§ 2.38 p.m.
§ LORD BARNBYMy Lords, I beg to ask the Question which stands in my name on the Order Paper.
§ [The Question was as follows:
§ To ask Her Majesty's Government whether they are able to state, where primary commodities for industrial purposes are bulk bought with public funds or through agencies receiving support of public funds; whether the policy of current issue for consumption in the United Kingdom is on the basis of current replacement cost.]
§ THE CHANCELLOR OF THE DUCHY OF LANCASTER (VISCOUNT SWINTON)My Lords, the selling prices of those raw materials which are still bought and sold on public account are kept closely in line with the free market prices in all cases where there is a generally accepted free market price. This means in effect that the selling prices of these materials are maintained at or about current replacement cost in the sense in which I understand the noble Lord to use the term. Where there is no generally accepted free 90 market price but prices vary according to sources of supply, selling prices are fixed on the basis of cost—that is, the average cost at which the Government are replacing the materials as they are sold. So far as raw cotton is concerned, I understand that the selling prices charged by the Raw Cotton Commission are based on current replacement cost.
§ LORD BARNBYMy Lords, arising out of that reply, which will to some extent allay the concern held with regard to the continuance of bulk buying in various directions, since the phrase "replacement cost" is a little ambiguous, might I ask the noble Viscount whether he could add anything with regard to the basis of the present disposal of jute?
§ VISCOUNT SWINTONMy Lords, I do not think there can be any doubt as to what is meant by "replacement cost"—it is what you have to pay in order to replace. I really cannot make it more simple than that. That is an entire change in Government policy. In the past the policy was that, whatever happened, the Government must not make a loss on transactions in any commodity although they might have made very large profits on a rising market. When we were pressing all business people to cut their losses on a falling market and reduce their costs, the Chancellor of the Exchequer and I considered that we must practise what we preached. The result is a complete change of Government policy, in that we follow the market down and sell at replacement cost. I really do not think I can put it more plainly than that. I can assure the noble Lord, through my very direct contact with almost all industry, that that is not only fully understood but fully appreciated by industry. With regard to jute, exactly the same policy is being followed. There has been a large fall in price in that commodity. The Government's selling price has come down in exact relation to the price of jute in Pakistan, and another reduction, the amount of which is already announced, will be effected on the 31st of this month.
§ LORD BARNBYI should like to thank the noble Viscount for the clarity of his reply.