IRON AND STEEL (PRICE INCREASE) (Hansard, 25 February 1952)

§ The Minister of Supply (Mr. Duncan Sandys)
Mr. Speaker, with your permission and that of the House, I should like to answer Question No. 114.
I have today signed an Order raising the controlled maximum prices of iron and steel. This has been made necessary by the increased costs and increased volume of the steel, pig-iron, iron ore and scrap which are being imported from abroad and by the higher costs at home of wages, transport, fuel, scrap and other materials. [HON. MEMBERS: "And profits."] We might have something to say about that later. It is estimated that these increased costs will during the current year amount together to about £75 million.
As the House knows, the Iron and Steel Corporation expressed the opinion, both to the late Government and to the present Government, that the loss involved in importing finished steel and re-selling it at the lower home prices should not be borne by a levy on the industry, but should be met by a subsidy from the Exchequer. For the same reasons as our predecessors, we have felt unable to adopt this policy.
However, in order to put this issue in its proper perspective, I should perhaps draw the attention of the House to the fact that, out of the total increased costs of £75 million, only some £4½ million arises in respect of imported finished steel. Of this £4½ million, about £1 million is in respect of imported finished steel from the United States, whilst the remaining £3½ million is in respect of similar imports from other countries.
The increased prices, which work out on an average at about £4 more per ton, are reckoned to yield over the year an additional £56 million. It will be seen, therefore, that the rise in costs of £75 million will not be fully reflected in the new prices. It is hoped that it may be possible to meet the balance of £19 million out of the earnings of the industry.

§ Mr. G. R. Strauss
May I first ask the right hon. Gentleman whether it is a fact that the profits of the publicly-owned iron and steel industry up to the end of September were about £65 million, and that increased charges were permitted from the middle of August which amounted to another £65 million, making a total of £130 million on a capital of £240 million in the industry; and whether, in fact, there is not ample in the profits of the industry to meet part, and the greater part, of the increase proposed at the present time?
May I further ask the right hon. Gentleman whether he is aware of the serious inflationary result of this increase, and whether it is not, therefore, to be avoided if at all possible?—and we maintain it could mostly be avoided. May I further ask him whether, in fact, the main purpose of this substantial increase is to see to it that the balance sheets of the publicly-owned companies contain such very large profits as to make the transfer of these companies to private owners attractive; and whether this is, therefore, nothing more than the first step in denationalising the industry? And are these proposed increases in keeping with the Government's policy of keeping prices down?

§ Mr. Sandys
I must say I am a little surprised that the right hon. Gentleman, who knows so much about this business of steel prices, should ask questions of that kind. First of all, may I remind him that when he increased prices last August he increased them by £5 a ton? I would also inform the House that if we had applied the same formula in fixing the margin of profit as was applied by the right hon. Gentleman in calculating the new prices which he adopted last August, we should have had to raise prices by at least £1 a ton more than we have actually done. [HON. MEMBERS: "Answer the question."] I think that what I have said has quite a lot to do with the question.
As regards the profit of the industry, the figures—which, I would inform the House, only reached me in their final form on Friday—amount to £63 million, or rather are at the rate—and I would emphasise that—at the rate of £63 million a year. Some of the figures are based only on a six-months' period. That figure includes profits on engineering, since 711 the nationalised companies include a great number of other industries; also bridge building, chemicals, and all sorts of other extraneous activities. It includes the premiums on exports, which has never been taken into account, as the right hon. Gentleman knows, in fixing prices, and a number of windfalls. All that comprises the figure of £63 million. From that has to be deducted tax—Income Tax and Profits Tax—the cost of servicing the Iron and Steel Stock, and also the amortisation which is laid down in the nationalisation Act. After deducting these sums, we are left with a figure of £25 million.
On the general criticism made by the right hon. Gentleman, I should like to point out that, with the increased costs of £75 million, to which I have just referred, and gross profits of £63 million, it will be seen that if the industry's earnings continue at the same rate next year as last year, and if no increase, as is now suggested, were made in prices, there would be a very substantial loss, on top of which the industry would have to meet a sum required to service the Iron and Steel Stock and to meet amortisation amounting to £10 million.

§ Mr. Strauss
May I put one further question at the moment? No doubt we shall have an opportunity of discussing this matter later. Will the right hon. Gentleman agree that I authorised an increase in August at the rate of £65 million a year? That was in anticipation of the increases in costs which we knew were coming on to the industry. [HON. MEMBERS: "Oh."] They were taken into account, or at any rate a substantial part of the increase in costs which the right hon. Gentleman now talks about were taken into account, by myself when I increased those prices substantially in August.

§ Mr. Sandys
The right hon. Gentleman must be more of a prophet than I thought. I should like, as the right hon. Gentleman has challenged me on that point, to give the House the figures making up the additional cost of £75 million which were not taken into account in the August price increase. Additional costs—that is, for an annual period—arising from the importation of steel and steel-making materials amount to £46 million, which includes the figure of £4½ million for finished steel, which I have already 712 quoted. Increased home costs amount to £29 million, which includes the increase in freight charges, which the right hon. Gentleman certainly could not have foreseen because they occurred only the other day—

§ Mr. Strauss
I anticipated them.

§ Mr. Sandys
—the increased cost of home scrap—the right hon. Gentleman anticipated that no doubt—the increased cost of coal, coke and fuel oil introduced only in December, the increase in wages, and the increase in other materials, and also the costs mainly due to the higher proportion of pig iron which is being used in steel-making owing to the shortage of scrap. All this amounts to £29 million. The £46 million cost of importing materials and the £29 million home costs together make a sum of £75 million.

Several Hon. Members
rose—

§ Mr. Speaker
We really cannot debate this now.

§ Mr. Herbert Morrison
Can the right hon. Gentleman state whether this very serious decision was reached departmentally on his personal responsibility, whether it was reached with the Department in consultation with the Treasury, or whether it was reached by the Government as a whole? I think it is important for the House to know whether the Government as a whole reached this decision or whether it was purely departmental.

§ Mr. Sandys
It was a Cabinet decision.

§ Mr. Speaker
We really cannot debate this complicated matter now. I think that the House has been very forbearing. This is still Question time. It is a very complicated matter and if the House wishes to discuss it, it must find another opportunity.

§ Mr. R. T. Paget
On a point of order. This seems to be a matter of very great importance and it has only been raised now. As you pointed out, Mr. Speaker, this not a convenient moment to debate it, and I therefore ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of calling attention to a definite matter of urgent public importance, namely, "The conduct of the Minister of Supply in forcing the resignation of the Chairman of the Iron and Steel Corporation and in sanc- 713 tioning an increase in steel prices." This is the first occasion on which that could have been raised. It is a matter of tremendous importance to the whole country. I submit that it falls within the rule, and that the Adjournment of the House should be moved for a special and immediate debate upon that subject.

§ Mr. Speaker
There is another statement on that matter to come, and if the hon. and learned Gentleman raises the matter then, I will consider it.

§ Mr. James Callaghan
On a point of order. I fully defer to your Ruling, Mr. Speaker, that this is not the occasion on which to debate the matter, but some of us wish to ask questions about it. I think, Mr. Speaker, that it is within your recollection that we have had two or three Front Bench questions and not a single question from any bench behind. Therefore, may I ask one question?

§ Mr. Speaker
I am not saying that this is not very important; obviously it is. I am only asking the House to choose a better occasion to go into this complicated matter than this crowded Question time.