§ The President of the Board of Trade (Sir David Eccles)
With permission, Mr. Speaker, I will make a statement on the reorganisation of the cotton industry.
In recent years the cotton industry has been exposed to formidable and increasing competition from textile industries established inside its traditional export markets. Moreover, Commonwealth countries have emerged as large exporters to the United Kingdom itself where they meet no tariff barrier. These changes have brought distress and anxiety to Lancashire. The result is a situation complicated and worsened by the existence of a large volume of surplus and obsolete equipment. The outlook, however, is by no means all black. The growing purchasing power in industrialised economies opens up excellent prospects for the better fabrics and made-up goods. Special measures are, therefore, called for to make the industry compact, up-to-date and efficient.
Following the Hong Kong undertaking to limit exports, the industry has been working out plans to adapt itself to changed conditions and to reorganise and re-equip its capacity. Leaders of the different sections have been discussing with me a contribution from the Government which they feel to be essential to the success of their plans.
604 The Government have no doubt that the circumstances of the cotton industry which I have just described justify the exceptional course of direct financial assistance from public funds. Accordingly we shall seek powers from Parliament to meet the industry's request for help.
The first step must be to remove surplus capacity. The Government are ready to contribute from public funds two-thirds of the cost of bringing this about under schemes to be approved by the Board of Trade. The balance will be met by the industry by statutory levy. A severe time limit will be set for qualifying for assistance and, in order to start without delay, arrangements will be made whereby, subject to the fulfilment of the necessary conditions, a firm which scraps machinery after today can qualify for assistance.
The Government have agreed to bear a high proportion of the cost of eliminating surplus capacity on the clearly understood condition that the industry itself will compensate operatives faced with loss of employment as a result of the schemes. This is a matter for the employers to settle directly with the trade unions concerned. The Government will do everything in their power to assist those displaced by the reorganisation schemes to find alternative work.
After the elimination of surplus capacity, the next step is to encourage re-equipment. Provided that the Board of Trade is satisfied that enough surplus capacity in the industry will be eliminated, the Government will be prepared to pay a grant of one quarter of the cost of modernising existing machinery and providing new machinery. Orders for machinery placed after today will be eligible for this grant, subject to the fulfilment of the condition to which I have referred, and to the granting of powers by Parliament. Re-equipment and modernisation completed during the next five years will rank for this assistance.
It is not possible to estimate at present how much the total charge on public funds will be. This depends on the extent to which the industry takes advantage of the assistance now offered and on such factors as the terms which are settled for eliminating surplus capacity. I can only say that, given a favourable response from the industry, the cost to the Exchequer 605 might well be about £30 million over five years.
These arrangements will require detailed administration. For this purpose the Bill which we propose to introduce will contain provisions for setting up a special agency under the Cotton Board to carry out the schemes in accordance with directions from the Board of Trade.
The House will see that this set of proposals forms a comprehensive whole. We shall meet with problems that we cannot see in advance, but with good will from both sides of industry they can be solved. I know that the employers will bring the trade unions into the fullest possible consultation at all stages. The Government will follow closely the reorganisation schemes and will do all they can to maintain the impetus to carry them through speedily and effectively. These joint endeavours will reshape our cotton industry and equip it to compote in the expanding markets of the world with the types of cloth that are wanted wherever living standards are high.
§ Mr. Jay
Can the President of the Board of Trade say, first, how far the cotton trade unions were consulted in drawing up these proposals? Secondly, as a good deal of public money will be spent, what assurance is there that every operative displaced as a result of these schemes will receive compensation? How is it to work? Thirdly, since by far the most important point is that people who lose their jobs should be able to find alternative productive work, can the right hon. Gentleman say whether the central agency that he is to set up under the Cotton Board will have a say in the selection of the actual mills for closure, and confirm that this question will not be left simply to private firms?
Can the right hon. Gentleman also say that we have some expectation of a plan to dovetail the introduction of new work into these areas, both in time and place, with the actual closure of individual mills?
