HC Deb 27 March 1956 vol 550 cc2041-57
Mr. Bottomley

I beg to move, in page 32, line 23, after "reasonable" to insert: and in determining what he considers reasonable the Minister shall have regard to any expenses incurred by refiners in the display or other use of advertisements affecting sugar. I should make clear that I am not one of those who think that advertising does not serve a useful purpose. In given circumstances there is a lot to be said for advertising. When we make an appeal lot increased production that is good advertising. It is also good advertising when we suggest an increase of our exports or make an appeal for National Savings. There are many ways in which we can put forward claims for advertising.

Mr. Cyril Osborne (Louth)

Vote for Labour.

Mr. Bottomley

I am very glad to have the support of the hon. Member opposite who thinks that "Vote for Labour" is good advertising. I think so too, and I am glad to have his co-operation.

Sugar is not something that really requires advertising. We know that sugar in itself is sweet and is a necessity. The Minister, in the Standing Committee, said that he could not tell the difference between sugar from sugar beet and refined sugar. He was challenged at the time, and he said that he was not quite certain. I am quite sure that by now he has had the opportunity of making certain tests and he is probably of the same opinion—that he cannot tell the difference. Therefore, it seems to me that if advertising is suggested, any such suggestion ought to be well looked at and that we can say that in the case of sugar it might be done away with altogether, particularly when it can be argued that we know that much of the advertising is done at the expense of the Inland Revenue as one way in which Income Tax can be avoided; but it adds to the liabilities of the State and loss of income which might otherwise help to reduce the already too heavy taxation which we have to pay.

6.45 p.m.

Advertising, too, is a means of using up money. When an undertaking finds itself making tremendous profits it can engage in a form of advertising as a way of diminishing returns. So far as sugar is concerned, the profits are as high as it is possible for them to be. One must assume that, judging by the number of sugar refiners engaged in private trade who die millionaires. I was once asked how it was possible to be a millionaire, and I said, "You either charge your consumers too much or you pay your workers too little." In the case of this industry, I think that advertising is something that is not necessary. In order to evade Income Tax and cover up profits, increased payments could be made to the workers or the consumers could be charged less.

Mr. Osborne

Does the right hon. Gentleman remember what Mr. Ford did in America?

Mr. Bottomley

Advertising, if allowed in the case of private refiners, gives them an advantage over the British Sugar Corporation. As we know, the Corporation is restricted in its sales of sugar. If it is a question of special sugar, even if it happens to be granulated sugar, the Corporation has not the opportunities to market it and to sell it, and, therefore, to the extent that private interests can advertise and have this advantage over the Corporation, it puts the Corporation in a less favourable position.

We know that advertising is not used exclusively for selling sugar. The Labour Government were a victim of a great campaign—"Mr. Cube," who was against nationalisation. [HON. MEMBERS: "Hear, hear."] It is wrong that firms should be able to do that while evading their taxation responsibility. I would say to hon. Members who say "Hear, hear" that the present Government are in difficulties at the moment. I think that they ought to consider this matter very seriously. The refiners might at this moment start a great campaign to stop the inflationary drive. They might even go further and attack, as some of the back benchers opposite have done, nationalised industry and other industries which are doing their best to secure the economic recovery of the country. I was glad that this afternoon the Prime Minister himself rebuffed those reactionary supporters of the Government who take that view.

I would say, for these reasons, that the Amendment which we are moving in connection with the limitation of the sugar refiners' margin is one which we think is necessary, and I think that the Minister, if he has listened carefully to my concluding comments, will agree that it is a safeguard for himself as a Minister and for the Government in carrying out their national obligations.

Mr. Amory

I would say to the right hon. Gentleman the Member for Rochester and Chatham (Mr. Bottomley) that I often find myself wholly in agreement with him, almost on occasions to the point of political embarrassment, because I think he is essentially a wise man, if I may say so; but I cannot quite agree with him in his reasons, if they were meant to be conclusive, why people become millionaires. I think that there are notable cases of people having become millionaires because they were quite exceptionally efficient and were able to offer the public better value than any of their competitors—but that is almost in parenthesis.

I am not quite clear as to what the supporters of this Amendment mean by "having regard to." It could mean, on the one hand, that advertising expenditure should be allowable as an element in costs, or, on the other, that it should be excluded. I think that it is the latter that is meant. I would mention, apropos of what the right hon. Gentleman said, that the British Sugar Corporation is not excluded from selling any type of sugar it wishes to sell, granulated or any specialised product. If it wishes, it can do so. It is entirely a question for decision by the management of the Corporation.

