RAW MATERIAL RESERVES (Hansard, 14 March 1951)

§ The President of the Board of Trade (Mr. Harold Wilson)
I gather from one or two informal discussions which I have had with the right hon. Member for Southport (Mr. R. S. Hudson) that it may be convenient to the Committee if I spend a few moments saying something about the need for the Supplementary Estimate for the expenses of the Committee of Privy Council for Trade. I trust it will be convenient if I confine my remarks to the subject of strategic stockpiling and do not deal with the British Institute of Management or the British Travel Association or——

§ Mr. R. S. Hudson
I agree. Perhaps I can assist the right hon. Gentleman by telling him that we are proposing formally to move to reduce the Vote, sub-head J4, by £100.

§ Mr. Wilson
I understand, then, that it will be convenient if I reply to that point in particular. There is a difference between the debate on this Supplementary Estimate and the one which we have just had in that this is not a new service but an expansion of the service, where more finance is needed. To judge from what the right hon. Gentleman said earlier, he does not feel that it is a sufficiently substantial figure in the case of either of the Votes.
1602 I think it is common ground between us that we agree on the need for strategic stockpile reserves—and I will deal with strategic stockpiling rather than with the general raw materials position which we debated at some length not long ago. For some time now we have been working on the question of a strategic stockpile, but I am in a difficulty here—and I am sure the Committee will sympathise—in that I cannot, naturally, say anything in detail about what principles we have followed, or what materials we have concentrated or what are the stockpile figures.
Clearly, we must have regard to the production requirements of industry in a possible emergency. We must have regard to possible interruptions of supply. We must have regard to the calls on the limited shipping space available in time of emergency. Obviously, all these things must be fully considered, and I can assure the Committee that they have been very fully considered indeed by all the Departments concerned, including the Defence and Treasury Departments as well as the Department concerned with procurement. The Board of Trade's responsibilities are, of course, confined to certain raw materials, excluding metals, and also to fertilisers. The Committee will be aware that next year it is proposed to have the whole strategic accounts under a separate Vote under the defence services, which may be more convenient to the Committee.
Long before last autumn, long before Korea, when we brought bulk purchase to an end and handed supplies over to the private trade the Board of Trade were already active in setting aside, from stocks which were then available, certain quantities of particular commodities for a strategic stockpile. When we handed over to private trade we set aside a proportion for a strategic stockpile, and that policy has been pursued for some time. I am sure the Committee will not press me to say which materials and how much, but some of the reserves have been held since 1948, being turned over, if necessary, to prevent deterioration.
Since then, in a difficult situation, we have been endeavouring to purchase materials, particularly since last autumn. The method of purchase varies from commodity to commodity. In some cases public purchase is in operation and we can use that as a means of building up a 1603 strategic stockpile. Where commodities are now bought on private account we have had to make special arrangements with the trade. Sometimes we have arranged to appoint one leading firm, or two, three or more firms, as our agents for strategic stockpiling or sometimes we have invited the trade to tender for supplies for the Government and have bought from the trade in that way.
As far as possible, the aim has been to do our buying as quietly as possible without disturbing the market but, nevertheless, to get ahead as quickly as availability would allow. As has already been made clear by the debate which we have had, for many months the stiuation has been dominated by world shortage and, obviously, it would be wrong to stockpile on such a scale as to bring our industrial production to a standstill or to interfere with our defence programme.
Earlier, either the right hon. Member for Southport or the hon. Member for Chippenham (Mr. Eccles)—I do not remember which—asked what was the order of priority which we intended to follow in respect of stockpiling. The order has been quite clearly laid down. First of all, it must be the maintenance, without providing for any increase in civilian consumption, of current essential production by British industry, including provision for exports. In some industries, of course, we must make provision for an increase for exports.
Secondly, we must bear in mind defence production and thirdly, after defence production and the maintenance of essential civilian production and exports, must come stockpiling. In other words, stockpiling comes after the first priority requirements. Only when these requirements have been met and only when we have made provision for stockpiling can we contemplate the use of materials for increasing the level of civilian consumption. As the defence production programme gets under way it is likely very much to restrict the amount of supplies available for current consumption and it will be necessary, therefore, as we go along, to make further restrictions in the amount available for less essential production in this country.
Before I turn to deal with the materials which have been mentioned, perhaps I should make a brief reference to storage, 1604 which will be very much in the minds of hon. Members. As far as possible, the storage accommodation necessary to house these strategic reserves will be provided by using existing premises so as to avoid to the fullest possible extent any call on the building resources of the country. We are, in fact, already using aircraft hangars, war-time buildings, and so on. Where necessary my right hon. Friend the Minister of Works will use his powers of requisitioning for storage purposes although, even with the fullest use possible of those facilities, it may be necessary to erect some premises for those purposes.
Perhaps I may refer briefly to some of the materials. Naturally, and particularly in view of the short time available, I will not attempt to give a full survey of the position. Moreover, we had a recent debate on that. The hon. Member for Chippenham suggested that prudent private shop keepers would not have allowed stocks to run down. He suggested that the Government have been imprudent. As far as metals are concerned, that point has been fully debated this evening, and there is no evidence at all to suggest that private buyers have maintained stocks when public buyers have not done so.
I agree with the hon. Member for Chippenham that rubber stocks have, on the whole, been fairly well maintained through 1950. But if we take wool, the figures show that stocks fell from 265,000 lbs. in December to 200,000 in March; whereas cotton, which is publicly purchased, actually increased between March and December.