§ Sir D. Eccles
The schemes were brought to me by representatives of the different sections of this complicated industry. They did not bring trade union representatives with them. They were considering only their own capital structure. But we told them that we made it a firm condition that they should 606 agree compensation schemes for displaced workpeople and, as a matter of fact, the discussions are going on now—and going on well, according to my information. We shall look at those schemes for compensation for the workpeople before any Government grants are paid, because, as the right hon. Gentleman will have heard that is a condition of the whole plan.
The right hon. Gentleman asked me whether the central agency would have a say in the selection of the surplus capacity to be eliminated. I think that the answer must be "No", because the main object of this exercise, without which we shall not have a prosperous cotton industry, is to make it efficient and at the same time to take care of the workpeople who are displaced. I do not think that there will be very many, because the industry has told me that it should be able to absorb a good number of them.
§ Sir J. Barlow
All of us from Lancashire will be very grateful for the statement which my right hon. Friend has made. It will obviously take a great deal of working out and understanding, and we shall have an opportunity of discussing it later. I should like to put three questions to my right hon. Friend so as to obtain a little information now. Can my right hon. Friend assure the House that there will be no compulsion for firms to enter the scheme, and that those who do will do so voluntarily? Secondly, can he say how the unit price of a unit will be determined? That may be very important. Thirdly, can he say how the whole scheme will come into taxation?
§ Sir D. Eccles
I can certainly tell my hon. Friend that there will be no compulsion. We have always thought that the cotton industry, with its very long tradition and its immense variety, was not the kind of industry in which any form of compulsion would succeed, even if it were part of our political principles to try compulsion. It has always been our firm conviction that it would not work. It is a voluntary scheme from start to finish.
As for the second part of the supplementary question, the unit price will have to be worked out by the agency in consultation with the industry, and will have to be approved by the Board of Trade 607 and the Treasury. We have had preliminary discussions on this matter and I do not think that we are very far apart.
I assume that by his third question my hon. Friend wanted to know how payments of public funds would be treated for taxation purposes. The present law raises a number of complicated questions in regard to balancing charges, and what happens when a firm goes wholly or partially out of production. We have examined this question, and my right hon. Friend the Chancellor of the Exchequer is authorising discussions to take place. We shall apply the law—but not change it—as sympathetically as we can towards the cotton industry.
What part has the Cotton Board Played in these negotiation? Why has the scheme come directly from the separate employer's organization rather than from the Cotton Board of Trade has always dealt in the past on matters affecting the whole industry? Secondly, although I am ware of certain difficulties about consultation with unions in the recent weeks, is the right hon Gentleman aware that Sir Alfred Roberts, one of the most respected and responsible of the cotton trade union leaders, made a complaint as recently as yesterday that the Cotton unions have been kept completely in the dark by the Cotton mill owners?
§ Sir D Eccles
I believe the hon Member know the Peculiar structure of the Cotton industry After the agreement had been made with Hong Kong, I said to the leaders of the industry, "Will you tell me the best way to prepare reorganisation schemes?" They answered, "There is no hope of getting these schemes unless they are brought forward section by section," And they formed a steering committee under the chairmanship of Lord Rochdale, to collect these schemes and bring them together to the Board of Trade.
We ought to congratulate them upon the fact that they have completed such a very complex job so quickly I am sorry to have noted that Sir Alfred Roberts By bad luck, was absent from the meeting of the Cotton Board when the steering committee reported these schemes to the Board of Trade last week
§ Mr. Maurice Macmillan
Can my right hon. Friend say whether the makers of textile machinery can meet, both in quality and rapidity of delivery, the demands that his scheme is likely to make upon them?
§ Sir D. Eccles
We have begun to think about that important question and are, in fact, in touch with the textile machinery industry.
