HC Deb 13 February 1963 vol 671 cc1443-54

Motion made, and Question proposed, That this House do now adjourn.—[Mr. J. E. B. Hill.]

10.24 p.m.

Mr. Charles Mapp (Oldham, East)

I am asking the House to turn from an important discussion of a particular street in a particular London borough to a wider issue dealing with a large region of our country. I want to remind the House that a cold war surrounds the cotton textile industry in the North-West, following the import blizzard which, for the last two or three years, has broken the confidence and undermined the strength of that industry.

The Government hold the economic reins, and the cruel sacrifice of this old and well-established industry has been continued to enable the more sophisticated part of our industrial structure to take roots in the export markets, but backed all the time by a powerful tariff shield over the home market—central heating, as it were, for the expanding industries, but exposure for those born during the Industrial Revolution. Let it be said at once that Lancashire has expressed its willingness to bear a fair share of the development of backward countries, but to accept the recent import torrents has been suicidal for the industry.

My purpose in raising the matter is not so much to complain of the blizzard—Lancashire has already expressed itself on that issue—but to face the present bitter spell of Government cynicism, to assess the present position frankly, and point to the very doubtful premise of the Government that re-equipment will of itself bring about the improvements required. It is my contention that re-equipment will not give to the industry as a whole the ultimate efficiency that is necessary, though here and there the more efficient units will gain. It is, therefore, for the President of the Board of Trade to recognise the facts and take effective steps to head the industry from economic and organisational weakness and transform it into one that will be modern in outlook, in structure, in technique, and in marketing, and fully able to compete with fair-wage countries.

The industry has made an overwhelming case about excessive imports over recent years. They are still running at nearly 40 per cent. of home production, although the U.S.A. considers that 6½ per cent. is adequate for their economy. But at least even at 40 per cent. we have quotas and ceilings, based roughly on 1961, that should hold until 1965. Those ceilings are far too high, but at last a tourniquet has been applied, and the real issue is whether re-equipment and internal initiative will revitalise the industry and represent some return for the subsidy and, more important, whether it will be a viable and healthy element, in future, in our industrial structure.

The most charitable interpretation of the statements of Ministers would be one of "hope", but the industry's leaders are very doubtful, the financial backers are seeking diversification, other consumer industries are very pleased that they have not been so far chosen for similar treatment, and, not least, the workpeople have reached the end of the road. There is heavy unemployment and unrecorded under-employment, as well as part-time working, in many parts of the county. In some areas where diversification has been taking place, cotton vacancies are difficult to fill; young people are turning away and older people are looking for escape routes. But diversification is not a justification for letting an industry of this character perish. The Government have a very bad record with the industry. Their 1959 Cotton Act was "panic stations" purely for political reasons—the Government acted like a dishonest broker when, in fact, trade reorganisation should have been the price of subsidy. Reform and assistance should have gone hand in hand.

There are some hard facts to record. Comparing 1959 with 1962, in cotton textile employment there has been a decrease of 21 per cent.; 44,000 jobs have gone. In cloth production the decrease has been 33 per cent., while in cloth imports there has been an increase of 4 per cent. In cloth exports there has been a decrease of 38 per cent. In piece goods exports, 1959 with 1961, there is a decrease of 17 per cent. In made-up goods imports there is an increase of 97 per cent.

When I look at the world production of cotton, not man-made fibres, I find that of the 33 major countries with textile industries, for 1959–61, 26 record increases in production. We, of course, are among the five with decreases, and the worst of the five at that. Regarding world exports, of the 30 major countries there are 21 with increases. But we are in the lower half, the "Fourth Division". We are in the last two in the 17 per cent. figure. We cannot be proud of these figures.

During the last two or three years, £11.8 million have been given to the industry for closure and scrapping. But I notice that the Board of Trade has been unable to prevent the opportunist from getting back after having been compensated. Claims for re-equipment have reached £29 million and £4 million have been paid so far in grants for re-equipment. The total projected re-equipment is estimated at £116 million, with a deadline in July next. In other words, in seven months the industry has had £29 million. There remains but five months for the other £87 million to be proved worth while.

Can the Board of Trade now confidently predict that the rate of investment over the next five months will be four or five times the rate to reach the anticipations and hopes of July last? Board rooms are in very grave doubt about the future. Even the few efficient units have been unable to stand against the political blizzard which has been directed against the industry.

