§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. R. Thompson.]
§ 10.31 p.m.
§ Mr. J. Langford-Holt (Shrewsbury)I wish to raise with the Minister of State, Board of Trade, and to bring to the notice of the House a matter which has from time to time excited the interest of hon. Members on both sides of the Chamber. It is the question whether it is desirable, in the first place, and possible, in the second place, to increase the percentage of the non-dollar and Commonwealth tobacco in the import quotas of tobacco imported into this country. That is probably something we should like to do if it is at all possible. Moreover—and this will certainly commend itself to my right hon. and learned Friend—it is a proposition which will not cost the Treasury anything, but rather the reverse —it may well save the Treasury a little money and so help the Treasury in certain difficulties.
Can we, in the first place, and should we, in the second place, use more non-dollar tobacco at the expense of dollar tobacco imported into this country? Were we maintaining in our smokes the percentage of dollar tobacco that we were maintaining in 1938 it would, I am told, be costing us an additional 50 million 1109 dollars a year. I have made some calculations, and they may be wrong, but if these figures be true, as I am assured by tobacco companies they are, then were we to maintain the same percentage of dollar tobacco in our smokes as we did in 1947 it would cost us about 150 million dollars to do so.
The last Parliamentary word on this question, as far as I can trace, was said on 12th February, when I asked whether my right hon. and learned Friend would consult the manufacturers to see whether it was possible for them to use more Empire tobacco, and my right hon. and learned Friend, who is to reply to the debate tonight, said:
Officials have discussed with manufacturers the possibility of using more sterling area tobacco. I understand that the manufacturers' fear is not so much directed to the impact on individual concerns as that their total sales would fall. We are. of course, considering this question in the general context of the public interest."—[OFFICIAL REPORT, 12th February, 1957; Vol. 564, c. 1074.]I am fascinated by that last sentence.There are in this business three parties, the Government, the growers and the tobacco manufacturers in this country. All these three parties have not necessarily conflicting interests. In many important respects their interests are the same.
Let us consider, first, the manufacturers' arguments and their fears. The manufacturers state that they have taken and will continue to take as much first grade Empire tobacco as they can get—with one proviso. It is an important proviso, and it is this. It is the manufacturers' view that the point will be reached —I do not know that they are prepared to say exactly where—at which what they call the essential character of the cigarette or tobacco, the Virginia character—the sweet Virginia character, I am told it is—will be changed, and that then the whole smoking habits of the British people will be changed. I shall say a little more about that, which one may call the critical point, later.
What are the arguments of the tobacco growers? They, of course, use, as it is quite logical they should because it suits their purpose as well as the Treasury's purpose, the argument of the dollar saving which I have already mentioned.
They also use the argument which would naturally appeal to each one of us in this House—what one might call 1110 the Imperial argument—that such increases in the Imperial rate are to the advantage of the Commonwealth and Empire, from the point of view both of this country and of the Empire country concerned. But they also have serious fears about the intentions of the United Kingdom. For example, on 7th February the President of the Board of Trade said:
I am ready to look at this matter, but, as I understand it, the facts are as stated by my hon. Friend the Member for Shrewsbury (Mr. Langford-Holt)—that a change in the proportion of American tobacco might have very serious effects upon the cigarette industry."—[OFFICIAL REPORT, 7th February, 1957; Vol. 564, c. 590.]Phrases like that, even if not calculated to do so, certainly have the effect of raising some fears and doubts in the minds of the growers and create an air of contentment in this country as to the present tobacco situation.It is further said that, although it is factually correct, it is quite wrong of my right hon. Friend the President of the Board of Trade to state that pretty well all the good quality tobacco from Rhodesia is now bought. It is factually correct, but the implication is incorrect because what has happened is that in Rhodesia steps are being taken to reduce the crop of tobacco rather than to increase it as we all wish to see.
Lord Malvern made a suggestion to my right hon. Friend the present Chancellor of the Exchequer when he was at the Board of Trade, namely, that the ratio of 61 per cent. dollar tobacco as against 39 per cent. Imperial tobacco should be changed. Had my right hon. Friend been able to accede to that request, I think we could have made a great step forward.