Here, however, we are dealing with the margin allowed for a certain process, that of refining, turning the raw sugar into refined sugar in bulk, and only up to the stage where the refined sugar is put into large sacks—I am not sure of their weight, though I think it is 2 cwt.—for subsequent sale.

Mr. H. Nicholls

It is 2 cwt.

Mr. Amory

We are not dealing with the later stages of packaging or anything else. The margin which is allowed is composed of two elements, one element being the main one for costs and then there is the element of profit which is considered appropriate for the process or processes covered. I would repeat what I said at an earlier stage, that with regard to costs there is in this margin no element of advertising expenditure allowable. With regard to the element for profit allowable on these processes, it is entirely up to the concern what it spends its profits on.

I hope that that explanation will lead the right hon. Gentleman and his hon. Friends to feel that the Amendment would not be appropriate to the profit margin that we are considering, which refers to the comparatively early stage in the provision of sugar for the public. The question of advertising does not fall to be considered at that stage.

Mr. Dye

In supporting the Amendment moved by my right hon. Friend the Member for Rochester and Chatham (Mr. Bottomley), I must say that the Minister's speech fell short of what we expected.

We are here dealing with what is to be taken into consideration in regard to the profit margins to be allowed to the refiners. We have to view this in the light of the fact that the country is divided into zones for the sale of the products of the British Sugar Corporation and Messrs. Tate and Lyle and that it is almost impossible in certain areas to buy granulated sugar produced by other than the concern supplying those areas.

The question therefore arises as to the amount and type of advertising in which the concerns can indulge and whether in estimating the margins of the refiners the right hon. Gentleman will take into consideration the national or zonal advertising in which the two undertakings indulge. The question obviously arises out of past experience. At the time of the 1951 General Election Messrs. Tate and Lyle engaged in a big advertising campaign not for the sale of its sugar but in relation to political objectives.

Mr. Amory

I would point out to the hon. Gentleman that this has nothing whatever to do with the margin referred to in the Clause, which, as I have explained, is a refiner's margin for producing the sugar in bulk up to the stage where it is sold to anyone at a uniform price in 2 cwt. sacks. The question of advertising does not arise until a much later stage, and the Clause has nothing to do with the later stages.

Mr. Dye

I appreciate that point. Nethertheless it is the same firm which is involved. It is not my understanding that the profits of the firm, when they are calculated, are allocated to different sections of its production; that is, the profit is allocated for one section and no account is taken of another section of the firm's undertaking. It seems to me that it would be possible for the firm to be allowed a small margin of profit on the refining of sugar and to make up for it by an extra large profit on the sale of sugar. It may well be that the Bill is not sufficiently clear and decisive in restricting the activities of such an undertaking as Messrs. Tate and Lyle so that it cannot take from its profits money with which to conduct a political campaign.

It is undesirable that we should leave the Bill in this state when in future part of the country being supplied with sugar by Messrs. Tate and Lyle might be subject to a political advertising campaign of one sort, and another part of the country being supplied by the British Sugar Corporation might be subjected to a campaign along entirely different lines, there perhaps being in power a Labour Government having some influence with it. We seek to remove the possibility of sugar refiners using any of their profits for political purposes or any purpose apart from the business of refining sugar and selling it to the general public.

It is because of the zoning of the country and the monopolistic nature of the sale of sugar that we seek in future to limit any extra activities which these concerns might undertake. Because of past experience, we want to ensure that in future the industry will be free from such activities. That seems to be a laudable object which I should have thought hon. Members on both sides of the House would have accepted. I hope the right hon. Gentleman will say, "We share your object, but this is not the right way to achieve it. At a later stage in another place we will try to meet your purpose." If he will say that, I am sure there will be unanimity in the House, but if we allow this Bill to pass with this possibility for the future, then we shall be doing less than justice to this industry. This is a controlled industry which supplies every household in the land with a commodity every week and we would be leaving it open to other industries to carry out similar propaganda—the milling industry and others. We should then have allowed democracy in this country to reach a stage which would be most undesirable.

7.0 p.m.

