RAW COTTON COMMISSION (CANCELLATION OF LIABILITIES) (Hansard, 14 December 1967)

§ The Minister of State, Board of Trade (Mr. J. P. W. Mallalieu)
I beg to move,
That the Raw Cotton Commission (Cancellation of Liabilities) Order 1967, a draft of which was laid before this House on 4th December, be approved.
Hon. Members are no doubt aware, and I personally vividly remember, that the Cotton (Centralised Buying) Act, 1947, established a Commission for the centralised buying, selling and distribution of raw cotton. The Act transferred to the Commission all property rights and liabilities in raw cotton and other contracts relating to trading in and dealing 765 with raw cotton vested in the Board of Trade immediately before the establishment of the Commission. That was during the period of wartime cotton control. The Act also made provision for periodical advances to be made by the Board to the Commission for the purpose of meeting outgoings chargeable to the Commission's revenue and capital accounts.
In 1954, the Cotton Act modified, if that is the right phrase, the functions of the Commission, principally by withdrawing its monopoly status, and provided for its dissolution if at any time the Board of Trade and the Minister of Materials were satisfied that it would be in the public interest to do so.
In exercise of this power, the Raw Cotton Commission (Dissolution) Order, 1954, was made out for approval by Parliament, and on 1st September, 1954, the Commission went into liquidation. A liquidator was appointed by the Board of Trade and the Minister of Materials, whose existence, oddly enough, I had forgotten, and he was empowered to exercise the remaining functions of the Commission during the winding up period.
The liquidator took over a net deficit of £7,035,502. The losses incurred by the Raw Cotton Commission were discussed exhaustively in the House during the debate on the Cotton Bill, 1954. During the winding-up period a further deficit of £1,233,094 was incurred. The major part of this additional deficit is attributable to the development premiums, amounting to £808,029, paid on Nigerian cotton imported during 1955 and 1956 as part of the negotiated cancellation of the agreement with the Nigerian Produce Marketing Company Ltd.
The liquidation has been delayed since that time by certain outstanding claims, but these have recently been settled. All assets have been realised and no further income can be expected to reduce the outstanding liabilities to the Board of Trade.
It is, therefore, now possible to proceed with the formalities required to complete the liquidation of the Commission, including the presentation of the liquidator's final account which, under Article 13(2) of the Dissolution Order, must be laid before Parliament by the President of the Board of Trade. Before this can 766 be done, the outstanding liabilities to the Board of Trade must be cancelled. Section 4(6) of the 1954 Act provides for the cancellation by Order, with the consent of the Treasury, of liabilities in respect of both initial and periodical advances. Section 5(1) of the Act provides that power conferred by the Act to make Orders shall be exercisable by Statutory Instrument and shall be invoked only if a draft of the Order has been laid before Parliament and approved by Resolution of each House. The draft has been so laid, and I now ask for the approval of the House.

§ Mr. Charles Fletcher-Cooke (Darwen)
There is, as the Minister of State suggested, a certain nostalgia about this subject. We well remember the debates from 1952 to 1954 about the Raw Cotton Commission and the duel between Lord Thorneycroft and the present Prime Minister on this subject. We remember further, the grave warning issued by the present Prime Minister that raw cotton would somehow be less available and less cheap to the industry than it was in those days—fears which have not proved correct, until, perhaps, today. I do not wish to rub salt into the wound. Here we have a deficit on State trading of £8 million. All I ask is that the Minister of State shall confirm that this is the end of the affair.
According to the Cotton Act, 1954, on the winding up of the Commission, initial advances made by the Board of Trade from the institution of the Raw Cotton Commission in 1947 must be repaid, either plus or minus, and also periodical advances made thereafter. What were the initial advances in 1947? We wish to know that so that we may judge the extent of the loss in State trading over the years. Second, so that we may further judge the losses to the taxpayer in State trading then, what were the periodical advances thereafter, if any, made by the Board of Trade?
Are there any other losses? As I understand it, it is only with initial advances and periodical advances that we are dealing tonight, but, under Section 4 of the Cotton Act, 1954, any other losses which are not accounted for by those two categories are automatically borne by the Treasury and are not to be brought before Parliament.
767 May we take it that the sum in the Order of about £8,200,000 is, as it were, the full amount of the loss to the taxpayer, or are there other losses which the Treasury has borne? I have already asked about initial advances put into the Raw Cotton Commission on its institution and about periodical advances thereafter.
It was, perhaps, a necessary feature of the immediate postwar world that we should have a Government monopoly in this sort of trading, but experience from 1954 onwards has shown the wisdom of the then Government in winding up this particularly expensive form of trading. Private industry and the Liverpool Cotton Exchange have managed very well up to the present to provide the cotton industry with its raw material. It has taken the risk at no cost to the taxpayer, and it is only in the past few weeks that, as a result of devaluation, there has been any problem in the raw cotton market between that date and now.
Finally, why has it taken such an interminable time to wind the Commission up? I understand about the Nigerian problem, but that was only two years after 1954; the limit of that problem was the year 1957. Why has it taken another 10 years since then to present this account to the House and the public? It is a most extraordinary state of affairs, and requires an explanation.

§ Mr. J. P. W. Mallalieu
May I speak again by leave of the House?
I agree that it is an interminable time? Unfortunately, the liquidator became involved in a series of legal processes, not with Nigeria, but with two Persian merchants, for a sum of about £200,000, and it is only recently that that question has been settled. It was the last matter to settle; this is the final curtain. There are no other liabilities. The total advances made when the Commission first started were about £86 million. They 768 have been steadily paid off until we see the present figure of just over £8 million. About £200,000 of that is attributable to periodical revenue advances.

§ Mr. Ernest Thornton (Farnworth)
Could my hon. Friend tell us the Commission's turnover during the six or seven years of its operation, so that we can get the losses into perspective in relation to the transactions during the time it operated?

§ Mr. Mallalieu
I do not have the exact figure, but the turnover was well over £800 million, so that these losses are small when considered as a percentage of that. They have not been considerable in view of the difficulties. Part of the time for which the Commission was responsible was very difficult with the Korean war, the limitation on exports of American cotton, and the shortage of dollars.
Although the Commission has not operated for many years, it will not have escaped hon. Members' notice that the difficulties of supplying raw cotton to this great industry are still pretty serious. In the present situation of the industry I do not wish to make any party points. The industry must have its supply of raw cotton. I do not think that the Commission, as we set it up all those years ago, was entirely right; in some ways it was too inflexible. But equally I cannot believe that the Liverpool Cotton Exchange, as reopened 13 years ago, has entirely satisfied the industry's needs. I wish that it were possible, given that the industry is going through such a difficult time, that we could again consider methods of ensuring the supply of raw cotton to Lancashire at a reasonably steady price. I do not think that either side has yet got the solution.