HC Deb 16 July 1953 vol 517 cc2377-86

Motion made, and Question proposed, "That this House do now adjourn."—[Sir Cedric Drewe.]

10.6 p.m.

Mr. Harmar Nicholls (Peterborough)

It was in May of last year that I had the opportunity of raising the subject of the small bakers and described the many problems which they were then facing. My hon. Friend the Parliamentary Secretary to the Ministry of Food was on the Treasury Bench, as he is tonight, and we were impressed with the sympathetic interest that he showed on that occasion. But the conditions described then, in May last year, are very much the same today, and it is right that the House once again should examine the ominous portents which surround the future of the small baker. It is vital that the Government should now make some contribution towards overcoming the difficulties which are so evident.

It is no exaggeration to say that the small bakers throughout the country—they number something like 12,000 firms—are finding that the present costing arrangements, added to the effects arising from the expensively equipped mammoth bakeries, are pushing them out of business. Quite inevitably, the numbers of small bakers in business are falling.

It will be at our peril that we ignore the significance of the fact that some 6,008 bakers gave up baking National bread between 1942 and 1951 and the fact that this trend is continuing today on an increasing scale. It may well be that when the next census in the industry is taken, it will denote a really grave situation as far as the distribution of bread in outlying districts is concerned, unless in the meantime we really do something about it.

I am not suggesting that there is likely to be shortage of production of loaves of bread. What is likely to happen is that the big plant bakeries will replace the small bakers. I do not suggest that the result of that will be a shortage of bread. What I do say is that the consumer would not get the same delivery service that he now gets from the small bakers, scattered, as they are, over the whole country. At holiday times there would be a great risk of households having to do without bread if the only source of supply is the highly mechanised plant bakers situated in the towns.

Those highly mechanised large bakeries do not compare with the man on the spot, who is in closer touch with the consumer and is less dependent upon the inflexible system which all big industrial concerns must have in arranging their labour problems over holiday periods in order to get this highly perishable commodity in sufficient quantities on one night that they can give deliveries that have to last for three or four days. The small man is able to do this; he is able to adjust his output to meet emergencies. We all have recollections of what happened over the three days of the Coronation period. There was an outcry in many parts of the country where households were not able to get their bread because they did not get it in stock from the normal retailers who had supplies from some of the big concerns enabling them to sell for two or three days' consumption in advance.

I am not being anti big plant bakers. We all know that new methods and modern equipment, resulting, we hope, in cheaper production costs, are just as essential for the baking industry as for any other industry. All concerns, whether large or small, I hope will move in the direction of making use of modern ideas in order that production costs can be brought down. But we must see in the first temporary phase when the big money in the big concerns can put a few ahead of the many that we do not permanently denude the country of the many smaller concerns who eventually will be able to compete on better terms than they can today with the new mechanised installations.

One way in which we can help in this direction to give the smaller bakers a much better chance during this emergency period is by trying to give them all an equal opportunity by producing as far as we can a fair costings system. We remember how the Government came into this matter. It is not now just a matter for the industry itself. Thirteen years ago, as a war measure, the Government fixed the retail price of bread at the same level throughout the country. As the price of ingredients that go to make bread and the cost of labour went up it meant that in order to maintain bread at the settled price the Government paid the increase in the form of a subsidy to the bakers. The subsidy was based on the number of sacks of flour used each week.

From the system adopted it was obvious at the time this was introduced that it was the aim of the Government to give the bakers a profit margin of 5s. a sack, and this was based upon what was supposed to be the pre-war profit margin. I ought to repeat what I said last year that the bakers have never accepted as a fact that their pre-war profit margin was 5s. per sack. But that was the view of the Government at the time, and they obviously intended it and it would have been fair from their premises that the profit margin should be on the basis of 5s. per sack.

That was what the subsidy was intended to bring about, but in practice it has not turned out that way at all. I remember quoting in the debate last year that whereas the profit margin of the Cooperative Societies was 9s. 9½d. per sack and the big plant bakers margin was 6s. 0½d., the small family bakers were having to work on a profit margin of 2s. l0½d. per sack. This great discrepancy, I suggested, was largely due to the refusal of the Government to admit in the costings the full cost of retail distribution.

Since that debate in some way the Government have rectified the matter, and I know it would be the wish of the whole industry that we should congratulate and thank the Minister for having faced more than has been the case for many years the problem of the bakers in the full cost of retail distribution. The result now is that instead of the discrepancy being of 6s. 9d. it is down to about 5s. That shows an endeavour on the part of the Minister to take into account all these distribution problems.

I must emphasise that there is still this difference between the small trader and the large plant bakers. It will continue as long as the present methods of determining the subsidy are maintained. I suggested last year that the remedy would be an extra subsidy of 4s. per sack on the first 25 sacks used and 2s. per sack on the second 25 sacks used each week. The Minister then expressed his interest but said that while some sort of prima facie case had been made out, the trade had not supplied him with sufficient details of their costs for him to accept the claim.

