§ 6.47 p.m.
§ LORD FAIRFAX OF CAMERON rose to ask His Majesty's Government whether, in the event of agreement being reached to purchase Cuban cigars for sale in the U.K., they will lay the matter before the contracting parties to G.A.T.T. with a view to obtaining a higher preference margin for Jamaican cigars entering the U.K.; and to move for Papers. The noble Lord said: My Lords, although the hour is late, I am sure your Lordships will forgive me for proceeding with this Motion, because I believe that it is a matter of considerable importance at this time. I shall be very brief. The object of the Motion is twofold: to draw your Lordships' attention, first, to the increasing unemployment in the Jamaican cigar industry, and secondly, to the effect on the industry of Cuban competition and of any encroachment on the United Kingdom market of Cuban cigars. I would remind your Lordships that the United Kingdom has a double responsibility towards Jamaica in this matter. Jamaica 228 is a Colonial dependency, and we have a responsibility for her well-being and prosperity. Secondly, the United Kingdom provides practically the only market of any size and importance for Jamaican cigars. According to how we manipulate our trade policy towards Jamaica, we can either cause great misery to the people employed in the cigar industry or we can give them a measure of prosperity.
§ Unfortunately, the attitude of His Majesty's Government during the last few years has not been wholly favourable to the Jamaican cigar industry. Tariffs on the import of cigars have been increased, and there has, at the same time, been a fairly substantial increase in unemployment in the cigar industry. I am not saying that the increase of tariffs necessarily caused the unemployment in the industry, but I think it is significant that unemployment grew from the time the tariffs were increased. In 1939, there was a duty of 14s. 2¼d. per lb. on Jamaican cigars coming into this country. That represented a preference of 22 per cent. over other cigars imported. That was quite a good preference. Subsequently, that duty, still a preferential one, was increased to 41s. 1⅝d. per 1b. Under the influence of those tariffs and those preferences; the Jamaican cigar industry grew from practically nothing, so that it was sending abroad each year 25,750,000 cigars, which was quite a good achievement. Since then, however, the duty has been raised fairly considerably, and it now stands at 64s. 9⅝ per lb. The preference margin has now gone down from 22 per cent. to 4 per cent., which is a big fall, and it does not leave very much preference. The effect of this has been that the export of Jamaican cigars has fallen from 25,000,000 to 10,000,000 a year. At the same time, since, I think, 1947, the number of people employed in the industry has fallen by 8,000, representing over half of those employed in the industry. And that, in a poor country like Jamaica, is a serious matter.
§ What is so extraordinary is that these duties were presumably raised to increase revenue to the British Treasury, but that revenue, has fallen by half—on the law, I suppose, of diminishing returns. It has not benefited the Exchequer in this country, nor has it benefited the Jamaicans in any way. That seems bad from everyone's point of view. I cannot help feeling that, if there were an 229 equal percentage fall in employment in an industry in this country, His Majesty's Government and everyone else would be much more concerned than they are about the fall in the employed in the Jamaican cigar industry. If it were at home, I believe that this matter would have received much more active attention. Yet the fact that it has occurred in a Colony, which has no direct Parliamentary representation, is no reason why we should be indifferent to this state of affairs. In the event of agreement being reached with Cuba, it is not difficult to imagine the effect of importing Cuban cigars into this country on the Jamaican cigar industry, if it is not given some protection. Any Cuban cigars coming into this country would take a large slice out of the Jamaican market, and this would be a direct loss to the Jamaican cigar industry, which is already badly hit. Not only that: the Cuban cigar industry is strong—it has the whole of the American market—and no doubt could afford to sell cigars on the United Kingdom market at a cost with which the Jamaican cigar industry could not possibly compete—and, moreover, keep up the sales at such prices long enough to force out the Jamaicans.