§ Mr. Hale
Can the right hon. Gentleman tell us what the Government have in mind in relation to compensation for displaced workers? What would be the likely amount of that compensation? Is the right hon. Gentleman aware that the Cotton Textile Factories Association has prepared its own scheme of reorganisation, but has never been consulted about it by the Government at all in any formal way? Why are the Government always against planning expansion, but always in favour of planning contraction? Is the right hon. Gentleman aware that this business looks like providing a couple of brass plates for the coffin of a very great industry?
§ Sir D. Eccles
I cannot give the hon. Member any details about compensation schemes, because they are under discussion between the employers and the trade unions. I am sure that both sides wish to come to an agreement and then to report the agreement to the Board of Trade.
On the hon. Member's last point, the whole purpose of a scheme of this kind is to provide a basis from which expansion can start again.
§ Mr. Leavey
We generally welcome the fact that about £30 million of public money is being spent to help the industry, but can my right hon. Friend say whether any assurances are to be built into this scheme to make it as certain as possible that plant which is not only new, but is efficient and up-to-date in every respect, will be purchased for the development side of the scheme, and, also, whether there are any safeguards to ensure that the spending of this substantial sum of money will not mean an undue inflation of the prices of that new plant?
§ Sir D. Eccles
My hon. Friend will recognise that very much more money than £30 million is at stake here, because the industry itself is to make a very large 609 contribution. In particular. the industry is to pay three-quarters of the cost of the new machinery. On the whole, I should have thought that that was a fairly good safeguard that care will be taken that the machines bought are likely to be efficient.
§ Mr. Holt
Following upon the answer given by the President of the Board of Trade to the hon. Member for Middleton and Prestwich (Sir J. Barlow), to the effect that the scheme was not compulsory, do I take him to mean that firms who do not wish to pay the levy need not do so, but that in return they will not be eligible for the Government grant for new machinery? Is that what the right hon. Gentleman means by the scheme not being compulsory?
Secondly, as the phrase "surplus capacity is not an absolute one, can the Minister say how he intends to assess it? Upon what criteria will he decide that the surplus capacity has been removed?
§ Sir D. Eccles
I am glad that the hon. Member raised the point in the first part of his supplementary question. What I meant was that there would be no compulsion upon a firm either to go out of the industry or to re-equip. But the industry has indicated to me that it would like to have powers under the Bill to raise a statutory levy for the purpose of financing its very large contribution to the two parts of the scheme.
§ Mr. Peyton
My right hon. Friend's statement represents something very new in economic policy. Can he say whether, under any circumstances, such reorganisation schemes will be applied to other industries in a similar plight?
§ Sir D. Eccles
As we said when considering the question of voluntary quotas on the imports of textiles from Asia, we consider that the cotton textile industry in this country is unique, and must be treated as such.
Mr. H. Wilson
We shall obviously want to study the Bill with the greatest care, and especially the long overdue provision for compensation for displaced workers. Is the right hon. Gentleman aware that his announcement this afternoon, so far from being anything good on behalf of the Government, is a shocking epitaph to seven years of failing the 610 industry? Does not he recognise that, apart from a quite useful reintroduction of the scheme which Sir Stafford Cripps introduced in 1946, for re-equipment, all that the Government have done is to stand aside while an industry has bled to death, and that they are now offering a fairly generous contribution to the funeral expenses of many important mills?
§ Sir D. Eccles
If the right hon. Gentleman had been with me in the negotiations with the leaders of the cotton industry he would not have used language like that. In their opinion, they could never have got this very complicated industry to adopt this very far reaching plan before. We have done it at the first moment that it has been possible to get the industry together. The right hon. Gentleman will remember that the scheme of Sir Stafford Cripps did not succeed. I studied it carefully and I hope that this one will be better.
§ Mr. Shepherd
As I understand that the Government are to advance two-thirds of the cost of redundancy, can my right hon. Friend tell me the basis on which the value of this redundant plant will be assessed?
§ Sir D. Eccles
In answer to a previous question, I said that the basis would be worked out by the agency with the various schemes brought to the Board of Trade and the Treasury for approval. The industry has mentioned to us a number of figures which led to the very rough estimate of £30 million which I gave previously.
