HC Deb 30 May 1952 vol 501 cc1854-67

3.7 p.m.

Mr. Harmar Nicholls (Peterborough)

I am glad to have this opportunity of raising the subject of the small bakers. I may be accused of using exaggerated language in saying that this is an urgent and important matter. I do not claim that the baking industry as a whole is likely to go out of existence, but it is true to say that it is urgent and important if we examine the one section of the industry I have in mind, and that is the small baker. I am referring to those who serve the small towns and the outlying districts of this country.

At the moment these people are on the verge of real disaster. To them—and there are considerable numbers of them—this description of urgent and important is a real and fair one. That is the first point I want to impress upon the Minister. I want to put it to him that, owing to the present high running costs in relation to the profit margin allowed in the industry, there is clear evidence that the small bakers are being pushed out of business. Considerable though the figures are today, they are only a beginning, as I hope to show him later in my case. They are only trickle which will develop into an avalanche unless something is done quickly. The whole purpose of my argument is to impress upon the Minister the old adage that a stitch in time saves nine. It is with that at the back of my mind that I shall produce my argument.

To establish the force of the constructive proposal that I shall submit to the Minister, it is necessary to keep in mind the background of the baking industry generally. Everybody realises the terrific importance of the makers and distributors of bread in their essential task of feeding the nation, but it is even more important today than ever before because we appear to have reached the stage where the baking of bread in the home is a lost art. And so we are completely in the hands of the various organisations and businesses that bake the bread for us.

We know that efficient distribution is in the national interests, not only from the consumer angle but on grounds of defence, in time of war, when we want our essential resources distributed; there is no more essential service than that of keeping the nation fed and supplying its bread. Those two angles, therefore, are important: the convenience of the consumer, and the national need.

That is why the baking of bread is such a vital matter in its own right. Because we recognise that, I think it would be accepted on all sides that it is essential that the maximum number of bakers should be kept in production; and because bread is such a perishable commodity—it cannot be kept too long without going mouldy—it is vital that the makers of bread should be evenly distributed, in both towns and rural areas, over the whole of the country as far as is possible. We recognise that the problems are for the most part in the rural areas, which are not wthin easy reach of vast shopping centres, with their choice of shops and bakers.

It is my argument today that unless immediate alterations are made, unless some higher profit margins are allowed, the small baker section of the industry will be forced out of production. That is the theme which I wish to have running throughout all that I have to say.

I think it well known that the industry comes under three main headings. We have what are known as the plant bakers —the bigger bakeries—who account for 27½ per cent. of production. Then there are the Co-operative bakers, who themselves are plant bakers in the sense that they are well modernised and have the latest equipment; they amount to 17½ per cent. And then we have the family bakers, who produce 55 per cent. of the bread that is distributed throughout the country.

The plant bakers—which includes the Co-operative societies—because of the cost of their extensive machinery and equipment are of necessity concentrated for the most part in the towns and cities. It is the family bakers—some of those I have particularly in mind are very small businesses—who operate both in the towns and in the rural depths.

The plant bakers and the Co-operative bakers, because of their specialised production, can produce a loaf of bread more cheaply than the family baker. Something like 214 ordinary loaves of bread can be made from a sack of flour. The plant bakers can get their 214 loaves from the sack much more cheaply than many of the ordinary bakers, because of their machinery and great efficiency. The small bakers have to make do with more primitive methods and premises, but they are in the areas where they are wanted and where the bigger producers will not go. They prefer to sell their bread over the counter. The size of many of the small businesses do not allow bakers to re-equip themselves with all the expensive machinery which is at the disposal of the bigger concerns. That, briefly, is the organisation.

How do the Government come into this? Why should I want to be addressing any argument to the Parliamentary Secretary to the Ministry of Food? The reason that the Government come into it, is because at the beginning of the war the Government realised that bread must be available to the public at a reasonable cost. They also realised that they had to face up to the fact that the cost of baking and distributing bread had gone up very considerably. To balance the higher cost of baking and distributing bread against the need to keep the price within the pocket of the consumer, it was decided to grant a subsidy so that the established trade could run at a profit. The Government attempted to base the profits on the pre-war profits of the industry, estimated at about 5s. per sack of flour. They said, "We will establish that in the form of a subsidy grant."

In passing I would say—although it has nothing to do with the argument I am making—that the trade have never accepted the 5s. figure as being their real pre-war profit. They have argued that certain things were not taken into account, and that it should be more. But that is not my point, and I do not know enough about the industry to argue it with any force. To arrive at even that subsidy the Government had returns from members of the three groups I have already described, and on the basis of their average figure the subsidy was settled. At present it stands at 12s. 4½d. per sack of flour and the intention of the Government was that that should give the producers of bread a profit of 5s. per sack of flour.