§ Mr. Osborne (Louth)
There is a great deal of difference between the rise in the price of wool and the rise in the price of cotton, and the risk of buying at the top of the market in wool is higher. I am sure the right hon. Gentleman will agree with that.

§ Mr. Wilson
The hon. Gentleman is throwing away the whole of his case. We have heard always from him and his hon. and right hon. Friends that bulk buying increases the price of raw materials. Now he is telling us that raw wool, which has been on the free market for four years, has increased very much in price, and that the private buyers do not know where they are, whereas in the case of 1605 cotton, which is publicly bought, it is more possible to plan purchasing. The hon. Gentleman knows perfectly well that both commodities, wool and cotton, have been faced with increasing prices. I grant him the fact that wool prices have risen far more than cotton prices, but I hope that he will quote that the next time he makes his speech on bulk purchasing in his constituency.

§ Mr. Osborne
The reason why the price of wool has gone up is not because of private buying. It is a matter of supply. If there had been the comparatively enormous supply of wool as there was of cotton two years ago in America prices still would not have gone up as much as this.

§ Mr. Dodds (Dartford)
Heads you win and tails we lose.

§ Mr. Wilson
Exactly. The hon. Gentleman opposite has tried to suggest all along that bulk buyers are wrong and that private buyers are right.

§ Mr. Osborne
No.

§ Mr. Wilson
It has been suggested by a number of hon. Members.
I am not making any complaints about one commodity as compared with another, because in both public buying and private buying we have been faced with very great difficulties. The hon. Gentleman the Member for Bebington (Mr. Oakshott) knows, for instance, so far as timber is concerned, that the public buyer and the private buyer are facing great difficulties on the world market today. But the suggestion that if we had had private buying in cotton we should have had greater stocks will not bear examination; and as I have indicated, from the example of these two textile raw materials, the facts have gone entirely contrary to what has been suggested all along by hon. Gentlemen on the other side of the Committee.
Let us take raw hides, skins, and leather, which have been on private purchase. These are very much down on 1950. I am not blaming the trades concerned. I agree that they have been up against very serious difficulties of availability. They have taken a particular view of the market, which has not turned out to be right. The conditions were difficult in 1950 for private or public buyers, 1606 and they could not know what would happen to the market, and yet hon. Gentlemen opposite are prepared to condemn the Minister of Supply for the view he took about the market, even though many of them thought differently at the time.

§ Mr. R. S. Hudson
The right hon. Gentleman is labouring under a delusion. He always forgets, as do hon. and right hon. Gentlemen opposite, that we do not claim infallibility, whereas his party do.