It is for my right hon. and learned Friend the Minister of State, Board of Trade, to state the Government's view, which, as I understand it, roughly speaking, is that, all things being equal, they would like to see a greater percentage of non-dollar tobacco used in this country provided that they themselves are not asked to interfere too much in the matter. Secondly, they would say that they are precluded from taking a straightforward tariff discrimination by the operation of G.A.T.T. Thirdly, they would say that, as tobacco is brought into this country on private 1111 account, it is not in the first instance a matter for Her Majesty's Government.
What of the interests, as opposed to the arguments, of the manufacturers with regard to dollar tobacco? First, they are not responsible for our dollar reserves, and one must accept that. It is no part of their responsibility to husband dollar resources in this country. It is their job to produce the best type of cigarette or tobacco, and the type which more and more people will buy. They want to get that tobacco at the lowest possible cost. I think that the tobacco companies have behaved perfectly properly in this matter, and it is not for them to initiate any action.
I should like to make some suggestions to my hon. and learned Friend. In this question of tobacco one has to use the average of cigarettes, pipe tobacco and cigar tobacco generally. Since 1947, the percentage of dollar tobacco used in this country has gone down from 87½ per cent. to 60½ per cent. That was a direct result of an arrangement whereby, I think in the time of the Labour Government, a maximum of 61 per cent. of dollar tobacco should be used in this country. It is worth noting in that context that that percentage has been adhered to consistently ever since it was imposed. It is to be noted, therefore, that the percentage of American tobacco was 61 per cent. in 1953 and 60½ per cent. in 1956, and that the current rate is 60½ per cent. My hon. and learned Friend may have different figures, but those are the best figures that I can obtain.
They indicate to me that the 61 per cent. is at the moment the limit that the Government have set up and one beyond which the tobacco companies are not prepared to go unless some other form of action is taken or an inducement is brought to bear upon them. They are quite obviously not prepared to go it alone as individual companies when there is a risk that their competitors might not do the same. It is said, though I do not believe it is true, that the Government have an unhealthy interest in maintaining high sales of tobacco at whatever cost. One gets a morbid vision of rows of Scrooges sitting on the Front Bench and raking in the shekels, whatever the result. They have this interest, it is said, because 1112 of the immense effect of tobacco sales on the Revenue.
I have mentioned the critical point which the tobacco manufacturers fear. They fear that at some point, which they are not able to specify, the whole of the great British public will cease smoking tobacco because the essential character of the cigarette has changed. I do not think that will happen with a public which has been undeterred by the sudden imposition of the taxation which the right hon. Member for Bishop Auckland (Mr. Dalton) put on when he said that he was imposing an extra 1s. to bring down the amount of cigarette smoking in the country. The public has seen that the Commonwealth tobacco content has been increased, and that the dollar tobacco content has been reduced from 80 per cent. to 60 per cent. The British Medical Association has told people that if they smoke cigarettes they will kill themselves with lung cancer and still, year after year. they smoke more. I cannot believe, therefore, that at the point when a little more Rhodesian tobacco is put into cigarettes the great British public will throw them away and give up the smoking habit altogether.
I should like the Government to consult with the trade to see whether it is not possible, bearing in mind the difficulties of cultivation and storage in Rhodesia where the industry is still growing, to increase the quantity of Commonwealth tobacco, by agreement with the manufacturers in this country, by 1½ per cent. or 2 per cent. at varying periods. Those are amounts which I am sure nobody would notice. There is, however, the valid argument that the quality of Rhodesian tobacco has fallen. Therefore, as a second suggestion, the Government might be asked, in order to induce the Rhodesian or Commonwealth growers to grow a better quality, to encourage a higher percentage of better quality tobacco at the expense of a lower percentage of poorer quality. Good Rhodesian tobacco at its best is second to none in the world, and bad Rhodesian tobacco can be really bad.
Like many others, I hope, I myself smoke Empire tobacco. One gets a certain amount of smug satisfaction, within certain limits, that one is doing the right sort of thing. I should like my right hon. and learned Friend to say that he will look at the whole question again, that 1113 there is no sense of contentment on the part of the Government, and that he will try to help in this matter which has such an immense psychological and sentimental appeal not only to us in this House, but to the vast majority of people in the country.
§ 10.45 p.m.