On the face of it that is not unfair, and if the system had worked out in that way, and had given the industry their pre-war profit, I think it would have been all right, and there could not have been any grumble from any source. But in actual fact it does not work out in that way.

I think the facts are accepted by the industry. The plant bakers, who can turn a sack of flour into loaves of bread more quickly and therefore more cheaply than the smaller bakers, are reasonably satisfied on the present basis. Indeed, from some of the figures I have seen I should have thought they would have been more than satisfied. But the small bakers, especially the very small ones, find it most unsatisfactory indeed. I need only give the actual figures, which are generally accepted, to show that they have a very real grievance. The Ministry said they wanted to establish the position that people making bread should have a profit of 5s. per sack of flour. Under the present system, with the best will in the world, this is the position today.

The Co-operative societies have a profit margin of 9s. 9½d. per sack. The plant bakers have a profit margin of 6s. 0½d. per sack. The family bakers, particularly the small ones, have a profit margin of only 2s. 10½d. per sack. I do not want my argument to be used in the sense that I am criticising either the Cooperative bakers or the big traders. If it is a fact that, with their efficiency and better production, they can turn this arrangement to better account, it is not my argument to attempt to take that away from them. My argument is that the small bakers have a profit margin of 2s. 10½d. per sack when the Ministry have said that they thought 5s. was a reasonable profit.

The discrepancy is even more unfair when it is realised that the large proportion of the plant bakers retail their bread over the counter, or deliver it to some other retailer to distribute for them. They do not take the bread to the door for the housewife like the small bakers throughout the country—with all the extra expense which goes with that kind of delivery. I hope that the Parliamentary Secretary will not pay too much attention to the delivery charge which such bakers are entitled to make. Only some of them make it, because it is an unpleasant thing to have to ask customers to pay more than they pay in the shops on account of the delivery charge. I do not think that ought to be taken into account in answering this point.

The importance of the discrepancy to the House is not because of the disparity within the trade. The interest which the House has in this has nothing to do with the fact that the Co-operative societies are making so much and the others so little. That is a matter for argument between the association and the Minister and it is for the trade itself to put its house in order. It is important to this House because the disparity puts the small baker on such a low profit margin that he is being forced out of business, which means that the consumers, our constituents, particularly those living in country districts, are not getting the service to which they are entitled, and certainly nothing like the service which the people in the towns are getting.

My plea is not so much for the bakers as for the housewives, particularly those in rural areas, who will be inconvenienced if small bakers are put out of business. I want to establish beyond doubt that we have a clear indication that that is happening now and that unless it is remedied the position will be even worse in the future. It is upon the fact that small bakers are being put out of business that my plea for urgent action is based.

My evidence in support of this comes under three heads. The Ministry's own figures show that between January, 1948, and December, 1951, the number of bakers claiming the subsidy fell by 2,600. In January, 1948, 16,200 were claiming the subsidy, but by December, 1951, the figure was only 13,600. That in itself may not be absolute proof of my point, but I feel confident that it is relevant evidence for the Minister.

I have further figures which I give confidently to my hon. Friend knowing that they are based on fact. The number of bakeries closed down or disposed of as distinct from those sold on reasonable terms—I am not concerned with those willingly merged purely on business grounds—over the last 18 months was 278, the number which ceased to make national bread and turned to more profitable lines was 301, the number which stopped delivering was 473 and the number which curtailed deliveries was 392. Thus, cases can be submitted to the Minister of about 1,400 bakeries which have stopped baking bread or have stopped delivering.

Even if my final evidence does not impress the Minister, it certainly impresses me. Over the last 12 months in my constituency seven small bakers have had to go out of business and 12 others have stopped delivering. My hon. Friend the Minister for Southend, East (Mr. McAdden) has told me that about 20 in his constituency have gone out of business. If the experiences of Southend and Peterborough are fair examples, and 625 constituencies are represented in this House, the Minister will appreciate that the problem is a large and urgent one and that something must be done about it before the numbers going out of business become more than a trickle. I can see that, if an extra subsidy were granted, the people who are already making good profits would be able to make more, and it may well be that the Minister would have good reason for not agreeing to it.

