HL Deb 19 July 1954 vol 188 cc1131-45

2.35 p.m.

THE CHANCELLOR OF THE DUCHY OF LANCASTER (VISCOUNT WOOLTON) rose to move, That the Raw Cotton Commission (Dissolution) Draft Order, 1954, reported from the Special Orders Committee on the 23rd of June last, be approved. The noble Viscount said: I beg to move that this Order be approved. Subsection (1) of Section 4 of the Cotton Act, 1954, empowers the Board of Trade and myself to provide jointly by Order for the winding up and dissolution of the Raw Cotton Commission if at any time we are satisfied that it is in the public interest to do so. As long ago as November 4 of last year, in the debate on the gracious Speech, I intimated that the Government's aim was that the Raw Cotton Commission should cease their active operations at the end of August, 1954. Nevertheless, I made it clear during the Second Reading of the Cotton Bill, in response to observations that had been made by the Opposition, that when the time came to make the requisite Order we should have to consider whether any fresh circumstances had arisen of sufficient gravity to make us feel that the public interest required some postponement. Such consideration has been given, and I am glad to say that, in our opinion, no postponement is necessary.

On the contrary, a number of new factors have combined to strengthen the belief that our original intention was correct and justified. There is every indication that the arrangements for the private purchase of cotton are functioning satisfactorily and that those spinners who have been buying their own cotton this season have been able to do so without difficulty. In particular, the fears expressed some months ago about a prospective shortage this season of long staple cotton, which was advanced as a reason for possibly retaining the Raw Cotton Commission in being, have, I am happy to say, proved to be unfounded. On May 18, the Liverpool Futures Market reopened and, as your Lordships will have observed if you have read the Press accounts, it is steadily absorbing the cover that has hitherto been placed with the Raw Cotton Commission's cover scheme. This means that the taxpayer is being relieved of the burden of covering the cotton trade against the fluctuations in price of its raw material. Last March there was a considerable fear that the United States might introduce an export subsidy on raw cotton. This fear has been removed by the recent announcement by the Secretary of Agriculture in the United States that there would be no such subsidy in the season 1954–55.

Finally, in the general sphere, the impact of the American economy on the rest of the world has been less severe than was feared in some quarters a few months ago, when we were last discussing this subject of cotton. My Lords, in view of all these circumstances, we have decided that it would be right to proceed with our intention of winding up the Raw Cotton Commission from August 31. We think this would be in the public interest. I must observe that since I last spoke the accounts of the Commission for the year 1952–53 have been published. They show that there has been a loss of £22,400,000. Therefore, we have no hesitation in recommending this Order.

I think I ought to talk for a few moments, if your Lordships will bear with me, on the subject of stocks, because during the Committee stage of the Cotton Bill I outlined arrangements by which the Raw Cotton Commission were to ensure continuity of supplies for their customers during the transitional period between August 31 and the arrival of the various new crops which they could purchase for themselves in the season 1954–55. In accordance with these arrangements, the Commission, apart from continuing to supply their immediate needs, have given contracting-in spinners an opportunity to enter into firm contracts for the purchase of cotton for delivery after August 31. The Commission estimate that by that date they will have sold some 230,000 bales of cotton for delivery between the end of August this year and May of next year. In addition to this, the Commission estimate that at August 31 they will hold approximately a similar quantity of unsold stocks, valued at about £20 million, the equivalent of six weeks' consumption. These stocks will comprise cottons of all sorts, including some for which there may be only a limited market. Their disposal will be one of the main tasks of the liquidator under the arrangements to be approved by the responsible Minister after consultation with the Treasury.

Article 5 (b) of the Order lays down that this disposal shall be effected in the way best calculated to serve the public interest in all respects, due regard being had to the price obtaining for comparable cotton in the open market. It was not possible to include a more precise provision than this, but as I indicated earlier, one-half of the total stock has already been sold forward. I am glad to say that the Cotton Import Advisory Panel, a body on which all interests in the trade—merchants, spinners and members of the union—are represented, and which has given Ministers valuable advice during the last two years, has agreed to continue to advise during the liquidation period on the method of liquidation. I think the fact that these gentlemen are prepared to continue to serve will meet with the gratitude, as well as the approval, of your Lordships' House. I am sure the House will agree that in this way the interests of both the Exchequer and the trade should be well protected.