§ Mr. Wilson
Well, I thought the right hon. Gentleman claimed infallibility for the doctrine that private buying was the right way to do this.

§ Mr. Hudson
Certainly not.

§ Mr. Wilson
I thought that he and his right hon. and hon. Friends claimed infallibility for the view that if we had put more materials back to private buying we should have had bigger stocks in hand. That is the view they have taken. Is that not the view of the right hon. Gentleman?

§ Mr. Hudson
I have never said it. The right hon. Gentleman heard me read out quotations from my speech in answer to an hon. Member. We have never said that we claim infallibility. We said that we thought that, on balance, private trade would make fewer mistakes.

§ Mr. Wilson
If the right hon. Gentleman says that that is not his view, will he explain to the Committee why he voted for the Motion that was discussed in the House about 10 days ago? It was certainly the view put forward by hon. Members opposite that if we had returned more materials to private buying our stocks would have been higher at present. They regretted that we had not done so.

§ Mr. Hudson
It was not mentioned in my speech at all.

§ Mr. Wilson
The right hon. Gentleman voted in favour of the Motion. I assumed he believed in what he voted for.

§ Mr. Jack Jones (Rotherham)
That was 10 days ago. The right hon. Gentleman has changed his mind since.

§ Mr. Wilson
We can see how things have turned out by taking a number of items in succession. There are paper making materials—wood pulps. Stocks are seriously down. I am not blaming the trade because we know the difficulties of the paper situation, and the difficulties concerning paper making materials. Then there is newsprint, but I do not want to start a debate on that.

§ Mr. Nabarro (Kidderminster)
Hear, hear.

§ Mr. Wilson
Stocks fell considerably in 1950, but newsprint consumers for a very long time were demanding larger newspapers because, they said, their stocks were embarrassingly high. Some of the purchases foreseen in the Newsprint Supply Company's budget were not bought because, in the end, supplies were simply not there. The situation turned out far worse than anyone on either side, in either private or public buying, was in a position to forecast. Then there is esparto. When it was returned to private purchase private buyers held off the market because they thought the price too high, and they were sure it was going to come down. Within two months they were back in the market having to pay very much higher prices. They had miscalculated the market. No blame can be attached to them. Prices and markets last year were in a very difficult and unpredictable position, but I do suggest that it is quite wrong for hon. Gentlemen to come to the Committee tonight to suggest that we should have had larger stocks, and that we should have foreseen all these things, which private enterprise, when it had complete control of the market, entirely failed to see.
I should like now to refer to sulphur, since the question has been raised. One hon. Member seemed to think that we should have been able to foresee shortages more quickly and should have taken the industry into consultation more quickly. I agree with him completely about consultation. In so far as sulphur is concerned we have been in consultation with industry about it for two or three years. If British industry had accepted a little more quickly our warnings about prospective sulphur shortages we might have got our sulphur pyrites production much nearer to present needs than we have. They did not accept 1608 our warnings in one or two important respects on the sulphur position.
I think it right to point out to the hon. and gallant Member for Scotstoun (Colonel J. R. H. Hutchison)—I am sorry he is not here—that, so far as sulphur supplies are concerned, over 90 per cent. of our supplies come from the United States. It is impossible to predict the supplies which will be available and, therefore, impossible to have as full consultation with the industry as we should all like to have. Since we got an allocation from the United States the Chancellor of the Exchequer and I have had a very long meeting with representatives of industry and asked them for their advice and their help in full discussions about what could be done, but I am bound to tell the Committee that it is still impossible, even today, to say what the supplies of sulphur will be even for the month of April, let alone the rest of the year. On the shortage of sulphur pyrites hon. Gentlemen will acquit us of any failure to consult industry as quickly as we should otherwise want to.

§ Squadron Leader A. E. Cooper (Ilford, South)
Would the right hon. Gentleman tell us, in connection with the shortage of sulphur pyrites and the deposits in Italy, which were washed out because they could not compete with the American price, whether, in view of the present world situation, it is possible for something to be done for re-working those deposits in Italy?