But there is the other argument that, upon the first 25 sacks of flour, there should be an increase in the subsidy of 4s. per sack. Again, I can quite see the Minister's point in saying that that again will cause extra profits to go to the bigger producers, who are already making enough, but my particular proposal is that the Minister should give this 4s. per sack extra subsidy to those using only 25 sacks of flour a week, that those who are using between 25 and 50 sacks a week should get an extra subsidy of 2s. per sack, and that, above 50 sacks per week, he should give no subsidy at all. The small baker is the one who uses between 10 and 25 sacks of flour a week—

The Parliamentary Secretary to the Ministry of Food (Dr. Charles Hill)

The hon. Gentleman means no additional subsidy.

Mr. Nicholls

I am much obliged to the Parliamentary Secretary; I meant no extra subsidy. My proposal is that that extra 4s. subsidy should be paid on the first 25 sacks, that an extra subsidy of 2s. should be paid between 25 and 50 sacks, and that, above 50 sacks a week, no extra subsidy shall be paid at all. I believe that the industry will be well able to deal with their domestic problems themselves, but I say that this "stitch to save nine" will afford this special consideration to the small man in the industry.

The scale I have suggested will cost £1,500,000 a year, and I should have thought that, if we mean to keep this industry in existence and ensure proper distribution throughout the country, and particularly in areas which it will benefit most of all, this would be a very small price to pay.

My final word will not be addressed to the Minister, but to the trade itself. If my hon. Friend accepts my suggestion, and I hope he will treat it with sympathy, and will give this extra subsidy up to 50 sacks per week, and I can well see that certain other bakers who are using 52 sacks per week will say "We are borderline cases; why cannot we have it?" If that is the suggestion, I ask the trade to see that that rather niggling approach does not come from them.

This scheme ought to be based on the bakers' use of flour over the last 12 months, and we shall have to make provision to see that a business which is now using 60 sacks a week, and in which two brothers are in partnership, is not broken up into two separate concerns in order that each may claim the extra subsidy. If this suggestion were adopted, it would be for the trade itself to see that their members really honour it. If it is found that the baking trade is not prepared to come to some arrangement to help its own members who are facing hard times, I shall be very surprised.

That is the special case which I put to the Ministry, but it would have to be developed in a much longer debate if it were to take account of all the points that could be made. I feel that, on the general statement I have made, I have clearly established that there is a case for urgency, and that it is important—as well as being possible without interfering with the general negotiations that are going on—to meet the immediate need of the small baker, who plays such an important part in the life of this country.

3.29 p.m.

Mr. James Hudson (Ealing, North)

The hon. Member for Peterborough (Mr. H. Nicholls) concluded an eloquent and impassioned plea by saying that this is a very special case. Possibly, if he had proved that, I should have been able to meet it with some sympathy, but I feel that if it be true that the Government must step in because there is a special case for the small baker, owing to the pressure of the competition of the larger units in the trade, it is also true at the present moment, in the present financial difficulties through which small traders generally are passing, of practically every department of retail trade. If the arguments used by the hon. Member were to apply generally in all cases on the standards he has mentioned, we should be opening the floodgates.

Speaking as I do in this House, in the Co-operative interests, it was with some pleasure that I heard the hon. Gentleman give the figures of the profits made by the Co-operative sections of the bakery trade. Their profits are considerable, but they are feeling a good deal of pressure in the present situation. I do not know whether the Minister would deny this, but one of the factors in the intensification of the troubles of the bakers today is, of course, the alteration in the bread subsidy. The hon. Member for Peterborough is making a sign to me that time is running out. I, too, am very anxious for the Minister to reply, but I want to put this point.

The necessity to face up to the alteration in the price level is, of course, forcing all types of trades to seek to effect economies in their productive and distributive processes. In many cases they are achieving this by means of delivery charges or by the suspension altogether of their delivery services. That is one way in which they can do it, but there are other ways. The method pursued by the Co-operative movement is the way in which the bakery trade generally must face up to the difficulties of today.

By joining together in federated bakeries it has been possible for the Co-operative movement to do what it is doing today, and it seems a pity that we should now be thinking of devising a subsidy scheme that will "reward" the Co-operative movement for its skill in meeting the problems of production, by leaving it out of any arrangement that is made.

I agree that the difficulty is a serious, one for the small baker. He has been going through this process for the last two years, but the difficulty has been much aggravated for him since the changes in the price level of bread. It must be faced frankly by the bakery trade generally that the small units which are running at high costs and which are incapable of developing the improvements in production which we see in the modern bakery trade must be carried on in other forms. It must be done in the most sympathetic way possible.

I think it would be a mistake for the Minister to respond to the pressure from his hon. Friend, although he has made a very human plea. I say on behalf of the Co-operative movement that we feel we have been making our contribution to this problem and that the contribution can still be made in directions other than that suggested by the hon. Gentleman. There is a lot more that could be said on this subject, but I shall conclude my remarks so that the Minister may reply.