The total stocks of cotton in this country at the end of May, the latest date for which complete figures are available, amounted to 910,000 bales, which is equivalent to about five and a half months' consumption by the whole spinning industry. My object in drawing the attention of your Lordships to these figures arises from the discussion that took place on the Cotton Bill, when, the noble Lord, Lord Lucas of Chilworth, will remember, some apprehension was felt as to whether the stocks would be sufficient. I also want to make it quite clear that adequate arrangements have been made to protect the interests of contracting-in spinners until they can buy freely on the open market.

When we were discussing the Cotton Bill, your Lordships were interested in the subject of Colonial contracts, and what was to happen to the long-term contracts for the supply of raw cotton which the Raw Cotton Commission had made with certain Colonial Territories. There are three of these contracts, with Nigeria, with Aden and with Nyasaland, and both the President of the Board of Trade and gave assurances—he in another place—that these contracts would be implemented in full, if that was the wish of the Colonies concerned. The position is that discussions with the Colonies concerning their wishes in the matter are, in fact, still going on. It is a question of considerable importance to them, and naturally they do not want to make any hurried decision. But meanwhile, in case they decide that they would like the contracts to run for their full term, we have included a provision in Article 3 of the Order to the effect that the liquidator will carry them out, subject to the direction of the Minister of Materials, or his successor in function. I should point out that, should Parliament agree to the proposed dissolution of the Ministry of Materials, the contracts will then obviously go to the Board of Trade.

From the passage of the Act in May all spinners have been free to buy where they would, except dollar cotton. From the same date they were given freedom to buy dollar cotton for delivery after September 1. This will give the industry the chance to buy their material in the cheapest sources, and will improve their competitive powers. It may mean some increase in dollar expenditure, the extent of which, of course, will depend upon the relative prices of other cottons; but in our view, arty such increase will be of quite manageable proportions. I beg to move.

Moved, That the Raw Cotton Commission (Dissolution) Draft Order, 1954, reported from the Special Orders Committee on the 23rd of June last, be approved.—(Viscount Woolton.)

2.47 p.m.

LORD LUCAS OF CHILWORTH

My Lords, I am sure that all your Lordships are grateful to the noble Viscount, not only for the manner in which he has presented his Order, but also for—if I may so call it—the progress report he has made. It was most interesting. I do not intend to repeat my Second Reading or Third Reading speech upon the Cotton Bill, but there are one or two questions which I should like to address to the noble Viscount, purely for the purpose of clarification. He has said, quite correctly, that the Act under which this Dissolution Order is presented to your Lordships gave the Board of Trade and the Minister of Materials power to dissolve the Raw Cotton Commission at their option, if they thought it was in the national interests so to do. The noble Viscount has said that, in their opinion, no factors have arisen to contradict that it is in the national interests that this Raw Cotton Commission should be dissolved. The noble Viscount will forgive me if I say that I do not think he brought proof to bear to substantiate that statement, and perhaps some of the questions which I ask, to which I should like answers, will go some way to clarify that position.

I do not know whether August 31 has been chosen as the appropriate date because of the demise of the Minister of Materials in that month. The act of dissolving the Raw Cotton Commission could only be done jointly by the Ministers concerned, and I can only assume that, like the two gondoliers of the play of that name, one is going to be thrown overboard very soon, after which there will be a "one-man band," and that it was necessary to dissolve the Raw Cotton Commission while the Minister of Materials was still alive. Though in future we shall cease to see the noble Viscount, Lord Woolton, as the Minister of Materials, we are only too happy to think that in his other, perhaps far more important, position we shall still enjoy his company in your Lordships' House.

To deal now with the Order before us, Article 2 gives the Board of Trade and the Minister of Materials the power to appoint a person to be liquidator. Would the noble Viscount tell your Lordships' House whether the appointment has been made, or the selection for the appointment, and who it is? Is it to be one person, or can the singular in this case include the plural and can it be a firm, or must it be one individual? What staff is it proposed that the liquidator shall have, and what charge does the noble Viscount estimate will fall upon public funds? The noble Viscount, when referring to Article 3 about the long-term contracts with the Colonial countries which are printed here, said that these particular producers of raw cotton have not yet made up their minds whether they wish the contracts to continue. Would he inform your Lordships' House how long these contracts have to run—whether it is two, three or four years—and also whether the Minister (in this case, I take it that in future it will be the President of the Board of Trade) can instruct the liquidator to terminate these contracts? Will the noble Viscount give your Lordships' House a firm assurance that, should these marketing organisations as set out in the Order desire their contracts to be carried on, nothing will be put in the way of the observance of their wishes?