§ There has been no indication from His Majesty's Government that, in the event of agreement being reached with Cuba, they will take steps to protect the Jamaican cigar industry. I do not blame them for not having given any indication yet, because obviously it is too early. But I sincerely hope that, in the event of agreement being reached with Cuba, the Government will take steps to protect the Jamaican industry. I very much hope that we may receive an assurance about that to-day. I hope not only that we shall receive an assurance that the Jamaican cigar industry will be protected, so that it retains a market not smaller than its present size, but also that the Government will say that they will take steps to increase the size of the market available to that industry. His Majesty's Government are unable to alter preference rates—we dealt with that the other day in the Motion by my noble friend Lord Balfour of Inchrye. By giving away their right to alter preference rates, they have put themselves in the position of being less able to protect Colonial industries. The case of Jamaica is an 230 example of that. To protect Colonial industries, such as the Jamaican cigar industry, is surely an important duty of an Imperial Power such as we are. Whether or not His Majesty's Government have signed the General Agreement on Tariff and Trade, the duty still remains on them to protect the Jamaican cigar industry.
§ As to the means by which this can be accomplished, it is open to His Majesty's Government, to approach the General Agreement countries and ask them whether we may increase our preference. I do not suppose that would be at all popular; in fact, it would be a most awkward situation for Great Britain to be in, and one which we do not particularly want. However, it is the only way in which the Government can increase the preference. At the moment, the preference is too small and the tariff too high. As an alternative, His Majesty's Government could lower the general duty, which would, of course, slightly increase the preference. But that would not be so satisfactory. I feel, however, that the Government should seriously consider either going to the General Agreement countries and asking for an increase in preference, or the lowering of general duties. At the same time, I believe that if agreement is reached with Cuba to import cigars into this country, those, cigars should be limited by quota to about 20 per cent. of the Jamaican cigar imports. But limiting by quota is not in itself sufficient protection for the Jamaican cigar industry, because even the 20 per cent. limitation on the existing market is a large amount by which to hit the Jamaicans.
§ I do not intend to detain your Lordships longer, except to say that, when we were unable to buy Cuban cigars during and since the war, Jamaica extended her industry and came to our help—and everyone will agree they served us very well indeed. I am sure that the Government, now that we are in a better financial position, would not wish to perform a shabby trick on Jamaica by saying: "You can take your cigars: we do not want them." But unless protection is given to Jamaica, in the event of agreement being reached with Cuba, that, in effect, will be what the Government will be saying. I beg to move for Papers.
231§ 6.59 p.m.
LORD HAWKEMy Lords, I think my noble friend Lord Fairfax has performed a great service in bringing up this matter in your Lordships' House before Parliament disappears into the country for some considerable period. There are no more loyal citizens of the Empire than the subjects of the West Indies, and it is only right that Parliament should hear their grievances. The situation that has arisen over the course of years is quite an absurd one. When I was a small boy the object of a Cockney on his Saturday evening out was to take his "missus" to the music hall, to the accompaniment of a fourpenny cigar. A four-penny cigar was considered quite a decent smoke in those days. The British working man was able to buy cigars at seven for a shilling. They were on the counter of every public-house, and the duty in those days was 5s. a pound. To-day, the duty is 65s. Successive Chancellors of the Exchequer—chiefly Coalition and Labour Chancellors—have first taken the cigar out of the British workman's mouth and left it for the middle classes, and then for the well-to-do; and, finally, the latest turn of the screw reserves it entirely for the rich. But the policy of His Majesty's Government is now to eliminate the rich and, therefore, they are in the process of eliminating the last market in this country for these Jamaican cigars.
As my noble friend has said, the revenue has gone down from £1,250,000 to £500,000. How much of that revenue is real, genuine revenue? If your Lordships go into some of the great caravanserais in this City at lunch time, and see the smoke curling up to the ceiling, how many people smoking those cigars have paid for them out of their own pocket? I suggest that three-quarters of them have come out of expense accounts in one form or another and, therefore, have already been paid for by the Chancellor of the Exchequer.