§ The Minister of State, Board of Trade (Mr. Derek Walker-Smith)My hon. Friend the Member for Shrewsbury (Mr. Langford-Holt) has correctly said that this is a subject which has excited a good deal of Parliamentary attention in recent months. In fact, there was an Adjournment debate on this subject shortly before Christmas, and between that debate and this a large number of Parliamentary Questions have been asked, some of them by my hon. Friend himself. But it would be quite wrong to draw from that the inference that this is in any way a deteriorating situation. In fact, if the situation is seen in perspective, I believe the reverse to be true.
My hon. Friend quoted early in his argument the 1938 figures of Commonwealth tobacco. In 1938, the Commonwealth percentage of all types of tobacco —I am using here the figures of clearances from bond for home consumption—was 24. By 1945 it was down to 20½ per cent., but by 1952 it had gone up to 45 per cent., and in 1956 it was no less than 48 per cent. That 48 per cent. was Commonwealth tobacco.
My hon. Friend rather tended to use the terms "Commonwealth tobacco" and "non-dollar tobacco" as if they were interchangeable. That is, of course, a misapprehension which is rather common in this controversy. It is not in any sense a straight issue between United States tobacco and Rhodesian tobacco. Commonwealth tobacco consists, for this purpose, of Rhodesian, Indian and Canadian tobacco, and Canada is part of the dollar area.
The trend of the dollar percentage compared with the Rhodesian percentage shows that in 1938 the dollar percentage was 87½, as I think my hon. Friend said, and the Rhodesian was only 7½. By 1956, the dollar percentage was 60½ and the Rhodesian percentage had gone right up to 22. I submit that, in perspective, this is a situation which is moving in the way which I understand my hon. Friend would want.
1114 This advance has proceeded with the aid of two agreements or arrangements. My hon. Friend said that the Government had set the limit of 61 per cent. There is a voluntary arrangement with the United Kingdom manufacturers whereby they restrict their usings of light flue-cured tobacco from dollar sources for home trade cigarettes to 61 per cent. Again, that 61 per cent. contains two elements—50 per cent. United States and 11 per cent. Canadian tobacco.
The second agreement is the so-called London Agreement between the United Kingdom manufacturers and the Rhodesian growers which specifies the quantities that the manufacturers are prepared to buy subject to availability, quality and price. Those quantities have increased year by year. Again, comparing the pre-war position with the present, pre-war the Southern Rhodesian crop was only 30 million lb.; by 1956 it showed a record production of no fewer than 165 million lb. If we take the test of the United Kingdom purchases, we get the same gratifying trend, from 20 million lb. before the war to 84 million lb. in 1956, plus a further 4 million lb. from Northern Rhodesia.
Indeed, the Commonwealth enjoys considerable advantages arising out of the trade and tariff structure. In the first place, dollar supplies of tobacco are the only ones which are restricted. Imports from non-dollar Commonwealth countries are on open general licence and non-dollar countries outside the Commonwealth have their imports of tobacco freely licensed. So the non-dollar Commonwealth, in which I understand my hon. Friend to be primarily interested, enjoys the advantages of both an open market and of Imperial Preference at 1s. 6½d. per 1b.
My hon. Friend referred to G.A.T.T. Of course, it is not possible to increase the Preference margin for the reasons that he knows. Article I of G.A.T.T, forbids the extension of the Preference margin in this context, because the present duty was fixed in 1943, that is to say, four years before the base date year 1947, when the G.A.T.T. was signed.
I want now to refer to the Rhodesian crop to which my hon. Friend devoted part of his argument. I assure him that at present all the good quality leaf and, 1115 indeed, a good deal of poor quality leaf is still being bought by the United Kingdom and other sterling area countries, particularly Australia. As my hon. Friend is primarily concerned with the Commonwealth, I would put it to him that there would be no point in expanding our purchases of Rhodesian tobacco if the effect was merely to push Australia pro tanto into the dollar market because Australia is also part of the Commonwealth, is part of the sterling area and has its own balance of payments difficulties.
My hon. Friend asked about Government policy. Our policy is, as I think he apprehended, that we want to see Rhodesia and other Commonwealth sources further expand the export of good tobacco so that our manufacturers may increase their purchases. As he will know, there are really two basic factors in this and he referred to both. The first is the availability of good quality non-dollar leaf at reasonable prices and the second is consumer taste.