Let me call in aid opinions from various sources to confirm that confidence is very low, and that something more basic must be done. In the debate last June, the Minister said: What we need today is a new strategy for the industry which will enable it, because of a reformed structure, either to discover what the consumer wants and then set about engineering its production in the most efficient way possible or to make the goods it can make most efficiently and then set about promoting their sale to the public. Those two methods are largely impossible for a horizontally organised industry."—[OFFICIAL REPORT, 28th June, 1962; Vol. 661, c. 1481.] On 3rd February the Observer, which is not Lancashire-based, stated in a financial article: This underlines the case the critics always make against the industry. Because it is organised on a 'horizontal' basis, i.e., spinning, doubling, weaving, finishing and so on— instead of vertically. In a few words addressed to the investor the Observer says: …investors can afford to sit on their shares and wait a bit. But these are definitely not for widows and orphans. But there are widows and orphans in Lancashire. There are men and women, wives and families.

I come now to the Guardian. On 31st July, it stated: The industry as a whole will only be able to take the fullest advantage of its opportunities if there is a much closer co-operation between engaged concerns in different processes, either through permanent financial mergers on vertical lines or through looser and perhaps temporary asociations for particular purposes of limited scope. Not only machinery and deployment of workers in the mills but also the organisation and control of production and marketing needs continual appraisal and overhauling. On 12th February, the Guardian, after the Common Market fiasco, repeated the remarks of the President of the Manchester Chamber of Commerce that reorganisation was needed, and Mr. Gell suggested that many firms were deterred from merging by the inadequacy of their marketing arrangements and the magnitude of the re-equipment costs which they would have to meet if they decided to go ahead. Last, but not least, may I quote the Parliamentary Secretary himself? In November, in a Question, I pleaded not for some drastic, backward-looking legislation but that we should have a working party and that the Cotton Board should have a reappraisal of the future. His Answer was: No. The basic facts are known and the necessary decisions must be taken by individual firms in the industry."—[OFFICIAL REPORT, 6th November, 1962; Vol. 666, c. 43.] It is this last policy statement which I challenge. It means that the Government wash their hands completely of the industry, that it is expendable and that possibly £30 million was a good price to pay for political expediency in 1959. The silly season is about to break out again, and the Government will be looking round for political gimmicks. But Lancashire folk have had enough of political gimmicks. They are hard-headed. They know that a large measure of reorganisation is necessary. They know that the industry, for many reasons, is unable to prescribe its own surgical treatment. It is for the Government to act.

The Chancellor, speaking in Oldham quite recently—how significant of coming events and what a wasted journey—analysed some of the problems fairly well, but failed to offer any solution, though he, of all people, knows what is wanted. I am not over-concerned about his friends in financial circles in the textile world who seem to have done fairly well in their distress. Last year they averaged 15 per cent. as dividends and the year before it was 18 per cent. Credit balances last year were £9½ million and the year before £7½ million.

What I am concerned about is the people in the industry. They are being exposed to insecurity and unemployment. It is the Government's duty to inject life into an industry which for the time being is meeting adverse weather not of its own making. Re-equipment is a shot in the arm but a shot in the arm only for those few efficient units in the industry who will use it to the maximum advantage in productivity. The industry requires a discipline which it is unable to evoke. It has lost all influence, apparently, with the Government.

Finally, it seems to me that the Government's attitude is that if the industry cannot catch the rope of re-equipment it will sink. Of course, there is a sinking feeling with the Government which I can well understand, but Lancashire does not propose to sink in that sense. What is wanted is a balanced reappraisal from the industry. The Cotton Board should be asked, and the Government should demand, a projection of the industry's efforts during the next five years. It would be a grim story, but the facts and obvious remedies would stand out. The structure must move quickly towards verticalisation, modern marketing methods, more orderly flow of materials and product and a dynamic sales policy. The present marketing methods are sheer chaos.