LORD HAWKEYes, the Prime Minister has one. The paltry remains of that £500,000 is, I venture to think, not real revenue at all—perhaps only two-thirds of it is revenue. That is truly an absurd situation. How are we to explain that sort of thing to the West Indies, loyal subjects of the King and our fellow 232 citizens? So far as I am aware, this is the first time that this sort of thing has happened. From time to time, changes of fashion and changes of taste have eliminated an Empire industry. Ostrich feathers is an example. But here is a very important industry, in a small part of the Commonwealth, which is being deliberately extinguished by the fiscal whims and fancies of His Majesty's Government. This Cuban Agreement cannot fail to make the matter still worse, because there will now come into the very restricted and diminishing market an ancient and strong competitor. At the best, we are asking His Majesty's Government to impose a quota, but even then Jamaica will be assured only of a certain percentage of an already declining and shrinking market. As a preliminary, of course, there must be a quota, but there must be some way of finding a way round this fiscal absurdity. It is an absurdity, and I will give your Lordships an example. You pay 1s. 3d. duty to smoke approximately forty-five minutes of cigar. You would pay 4d. duty to smoke approximately the same length of time a pipe of tobacco. The rates are out of proportion. The cigar has been "dutied" off the market.
The whole question of anything to do with Excise and Customs is most appallingly complicated, and it is quite impossible for the uninitiated layman to suggest anything intelligent. It must rest with the Minister to send for his officials, to point out the absurdities and say that this problem must be solved before the next Budget. We cannot remain the heart of the Commonwealth and, at the same time, go on, by fiscal policies, imposing unemployment in the far-flung periphery of the commonwealth. Once before we lost an Empire through our fiscal policies. Let us pay heed to the past.
§ 7.6 p.m.
LORD SANDHURSTMy Lords, I do not wish to detain your Lordships for long, but I speak on this question with a certain amount of knowledge and from an entirley different attitude. So far as cigars are concerned, the tobacco trade in this country, as the noble Lord has already said, has been carried through during the last few years entirely by the Jamaican manufacturer. I know perfectly well, and it has been made painfully clear to us during the past week, that the present 233 Government do not care about any reward for private endeavour. I suggest that when it comes to dealing with our Colonies they cannot adopt that attitude. Private endeavour has to receive its reward.
Now the Jamaican cigar manufacturers have done a wonderful job of work in improving the quality of their cigars. That quality has been raised from something which nobody ranked very highly to something which to-day is distinguishable from that of a Cuban cigar only by an expert. They have brought Cuban operatives into Jamaica, and the result is that the Jamaican cigar to-day is so similar to the Cuban that the only thing which kills it is what I might call "snob value." Now that is not something which I should expect the Government to encourage, but they are encouraging it unless they give preferential treatment. The Jamaican cigar is a very good cigar, on which a great deal of local money has been spent. Are we going to kill it? Are we going to do away with the results of private effort in Jamaica? Are we going to cause unemployment in Jamaica after all they have done to turn their cigar from a third-rate article into a first-rate article? I say, quite frankly, that the Jamaican cigar to-day is a first-class cigar. I am certain that I shall have no difficulty in walking into my premises and producing a cigar which any member of the Bench opposite would be very glad to smoke after his dinner to-night; and it would be a Jamaican cigar and not a Cuban. The Jamaican people have built up their trade arid have risked their money. Are we to destroy it simply to satisfy "snob value"?
§ 7.9 p.m.
§ THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD LUCAS OF CHILWORTH)My Lords, after the agreeable and eloquent manner in which the noble Lord moved this Motion, I am afraid that he will be very disappointed with my reply because, in the shortest terms which I can use, it is "No." His Majesty's Government have no intention whatsoever of approaching the G.A.T.T. countries to increase the preference on Jamaican cigars. That is putting the matter very baldly. But I feel the noble Lord's disappointment may be mitigated if I give him the reason—and it has nothing whatsoever to do with G.A.T.T. We have an international 234 Agreement of great importance, the United Kingdom-Cuba Commercial Agreement of 1937. If my memory serves me aright, it was not made when a Socialist Government, or even a Coalition Government, were in power. Perhaps the noble Lord, Lord Hawke, will correct me if I am wrong in saying that. The salient Article of the Agreement is Article 7, which I will read to your Lordships. It says:
The Government of Cuba reserve the right, notwithstanding anything in paragraph 3 above, to terminate the present agreement on three months' notice at any time, should the Government of the United Kingdom of Great Britain and Northern Ireland increase the differences which existed on the 1st May, 1936, between the tariff rates applicable in the United Kingdom to sugar and tobacco, the produce of Cuba, on the one hand, and to sugar and tobacco, the produce of any territory under the Sovereignty … or protection or mandate of His Majesty the King …That Commercial Agreement between ourselves and Cuba has been a very valuable one. It has brought us in, on insurance alone, £2,000,000 a year. Perhaps I may be allowed to quote another article, Article 4:The Government of Cuba agree not to subject British insurance enterprises to legislation imposing conditions which are in any respect more onerous than those already applying to the conduct of their Cuban business.British insurance has called in aid that Article on many occasions.