VISCOUNT WOOLTON

I did say so. I will give that assurance again.

LORD LUCAS OF CHILWORTH

I am obliged to the noble Viscount. Would he also give your Lordships some assurance with regard to the other Colonial and Commonwealth countries who, while they may not have had written contracts, had bulk-buying and long-term arrangements with the Raw Cotton Commission? I cite as an example the West Indies, with the Sea Island cotton. Should any of these much-prized markets wish to enter into further contracts at some future date—long-term contracts—would the noble Viscount tell us whether the President of the Board of Trade will be prepared to enter into such contracts? Will that be given consideration, or have we seen, once and for all, the end of the great Commonwealth development of cotton which I repeat now, as I have maintained all the way through, is so valuable? My noble friend Lord Ogmore quoted from the Report of the Colonial Office, which laid such great stress on the value of long-term contracts. Are we to say now that the door is shut, except in regard to the three specific instances which are set out in the Order? I feel sure that not only your Lordships' House but also the cotton industry and the country would like to have an authoritative statement upon that particular point.

When I come to Article 4, the powers of the liquidator, could the noble Viscount give us some idea of the values of the assets, other than stocks, which will pass to the liquidator? That is what I want to know, because Article 4 (2) says: The liquidator, in the course of winding up the Commission, shall, subject to the provisions of Article 5 hereof, have power— (a) to sell the real and personal property and things in action of the Commission by public auction or private contract … I should like to know approximately the value of these assets. As regards the stocks, the noble Viscount was kind enough to tell us that the stocks of the Raw Cotton Commission held at the present moment amount to £20 million—I think that was the figure.

VISCOUNT WOOLTON

Approximately.

LORD LUCAS OF CHILWORTH

The noble Viscount then went on to give us the actual value of the spinners' stocks at the present time. Unless I misunderstood him, he gave one figure in sterling and the other in bales. Could the noble Viscount translate the spinners' stocks into the same figure—that is, the sterling figure—that he gave us for the Commission's stock, because that would be a comparable figure which your Lordships could easily see? Not many of your Lordships will be able to do the mathematical calculation as to what 230,000 bales, I think it was, would represent in sterling. I believe that the 230,000 bales which I have in mind was not the amount of the spinners' stocks, but the amount of the forward contracts. Does that not illustrate the value—and I wish to give the noble Viscount credit for this—of the arrangement which he made with the Raw Cotton Commission for the safeguarding of the interest of the contractors-in, for which we on this side of the House pressed so hard all the way through the Committee stage? Could the noble Viscount sub-divide that figure for us again?

Viscount WOOLTON

Which figure is this?

LORD LUCAS OF CHILWORTH

The 230,000 bales of cotton which the contractors-in could order from the Raw Cotton Commission, either on futures or spot.

VISCOUNT WOOLTON

Have ordered.

LORD LUCAS OF CHILWORTH

Have ordered. Would the noble Viscount tell us how much the Liverpool Cotton Exchange are going to hear on this? In other words, how much of that is on futures and how much was for spot that will be taken delivery of before, I think the noble Viscount said, May, 1955? All these things conjure up in my mind—and I do not want to use the term harshly—the haste of dissolving the Raw Cotton Commission. I should have thought that it might have been advisable not to dissolve the Raw Cotton Commission until May, 1955.

VISCOUNT WOOLTON

Why?

LORD LUCAS or CHILWORTH

Because that is the last day on which delivery can be taken. That was a reasonable time—I make no complaint whatsoever about the generosity of the noble Viscount's concession in this matter. But will the liquidator, who will have to carry on this sizeable business—unless, of course, he has other instructions from the noble Viscount's right honourable friend the President of the Board of Trade, which I do not suggest he will—and, very likely, will be buying a lot of cotton, be able to supply the demand of the contractors-in for the 230,000 bales, orders for which are now standing on the books of the Raw Cotton Commission and which the liquidator will have to take over? That is one of the thoughts in my mind in asking all these questions.

