ADVERTISING (ECONOMIC VALUE) (Hansard, 3 February 1954)

§ Mr. Raymond Gower (Barry)
I feel rather guilty, Mr. Speaker, at detaining you and the House at this late hour, but I wish to raise the question of the economic value of advertising; a subject which has been seriously disputed recently in organs of the Press and also in another place. I should like to thank my hon. Friend the Economic Secretary to the Treasury for having come along to reply to this debate. Normally, I might have addressed my remarks to the Board of Trade, but as the representative of the Department finally responsible for our economic planning, I think it apposite that my hon. Friend should be here tonight.
To keep within the rules of order, I shall not ask for any promise of altered legislation, but what I really seek is a statement from him that the Treasury is fully seized of the importance of the topic which I am raising. Britain, it is always being said, lives by selling abroad, and it may be that she will have to live by advertising abroad. I therefore particularly want to stress the value of our advertising overseas.
I do not know whether it has ever been estimated how much is spent on our advertising, but some figures which I have discovered about the United States are most significant. It is stated in the Encyclopaedia Britannica that the amount spent in 1938 was 1,530,000,000 dollars; the only figures which I have been able to discover for post-war years were in the "American Printer's Ink" National Index; and that shows that for 1952, 7,000 million dollars were spent. I cannot find whether this represents advertising internally or as a whole, but this is a tremendous increase on United States expenditure in pre-war years.
In this country, can we estimate the amount of our national resources devoted to advertising? The case against advertising, as I understand, has been on a number of lines. First, it is asked who pays for it, and how the price of a commodity is affected. The critics say 519 that the price becomes higher and that the cost really represents economic waste. Secondly, it is stated that advertising tends to increase internally the demand for luxuries such as vacuum cleaners and, maybe, television sets, and thereby interferes with the proper development of our economic forces, and also even damages our powers to export.
There is an exaggerated opinion among many people about the effect on the cost of a product of advertising. I know that this opinion is not confined to this country. When I was looking into the subject as it affected America, I discovered that there, too, a similar opinion has prevailed. But an investigation which was carried out there showed that most people had over-estimated by four or five times this proportion, which, in America, was finally estimated to be less than 3 per cent. of the cost of the manufactured articles of a representative body of manufacturers.
What can we say are the advantages of advertising? As we are a trading community, it has to be considered primarily under two headings, advertising at home and advertising overseas. I submit to my hon. Friend that these two headings cannot be entirely separated.
With regard to our production of goods at home, it may be said, first, that advertising decreases the cost of selling them at home and also the distribution costs. That has a relationship, as I shall attempt to show, with our prospects of selling abroad. Secondly, advertising lowers the cost of production on account of the increased volume and continuous use of labour and plant. That, again, may have a relationship with our prospects of selling abroad. Thirdly, advertising lowers the price to the home consumer and thereby brings him a better standard of living. Fourthly, it aids in stabilising production and helps to prevent fluctuations in prices. It helps to iron out or prevent seasonal changes.
By increasing our sales at home and thereby reducing the price of any commodity, we can increase our capability of selling those goods, made cheaper in that way, abroad. But apart from that—here general economic policy is of some importance—I have heard recently from friends and from letters somewhat disquieting reports from other countries, 520 particularly in South America, that our advertising there, whether by Government agencies or otherwise, is not comparable with or on a scale similar to that done by our competitors, particularly, it is said, the scale of advertising carried on by the United States and, more recently, Germany.
I appreciate that in some cases this may be outside the direct control of my hon. Friend and his right hon. Friend, but I believe that this is largely governed by the attitude of the Treasury to this important problem. I sincerely hope that the Treasury and all the Treasury Ministers, in company with their colleagues and, in particular, the President of the Board of Trade, are seriously convinced of the importance of advertising, both internally and externally, to our future well-being.
I hope that my hon. Friend will be able to assure the House tonight that they have this in mind and that nothing in future economic policy will be calculated to act as a disincentive to our advertising by private firms abroad and that nothing in our policy will be so designed as to prevent a generous level of advertising at home, by both Government boards and private firms. There is, of course, an obvious relationship here between the level of taxation and the amount of advertising which may be possible.

§ Mr. John Rodgers (Sevenoaks)
As one who spent 20 years of his life as an advertising agent, I am glad to have this opportunity of taking part in this debate. I believe that advertising has done much to raise the level of the industrial capacity in this country and to raise the standard of living of all people. As my hon. Friend the Member for Barry (Mr. Gower) has said, it has canalised demand, led to a lowering of prices and improvement to and standardisation of quality of merchandise, and it has made possible, through mass selling, the immense benefits of mass production; and, of course, it has an immense part to play in our export drive.
As I was coming into the House, a friend who knew the subject of the Adjournment Motion gave me a quotation of the Prime Minister's on advertising which shows the sagacity and lucidity of expression so characteristic of my right hon. Friend. 521 Advertising can play an important part in repairing the consuming power of the world. Advertising nourishes the consuming power of men. It creates wants for a better standard of living. It sets up before a man the goal of a better home, better clothing, better food for himself and his family. It spurs individual exertion and greater production. It brings together in fertile union those things which otherwise would never have met. Advertising. as every advertising man will admit, is not all. There must be the spirit of enterprise on the part of the individual. There must be stability, there must be goodwill. But all these conditions might exist unrelated and unconnected, unless advertising was brought in to unite them and to fuse them into one effective whole, to make them vital and to make them active. I commend these words to the Economic Secretary.