On that occasion the Minister called for greater co-operation from the trade in providing figures proving or disproving the need for what they were asking. We have now had the advantage of 12 months of this extra co-operation and I am confident that the Minister has now the extra knowledge to allow him to agree to the suggestion I have made. I therefore repeat my appeal for the extra 4s. and 2s. subsidy and I urge him to make such an announcement without delay. I understand his reluctance to do so 12 months ago, but I hope that he may now be able to make that announcement, if not today, then as soon as he has had an opportunity to consider the details.

I would warn the Minister however, that even though he agrees to this extra subsidy, greater problems may well arise in the industry following the decision to remove price control from flour from 29th August. That is a situation which did not exist when we discussed the matter last year. I emphasise that the bakers are not frightened of freedom. They would welcome it. But it is important to bear in mind that while the price of their main raw material, flour, is now to be freed and left to fluctuate, the bakers have to work to a controlled price to produce the National loaf which they must still produce. It's a pity that the Minister did not consult the baking industry more fully before the decision was made to free the price of flour.

The White Paper announcing the freeing of the price of flour and the control of the price of the National loaf makes it clear that the Government intend to continue with a subsidy to cover the discrepancy. I have already tried to show that the existing basis of the subsidy was unfair even before this latest move, and the new arrangement will be even more unfair unless fresh safeguards are introduced.

Let us examine what the position will be comparing the situation before 29th August with what it is likely to be afterwards. As I have tried to explain, the present subsidy figure is based on an average of both the large and the small producers of bread. That means that the average takes into account the cheaper production costs of the mechanised bakeries. The average level arrived at has turned out to be unfair to the small bakers who have not had that advantage in production.

Similarly, after 29th August the bulk buying of flour by large concerns will mean that the average will be a level which is unfair to the small baker. Large concerns will be able to negotiate special discounts because they will be buying in bulk. It is a discount which millers will have to give in order to get the big orders. They will have to take into account the distance from the mills, and so on. The fact that the average will be unfair to the small baker is an added reason in support of the extra 4s. per sack. Indeed, after we have had some experience, I hope that further thought will be given to making it even higher.

I know that in the Ministry we have a Minister of Food and a Parliamentary Secretary who really want to help to maintain these small industries in good health and heart. The trade know that they have had greater sympathy in facing up to their problems over the last two years than they had over the previous five years. I hope that, in view of the evidence which will be in his possession and of the knowledge that we are not appealing for the baker—because it is the consumer who will suffer if we take away from him the advantage of having a shop round the corner with production on the spot—the Parliamentary Secretary will be able to continue his good work which he has already done in his difficult Ministry. I hope that he will ensure that real freedom of consumer choice is left to the ordinary households of this country.

10.22 p.m.

Mr. James Hudson (Ealing, North)

I intervene for only a few minutes because I do not wish to shorten the speech of the Parliamentary Secretary. The hon. Member for Peterborough (Mr. H. Nicholls) has referred again to some figures about Co-operative Societies. I assume that he got those figures from Ministry statistics. The Ministry, in securing the figures of 9s. 9½d. per sack as the profit margin on National bread as compared with 2s. 10½d. in other cases, ignored or rejected certain costings regarding the delivery of bread. I do not know why they did that, but these costings were ignored, and they amount to over 4s. for Co-operative Society sacks and less than 1s. for the others.

Therefore, the very considerable difference between the two sets of figures would be greatly minimised if all those costs were taken into account. I have also to say that this plea for the small baker must not be regarded as having nothing to do with the Co-operative Movement. One third of the Co-operative Societies are themselves quite small organisations which deal with less than the 25 sacks per week which is the figure referred to by the hon. Gentleman. Yet I have to say that the Co-operative Movement on this issue of a special subsidy—a very curious demand in these days from the party opposite—do not feel that they could give it their support. Indeed, they definitely oppose the proposal which is now put forward.

10.24 p.m.

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

My hon. Friend the Member for Peterborough (Mr. H. Nicholls), in what I am sure the House will agree was a clear speech on a difficult topic, has reinforced and brought up to date a plea which he made in an Adjournment debate in May of last year. On that occasion, in reply to his plea for a graduated and an increased subsidy in order to meet the special problems of the small baker, I replied with a plea to the organisations representing the industry, and, in particular, the small man, to co-operate and bring up to date their costings so that they could give us a sample of sufficient size and variety to enable us genuinely to understand the position.

I say at once that we have had that co-operation. I asked for some 300 costings, and we expect shortly to have the analysis of some 350 costings. I want to thank the National Association in particular for the co-operation which they have shown in this difficult task of persuading people to supply us with the necessary information.