LORD HAWKEThat was the Agreement made in 1937. Have the Cuban Government fulfilled those conditions? Is there anything about their treatment of the railways?
§ LORD LUCAS OF CHILWORTHThat Agreement, old though it may be, has proved, and is proving, of the utmost value to commercial interests in this country. We are not going to do anything in breach of it which will injure our relationship with Cuba, which has proved of so much profit to the interests I have just named.
But there are other interests—the level of Cuban import duties on our main exports to Cuba. Our exports of linens and woollens accounted in 1950 for over £500,000 worth of trade. These are all substantial things, ant we would not for one moment risk doing anything which would be in breach of Article 7. If we did, this Agreement between ourselves and Cuba might be terminated. I am sure 235 that the noble Lord would be averse to anything of that kind. That is the short answer to the noble Lord as to why we do not intend to go to the G.A.T.T. countries and ask them to agree to an increase in the preference on Jamaican tobacco.
There are other points which the noble Lord raised but which, of course, do not now arise. I might be considered churlish, however, if I did not give some answer, because I can see what is agitating the mind of the noble Lord. While giving him these answers, I would not for a moment like him, or any other noble Lords, to think that His Majesty's Government are at all unsympathetic to any interests in Jamaica. But, as I say, there are other interests too—and, incidentally, our own. The noble Lords, Lord Fairfax, Lord Hawke, and Lord Sandhurst, talked about unemployment in Jamaica being caused by the high tariffs, and suggested that if the tariff were brought down the unemployment situation would be improved. But if we reduced the tariffs, even if there were no other obstacle in the way, we should also have to reduce the rates on the imported leaf from which British cigars are made. I suppose noble Lords would not like to see discrimination against British workmen in favour of Jamaican workmen. We are being pressed frequently by the home industry to the effect that if any alteration were made in the duty on imported cigars they would desire similar protection; and British manufactured cigars made from imported leaf represent the greater proportion of cigars smoked in this country. I sympathise with the noble Lord's desire to be tender to the interests of Jamaican employment. But let us not forget that we have people in this country employed in the cigar-making industry; and they are usually elderly people, people who might, perhaps, be unable to find suitable employment elsewhere than in that industry.
But I am going on to suggest to the noble Lord that an increase in the preference or a reduction in the duty would not help Jamaica. Let me give him the figures. The present rate of duty is 67s. 9d. per lb. on imported cigars. The preferential rate is 64s. 9⅝d. per lb. That is about 1s. or 1s. 2d. on an average-sized cigar selling at about 3s. The preference 236 margin of 2s. 11⅜d. represents about ½or ¾d. per cigar. If the duty were to be reduced, unless the reduction in duty were very sizable, it would make no appreciable impact on the consumption of cigars. The noble Lord mentioned the 1947 figure—
LORD FAIRFAX OF CAMERONI suggested that it should be below the 1947 figure—perhaps at the 1939 mark.
§ LORD LUCAS OF CHILWORTHLet us take the figure for 1945 to 1947. The preferential rate at the beginning of 1947 was 41s. 1⅝d. per 1b. A reduction to this level would be equivalent to a reduction of 4d. or 5d. on the 3s. cigar. Let us suppose that, if we made such a reduction, it would stimulate the consumption of Jamaican cigars by 10 per cent.—I doubt very much whether it would, but let us put it at 10 per cent. That would cost the revenue of this country £750,000 and would benefit the Jamaican cigar industry by £50,000. It just does not add up to a commercial proposition.