§ Mr. Wilson
We have had discussions with the Italian Government about those deposits.
Perhaps I should tell the Committee that every available source of supply all over the world has been the subject of our inquiry and of high level activity— during the last three or four months particularly. In the case of Italy, there has been a considerable limitation of sulphur buying over the last three or four years because the costs were higher than the American, and the producers did not turn over from sulphur to pyrites, which were cheaper. The shortage has encouraged buying from Italy as much as possible, but there is little to be got from that country and they are over-sold there.
So far as pyrites are concerned, we are examining a large number of possible sources of supply, but I am sure that the 1609 Committee will recognise that it takes a very long time to work some of them up to full production. In other cases it takes a long time for us to build the plants necessary for using pyrites to make sulphuric acid as opposed to the sulphur we have been importing from the United States.

§ Mr. Osborne (Louth)
The Minister has been very careful to try to show the Committee how foolish and mistaken private industry has been in its forecasts of future prices, and he has been trying to claim how clever he and his officials have been in handling these affairs.

§ Mr. Wilson
I am sure the hon. Gentleman would not want to misrepresent me. What I was saying was that it is suggested from the Opposition benches that only private buyers are prudent. I have made it clear that where the private buyers had a completely free hand, even in cases where dollars were not involved, they have not been prudent or better shopkeepers, or produced better records at the end of the day. That was not meant in any sense of criticism. In fact, I went out of my way on each commodity to say that I was not blaming them, and that they were facing difficult conditions.

§ Mr. Osborne
I do not wish to misrepresent the Minister, but I do want to make a complaint to him from the textile industry, which is affected by his handling of the sulphur position. In the debate on 2nd March, the President of the Board of Trade said: In October reports reached us that the United States were contemplating export licences and strong representations were made to them about the allocation we should require —representations again at the very highest level. He then went on to say that for that quarter our allocation was 81,000 tons as against 112,000 tons in the previous quarter. In the same speech he said: I am bound to tell the House that it presents a very grave picture indeed, and he suggested that it would also have an extremely serious effect upon employment. I think he will remember saying that there was going to be a cut of some 20 per cent. in rayon production, and he predicted that that cut would have to be increased to 40 per cent.

§ Mr. Wilson
Might have to be.

§ Mr. Osborne
That it might have to be increased to 40 per cent. This information was given to the President of the Board of Trade, on his own showing, as long ago as October. With that knowledge in front of him, he went——

§ Mr. Wilson
Would the hon. Gentleman say which information was given to me? Not the allocation figures.

§ Mr. Osborne
Well, the right hon. Gentleman said: In October reports reached us that the United States were contemplating export licences and strong representations were made to them about the allocation we should require."—[OFFICIAL REPORT, 2nd March, 1951; Vol. 484, c. 2570–1.] Surely on that statement he will admit that in October he knew the position was going to be very serious indeed.

§ Mr. Wilson
I had no reason to suppose in October that our allocation would be as low as 81,000 tons. It was clear that there would be export licensing and not free buying. Representations were therefore made in the hope of getting 110,000 or more per quarter, but there was no suggestion of that cut at that time, and it came as a very great shock to everyone when the figure was cut to 81,000 tons.

§ Mr. Osborne
I agree that the right hon. Gentleman did not know the exact cut in the allocation, but a warning was received from the United States which made it quite clear to him that there would be a shorter supply for the next quarter than he had been having previously or those export licences would not have been suggested by the United States authorities. I would remind him that he went on to say that it presented a very grave picture indeed.
This was information available to the right hon. Gentleman, as he himself says, last October, yet on 8th November, 1950, he went to a luncheon of the British Rayon and Synthetic Fibres Federation in Manchester and made a speech, a great deal of which he devoted to the supply position of rayon. I remind the Committee that, as he admitted, he had the knowledge at least a month before that there was going to be a shortage in the supply of rayon. This is what he said in that speech: We have seen great increases in the products of these industries. The production of 1611 rayon staple fibre was £11 million in 1935. By 1945 it had risen to over £53 million, and this year, in 1950, it has been running at the annual rate of £171 million. He went on to talk about the importance of the export of this basic commodity. I shall be pleased to give the right hon. Gentleman the cutting containing his own words when he went on to urge industry in Lancashire to use more and more rayon in helping out with the difficult supply position of cotton and wool. He said that we must use more fibre; that we must substitute pure rayon for the staple production of either cotton or of wool. It seems to me that he not only did not use the information that was at his disposal, but that he entirely misled industry.