§ Mr. F. P. Bishop (Harrow, Central)
I intervene only because my hon. Friend the Member for Barry (Mr. Gower) referred to expenditure on advertising in the United States, and wondered whether similar figures are available for advertising expenditure in this country. As a matter of fact, they are, because a great deal of effort has been put into an inquiry carried out for the Advertising Association by the National Institute of Economic and Social Research to find out just how much of our national resources were before the war, and are today, devoted to the activity of advertising. The figure in 1938 was £80 million. The next year taken was 1948, when the figure was £124 million, and I understand that the latest inquiry, which refers to 1952, will show an increase to a figure of £180 million.
Of this very large total more than 50 per cent., of course, is spent in the Press of this country. I have no doubt that in the present active trade conditions the total in 1954 would be even larger than that were it not for the restriction at present imposed on advertising by the shortage of newsprint. This is not an occasion to go into that, but as we have a representative of the Treasury here I hope he will take note of the fact that this very important economic activity, which as my hon. Friends have said plays so large a part in our economy, is being severely hampered and restricted by the fact that newsprint is still so scarce, and the newspapers are not able to offer all the facilities the advertisers require.

§ The Economic Secretary to the Treasury (Mr. R. Maudling)
The subject of the rôle of advertising in our economy and in a free enterprise economy generally is extremely interesting and obviously an excellent subject for discussion, and, indeed, for controversy. As for controversy, I gather from my hon. Friend the Member for Barry (Mr. Gower) and my hon. Friend the Member for Sevenoaks (Mr. J. Rodgers) that, on the whole, they are in favour of advertising—and I believe that my hon. Friend the Member for Harrow, Central (Mr. Bishop) also holds that view.
But I do not think that, in the course of this debate, it is for me, speaking on behalf of the Government, to express a view on these highly interesting economic theories and arguments. As I understand, no action is called for from the Government by my hon. Friends. What hon. Gentlemen are seeking is an assurance that the Government recognise the importance of advertising in our economy, both our home economy and our export trade. I will gladly give that assurance, because, quite clearly, advertising is an integral part of the machinery of distribution, both at home and abroad. It should be regarded as a part of the machinery of distribution and not as a separate subject, entirely independent.
There is, of course, good advertising and bad advertising. There is also very amusing advertising. I must confess that in some of the periodicals and newspapers which I read I often think the advertisements are quite the best part. Be that as it may, there is also the argument that advertising can at times be too expensive and can add to the cost of a product rather than reduce its cost. I gladly accept—as I personally always have accepted—the argument which my hon. Friend the Member for Barry put forward, that it is very largely upon advertising that the modern mass market, the modern branded goods, the high standard of values and the consistency of quality which the consumer can now obtain, have been based.
I think it is also true that one of the services of advertising to the community is to bring to the notice of the consumer requirements and amenities of life which otherwise he might not know. I therefore accept what my hon. Friends have 523 said about the importance of advertising, although I do not accept that all advertising is necessarily of equal economic value.
As for the scale of advertising in this country, my hon. Friend the Member for Harrow, Central gave the only figures of which I know. They were published in a supplement to the "Financial Times"on 25th January. It is a most interesting publication and gives a great deal of information about the whole subject.
I also agree that advertising is of importance—and growing importance—in the export trade. I am quite sure that the more attention that can be paid by our traders, industrialists and merchants to the importance of advertising, the better for trade generally. We in this country can take a great pride in the achievements of British advertising, particularly in the North American market. In that market there is the keenest possible competition in salesmanship and advertising, and some of the British advertising work in recent years, particularly in the new York area, has been admirable and has contributed substantially to the encourag- 524 ing growth of our exports, both visible and invisible, to the North American Continent.
I hope I have been able to cover the points which my hon. Friends had in mind. As I say, I was not asked for any specific action on the part of the Treasury, but I can assure my hon. Friends that we appreciate the importance and significance of advertising in the economy of this country.

§ Mr. Gower
Could my hon. Friend comment on the apparent tremendous disparity between the figure of 7,000 million dollars expenditure in the United States and the figures quoted by my hon. Friend the Member for Harrow, Central (Mr. Bishop)?

§ Mr. Maudling
I can only say that any studies I have made from time to time of comparative economic statistics in this country and in the United States have frequently disclosed wide disparities.