LORD FAIRFAX OF CAMERONI am sorry to interrupt the noble Lord, but I cannot understand his statement about the cost to the British Treasury. As I understand it—I know the noble Lord will correct me if I am wrong—the total annual revenue to the British Treasury from duty on imported Jamaican cigars is about £500,000.
§ LORD LUCAS OF CHILWORTHI am talking about the whole, because we could not reduce the duty on Jamaican cigars alone. I have just told the noble Lord that if you reduce the duty at all, you reduce it on leaf tobacco as well, because you cannot pick out only imported cigars and say you are not going to reduce the duty on leaf from which British cigars are made. So we should lose £750,000 and it would benefit the Jamaicans, at a very wild exaggeration of figures, even if the Jamaican imports were increased by 10 per cent., by £50,000. The noble Lord, Lord Hawke, is completely in error—
§ LORD LUCAS OF CHILWORTH"In error." not "inaccurate," when he says that cigars have been "dutied off" the market (which was the phrase I think he used), because the duty on an aver- 237 age 3s. 6d. cigar is only 1s. to 1s. 2d., whereas the duty on a packet of twenty cigarettes costing 3s. 6d. is 2s. 10d. Why do not people smoke cigars in preference to cigarettes? The noble Lord made some humorous remark, which had a great deal of truth in it, to the effect that the cigar had become a luxury "smoke." Years ago I used to buy cigars; then the time came when I had to rely upon those of my wealthy friend, perhaps those included in the category mentioned by the noble Lord; they used to send them to me. Now, I can neither afford them nor are they sent.
§ LORD ALTRINCHAMNo friends?
§ LORD LUCAS OF CHILWORTHNo friends with those large expensive cigars. The trouble with cigar consumption is that it is a luxury. Therefore, the importation of cigars into this country, if the noble Lord would examine these figures—
LORD HAWKEThere is one point that so far both sides have omitted. I could not teach the noble Lord to suck eggs, because he knows all about it. My point is that if you knock off the duty by a certain amount, the price of the final article may come down by anything up to double the amount that you knock off.
§ LORD LUCAS OF CHILWORTHI do not know whether the noble Lord means that I know all about sucking eggs or smoking cigars. What the noble Lord suggests is pure theory. It does not happen in practice, because I am not at all certain what would be the result if we did reduce the duty as the noble Lord wants. There are in this country today many stacks of cigars upon which the higher duty has been paid. Do you think their price would be reduced by the amount of the reduction? Of course it would not.
§ LORD LUCAS OF CHILWORTHYes, but it would take a little time to finish them.
LORD SANDHURSTI think the noble Lord is wrong in that statement. One finds that when duty goes down, every seller at once reduces his prices by the amount that the duty has gone down. That applies not only to cigars but to any other article you like to take.
§ LORD LUCAS OF CHILWORTHThe noble Lord's experience of trade and industry has been entirely different from mine, because I have found that when anything has been taken off an article, such as duty and tax, the price to the consumer is kept up as long as possible to cover cuts that have been previously incurred.
§ LORD LUCAS OF CHILWORTHThat, of course, is a matter of opinion. While I have every sympathy with the noble Lord in his endeavour, we cannot think about reducing the duty. Noble Lords well know that, when Sir Stafford Cripps was the Chancellor of the Exchequer, the tobacco duty was increased very heavily for one reason—an attempt to cut down smoking. It has cut down luxury smoking. I cannot agree to the proposition the noble Lord unfolded in his original Question for the reason I have explained—the 1937 Anglo-Cuban Agreement. I cannot discuss, and the noble Lord will not expect me to discuss, any Agreement which is being negotiated now with Cuba, but I can assure him that if all the difficulties which stand in the way were removed, a quota scheme would not be worth anything to Jamaica and would not be worth anything to us because it could not be anchored to anything. There is no embargo upon the import of Jamaican cigars. We do not want to anchor it to any quota. Jamaica is perfectly free to export to this country as many cigars as she can find a commercial sale for. Therefore, it would be impossible to have a quota, unless, of course, the noble Lord wishes to encourage the Government to go in for bulk buying of Jamaican cigars, and to go into the cigar business in a big way. I do not know whether that is in his mind.