§ Mr. Wilson
Would the hon. Gentleman kindly read to the Committee that section of the same speech where I warned the rayon industry about the serious sulphur position and about sulphuric acid? Would he read us that part of the same speech where I explained to the textile industries the hopes we all had, and said that rayon production—because it was an exhibition organised by the rayon industry-might be frustrated if we could not get essential supplies of both rayon and cellulose products? So as not to mislead the Committee, would the hon. Gentleman read the section of my speech dealing with those supplies?

§ Mr. Osborne
I am quite willing, but I do not want to keep the Committee long because other hon. Members wish to speak. I would point out, however, that there is not one word in this report about the shortage of sulphur.

§ Mr. Janner (Leicester, North-West)
Then it is a bad report.

§ Mr. Osborne
I am taking the report from a responsible trade paper, in which the Minister is urging industry to use more rayon which he himself knew was not available. Certain sections of the trade have asked me to say this—[Interruption.]Why not? It is my job, in a small capacity, to try to keep some hundreds of people employed, to find them regular work and good wages, and I am dependent upon the supply of rayon. Lots of men in my position have to look after their jobs and their wage packets, and we were encouraged by the right hon. Gentleman to use more and more rayon 1612 at a time when the Minister knew it would not be available. I therefore say that he did not use his information wisely. that he misled industry, and when he says to me that private industry has not been very wise I say in reply that at a time when he had much more information than private industry had, he did not use that information wisely, and he misled the Lancashire trade and the other trades dependent upon rayon.

§ Mr. Wilson
The hon. Gentleman keeps on accusing me of misleading the trade. Will he now cease misleading the Committee and quote the particular section of the speech I have asked him to give to the Committee.

§ Mr. Osborne
I have tried to explain that in the report sent to me there is no such quotation, and I cannot read a part of a speech I have not got. I do not doubt the right hon. Gentleman's word, of course, but I have no evidence that he spoke about it at all. All I have got is his request to the industry to use more and more rayon which he himself knew a month earlier would not be available. I accuse the right hon. Gentleman of misleading the industry; I accuse him of making it much more difficult for us, and I warn the Committee that in the textile industry—it may not be as important in the heavy metal industries which we have been discussing—it will lead to short time, if not unemployment. The Minister knows quite well that it will cause the cost of clothing to rise again, because we were hoping to substitute rayon for the more expensive fibres.
I am accusing the right hon. Gentleman of this. He did not use intelligently the information which was available to him. I think that it is only fair to say, on behalf of rayon users, that they have a complaint against him. I ask him one question. It has been said in the industry that the warning of a 40 per cent. cut may have been too severe. Can the Minister tell the Committee now if there is any hope that the cut of 40 per cent. in rayon supplies is likely to be less than that figure of which he warned us 10 days ago?

§ Mr. Geoffrey Lloyd (Birmingham, King's Norton)
I beg to move that Item Sub-head J.4 (Purchase and Storage, etc., of Strategic Reserves) be reduced by £100.