§ Mr. S. Silverman
When the right hon. Gentleman talks about surplus capacity does he wish the House to infer that when the scheme is applied the capacity will he less than it is now? If the answer is. "Yes" is the right hon. Gentleman aware that the industry has been rapidly contracting for the past seven years, and that half of the mills have closed down in the last seven years without a public cry that they should do so; and that there are many towns in Lancashire, two of which I represent, where cotton is virtually the only industry and the contraction of that industry would mean the virtual debarring of many hundreds of workers from earning their livelihood at all?
611 Does the right hon. Gentleman appreciate that in such cases a week or two's wages by way of compensation is no compensation whatever, and that if the Government are setting themselves out to reduce this industry still further the only compensation which would be satisfactory would be the provision of alternative industries where they are required?
§ Sir D. Eccles
It is not a case of the Government setting themselves out to reduce the industry; it is a question of market forces which have gone against Lancashire for many years, as the hon. Gentleman knows. In the case of the towns he represents and the employment of cotton operatives, what will be left of the industry when this scheme has been put into operation will make their position more secure.
§ Mr. H. Hynd
Does not the President of the Board of Trade consider that this is a very one-sided arrangement? He has made up his mind definitely that £30 million is to be paid to the industry and he visualises the payment of two-thirds of the cost of its diminution. Does he realise that this very diminution of the industry will mean further unemployment? Can he make a more definite statement about what kind of compensation is to be paid to the workers in that industry?
§ Sir D. Eccles
In answer to the first part of the hon. Gentleman's question, I think that may not be quite the case. Roughly speaking, at the end of last year, there were nine out of 25 spindles idle and three out of 10 looms idle. We have to get the nine and the three out to prevent the weakness in the structure of the industry, and to make the efficient firms ready to put up 75 per cent. of what is required to modernise still further.
§ Mr.s. Castle
Is it not the fact that the Government are contributing two-thirds of the cost of redundancy and only one-quarter of the cost of re-equipment? Is not this, therefore, another sign that the Government are thinking in terms of a contraction of the industry rather than its revival?
§ Sir D. Eccles
We are not thinking in terms of contraction. I am sure that the 612 hon. Lady will agree that unless we get this industry into a state where it is efficient and credit-worthy, it has no future. This, therefore, is the essential first step before we can modernise throughout the industry.
§ Mr. Robens
Are we to judge from the statement of the right hon. Gentleman that if a machine is scrapped, two-thirds of its life is to be paid, but that if a cotton worker is put on the scrap heap, the compensation for that worker is to be decided between the employers and the trade unions, and that the employers require a subvention from the Government to meet their own problems, so that they are not in a position to be over-generous with compensation?
In view of the fact that he has already said that this is a unique situation, does not the right hon. Gentleman think that this is a case where there should be tripartite negotiations between the Ministry of Labour. the cotton unions and the cotton employers on the question of redundancy payments?
Is the right hon. Gentleman aware that compensation to a working man is no substitution for a job, and that the efforts of the Government must, therefore, be extended towards providing alternative employment, in addition to compensation, for those who are put out of employment as a result of this scheme?
§ Sir D. Eccles
I should like to tell the right hon. Gentleman that nothing like two-thirds of the cost of a machine or spindle will be paid in compensation, but only a very small fraction of the original cost. From now onwards the trade unions will be consulted at all stages—[HON. MEMBERS: "Oh"]. I had to take the only form in which the industry was willing to bring forward various schemes. But as soon as it was brought up in that form the Government insisted on the condition of the compensation scheme. As I said in my statement, we intend to use all our powers, under D.A.T.A.C. and otherwise, to see, if it is necessary, that alternative work be provided.
§ Mr. Robens
In the event of a deadlock between the employers and the cotton unions in the matter of compensation, what do the Government propose to do?
§ Mr. Speaker
Order. We have had a long period of questions. We can discuss these matters when the Bill is before the House.