§ LORD LUCAS OF CHILWORTHI should not have thought he would venture to make that suggestion; so a quota scheme is useless. The 1937 Anglo-Cuban Agreement forbids us, while we place value, and while the insurance interests and the textile manufacturers place the value they do, upon the Cuban Agreement. Therefore, as I said before, 239 I regret very much that I cannot accept the noble Lord's Motion.
§ 7.26 p.m.
§ LORD ALTRINCHAMMy Lords, I am going to say only a few words, because the hour is late. However, since the noble Lord opposite seems satisfied with his own reply, I feel bound to say that we on this side are entirely dissatisfied with it. We are not prepared to accept most of the propositions which he put forward. Of course the Cuban Treaty exists, but when treaties cause difficulty, and particularly when they have been in existence for a number of years, responsible statesmen try to renegotiate them. Apparently this Government are unable to approach the Cuban Government to consider whether any modification in this particular direction is possible. After all, this is a valuable market to Cuba, just as Cuba is a valuable market to us, and ancient trading treaties have to be discussed frequently from time to time. Therefore the noble Lord's argument on that point made no impression whatever upon me. Still less did his contention that when you reduce the duty on an article you do not reduce its price. There may be stocks in this country, but I am sure my noble friend behind me is right in saying that, when the duty is reduced, prices have to be reduced.
Finally, I would say that I agree that the general idea in this country is that cigar-smoking is luxury smoking. It is, in fact, a much more wholesome form of smoking than cigarette-smoking. It is most important to undermine the idea that the cigar is only a luxury "smoke." If you go to Belgium, Holland, Denmark, Sweden or Norway, you can get exceedingly good "smokes" for very little indeed. That is how it should be in this country. I should regret it if it involved us in more dollar expenditure for Havana cigars. I think that particular point ought to be re-negotiated. I am absolutely convinced that, in due course, it will be of great benefit to this country if the duty on all forms of cigar and also imported leaf is brought down.
§ 7.29 p.m.
LORD FAIRFAX OF CAMERONMy Lords, the noble Lord who replied talked about the 1937 Commercial Agreement 240 with Cuba, and said that there was a clause in that Agreement which prevented the alteration of preference rates. The preference rates given to Jamaican cigars have been altered from 22 per cent. in 1939 to approximately 4 per cent. That is an alteration in value; the actual money rate is the same. Presumably, if we had been trading with Cuba during that same period, that alteration in value would have applied there. So I really cannot understand what the noble Lord means when he says that the alteration in preference rates is forbidden under that Agreement. I am quite certain, on the basis of the alteration in preferences to Jamaica, that if we had carried on cigar trade with Cuba the alteration in value there since before the war would have been considerable. The noble Lord gave me the impression, also, that he was far more concerned about carrying on trade with Cuba than about carrying on trade with Jamaica, and that he had far more fear, perhaps awe, of the Cubans than he had sympathetic feeling for the welfare of the Jamaicans. I think that is a very great pity.
§ LORD LUCAS OF CHILWORTHIf the noble Lord will forgive my interrupting, I do not think that is quite a fair thing to say. I prefaced my remarks by saying that nothing I said was to be taken as meaning that His Majesty's Government were lacking in sympathy for Jamaica.
LORD FAIRFAX OF CAMERONAll I can say is that I find it very difficult indeed to line up the content of the noble Lord's speech with that statement, because the impression it made upon me was quite the opposite. It seems also that His Majesty's Government have got themselves tied up so much in a series of Agreements, and have so far committed themselves to this, that and the other, that they are now entirely unable to help a British Colony. That is a most deplorable situation, and one of which I feel His Majesty's Government should be heartily ashamed. The Jamaicans will have very little reason to be proud of us, and I consider that the reply of the noble Lord who spoke for the Government is quite unworthy of this country, which has been a great Imperial Power in the past. I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.