§ Mr. Chetwynd (Stockton-on-Tees)
I intend to confine myself entirely to that Vote. I think that as a result of my right hon. Friend's opening remarks we now have a somewhat clearer conception of what the Government have in mind by a strategic reserve of raw materials. I must confess that as he spoke the idea of a large reserve for strategic purposes, whether for maintaining the re-armament programme or for keeping in reserve in the case of hostilities, became more and more remote. The main purpose of this Vote seems to be concerned with obtaining scarce raw materials to be made available for current production. I think that that is the right emphasis at present.
The problem arises in the main, I think, from the severe shortage of world supplies. One lesson that we ought to learn is that in past years we have been far too prodigal with the world's resources. We must take into account that if we and others are to preserve our position as industrial nations in the world in the future we have to be far more careful of the use that we make of the natural resources at our disposal, and at the same time we have to go ahead with all the means at our command with research to find substitutes by way of synthetic materials.
The problem is further complicated by the grave maldistribution of these materials between countries and between users at home. I should like to refer to the figure given by my right hon. Friend on 2nd March with regard to wool. It was quite clear, he said, that the United States Administration intended to build up a stockpile of £350 million worth of raw wool representing 35 per cent. of the entire export surplus from five exporting countries. If one single country is to take that share out of all the available supplies, it must mean serious scarcity to countries such as ourselves.

Mr. Osbome
Did the Minister say that he had authority for making that statement, because it is of the greatest importance to industry if America stated that they were going to stockpile to that extent?

§ Mr. Chetwynd
I think that the right hon. Gentleman said that he was going to check that assertion, and I am hopeful that he will be able to confirm or 1614 deny it. That, however, does not affect my argument that we have to see that we get a fair allocation of what is going. We have to change the methods of allocation. It does not seem to me that we are tackling this problem effectively in allocating what we have been able to buy only at very high prices and in very small quantity. We should be more concerned with purchasing by international agreement what is available as cheaply as possible and in the greatest quantity possible, and then deal with the allocation of it.
Let me refer to sulphur and wool-in particular. How can we possibly stockpile sulphur and wool at the present time when we need it to maintain our industrial economy even at a reduced level? It is quite impossible to do that. I hope that my right hon. Friend will pursue a very firm line with the United States on this policy. We have been now arguing and debating the allocation of sulphur with them over a long period, and 10 days ago we were expecting the Commodity Committee to come to some decision on the question of sulphur for our needs here. I understand that no decision has been reached, but our industry must go on. Plans must be made for re-armament, export and so on, and I believe that we do not know even yet what the April allocation is to be. I urge the Minister, with all the strength I can, to use all his endeavours to get some settlement of this matter immediately, even if it means paying a personal visit to America himself.
There is a run at the moment on all forms of clothing. People are ordering suits far beyond their needs. I believe that there is panic buying. I should like to put this point. Can my right hon. Friend give some indication that, unless we can get increased supplies of wool fairly soon, he will be willing to reconsider reimposing clothes rationing? I know that that may be unpopular and take a lot of administration to put it into operation again. It seems, however, only right and proper that we should go back to some system of fair shares of clothing rather than allow some people to buy as much as they can afford while others have to do without.
It is essential for our own strength and the strength of our Allies that we maintain a sound healthy economy at home. I would point out to my right hon. Friend 1615 and to the United States that it is no use setting up a stockpile for the sake of sitting on it, while our industry is in jeopardy. That is the surest way of weakening our position. We have to make certain that we keep a balance between our stockpiling and our reserves for essential industries and our supplies for consumer use in the immediate present. Our main problem seems to be not only sulphur but other supplies, and if my right hon. Friend can give some reassuring information, particularly on sulphur, I think that he will deserve the credit of the House.

§ Mr. Nabarro (Kidderminster)
In the two minutes left, before 7 o'clock, there will probably be only time for me to make reference to one point mentioned by the President of the Board of Trade in his speech. A rather curious position arises under this Vote for the stockpiling of strategic raw materials, other than those dealt with by the Minister of Supply. It is a curious position because approximately one-half are bought on public account and one-half on private account.
With cotton on public account and wool on private account, matters are fairly straightforward. In the case of the timber group, the position is peculiar because all hardwoods are at present purchased on private account, but only approximately one-half of softwoods are purchased on private account and the other half on public account. The position is exactly the same with plywood, an essential commodity in time of war for aircraft manufacture and many other purposes, where again a percentage falls on private account and the balance on public account, according to the part of the world and the foreign currency necessary to be employed.