HC Deb 02 August 1966 vol 733 cc417-23

11.5 p.m.

Mr. Keith Stainton (Sudbury and Woodbridge)

I beg to move, That an humble Address be presented to Her Majesty, praying that the Import Duties (General) (No. 4) Order 1966 (S.I., 1966, No. 745), dated 20th Jun, 1966, a copy of which was laid before this House on 24th June, be annulled. We are rather pressed for time and I shall do my best to contract what I have to say so that the Minister of State may be able to give a reasoned reply.

This Statutory Instrument has an effect on frozen fish and almonds. I wish exclusively to relate my remarks to almonds. The objective of the Order is to reduce to zero the import duty on almonds from 2 per cent. on imports from E.F.T.A. countries and from 10 per cent. on imports from other countries. It will eliminate the import duty on almonds and various semi-processed almonds.

The objective of the Order is wholly laudable. We have tabled this Motion because we want to call attention to what we regard as two important features of the almond regulations. One concerns the timing of this Order, which shows a complete disregard for the trade and ignores points put to the Government some time ago about the highly seasonal nature of this business. The second concerns the circumstances surrounding the making of the Order, an aspect indiscreetly and ineptly handled by the Board of Trade. I should now declare my interest in this matter. The Minister of State is aware of it, and that no doubt disposes of the point.

The Order was laid on 24th June and became effective on 1st July. But the Government overlooked the fact that the stock of almonds held in this country are very substantial at this time of the year. The new season's crop from the European countries does not become available until September-October, more usually towards the end of October, by which time its arrival is too late for processing for the Christmas trade.

The implications are serious when one considers that this commodity in its raw form is at a figure of about £500 to £550 a ton at the present time. It is a highly volatile commodity. The abolition of the 10 per cent. import duty involves about £50 to £55 a ton. Several processors carry stocks of between 100 and 500 tons. To be caught out by such an Order, laid on 24th June and becoming effective on 1st July, is asking too much of the trade to stomach. In the case of firms carrying up to 500 tons the loss approaches £30,000 while, for smaller firms, it is about £5,000 to £10,000.

No doubt the hon. Gentleman will say that the Order was advertised and that the precaution was taken of canvassing the view of the trade, but I shall insist that, whatever the Board of Trade did, it certainly did not exert itself to ascertain the pattern of the trade, therefore not discharging its duty as a Department concerned with import duties by paying regard to the essential interest of the trade.

A second point which arises in terms of trade is the difficulties which this sudden move has posed as regards forward sales contracts. The pattern of the industry in this country is that importers and processors sell forward in turn to users and distributors. Much of the trade is contracted as early as February or March for the remainder of the calendar year. This sudden decision by the Government has led to a bad relationship between the trades at all levels. Curiously, although I have been talking about losses for firms which have almonds in stock, some firms which speculate in this commodity and have sold forward now find themselves with an un-covenanted profit in so far as almonds which they import in the next few weeks will be free of duty against the forward sales they have already made.

I believe that a substantial part of the argument advanced by the Board of Trade will be that the dating of this decision derives from the negotiations with the Cyprus Government. Cyprus almonds have been admitted duty free under Commonwealth Preference. I plead with the Minister not to over-indulge himself in that argument since this country imports annually from Cyprus only 300 tons out of the total of 10,000 tons. Although one does not want to set on one side the interests of Cyprus in this matter, one needs to have a keen sense of perspective and not to permit the Government to say that in view of the negotiations with Cyprus which are now coming to a head, the change should come about now instead of being made effective in December this year or January next year.

That leads me to my second major criticism about the circumstances surrounding the laying of this Order. Had the Order been in such a form that it was an intimation that the change was to become effective by the end of this year, it would have fitted the seasonal pattern and then the Government would not have exposed themselves to the possible change of a leak which I submit might have occurred in this instance. I see the Minister of State shaking his head. I shall be glad if the Government can acquit themselves of this change.

I do not think that the Minister will dispute that the Board of Trade was in close touch with various parties regarding the negotiations and what should be decided upon. I have written down a message from the Board of Trade to one of the parties who had been in touch with the Board of Trade. It reads: There is no point in continuing our conversation as an announcement will be made on Friday…. This was Friday, 24th June, when this Order was laid and this message came on Tuesday of that week—— which will have a direct bearing on the matter we are discussing. This is reminiscent of those advertisements one sees in the Sunday newspapers saying that if a party of a certain name replies to the advertisement he will hear something to his advantage. One could not but interpret this kind of message as other than that the duty would be reduced or abolished entirely. Had it been going up, there would be no need to pass this kind of message, and equally if it were to remain stable. The only possible conclusion would be that it would go down. I have various quotations giving similar expressions to various people.

The effect of all this was to excite interest in the market. I know parties who were approached by dealers to effect trading arrangements prior to the Friday in anticipation of this situation. I press the Minister to let us know something about stocks in bonded store and whether they accumulated rapidly prior to the public laying of the Order, and about stocks in transit sheds, since stocks can lie in transit sheds for a fortnight before they become liable to entry for Customs.

I know that the question of bonded stores poses the Minister with a difficulty inasmuch as the returns are not necessarily convenient to trace, but in view of the serious nature of what I am saying I insist that there is a strong onus upon the Government to give a full and frank reply on this matter.

Therefore, in summary, we on this side regard the objectives of the Order as entirely right and, indeed, laudable, but we deplore the timing, which was entirely wrong, and the circumstances surrounding the announcement we regard as being indiscreetly and ineptly handled by the Board of Trade.

11.17 p.m.