3.35 p.m.

Brigadier F. Medlicott (Norfolk, Central)

I am grateful for the opportunity of saying a few brief, compressed words on this subject, because those of us who have had the opportunity of meeting deputations from the family bakers have been deeply impressed by the sincerity with which they have made their case and the very strong arguments with which they have supported it.

In answer to what has just been said by the hon. Member for Ealing, North (Mr. J. Hudson), I would observe that the issue really is very plain—either we want the small, independent baker, or we do not. I very much hope that, as a result of what has been said to the Parliamentary Secretary today, he will continue the good work which his right hon. and gallant Friend has already started.

The difficulties of the small bakers are not of recent origin. As has been said, they have been growing over the last four years, and the Minister has already shown a good deal of sympathy with the bakers in the measures he has already taken. I hope that it will be possible for him to follow those up.

What I would urge is that the method suggested by my hon. Friend the Member for Peterborough (Mr. H. Nicholls) should be carefully thought over, because I feel that a graduated subsidy for the small producer is what must be adopted if a fair solution is to be found. I would go even further and say that if it has to be at the cost of the larger producer I should be prepared to go to that extent, because I see little prospect of the Minister finding the money that would be needed for an overall increase in the subsidy.

There is a very serious drift from the countryside into the towns. We are becoming an urban civilisation, and if we are to avoid that, and if we are to maintain the fabric of our country life as it ought to be maintained, we must be prepared to pay for it. Already, 3,000 bakers have drifted away from baking work in the countryside. Others will follow. I believe that the countryside will be the poorer for their going, and I hope that the Parliamentary Secretary will say a word today which will encourage their colleagues to remain.

3.38 p.m.

The Parliamentary Secretary to the Ministry of Food (Dr. Charles Hill)

My hon. Friend the Member for Peterborough (Mr. H. Nicholls) made what I thought was a model speech in opening this short Adjournment debate—clear, fair, factually accurate and not ignoring the underlying difficulty to which the hon. Gentleman the Member for Ealing, North (Mr. J. Hudson) drew attention, which is that there has been for many years competition between the large and small business—the mass produced loaf and the individually produced loaf. It is for the public itself to decide the outcome of that competition, and it would be improper if the Government were to use the subsidy instrument to intervene so as to widen or to narrow the competitive position which finds expression in the relative costs.

At the same time, my right hon. and gallant Friend is impressed by the considerations which my hon. Friend put forward—the general consideration in the national interest, and the narrower emergency consideration—to see that this country is properly served by both bakers and distributors of bread. The difficulty arises because it is the purpose of Her Majesty's Government, as of the previous Government, to secure that the trade as a whole achieves not only reimbursement of its costs but a net profit of 5s. per 280 lbs. sack of flour. The Government cannot secure that each individual person obtains that 5s. per sack for himself.

How are these figures achieved? As my hon. Friend the Member for Peterborough said, sample costings are obtained from the three organisations, the National Association of Master Bakers, the Federation of Wholesale and Multiple Bakers and the Co-operative Bakery Trade Association. Figures are obtained of the average loss on making subsidised bread on the basis of figures submitted by volunteers for the information first of their association and secondly of the Ministry.

I must add a note of disappointment here. If we take the National Association of Master Bakers, we get figures from 1 per cent. of the bakers in that group, covering rather more than 5 per cent. of the flour used by the group. It is a pity that when a case needs the reinforcement of figures, not more than 1 per cent. of the persons involved will give us the returns upon which we would be enabled accurately to estimate the position.

As has been said, when the figures are obtained from the three groups, they are weighted according to each group's usage of flour and one figure is calculated for the whole trade of the loss on bread; the latest figure is 7s. 4½d. per sack. Five shillings are added, making a figure of 12s. 4½d. I have no desire to give anything but sympathetic examination to what my hon. Friend said. He pointed out that the 5s. may be 5s. when it leaves us, so to speak, but it is 2s. 10½d. when it reaches the master baker. It is 6s. Old. when it reaches the wholesaler and the plant baker and it is 9s. 9½d. when it reaches the Co-op.

I agree that those figures will be received by many with surprise, and they present a problem which, somehow or other, has to be solved. At the same time, when one examines the National Association figures one finds that the hardship, measured in terms of the percentage who are working at a loss, extends well beyond the first 50 sacks. The returns are admittedly inadequate and I imagine that a statistician would have something violent to say about conclusions based on 1 per cent. of self-selected persons.