Therefore I appeal to the right hon. Gentleman and his supporters to give consideration to this point. We tried to put it in Committee upstairs. We aimed at removing the possibility for the future. If the right hon. Gentleman cannot accept our Amendment because it is in the wrong place or because it uses the wrong words, I hope he will say that he agrees with its intention. I hope that before we part with this Bill we shall have an assurance that the Government will give consideration to this point in another place.

Mr. G. Jeger

When we were discussing a previous Amendment which the Minister agreed to accept, the right hon. Gentleman referred to the way in which his mind worked and talked about delaying action. I think that on this Amendment also there has been a little delaying action; but the delay has not been long enough.

My hon. Friend the Member for Norfolk, South-West (Mr. Dye) suggested that perhaps a more suitable form of wording might be acceptable and that the Minister might carry the intentions into effect when the Bill goes to another place. The Minister has shown a certain amount of sympathy with our idea that advertising on sugar cartons is undesirable. In fact, in Committee, he went out of his way—I believe on two occasions—to give an undertaking that no element of advertising would extend beyond the 2 cwt. bag of sugar and that therefore the "Mr. Cube" political advertising to which we were subjected in the past would not be an element of costing when the price of granulated sugar was calculated.

Mr. Amory

I must correct the hon. Member. I said that no element of advertising would be allowable in the calculations of the margin to cover cost in the refining stage. I said nothing about any later stage, because that is not subject to control.

Mr. Jeger

That is quite right. I was confirming what the right hon. Gentleman said, that the later advertising would not enter into the cost which was being calculated and that therefore the calculation of cost would stop short at the 2 cwt. bag. But there are other forms of advertising which have been indulged in by the refiners and distributors which do not really affect the small packet with "Mr. Cube" and some political slogan printed on it. There is advertising in the Press and on hoardings and posters, all of which is concerned not merely to sell the packet but the product as a whole. Consequently, that element of advertising which can hardly be divorced from the small packet advertisement is one which would enter into the prime cost of the refining and distributing and would be an element on which the marginal profit would be allowable.

I ask the right hon. Gentleman to think again on this question and to take the opportunity of the Bill going to another place to fulfil the promise he made in Committee upstairs that advertising would not be a constituent part but that he would exclude it at every stage irrespective of where it takes place—whether it is political advertising on the carton or packet, or is advertising on hoardings or in the Press.

Mr. Osborne

I wish to challenge one thing which was said by the right hon. Member for Rochester and Chatham (Mr. Bottomley) in justifying the Amendment. Whether or not the profits of refiners are too large I do not know, but, if I took down the words of the right hon. Member correctly, he said that enormous profits had been made in this industry and, therefore, the profit margins were too wide because, he said, so many of those engaged in it died as millionaires.

He went on to justify that and I thought it was the weakness of his justification which should be refuted. He said that when a few years ago he was asked how one became a millionaire he replied that there were two ways—either one paid one's workers too little or charged the customers too much. To allow that statement to go out from this House without being challenged would be wrong.

May I ask the right hon. Member to bear in mind three classical cases? There was the case of Henry Ford in America, who paid the highest wages ever known and sold his goods at the cheapest prices. In this country Lord Nuffield did exactly the same and, only two years ago, the Chairman of the Woolworth organisation, in which millions have been made, stated that if each article had been sold at ½d. less than the price at which it was sold there would have been a great loss instead of a profit of £20 million.

I beg the right hon. Member to disabuse his mind of the old-fashioned idea he had as a boy that profits are only made by squeezing the worker or by charging too much.

Mr. Willey

I wish to follow the hon. Member for Louth (Mr. Osborne) on one point which is of particular relevance to the matter that we are discussing. He explained how, in the case of Woolworth's, the difference of ½d. decided whether a person would be a millionaire or not. That is just what applies here. One cannot change the retail price of sugar by less than ½d. unit and, for that reason, within the marginal returns the price decides whether one can be a millionaire or not. That is the difficulty in determining margins.

For that reason we have shown ourselves throughout discussion of the Bill not satisfied with the attitude of the Minister towards margins. Here we have an industry in which, it is conceded on all sides, there is ground for a great deal of criticism. The Green Committee was so dissatisfied with the margins earned by sugar refiners that it said that the margins ought to be decided by the Sugar Commission. The Government evaded that by discussing the matter with the sugar refiners and accepting their assurance.

