now, or until we are able to satisfy a much higher proportion of our needs of electrolytic copper from Northern Rhodesia.
I want to say one word on the subject of price, and particularly a word of some interest on the question of the American tariff, about which the hon. Member spoke just now. Once a case has been made out—it may be debatable, but we believe we have made a case out—for a 1256 system of bulk purchase, there are only three things one can do about the price. One can either get the best bargain possible with the Rhodesians and sell to the consumer on a no profit, no loss, basis, whatever the price is; and that involves the risk of letting the United Kingdom price go substantially above the United States price; or one can agree to pay the United States price and sell again to the consumer on a no profit, no loss, basis at that price, plus an on-cost to cover our expenses; and that at least prevents British industry being placed at a serious disadvantage with its United States competitors.
Or, we could subsidise British industry by deliberately selling copper at below cost, even if we know that in doing so we are not liquidating stocks. The third of these alternatives the Government are not prepared to consider and of the first two I think it is abundantly clear that the majority of consumers would far rather have the second than the first. That is what we have been doing.
I would like to say, in answer to one of the hon. Member's points, that it is all very well talking about the great price differential; but, as I am now advised and as I calculate myself, the on-cost added to the American price, which is taken as the price f.a.s. New York, is computed on a costed basis and not calculated to make a profit on the Government's trading account. In fact, it means that when the metal is delivered to Birmingham, for instance, or wherever the consumer may be, the differential is very, very little indeed. There is, of course, in some cases a certain differential, but it is an extremely small one. If the hon. Member cares to put down a Question, I will willingly show him how that on-cost figure is calculated, and I think he will find there is nothing serious to criticise about it.
Reference has been made to the possibility of the re-imposition of the United States import duty on copper and the position it might interest the House to know, is this—that unless an Act is passed through Congress not later than the 30th of this month, waiving the duty for a further year, it is automatically re-imposed on 1st July. So far as we understand and are advised, it is the intention of the United States Administration, in conformity with the policy they have been 1257 following, to pass that Act and to waive the duty; but owing to the congestion of business in Congress it does seem possible that it will not be through by 1st July and the duty may, therefore, be automatically re-imposed.
If the American import duty of 2 cents. per lb. were to be re-imposed at the beginning of next month, it is uncertain whether the United States export price would, in the end, reflect the full rise of 2 cents. or something less. But it is most unlikely that the American consumer would be prepared to pay the duty and it seems fairly safe to say that the price paid to producers outside the United States would, ultimately, be the American domestic price, less 2 cents.
If, therefore, the duty is re-imposed we consider that it would be quite wrong for the price paid by this country to the Rhodesian producer to include an extra 2 cents. on account of the element of duty in the United States domestic price. My right hon. Friend has, therefore, written to the Rhodesian producers inviting them to agree with him that a proper interpretation of our arrangements with them is that the price to us should be no more than the United States domestic price, less the import duty if it should be imposed. I am sure that the whole House will agree that this is the proper course.
§ Mr. J. Grimston rose—
§ Mr. Freeman
I have only one minute left to me and I want to add this: there seems to me and to the Ministry to be a very real and serious difficulty in this danger of losing sterling metal and having to replace it with dollar metal. There are, of course, other advantages in favour of our bulk-purchase policy, but I admit that they are progressively becoming weaker as the disadvantages are. of course, tending to become stronger.
If we could get over the difficulty of losing sterling metal we would at least undertake to look with sympathy on any alternative suggestion. I do not say that we would not still take account of the other factors in the balance of advantage. But that is the salient point; and if the hon. Member or any of his friends on the Metal Exchange would care to come to us with a scheme which overcomes this difficulty, then we should give it sympathetic consideration, and I should not be surprised if, in the end, he and I found ourselves more nearly in agreement.
§ Question put, and agreed to.
§ Adjourned accordingly at Twenty-nine Minutes past Twelve o'Clock.