The Minister of State, Board of Trade (Mr. George Darling)

The hon. Member for Sudbury and Woodbridge (Mr. Stain-ton) has said that the Opposition have certain views to express on the Order. I must make it clear from the outset that the only criticisms that we have had of the Order in so far as it relates to almonds have come from the hon. Member himself. We have had no further criticisms from the trade. If I have time, I shall quote a leading article from the trade journal concerned which disposes of the criticisms which the hon. Member has put forward.

I must repeat that we have had no criticisms of the Order, either of its timing or of the suggestion that it has been ineptly handled by the Board of Trade, or of the discussions with Cyprus or the question of a leak, except from the hon. Member. As far as I know, everybody concerned with the trade—the importers, the processors and the bakery trade, which is involved—is pleased with what we have done. Those people have no criticism of the timing. Our only criticisms have been from the hon. Member, who has declared his interest in the matter.

All that I need do is to say—and this is a point that the hon. Member has, apparently, overlooked in his reference to Cyprus—that when representations came forward in June, 1964, to begin with, from the trade that the 10 per cent. duty should be taken off, we had to discuss the duty with Cyprus because of the Commonwealth preference arrangements. Under the rules, the law and everything else, unless the Cyprus Government agreed to our taking off the 10 per cent. duty, we could not take it off.

It is clear that when the announcement was made by the Government some months ago that the remaining import surcharge would be taken off in November, this made urgent the need for action with the Cyprus Government to get their agreement for the tariff to be taken off because, as the hon. Member has said, the main competition comes from Denmark, which exports marzipan to this country. An examination of the cost of production of manufacturers here shows that Danish produce can come here below the level of cost of production in this country 50 long as the 10 per cent. charge remains on the imported raw material.

It was urgently necessary to take off the tariff before the import surcharge was taken off in November. The Government therefore asked the Cyprus Government to treat this as a matter of urgency. They were very co-operative, and agreed that the tariff should be taken off completely. Having told the Cyprus Government that it was urgently necessary to remove the tariff immediately, and as we have had no representations, except from the hon. Gentleman, about the timing of this Order, there seems no reason why we should postpone the removal of the tariff.

Having told the Cyprus Government that this was a matter of urgency, and they having agreed that the duty should be taken off, then to postpone it for seven months, which is what the hon. Gentleman is asking for, is surely breaking faith with the Cyprus Government, because it would no longer be a matter of urgency. In any case, the manufacturers wanted this taken off before November, before the surcharge was taken off. Therefore, when we got agreement, we laid the Order as quickly as possible. That is the answer to the hon. Gentleman's criticism about the timing. I repeat that the only criticism that we have had of the timing has come from the hon. Gentleman himself.

The hon. Gentleman said that the matter has been handled ineptly by the Board of Trade, that we have not had proper consultations with the trade. I have seen the stack of correspondence that has taken place. I have spoken to representatives of the trade since the hon. Gentleman raised this matter, and there has been no criticism from the trade associations about the way in which we have handled this.

The British Baker said: For the last four years representatives of the Almond Trade Association have been negotiating with the ministries concerned in an attempt to have the import duty on shelled almonds removed. It then explains their objectives, on which we are both agreed. It goes on to say: The almond processors of the baking industry will welcome this reduction in duty, but it has to be realised for the next few months, coming as it does at the beginning of the very busy season, an awkward problem is posed for manufacturers. Normally, they work on about eight weeks stock in their factories, but before the seamen's strike commenced these stocks were built up to considerably higher levels to ensure that production could continue uninterrupted from outside influences, and to protect the bakery trade from any interruption in their supplies. Processors, therefore, have several months stock on their premises and it will be some time before any effect of the duty reductions can be expected by the trade. The build-up of stocks before the Order was brought in was due entirely to stocking up in anticipation of the seamen's strike and the possible interruption of supplies.

I assure the hon. Gentleman that, even taking the increased supplies that came in before 20th June in anticipation of a possible disruption of supplies during the seamen's strike, only a marginally increased amount of those supplies went into bond. Usually about 50 per cent. of the supplies are in bond. At this time last year the figure was 49 per cent., and this rose to 58 per cent. this year. When one considers the increased supplies which came in in anticipation of the seamen's strike, one realises that there was only a marginal increase in the amount that went into bond. I propose to deal with the leak which the hon. Gentleman alleged was given ineptly by Board of Trade officials. I am sorry that the hon. Gentleman has raised this matter in this way, and I intend to defend our officials. What happened—and this frequently happens—is that members of the trade telephoned the Board of Trade to ask how these negotiations were going on. They had a perfect right to do so, because we were trying to work out a time limit for the duties to be taken off before November. A lot of speculation was going on, and in all circumstances of that kind the Board of Trade officials give the information about when a decision will be taken.

Time and time again—I can give the hon. Member a number of instances, such as goatskins—there have been discussions about raw materials, with the trade asking when a decision will be taken. We can say that negotiations are going on, that we expect to make an announcement shortly. That gives rise to speculation. We can say that negotiations are going on satisfactorily, and that we hope to be able to make a statement. I do not care how it is expressed, that is bound to give rise to speculation, and when persons in the trade telephoned in this case the Board of Trade official consulted his superiors and was told to say that an announcement would be made that week. What is wrong with that?

Does the hon. Member suggest that in the space of four days—the telephone conversation took place on the Tuesday and the person requesting the information was told that a decision would be taken on the Friday—large quantities of almonds would come into this country in the middle of the seamen's strike and go into bond in anticipation of the duty coming off? Of course not. To talk about a leak upsetting the market is complete nonsense, and the hon. Member knows it.

I repeat that I do not want to go into further detail. The only person to make any criticism of the Order, its timing, and the way the Board of Trade has handled it, is the hon. Member, and he has no support from the trade in that criticism.

Question put and negatived.