INVESTMENT GRANTS (DAIRY MACHINERY) (Hansard, 11 June 1969)

§ Mr. W. T. Williams (Warrington)

I want to put this matter into context. Under the Industrial Development Act, 1966, grants were made payable in respect 1631 of expenditure on new plant and machinery which was to be used for carrying on a qualifying industrial process. Shortly before that Act, the Ministry of Agriculture declared that it regarded as a qualifying process the process of bottling milk. So milk processers who invested in new equipment for this purpose became eligible for grants.

Milk bottling is done in this way. Soiled milk bottles are carried in crates to the bottle washing machines, then to a cold store, where they are kept sterile, from which, after being filled and capped, they are carried, again in crates. Under the requirements of the Milk and Dairies General Regulations, 1959, Regulation 26(2), every dairy farmer or distributor is required to cause any appliance used by him for any purpose which is brought into contact with milk to be cleaned in accordance with the Regulations and to be thoroughly clean before use.

It follows that the crates are essentially part of the bottling process. As well as carrying the bottles in and out of the washing machinery, they hold them while they are filled and capped. We cannot do with milk bottles what we do with soiled clothes—throw them into a washing machine, where they tumble about. They must be scrupulously clean, because of those Regulations. It is obvious, therefore, that they are an essential part of the whole process of cleaning and bottling milk. If they are not scrupulously clean for their duty, the processor can be prosecuted under the Food and Drugs Act.

The nonsense of the situation is that grants are payable in respect of bottle washing machinery, the machine which puts the bottles into the crates, the conveyors that carry the crates to the cold store, the cold store itself, and even the machinery that is used to wash the floor of the dairy. But the machinery that is available for washing the crates, which is an integral part of the whole process, is, by some logic that wholly escapes me, not available for grant.

Although grants were originally paid in respect of crate washing machinery, following some blinkered process of thought that goes on in the Board of Trade, they were withdrawn. The justification for the withdrawal was explained 1632 in a letter written to me by my hon. Friend the Minister of State. Dated 7th March of this year, the letter read: It was the view of the Board in rejecting applications for grant on such machinery that the process it carries out is closely linked to the distribution of milk, which is not itself an activity qualifying for grant. My hon. Friend went on: I appreciate, of course, that modern automated dairy plants can be so highly integrated that it is difficult to distinguish that part which is devoted to crate washing machinery. Indeed, the Board's own Investment Grants Offices encountered this difficulty and in some cases paid grant. The Minister continued: In the light of the representations you have made, I have taken further advice, which has served to confirm that equipment used for the washing of these crates is not eligible for investment grant. It could be argued that machinery used for placing bottles of milk in crates is machinery for packing the bottles, and thus eligible for grant under Section 1(3)(c) of the Industrial Development Act, provided the conditions of that Section were met. Machinery for washing the crates into which the bottles are to be put cannot, however, be said to be used 'for packing' the bottles, neither can it be said to be used for any other process incidental to the making of an article. There is thus no provision of the Act under which payments can properly be made in respect of this equipment. I hope that the Minister has enough sense of humour to admit that he wrote that with his tongue in his cheek, for it is the most palpable nonsense and rubbish.

This is not an optional extra. The processor is bound to have clean crates, in the same way as he is bound to have clean bottles. Cleaning bottles is not part of a manufacture, yet the bottle cleaning machinery is given a grant. If that machinery is deemed to be processing for the purpose of enabling grant to be paid, there is nothing in the law to prevent crate washing machinery to be equally deemed to be eligible for grant. The whole operation is part of one process. Unless the crates are clean, contamination is carried to the bottles. Unless the bottles are clean, contamination is carried to the milk. By some odd quirk it is possible for the official mind to conceive of the cleaning of bottles so that contamination is not carried to the milk, but it is incapable of appreciating that an integral part of the same process is that which makes quite sure that soiled crates do not carry contamination to the bottles.

1633 I do not know whether the logic of the argument which I have made to the Minister will make him appreciate the nonsense which he is writing when he sends that kind of excuse, and the nonsense which the Department is making of the whole thing. It seems to me to be a classical example of niggling bureaucracy. While I appreciate that the Minister has many other more important things with which to concern himself a: length and ad nauseam, I do hope that he is not going to insult my intelligence tonight by making that kind of argument again, but that he will feel free to say tonight not only that he will look at it again, and a little more sensibly, but that he will recognise that that which is an integral part of the process can be deemed to be sufficiently integrated with the purpose of processing as to enable him to make this grant which, for such trivial reason, has been refused by his Department.

§ The Minister of State, Board of Trade (Mr. Edmund Dell)

As my hon. and learned Friend the Member for Warrington (Mr. W. T. Williams) has said, the subject he has raised tonight has been considered in the course of correspondence between us, and I am sorry he is so dissatisfied with the letters which he has received.

Let me say at the outset that there is no dispute between us about the need for high standards of hygiene in the handling of supplies of milk for public consumption. The point at issue is confined rather to the justification for the Board of Trade's decision not to make investment grants on crate washing machinery while making grants on several other types of equipment commonly used in a modern dairy. It has been suggested, as my hon. and learned Friend has put so forcefully tonight, that the distinction is illogical and the decision arbitrary, but what I have to say will, I think and I hope, show that both are within the spirit and the letter of the investment grants scheme.