I join with the noble Viscount in saying that I agree that it is a good thing that the Advisory Committee is to continue. I hope that it will safeguard the interests, not only of the taxpayer but also of the trade. Whether or not this is a good thing, as I said about the Cotton Act, the Act which authorises this action, whether or not it will eventually be to the betterment of the Lancashire cotton industry and this country as a whole, remains to be seen. The noble Viscount has given a few opinions. They can be only opinions. I do not doubt the sincerity with which he expressed them, but the latest information I have is that all is not too happy in the Lancashire cotton industry, that two-thirds of Lancashire's output has now to be absorbed in the home market. The question is whether or not in future we shall get the raw cotton at lower prices than in the past. The noble Viscount—I thought he would bring it in—has mentioned losses valued at £20 million-odd. I would only remind your Lordships that I pointed out, on the Third Reading of the Cotton Bill, that the first essay of Messrs. Coats into the raw cotton market when contracting-out cost the Coats shareholders a few million pounds; so there was nothing very much to be gained that may not be gained to-day.

Those are all the observations that I have to offer. As I said at the outset, I do not alter my opinion about the inadvisability of taking this step at the present moment. From my investigations, end also from the outline which the noble Viscount has given commending this Order to your Lordships, I should have thought that it might be advisable to continue the Raw Cotton Commission for at least another twelve months. But if the noble Viscount will give me some of the assurances and some of the figures for which I have asked—I do not think I have asked for anything unreasonable—he will perhaps go a little way to allay even that fear in my mind.

3.3 p.m.

LORD OGMORE

My Lords, the whole House ought to be grateful to my noble friend, Lord Lucas of Chilworth, who has dissected this Order, has pointed out some of its defects and also one or two of its good points, and has asked a number of most important questions. I cannot pretend to anything like his knowledge of this subject. Therefore, I shall confine myself only to Article 3 (2) which refers to Colonial raw cotton. I think we managed to salvage something out of the wreck. My noble friend and myself, when the Cotton Bill, which is now an Act, was before the House, made a big protest about what we regarded as the "sale down the river" of the Colonial producers. We had no satisfaction whatsoever at that time, but the Government to-day, I am glad to see, have given us a little satisfaction—not very much but a little—because so far as concerns the three producing areas with which the Commission now deals, the subsisting contracts will be carried on if the producers so desire. That is what I understand to be the position.

VISCOUNT WOOLTON

That was my precise language.

LORD OGMORE

Then I have understood the noble Viscount and that is the position. The point that has been made by my noble friend, Lord Lucas of Chilworth, is an important one—namely, what happens to new contracts either by the existing authorities with whom the Commission has contracts or, as he said, the West Indies or any other producers? What is going to happen to those areas? Is there any possibility that they will be able to make long-term contracts? This is vital for a very important staple product of the Colonial territories. I should have thought that this was not a matter of Party politics; I should have thought that noble Lords opposite would feel equally worried as we feel on this point, because noble Lords opposite know as well as we do that, without long-term contracts and without, in some cases, bulk purchase, it is often quite impossible to develop a new product or sometimes to sustain an old one.

On occasion, I have been to various parts of the Colonial territories—West and East Africa, and so on. I always make a particular point, when I go to those places, of going into the bazaars and the markets, and ascertaining from the merchants themselves, and the retailers, what particular classes of goods are being sold and what their difficulties are. It is all right to see statistics in blue books, white books, green books and yellow books, but it is only when you get on to the ground and talk to the retailers themselves that you find exactly what their problem is. In West Africa, I found at that time that they were having great difficulty in getting British cottons—this was a few years ago. They liked them very much although the prices were rather high. Since then, there is no doubt that foreign cottons are flooding into the market, particularly from Japan. The result of the Government's recent Agreement with the Japanese is that we can expect a very large amount of Japanese cotton and printed goods to go into our Colonial territories.

