BISCUIT MANUFACTURERS (LEVY) (Hansard, 5 March 1952)

§ The Parliamentary Secretary to the Ministry of Food (Dr. Charles Hill)
I beg to move, That the Biscuits (Charges) Order, 1952 (S.I., 1952, No. 230), dated 7th February, 1952, a copy of which was laid before this House on 8th February, be approved. Put simply, the purpose of this Order is to withdraw from biscuit manufacturers the subsidy in respect of flour used in the manufacture of biscuits. Since 1944 there has been no subsidy in respect of biscuits. As the flour subsidy has grown from 20s. 3d. to its prevent level of 50s., so it has been sought by the levy upon biscuit manufacturers to regain the subsidy element in flour in order that biscuits should not enjoy the subsidy.
573 Between 1944 and 1949 it was possible exactly to regain the subsidy by a levy imposed upon biscuit manufacturers. The difficulty arose in 1949 when, following devaluation, the price of flour went up by 12s. Logically, it would have been wise to have raised the price of biscuits proportionately at that time, but the difficulty about marrying the levy with the price of biscuits is that it is extremely difficult to raise the price of biscuits except in elements of 1d. per lb. and to have done so then would have made an increase in price which would have been disproportionately larger than the element of subsidy involved.
This led to the position that in 1949, because of that practical difficulty, the 12s. increase in the price of flour was dealt with by a temporary fall in the levy. In other words, the biscuit manufacturers got into a position of indebtedness to the Treasury because, for practical reasons, it was not possible to adjust the price in elements of less than ld. So the hon. Member for Sunderland, North (Mr. F. Willey) came to the House—I think, in October, 1950—to bring the position up to date at that time by so increasing the levy as to create a levy in respect of current subsidy and a levy in respect of moneys due to the Treasury. The levy per 280 lb. sack then rose to a level of 56s. 4d. and put the position right at that time.
Since then there have been changes. In April, 1951, the price of ingredients—oils, fats, and sugars in particular—rose and that led the manufacturers to ask for increased prices. The then Minister was not wholly satisfied that he had all the appropriate information and called for investigations, but he was so far convinced of the difficulty of the position of the biscuit manufacturers at that time that he allowed them temporarily to suspend that element of the levy in respect of money owed to the Treasury. In April, 1951, the levy was reduced to the level of 45s., the amount necessary to repay the subsidy at the current rate, but the indebtedness was allowed to run on until the Minister of the day could see the position in full.
In October, 1951, there came a new element—an increase in the price of wheat and milling and its distribution. This led to an increase in the flour subsidy of 5s. and so again, it could well be argued, 574 prices should have gone up. Since that time, continuing the work of the late Minister of Food, the examination of costs has gone on.
The purpose of the Order is to clear up the position and raise the levy on biscuits to a level which will not only mean the return to the Treasury of subsidy at its present level of 50s. but will also secure, by the additional 11s. 3d., the repayment to the Treasury by the biscuit manufacturers of the amount that is due in arrears. The amount of arrears is about £530,000, and of that £365,000 had been incurred before September, 1950, and £165,000 since that date. This Order will achieve stocktaking of the position and determine the level of biscuit levy at a level which will mean reimbursement of the Treasury at current subsidy level, repayment of back money, and adjustments which were put before the last Minister, as they were before my right hon. Friend, in respect of increased costs.