One of the reasons why we press this Amendment is that we are dissatisfied with the general approach of the Government to the difficult question of determining margins. So far as we can ascertain, the position is as it was before the war. The case of the Government is that the margins earned by the refiners are the same as they were before the war. I do not wish to repeat them as the hon. Member for Louth is probably aware of the figures of profits made by the principal refiner. The profits must of course be related to margins. I conceded in the Standing Committee that it is difficult to determine the proper criteria in determining the margin, but I think that the hon. Member would concede that, in deciding whether one is right in determining the margin, one ought to look at the profits. The fact that the principal refiners have had substantial increases in profits over the past few years leads one to doubt the efficacy of the present formula for determination of margins.

Equally, it is a matter of common knowledge, and we can pay attention to the fact, that enormous sums are spent by the sugar refiners on advertising. The reply of the right hon. Gentleman is that he only determines the margin for the operation of refining, and he assured the Standing Committee that, so far as refining goes, he allows for no element of advertising. I would say to the right hon. Gentleman that that is really a very unrealistic view of the responsibilities of the Government.

I do not want to be unduly critical of the Minister's comings department, but it really must be very artificial if the department thinks it can determine the refining margins in isolation and divorce from the refining operations the advertising expenses incurred by the firm which refines and distributes sugar. It is quite unrealistic, because the shareholders are not interested in that distinction; they are interested in the profits which they receive on the shares which they hold. It is not for the right hon. Gentleman to make these artificial distinctions.

Here, as the White Paper shows, we have a unified price system for sugar On the domestic market. Obviously, all these things are inter-related, and, for that reason, we say to the right hon. Gentleman, as indeed my hon. and right hon. Friends have said already, that he cannot draw an artificial line in determining where advertising is related to refining and where it is related to wholesaling. He has to have regard to the costs borne by the refiners as companies in respect of advertising.

It was for that reason that we put down this Amendment, because we were not satisfied with the assurance which the right hon. Gentleman gave, in the context in which he gave it. We accept the general proposition which the right hon. Gentleman apparently put before the Committee—that advertising costs should be disregarded—but we think it is quite artificial in that process then to draw the line at the refining process and to say that advertising is divorced from that process. That is really something which the right hon. Gentleman cannot do. Advertising is an expenditure and an expense borne by the company which is engaged in sugar refining. That is the first point which we wish to impress upon the right hon. Gentleman.

The second point is that we are dealing with what everyone on both sides of the House concedes to be a State-protected monopoly. We are not arguing the merits of monopoly, but this is a State-protected monopoly. This Bill gives wide powers of price control—in this instance control of margins—and that being so, we have to consider what is the public purpose of advertising.

Advertising reflects upon the element of subsidy which goes to support sugar consumption in this country, and goes to support the production of sugar from the Commonwealth and sugar beet. In those circumstances, advertising is impinging and touching upon a point of public policy. Therefore, we suggest that advertising is something which should rightly be within the scope of the right hon. Gentleman's inquiry, when, in this instance, he determines the margins.

Finally, there is another broad consideration, on which I should have hoped we could get general agreement, when we have a position obtaining in which margins are subject to the control of the right hon. Gentleman, when he has powers of price control, and when there is an absolute monopoly, which, as one of my hon. Friends said, has divided the country up into zones for distribution purposes. In those circumstances, it seems quite inappropriate and out of place to allow any form of advertising, and particularly any form of advertising which might be used, as it has been used, for political purposes. The whole of the matters that we have been discussing during the progress of the Bill concern the subject of advertising over the past few years. I am not denying for a moment that it is right and proper to express a point of view about this. "Mr. Cube" in many respects, would obviously be very upset by many of the detailed provisions of the Bill, but what is offensive is that, as the marginal price support is provided by Governmental action, formerly in the form of a subsidy but now in the form of Government-organised price support, there is no place for such advertising as we have had in the past few years—political advertising to secure political ends.

7.15 p.m.

Therefore, I appeal to the right hon. Gentleman to accept this Amendment, at least in spirit. He has commented upon the wording of our Amendment. We have tried to avoid being too doctrinaire in that wording, and all that we want to ensure is that the right hon. Gentleman regards expenses of advertising as a matter proper to the scope of his inquiry in determining the margins. He says that he does that already, and that he disregards such expenditure. We accept that as a very good reason for accepting this Amendment, but we add the rider that while we are not endeavouring to commit him by the wording of the Amendment, we believe that his regard should be wider than that which he shows at the present time in determining whether these margins are reasonable. Within the terms of the Amendment, we have left that wide.