On the first of those two matters, my hon. Friend referred to what he called the reduction of the Rhodesian crop. If I may briefly indicate the facts with regard to that, they are that the rapid expansion of the tobacco acreage in Rhodesia has temporarily outstripped the facilities for supervising and curing the crop. In consequence of that, the percentage of sub-standard leaf has so increased that the United Kingdom has bought a considerable amount of inferior tobacco in recent years. The whole of the increased yield which made 1956 a record crop year was in the so-called "nondescript" grades, that is to say, a type not suitable for our market.
It is in those circumstances that the Rhodesian Tobacco Association has called for a reduction in the acreage planted. Naturally, we hope that these steps which it has taken to check over-planting and to improve the standards will succeed, and that good Rhodesian tobacco will become more nearly competitive in price with the North American.
The second matter which influences this question is the matter of consumer taste to which my hon. Friend referred. I am told that it is a fact that a marked increase in the proportion of Rhodesian tobacco would affect the flavour to 1116 smokers. Of course, it is true that we cannot precisely say at what point that would affect consumption. But at least we have this to guide us, that the market in the United Kingdom for all-Rhodesian cigarettes has practically vanished.
That being so, I think my hon. Friend, and those who think with him on this issue, must concede that there is clearly a case at any rate for some caution in the context of those facts, and especially in the light of the Revenue aspect, because, although my hon. Friend had some hard words to say about the Treasury in this matter—and I was at the Treasury when it first became my duty to study this subject—I think he would readily concede that the Revenue aspect is highly relevant in the context of tobacco.
I hope that I have been able to put the matter fairly and objectively in regard to this question of the sources of our tobacco. It is a customary courtesy to say that a service has been done in raising these matters. I should certainly say that in regard to my hon. Friend's initiative, and especially so if, as a result of it, those interested in the matter will be good enough to study the clear and simple facts as I have sought to explain them and reflect upon them. I am sure that they will come to the conclusion that we need not take the rather pessimistic view which my hon. Friend has taken.
§ 10.57 p.m.
§ Mr. W. A. Wilkins (Bristol, South)I listened with interest and satisfaction to the reply given by the Minister of State to the hon. Member for Shrewsbury (Mr. Langford-Holt). I have considerable interest in the subject because I have in my constituency what I believe to be the largest of all the tobacco manufacturing factories in the country, and I have therefore taken opportunities to discuss these matters with the directors of that company. In the first place, I want to make it clear that this is not a matter which concerns only the Imperial Tobacco Company; it concerns all the tobacco manufacturers in the country.
I think I am entitled to say, from the conversations which I have had with them, that the last thing in the world they want to do is to curtail their purchases of Rhodesian tobacco. The evidence of that is to be found in the amount of capital investment which they put into 1117 that country, and I believe they are prepared to extend the welfare services which they have already sponsored there. But we must recognise that they have some sense of pride in the manufacture of their goods. After all, we say that it is the quality of our goods which is the hallmark on which we depend for selling them abroad, and that applies no less to the manufacturers of tobacco than to any other industry. That is their major concern.
The Minister of State rightly stressed the most important fact in the whole of the debate, that there was a tendency to overgrow, if I may use that expression, and to outstrip their ability in Rhodesia to produce a first-class article. It is a fact that particularly Australia, but also many other countries, are prepared to buy the best grade of Rhodesian tobacco while wishing to leave behind the seconds and thirds which it is most difficult to sell except in certain countries where they are prepared to smoke almost anything. It seems to me to be primarily a matter of techniques of growing and especially of curing. We must be honest about this and recognise when we are talking about 1118 Virginia tobacco that we are talking about tobacco produced in a country which has been growing it for many years and where the technique has been developed to a fine art. That has to be learned in Rhodesia.
I believe that the tobacco manufacturers here feel that the Government could help them in the expansion of the Rhodesian tobacco industry in certain directions, possibly in making technical advice available and in other forms of the application of technical machinery. May I therefore suggest to the Minister of State that it might be well if his Department got in touch with the tobacco manufacturers, if it is not already doing so—as I expect it is—to see in what way the Government and the manufacturers can work together to improve the quality of the tobacco which is being produced in Rhodesia?
§ 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 accordingly at Eleven o'clock.