I did make some sympathetic noises about the problem of delivery charges in reply to the plea that the full six days should be allowed, and, as my hon. Friend knows, that change was subsequently made. Furthermore, two other changes were subsequently made. One was the introduction in December last year of advance payments on account—so-called imprest payments—and the other a general speeding up of payments.

So the present position is that the costing sample has improved. That enlarged and more valuable sample is now being analysed, and before long we shall be able to examine the position on the basis of it. These costings will be the basis of the calculation of the subsidy when next it is done.

My hon. Friend went on to refer to the situation created by the Government's decision to return to freedom in the field of cereals. He said that we should have consulted the bakers before we took that decision. I do not agree with him for a moment. It is the Government's duty to reach a decision on a fundamental issue of policy, and thereafter to consult those concerned on ways and means of carrying out that policy. With the removal of the flour subsidy, it became necessary, as from 5th April this year, so to adjust the bread subsidy—so to increase the baking subsidy, to give it its proper designation—as to allow for the increased price of flour.

In figures, on 4th April, the last day of subsidised flour, the subsidy was 19s. 3½d., on 5th April it was raised to 40s. Hid., and on 17th May it was raised again to the current level of 42s. 7½d. In short—and I am not suggesting that this is an increase in remuneration for the bakers—the increase of 23s. 4d. was made in the subsidy so as to eliminate the effect of the removal of the flour subsidy on the baker, who was still, of course, required to sell his bread at a controlled price.

Other issues arose. Clearly, there was a problem of financing, and there was an argument for more money on account. Consequently, the imprest account—the advance on account of subsidy which had been fixed at a 50 per cent. rate in December last year—was raised to 66⅔ per cent. as a contribution to an admittedly difficult situation.

But that is not the whole solution. Another problem arises. It is this. Under the situation which will obtain from 29th August when freedom returns, the small baker will admittedly be at a disadvantage in the purchase of his flour because, purchasing in smaller quantities, he will have a lower discount. The small baker will be paying more for his flour than the big baker.

I am not going to enter into the controversy as between small baker and big baker. The Ministry of Food must, with meticulous care, avoid participating in natural developments and avoid influencing, through its subsidy intervention, any natural competitive developments in that field. At the same time, the Ministry of Food must ensure that, as a result of its subsidy arrangements, the position of one group is not worsened in relation to another. With the advent of decontrol and the different levels of discount, the small baker will pay more for his flour than his competitor, and my right hon. Friend has decided that this is a position that must be met from 29th August.

The hon. Member for Ealing, North (Mr. J. Hudson) gave a clue as to what other and larger groups of bakers think of this, and I am not going to pretend that the change which is to be made will please everybody. But I do say that as we have to require bakers to conform to the same retail price and as we seek to give the same level of net profit to all bakers, while one kind of baker is paying more for his flour than another kind we are faced with a situation which must be met.

That situation must be met in this way. As from 29th August all bakers will receive in respect of the first 25 sacks an increase in subsidy of 4s. per sack. If my arithmetic is right, that is £5 per baker per week. That falls for review when the 350 costings have been analysed and can be brought to bear on the situation. In any case, the result is that as from 29th August, that increase will be paid to all bakers, large and small, on the first 25 sacks.

Mr. H. Nicholls

Does the hon. Gentleman mean that if, when the 350 costings are examined, he finds that the original case is made out, there will be a bigger and better subsidy?

Dr. Hill

I mean that the facts will be analysed and the conclusion reached will be reflected in the new decision. All I am saying is that we are meeting a particular problem now, and the change is to be made not on account of the arguments adduced by my hon. Friend, which must await the analysis of the new figures supplied at our request, but on the basis of the new situation created by the decontrol which is to take place on 29th August. So, I hope that this will be felt to be a fair and reasonable solution of the problem created by the move from control to freedom.

Mr. J. Hudson

Can the hon. Gentleman say if the figure of the total cost of this change is available?

Dr. Hill

Yes, about £1½ million, and that money will fall on the subsidy account. But despite its very considerable size, we are compelled, out of fairness to the small baker, to meet and to seek to balance in his favour what is lost by him through the operation of the discount system. So, my hon. Friend who has pressed with force and clarity the argument he has put tonight, can rest assured that something of the kind which he has sought is being done, and an increase in remuneration will result to bring solace and help to that sorely tried community, the small bakers.

Sir Herbert Williams (Croydon, East)

Can my hon. Friend say if he thinks that the situation is likely to be relieved to any extent owing to the fact that the world price of wheat is now falling?

Dr. Hill

At this hour, and even at the instigation of my hon. Friend, I would say that I think it wiser not to go into the larger subject of the influence of world prices on this essentially human, but not unimportant, problem.

The Question having been proposed after Ten o'Clock, and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Twenty-four Minutes to Eleven o'Clock.