All we want to saddle the right hon. Gentleman with is the political responsibility of being cognisant of the expenditure on advertising, and of being able to say without dubiety, if he feels that the occasion warrants it, that that expenditure will be regarded in determining the adequacy of the margin. For these reasons, I hope that the right hon. Gentleman will take this last opportunity of being conciliatory by accepting the Amendment.

Mr. H. Nicholls

The hon. Member for Sunderland, North (Mr. Willey) and his hon. Friends have made perfectly clear what their views are. I do not think that they have any relevance to this particular Clause; nor do I think that they have much relevance to the Bill, certainly in connection with the fixing of refiners' margins.

I think I ought to say at the beginning that, zoning also has nothing to do with the position, though I do not think the impression should be allowed to go out from the House as a result of speeches of Members opposite that zoning was to protect the private refiners. As hon. Gentlemen opposite well know, zoning was introduced for the protection of the British Sugar Corporation, and we all approve of that. It is right that it should be so, but I do not think that it is right that the impression should go out from this House that it placed the private refiners in a more favourable position and that they took advantage in the form of some sort of advertising scheme.

Mr. G. Jeger

The point of the zoning scheme is that it gives a monopoly or almost a monopoly to a particular distributor in a particular area. That is where the unpleasant nature of the advertising comes in, when a non-political grocer may be forced, because of that monopoly position, to be handling and selling sugar, and handing out packets bearing slogans. That is something which I am quite sure we all want to avoid.

Mr. Nicholls

It is all very well for hon. Gentlemen opposite to make that generalisation, but zoning was for the protection of the British Sugar Corporation. In fact, in the zoned areas, one can get other kinds of sugar if one wants them. As the hon. Gentleman said, there are difficulties in that it costs more, due to freight charges, but that is not a tight monopoly in the sense that other kinds of sugar are not obtainable. But I repeat that that has no relevance to this part of the Bill.

My right hon. Friend has already explained that advertising expenses are not allowed when fixing the refiners' present margins, but this Amendment, however used, could mean only that it was preferred that advertising costs be included. We say, and we stand by the position, that refiners' margins should be fixed on the actual costs of getting the sugar granulated and delivered in 2 cwt. jute bags. All the expenses and costs of doing that should settle what is a fair margin to be allowed to the refiners, and in arriving at that figure we say that advertising costs should not be taken into account at all. If we use any words at all about advertising at this stage of the Bill it can mean only that we want advertising costs to be taken into account in the context of refiners' margins.

That has not happened during the time that we have been fixing these margins. We discussed the matter at length in the Standing Committee. It is well known that the margins fixed are submitted to the Chancellor of the Exchequer and must be approved by the Exchequer as being proper. If, in the opinion of the Chancellor, a margin is not satisfactory, the Minister of Agriculture, Fisheries and Food is given power to decide the margins. It is only fair to say that over a period of many years there has been no accusation or suggestion that the margins voluntarily submitted by the refiners have been other than fair.

Once a margin has been settled and accepted by the Chancellor, and has been agreed as fair and proper taking into account the proper expenses up to the stage of the 2 cwt. jute bag, and if, after that stage profits are made, I do not think that in such a Bill as this we should tell the refiners how to spend their profits. I do not think it is for this House to decide whether there is any need for the industry to advertise. That is a matter for the people in the industry.

It may well be that the advertising which is going on in an effort to persuade people to slim by not using sugar might prompt those in the industry to do a little advertising to the effect that if we want the people of this nation to have the vitality which they should have, they ought to consume more sugar. To say that in no circumstances ought those

people, who know their business, to advertise, is in my opinion going outside our terms of reference.

I consider the explanation given by my right hon. Friend to be a full one. Advertising costs are not taken into account, nor should they be. Under this Bill they will continue not to be taken into account. If, within the narrow limits of margins once made, and which are satisfactory to the Chancellor, those in the trade desire to spend their money in ways which have been described by hon. Gentlemen opposite as silly, that is a matter for them.

While I can appreciate the reactions of hon. Gentlemen opposite to the particular advertising campaigns that they have in mind, I do not think that this is the right time or place to pursue that subject. I have no doubt that hon. Gentlemen opposite will discover other times and more appropriate places where they can do so. I feel that the explanation of my right hon. Friend is in keeping with the Bill, and that this way of dealing with the matter, if regarded impartially, will be seen to be fair.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 158, Noes 213.