We were able to say to some of these areas before: "We buy your raw cotton; we make arrangements through bulk purchase: we make arrangements through long-term contracts to take your raw cotton. We think in exchange you might take from us our printed goods, as a quid pro quo." But, if we are no longer going to help them to market their goods and no longer give them the security of long-term contracts, what basis have we for asking them to take up our printed cotton? It seems to me that this Order, which is supposed to be a great charter of liberty for Lancashire, will have not only possibly a devastating effect upon some of the Colonial territories whose raw cotton will be affected but also a very important effect on Lancashire's trade with those territories.

I am quite certain that it is not going to help Lancashire in the great competition in Colonial territories which she is going to face in the near future from Japanese cottons. We have been through all this before. I remember the time in the early 'thirties when in Malaya the goods imported from Britain went down from about 91 per cent. to 9 per cent. in a little over twelve months. We had to pass a special ordinance in Malaya to ensure the import there of a quota in proportion to the goods previously imported—that is to say, if imports from a certain country had previously amounted to 4 per cent., no greater proportion than that could be imported into Malaya. That was an extreme measure, almost a panic measure, but it had to be taken because, in one year or so, the exporting position from this country, from Lancashire, fell in such a devastating way. I ask the noble Viscount—I am serious about this—to bear this point in mind, not merely from the point of view of the Colonies themselves but also from the point of view of Lancashire. It is a two-way business—if we can help them, they will be prepared to help us. If we no longer help them, then they will probably say, or may say, "Why should we help Britain?" I think the Government should look at this, because it is really a most important matter.

3.10 p.m.

VISCOUNT WOOLTON

My Lords, I am much obliged to noble Lords for the way in which they have received my observations. I can assure the noble Lord, Lord Lucas of Chilworth, that the business of bringing in this Order had nothing to do with The Gondoliers. The functions of the Minister of Materials are quite independent of me or of the existence of the Ministry, and they will be transferred to the Board of Trade, subject to an Affirmative Resolution in both Houses of Parliament. I should be the last person in the world to assume that your Lordships would give your approval until the appropriate time. Just in passing—a slight personal observation—I have not been "thrown over-board"; I have deliberately dived, because the announcement that the Prime Minister made last week in another place was made at my special request.

I wish the noble Lord, Lord Lucas of Chilworth, who is always so full of courtesy, had told me of some of the arithmetical questions that he proposed to ask me. I dare not rely on my memory on such important issues, but I will do my best to answer his questions. I do not see why I should not answer the question about the liquidator. He has not been appointed, but as the law now stands he is to be appointed jointly by the Board of Trade and myself, and it is our intention to appoint the gentleman who at the present time is the Chairman of the Commission—his name is Jackson. He is a man who has had considerable experience in the banking world. I think he has the confidence of the people with whom he has been working. He was No. 2 to Sir Ralph Lacey for a considerable time, and both Mr. Thorneycroft and I have the greatest confidence in him. I believe that he will be an admirable appointment.

I was asked about the Colonial contracts. The Nigerian contract has two more seasons to run, the Aden contract three more seasons, and the Nyasaland contract four. I hope that I have given to the House the most explicit assurances that the responsibility for continuing these contracts now rests with Ministers and that we shall give instructions to the liquidator that he must honour these contracts. The contracting parties have to make up their minds whether they think it will be to their advantage to continue these contracts—and if so, there is no more to be said about it—or whether they would rather surrender them. Only their own advantage is to be considered in this matter—action, decision, lies with them. So, in regard to that part of Lord Ogmore's observations, I hope that I have completely covered the situation.

LORD OGMORE

That is the existing contracts?

VISCOUNT WOOLTON

Yes, the existing ones; I will deal will the others later. Noble Lords thought there was a little confusion arising from the arithmetic. I quoted the total stocks of cotton in the country as being 910,000 bales—those figures are obviously round figures. The approximate value of the cotton is £75 million. The stocks that I said rested with the Raw Cotton Commission when they had sold half forward, were 230,000 bales at an approximate value of £20 million. The arithmetic does not seem to be quite right—

LORD LUCAS OF CHILWORTH

Would the noble Viscount forgive me? This is the question I asked. The noble Viscount said that the present raw cotton stock of the Raw Cotton Commission was valued at £20 million. Am I to understand that he now says that the total of raw cotton—

VISCOUNT WOOLTON

I was just going to finish. If the noble Lord will just let me finish my sentence, I think I shall have given him the answer. The total stocks in the country are approximately 900,000 bales, valued at approximately £75 million. The Raw Cotton Commission will have unsold 230,000 of the 900,000 bales, valued approximately at £20 million. There is a divergence there, but that, of course, is due to the differences in the qualities of cotton; there is no fallacy. I rather wanted to point that out to your Lordships. I hope that I have answered that question to your Lordships' satisfaction.