In the debate on Monday we reviewed the end of Britain's efforts to join the Common Market. Lancashire might have had something fortuitously to gain from the Common Market. This has been lost. May I quote from the Prime Minister who, on Monday, admitted the sacrifices of the textile industry? He said: In the case of those manufactured goods which are of special importance to India, Pakistan and Hong Kong, we had hoped, by the negotiation of comprehensive trade agreements, to inaugurate in Europe as a whole a move towards those advantages which we in Britain have given to these Commonwealth countries, often at very great sacrifice to ourselves. He meant not "to ourselves" but "to Lancashire and the people who live there". The Prime Minister concluded by saying this: Finally"— this is a hopeful word, the kind of thing that the Board of Trade can put into practice— we will accept and encourage changes in the technique and structure of industry while paying particular attention to areas of temporary unemployment."—[OFFICIAL REPORT, 11th February, 1963; Vol. 671, c. 944 and 953.] There has been ample notice of this temporary phase. It is a cold war phase in Lancashire. The Government will be knocking at political doors until this problem is faced. It is for the Government to face the long-term problem. If they rely on re-equipment, they will rely on hope. That is no yardstick for either a businessman or a Government who mean anything at all.

10.40 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. David Price)

I am sure that the House will be most grateful to the hon. Member for Oldham, East (Mr. Mapp) for having raised this important subject of the reorganisation of the cotton textile industry and for his vigorous, if at times somewhat political and partisan approach.

The House has on a number of occasions discussed the problems posed for the industry by the import of cotton goods from low-cost countries. My right hon. Friend the President of the Board of Trade has taken a number of measures to bring a greater measure of stability into the import position than has hitherto been the case. Now it is right that we should follow the hon. Member in looking at the future of the industry, with the equally important problem of the industry's competitive strength, especially in comparison with countries whose standards of living are comparable to our own and which, therefore, should have no cost advantage over our own industry.

As the House will know, the reorganisation schemes for the spinning, doubling and weaving sections of the industry have been completed. The schemes for the finishing sections came into force a year later, but claims for compensation will probably have been settled within the next financial year 1963–64. The total cost to the Treasury of the Government's share of the compensation payments, which the House will recall is two-thirds of the total compensation payable, will be about £11.8 million when all the schemes have been completed. So far, £10.8 million have been paid out.

In the spinning, doubling and weaving sections, about half the spindles and two-fifths of the looms have been scrapped, and about one-quarter of the capacity in the finishing sections. This elimination of excess capacity was of considerable value to the industry in itself. In addition. it has laid the basis for the second stage of the Government's assistance to the industry, to which the hon. Gentleman referred, namely, the payment of grant for the encouragement of re-equipment and modernisation. The Government's contribution is one-quarter of eligible expenditure incurred by firms in purchasing and installing new equipment or in modernising their existing machinery.

To ensure that re-equipment was carried out without too much delay, the 1959 Act laid down that applications for approval in principle of the proposed schemes must have been submitted to the Cotton Board, which acts as the Board of Trade's agent on this part of the Act, by 8th July, 1962, and that all the work must have been completed by 8th July 1964. A further requirement has been added that orders for new machinery must have been placed by 8th July, 1963.

In response to what was emphasised in the hon. Gentleman's remarks, I wish to make it quite clear to the industry that no hope can be held out that these time limits can be extended. Therefore, it is in everyone's interest to get on with the jab of re-equipping as quickly as possible.

As the hon. Gentleman will know from my right hon. Friend's reply to him on 5th February, the Government have so far paid over £4 million in re-equipment grants. He will also know that, since claims for payment are not made until the expenditure has actually been incurred, the final total commitment cannot be known until after 8th July next year. It is impossible to assess how far the industry will proceed with the large volume of re-equipment schemes shown in the provisional applications submitted by 8th July last and involving total expenditure of £116 million by the industry and the Government together. Applicants are under no obligation to put their schemes into effect, but I should like to take this opportunity to urge all those in the industry still considering whether to reequip themselves that they have now little time left, if their expenditure is to qualify for grant. The decision is essentially one for the individual firms to take for themselves.

It would be unfair not to recognise that the industry's confidence, and thus its willingness to re-equip, has been impaired by the substantial volume of imports, especially from under-developed countries, which Britain has been absorbing in recent years. However, in 1962 imports both of cloth and yarn, were well below the 1961 figure. Moreover, steps have now been taken by the Government to introduce a far greater measure of stability into the import situation than has previously been available. Imports from virtually all low-cost sources of cotton textiles are now subject to some form of limitation or restraint.

Imports from China and the Iron Curtain countries of Europe are subject to quota restrictions at minimal levels, and the same applies to Formosa. Under the recently concluded Commercial Treaty, the Japanese Government recognised that there could be little scope for expanding their sales of cotton textiles to Britain. Imports from Spain are limited by agreement with the Cotton Board, and negotiations are now proceeding with other important suppliers at the governmental level.