My hon. and learned Friend knows as well as I do the thinking behind the introduction of the investment grants scheme. It was stated in the White Paper on Investment Incentives which introduced the scheme that in the private sector the most pressing need was to 1634 increase investment in manufacturing industry. This need, we decided, would best be met by replacing the widely dispersed effect of investment allowances by the more concentrated assistance of direct cash grants made in selected and narrower areas. The essence of such a policy is that it is selective and that it should discriminate in favour of manufacturing industry as opposed to the service sector, such as the distributive trades.

The Industrial Development Act was drafted with this in mind. The basic provision of the Act is that the Board of Trade may make grants towards capital expenditure incurred in providing machinery or plant for use in a qualifying industrial process. To cover the case of manufacturing machinery, such qualifying processes are defined in the Act to include processes for, or incidental to, the making of an article; and the Act goes on to provide that the storage and packing by a manufacturer of the goods he produces shall be treated as processes incidental to the making of an article. There is, however, no provision for the treatment of distribution as an incidental process. It is a stage further removed from manufacture than storage and packing, and, as I have said, it was never the intention that the scheme should cover distributive processes.

Applying these principles to dairy machinery, the Board has accepted from the outset of the scheme that the operation of processing and bottling of liquid milk may be regarded as a qualifying process within the meaning of the Act. The bottle of pasteurised milk, which is the end product of the operation, is regarded as the article made. As a result, grants have been paid to dairy operating firms on such productive equipment as heat treatment plant, bottle washing machines and bottling machines. Equally, grant has been paid on incidental storage and packing equipment such as refrigeration plant and machines used to place bottles in crates. My hon. and learned Friend, however, wishes the Board to go further than this and to pay grant in respect of equipment used to wash the crates into which the bottles are put. This, I am afraid, the Board cannot do. The crates are used to distribute the bottles, and the machinery used to wash them cannot be said to be used 1635 for packing the bottles, nor for any other process incidental to the making of an article.

I am, of course, aware that in some cases grants have been paid on a complex of dairy machinery which included crate washing machines and that such payments were in part inconsistent with the policy I have just explained. As soon as this came to light, steps were, of course, taken to ensure that these erroneous payments did not recur.

I owe it to my hon. and learned Friend to explain why these mistaken payments came to be made. There is at present a tendency for forward-looking dairies to re-equip with assembly line systems which will perform all the functions necessary to convert incoming crates of empty milk bottles into crates full of bottles of processed milk. Such plants are more efficient than older methods of production, and their introduction is from every point of view advantageous. Such plants are often invoiced by the supplier on a single document, and the individual machines which compose them will usually appear all together on a single application for grant showing a single figure for the total cost. My hon. and learned Friend will appreciate that in these circumstances it may not be easy for the staff of an investment grant office to distinguish at the time of application the items which relate to crate washing, and it was this distinction which was not in every case made. Crate-washing machines account for only a small fraction of the total cost of the plant used in a dairy.

It has been argued on behalf of the dairies that if a plant is so closely physically integrated, it is not sensible to separate for grants purposes one part of a continuous process. But, as I have said, the Industrial Development Act requires the Board to have regard to what process each machine performs. It is true that a continuous process is carried out on the bottles from the moment they are removed, empty, from incoming crates, to the moment when they are replaced, washed, full of processed milk and capped, into crates. While this is being done, the emptied crates are separated on to a different conveyor, and 1636 passed through a washing machine to the machine which will fill them with bottles of milk. It is this quite separate process of washing that we cannot admit to grant.

In essence, I think that I can say fairly that the case which my hon. and learned Friend has put to me is this. If grant is paid on bottle washing machines, and if grant is paid on crating machines, and if grant is paid on cold storage equipment, why should not grant be paid on machines used to wash the crates, which presumably have to be clean before they go into cold storage? In other words, is not the crate as essential to the process as the bottle; and, if so, why should washing not be grant-aided in both cases?

Taking the various pieces of plant in turn, grant is paid on bottle washing machines because the article being made is a bottle of processed milk. Washing the bottle is thus an essential part of the primary manufacturing process under Section 1(2)(a) of the Act. Grant is paid on crating machines because they are used for packing the bottles of milk in crates, and packing is a process incidental to manufacture under Section 1(3)(c) of the Act. Finally, grant is paid on cold storage equipment because it is used for storing the bottle of milk, and storage is a process incidental to manufacture under Section 1(3)(b) of the Act.

That the bottles are only put into clean crates does not alter the fact that the function of the crates is distribution. The crates are not part of the article being made, and therefore washing them cannot be part of the primary manufacturing process. Nor are crates used for any other qualifying or incidental process—if they had been, washing them might have been regarded as qualifying maintenance under Section 1(3)(a) of the Act.

As I have said, there is thus no provision of the Act under which crate washing machines can qualify for grant, and the fact that the bottles are in crates when they are stored cannot change this.

Lastly, I should like to dispel any thought that the Board of Trade has singled out the dairy industry for especially unfavourable treatment. This is not so. The general policy of discrimination in favour of manufacturing 1637 and against distribution is applied across the whole industrial spectrum.

I am grateful to my hon. and learned Friend for giving me the opportunity to clear up any misunderstanding of the 1638 Board of Trade's policy which may have arisen.