§ Mr. Frederick Willey (Sunderland, North)
I am sure the House is obliged to the hon. Gentleman for his endeavour to explain simply something which is really quite difficult, as I know from my previous endeavour to explain a similar Order to the House. I am not so well informed about the arithmetic of the matter as I used to be, but I would make the point quite plain that I do not think I can go all the way with the Parliamentary Secretary in his suggestion that his clearing up of the position is what my right hon. Friend the Minister in the last Government would have done. He will admit that my right hon. Friend, when he was Minister, was not prepared to concede the price increase on biscuits. The circumstances may have changed, but that should be made clear to the House.
I know the difficulty about raising points on this charges Order, because there is also a price increase Order. I will confine my remarks to one or two questions. Can the Parliamentary Secretary tell us what the addition to the subsidy figure would have been if the Order had not been made? What is the position in terms of subsidy, both as an annual rate and as far as the current financial year is concerned?
Can he assure the House about another matter on which, frankly, I am not too clear? I may be wrong but it seems to 575 me that an element of margin has been taken into account in this calculation, because this cannot be considered apart from the price increase Order. I do not want to say much about that Order, except that the one must be considered in the context of the other. In the Press statement issued by the Ministry, reference was made to increased production costs. If allowance is made for them by way of an increased margin, I presume the sum would be arrived at by taking the two together, but as I understand the position, there is not an equation between the charges Order and the price increase.
In other words, this charges Order is not similar to the previous charges Order. It is primarily serving the same purpose, but I suspect that it does contain an element to offset the claim made for increased production costs. It would be more appropriate to discuss that on the price Order, if the House wishes, but this is the appropriate occasion to ask the Parliamentary Secretary what the facts are. I know that the distributors' margin is another matter; it is a percentage margin, and it will have gone up with the price increase.
There is another point I am sure the Parliamentary Secretary would like to take the occasion of giving an assurance. When I explained the charges Order to which he has referred—of which he has given, again, a simple explanation—the hon. Member for Farnham (Mr. Nicholson) suspected that the Ministry were being dictated to by the Treasury. The Parliamentary Secretary will be obliged to me for giving him the opportunity of telling the House it was not so, as it was not on the previous occasion.

§ Dr. Hill
To deal with the last point first, the Treasury requires that, no subsidy being payable in respect of biscuits, every effort should be made by the procedure of levy to secure the return of the subsidy. To deal with the hon. Gentleman's other two points, the amount of subsidy which is paid or which is involved in respect of biscuits generally, and subsequently recovered by the normal procedure of levy, is in the region of £5 million per year.

§ Mr. Willey
That is the total figure?

§ Dr. Hill
Yes. On the hon. Gentleman's first point, he is right that there is not an exact equation between the increased levy and the increased price of biscuits. The price, as he knows, was raised by 1d. a lb. The equation is the increased levy, on the one hand, and a number of elements on the other, including higher costs. Perhaps I may put the position simply by translating it into terms of a cwt. of biscuits and getting away from the 280 lb. sack of flour.
A penny increase means a sum of 9s. 4d. Of that, 7s. goes to the manufacturer of biscuits. But the extra levy imposed by this Order amounts to 4s. 4d. Therefore, to meet the increased costs with which his right hon. Friend was confronted, and with which we have been confronted, there is the amount of 2s. 8d. per cwt. of biscuits—the difference between the 7s. which is retained by the manufacturer and the 4s. 4d. which is the element in respect of the increased levy and 2s. 8d. per cwt. of biscuits is the amount which is implicit in this Order in respect of the increased costs sustained by the manufacturer.

§ Mr. Willey
I am much obliged for that explanation. I was right in believing that a substantial element had been allowed for increased costs, and I think it is fair to my right hon. Friend to say that the Parliamentary Secretary and his right hon. Friend are not following the path of their predecessors. While we were examining the matter, it was no more than an examination, following a refusal to allow an increase in the price of biscuits.

§ Dr. Hill
My only point in reply to that is that the hon. Gentleman's right hon. Friend was sufficiently impressed by the case put before him to permit a temporary cessation of the repayment of that additional levy which was in respect of money owed. He met the applicants and was sufficiently impressed to say that such was their case that the Department would not ask for repayment for the time being, but would wait for the day when the money could be fully repaid.

§ Mr. Willey
I do not think the hon. Gentleman can claim to be following the example of my right hon. Friend, whose only step was to suspend the recovery of what I previously described as a gratuitous subsidy I do not want to go out of my way to quarrel with the 577 hon. Gentleman, but I am saying it was no more than that. In fact, our decision was not to allow an increase but to pursue those inquiries which the Parliamentary Secretary has said have led the present Minister to allow the increased costs covered by this Order.

§ Mr. I. Mikardo (Reading, South)
As I have the honour to represent a part of the borough of Reading, which is the first name we think of in connection with biscuits, I hope I may intervene in this loving duologue, in which each hon. Gentleman has leaped to make a point before the other has sat down, in order to associate myself with the thanks expressed to the Parliamentary Secretary for his clear and patient exposition of a matter which even we in Reading find complex and intricate.