As regards the Commonwealth, India and Hong Kong have undertaken to maintain the existing ceilings on their exports of cotton cloth and made-up goods to Britain until the end of 1965, and they have introduced a new restriction on cotton yarn over the same period at the 1961 rate. Pakistan has not been able to accept these limitations on a voluntary basis, but the Government have made it clear that they will take necessary action to ensure that exports to Britain do not exceed what in her case would be the corresponding levels. These levels are, admittedly, higher than Lancashire would like, but the Government cannot overlook their obligations to the under-developed members of the Commonwealth and their special responsibility for the Colony of Hong Kong. This is why it has not been possible to take action that would involve cutting back the previous level of trade or previous agreements.

The Government have made it clear that they will take necessary action under the Geneva Cotton Textile Arrangement to deal with any new threats of disruption that may develop, and countries with no traditional trade in cotton textiles have been warned that they must not count on being able to build up a new market in Britain. At the same time, it would be unwise for the Lancashire industry to ignore that fact that over recent years substantial imports have come, in spite of tariff protection, from the countries of Western Europe and North America, whose standards of living are comparable with our own. We are importing far more cotton textiles from these countries than we are exporting to them, and this is an urgent problem which the industry must tackle by strengthening its competitive efficiency, modernising its structure and above all, by improving its marketing—

Mr. Mapp rose—

Mr. Price

I am sorry, but I have little time at my disposal, and I want to deal with as many aspects of the problem as I can.

Turning to the wider question of the industry's structure, to which the hon. Member devoted the later part of his speech, the shortcomings of its essentially horizontal structure, with the various production processes—spinning, doubling, weaving and finishing—separate from each other and, what is perhaps more important, separate also from the distribution and marketing channels—have been under discussion for a long time. There now appears to be an increasing consensus of informed views that, whatever the advantages of this system in the past, it is no longer suited to modern trading conditions, and major structural changes must take place.

The case for a more vertical structure, in which production is planned as a fully integrated operation with the end product in mind, is being increasingly and plausibly advanced. It is also argued that such a development would reduce the severe fluctuations which the industry suffers in the stock and ordering cycle—far greater than any changes in final demand from the consumer—as well as reducing the stimulus to imports which the existing arrangements are said to provide. It is difficult to disagree with this view.

This takes one on to the crucial question of how these structural changes can be effected. It is easy enough for the academic economist to say that we need greater verticalisation, but the practical problems of effecting these theoretically desirable mergers are rather more complex and rather more human. Even if the Government had powers to bring about mergers, how could we decide who to merge with whom? Many technical, financial, commercial and human factors come into account which it would be neither right nor efficient for the Government to assess. Like the hon. Member. I recognise the need for industrial marriages in the cotton industry, but they should not be "shotgun" marriages, with the Government's finger on the trigger. Furthermore, I have reason to suppose that with the coming of spring, proposals are in the air in Lancashire.

I recognise that there may be a need for a "marriage broker", and the hon, Member has suggested that this rôle should fall to the Cotton Board. The Cotton Board, at its regular conferences and by other means, is stimulating the industry to think along these lines. A particularly successful instance was the study conference that it arranged at Oxford last year on the industry's structural problems and ways of tackling them. More recently —and I hope that this will please the hon. Member—it has gone one stage further by letting it be known that it would be prepared to compile a register of firms indicating their interest in vertical mergers.

The aim is to put suitable firms in touch with one another, if both parties consent. This would, of course, facilitate initial approaches, but beyond that, the detailed implications can only be pursued directly by the parties concerned, if they consider that it is in their interests to do so. I personally hope that firms will make use of these facilities.

In fairness, it must be recognised that some people in the industry will not accept the view that verticalisation is the answer to its problems. Certainly, there are no ready-made solutions. But I would join the hon. Member in asking the industry to consider most earnestly how far its structure is appropriate to modern conditions, however great a contribution it may have made to past glories. There is perhaps less need now for the industry to dwell on its import problems, but there is every need for it to address itself to the improvement of its competitive strength by measures which lie within its own control.

I am reminded of a notice which I once saw in an American factory, "Hats off to the past. Coats off to the future."

Question put and agreed to.

Adjourned accordingly at eight minutes to Eleven o'clock.