But let us assume that those who selected themselves are not likely to have done so because their businesses were unduly profitable. That is not a criticism but a comment upon human nature. It may well be that those who suffered loss would be more inclined to make a return. Thirty-nine per cent. of those using 6 to 25 sacks weekly showed a loss; 29 per cent. of those using 26 to 100 sacks showed a loss, and 34 per cent. of those using 101 to 200 sacks showed a loss. I recognise the character of the problem, but I must say forthwith that it is not easily solved by assuming that the loss falls only on those using a relatively small number of sacks.

Mr. H. Nicholls

I thought I had made myself clear. I knew that my 50 sacks would not settle all hardship cases, but I hoped that that figure would settle enough to preserve distribution throughout the country.

Dr. Hill

I hope my hon. Friend will realise that to satisfy some and to arouse howls of indignation among others whose case might be equally strong is something which my right hon. and gallant Friend the Minister of Food would approach with considerable reluctance.

If one looks on the Federation of Wholesalers and Multiple Bakers field—admitting the inadequacy of the statistics—15 per cent. of those are making bread at a loss. The return of figures for the Co-operative societies, while better, is still low. Only 8 per cent. of their members returned figures. I am merely stating the facts and not rubbing any salt in the wound because the hon. Member for Ealing, North is here.

Mr. J. Hudson

The wound is not so big.

Dr. Hill

According to the figures returned 30 per cent. of those engaged in the Co-operative field are sustaining a loss. What I am saying is that it is extraordinarily difficult to identify and to deal with the loss. That is no answer; that is a commentary on the argument put forward by my hon. Friend.

I should add that figures are available for the profitability of firms of all sizes who are engaged in both the baking of bread and the manufacture of flour confectionery. The figures available are for 18 months ago—the period ending January last year—and they show that the general level of profitability at that time was three times that of pre-war. This general level of profitability applies only to those engaged in both the activities of baking bread and making flour confectionery.

There is reason to believe that since that time the level of profitability has fallen or, if it has not already begun to fall, it is certain to do so because of limitations in the supply of materials to bakers. I do not wish anyone to misunderstand me. I want to deploy the facts as they are. The level of profitability has declined since the figures to which I have referred became available.

My hon. Friend did not refer—perhaps he could not have been expected to do so —to certain steps that have been taken in the direction of improving the position. He knows what has been done in the case of wrapped bread; what has been done to de—control the loaf weighing up to 10 oz., and what has been done to soften the blow of the fats cut for the small man.

Mr. Hudson

Have they had that fats cut?

Dr. Hill: Yes; those things have happened. I am not suggesting that they are a complete answer to the problem.

Now I should like to look at the remedies suggested. It was suggested, on behalf of the bakery trade as a whole, that there should be a 2s. 6d. overall increase in the 5s. to all concerned—to those who are doing well, to those who are just getting along, and to those who are losing—but my right hon. and gallant Friend felt that he could not accept a blind proposition of that kind, bearing in mind that it would cost £3 million in subsidy, in addition to the present level of £13¾ million.

My hon. Friend has put forward a proposal for increasing the subsidy rate to 4s. and 2s. in respect of 25 and 50 sacks. I would say to him, most sympathetically, that I do not believe that such a step, even as an emergency measure, would, of itself, be an effective contribution to the problem. I hasten to add that we need—and we have asked for—the co-operation of the National Association in order to identify those who stand in the greatest need—and it may prove not to be those who are using fewer than 50 sacks but those who are baking fewer than 100 or 200 sacks. If we are to solve this problem with any sense of satisfaction to the parties concerned we must first identify and define the areas and the persons in greatest need.

There is another possibility. Under our present system of costings, even though deliveries are made each day we take into account only three deliveries a week. Our minds are open on that. If we allowed the full delivery cost it would make a difference of ls. 4½d. a sack over the whole field. We are looking at that and inviting the comments of the trade.

We are impressed by the difficulties of the situation. Had it been easier to separate the hardship, we should have done so earlier, but this is a complex problem. We will take into account what my hon. Friend has said and reexamine the problem with the aid of the National Association when we have made progress in defining the greatest need. We are examining, too, the other but significant item of the costs which are incurred but which are not permitted to appear in the reimbursement.

I am grateful to my hon. Friend for `having raised this topic in so informed a speech of such fairness. I do not wish anything I say to appear to deny the character of the grievance or to refute the substance of the argument which he put forward. We are in great difficulty 'in trying to do the right thing in the right place. The only argument of his which I cannot accept is that it would help, speedily and roughly, to solve the problem within a narrow field and then 10 pray that, no one else will take up the battle in respect of other concerns among which there is almost the same degree of loss.