LORD LUCAS OF CHILWORTH

Not quite; but it may be my own fault. I may have misunderstood the noble Viscount, but I thought he related the 230,000 bales to the figure which the contractors-in have placed with the Raw Cotton Commission in response to the concession that the noble Viscount made. I asked if he would tell us how much of that amount is being borne on the futures market, and how much was spot buying—in other words, would be paid for only on delivery. I am sure he will remember that under the arrangement—I have the statement that the noble Viscount made, and I expect he has too—the contractor-in could order with the Raw Cotton Commission as much of the new crops as would satisfy his needs right up to May, 1955. He could apply for it on the Liverpool Cotton Exchange futures market or he could have it on spot, which means that he need not pay for it until he actually took delivery, which might be somewhere in 1955, or even at a later date. I understand that 230,000 bales have been ordered on that arrangement. Which is futures, which is spot?

VISCOUNT WOOLTON

It is rather unreasonable that the noble Lord should ask questions like that without giving notice. This is a highly technical question. If I may venture an opinion (and it is no more than that) I believe that of the 460,000 bales—the noble Lord will remember that there are two amounts of 230,000—half of it will have been sold forward, and that half sold forward is subject to the arrangement that we made here, which, as I announced at the end of the last debate, they could have on call. Does that answer the noble Lord's question?

LORD LUCAS OF CHILWORTH

Approximately, it is quite enough. I cannot expect more.

VISCOUNT WOOLTON

I hope that I have now answered every question except the very important one put by the noble Lord, Lord Ogmore, about trade within the Empire. I yield to no one in my desire to see Empire trade developed, but this is not the only way in which Empire trade can be developed. It cannot be developed only by our placing long-term contracts forward. The Empire Cotton Growing Association, which I have known for very many years, made considerable developments in this field before there was any question of bulk buying being a necessity. I hope that noble Lords will not think that, because we give up this experiment (which arose really out of war-time necessity, and was subsequently carried on by the previous Government), we do not want to see Empire trade developed. We feel that with growing freedom there may be an advantage to this trade. Certainly we cannot continue to face these very large expenses by the Raw Cotton Commission—£22½ million this year and a somewhat similar figure for the previous year. These are very high expenses to put upon a nation. Surely there are methods other than this by which we can develop Empire trade. We are most anxious to develop that trade.

I was most interested to hear Lord Ogmore's suggestion—and, indeed, I shall take note of it—that we should enter into bargains with the Colonies and say, "If you do not take our cotton goods we will not buy your cotton." I hope we may, within the Commonwealth, move towards the same result by somewhat less ferocious methods, as I am sure the nob1e Lord, Lord Ogmore, also desires. Doubtless he put this suggestion forward merely as one means whereby that might be done.

LORD OGMORE

What the noble Viscount has said is a complete travesty of my suggestion. I said that if we are helping them by taking their raw cotton, they are more likely to help us, even though the price is against them, in taking our goods—which, as the noble Viscount knows, are very likely to be quite priced out by cheap Japanese cottons. They are more likely to help us if we are stabilising their raw cotton production. I should be the last person to threaten the Colonies in any shape or form. The noble Viscount is really rather unfair.

VISCOUNT WOOLTON

I did not mean to be unfair to the noble Lord; I only said that we might adopt other methods. I am sure that he would be glad to have other methods adopted. I can add little more, from my own knowledge on this subject, to your Lordships' deliberations and I hope you will now be good enough to pass this Order.

LORD LUCAS OF CHILWORTH

Before the noble Viscount sits down may I offer him an apology? I should certainly have let him have a list of the points I wished to raise. I did not see the Order until this morning, because my attention has been somewhat distracted by a rather serious family incident during this last fortnight.

VISCOUNT WOOLTON

I am very sorry; and I can only congratulate the noble Lord on the way in which, without any preparations at all, he got right to the heart of the subject and asked me such very awkward questions.

On Question, Motion agreed to.

Back to