§ 2.47 p.m.
§ Order of the Day for the Second Reading read.
§ THE CHANCELLOR OF THE DUCHY OF LANCASTER (VISCOUNT WOOLTON)
My Lords, the Bill I have the pleasure of commending to your Lordships is of no great length, but I think your Lordships will agree that it is a Bill of very considerable importance. It comes to us after a most careful examination in another place, where it had two and a half days of discussion on the Floor of the House and ten days in Standing Committee—forty hours in all: and Members of another place criticised and supported the Bill to the tune of 850 columns of Hansard. I hope that it may move a little more quickly in your Lordships' House.
This Bill is a major step in carrying out the Government's policy of restoring to private hands trade in all those commodities which, under the stress of war, had of necessity to be handled by Government. But—and we must face the fact—it is more than this: it is a reversal of the policy that noble Lords opposite, in pursuance of their beliefs, thought was the best policy for the country to pursue. They passed the Cotton Act, 1947, intending that cotton should he continually traded in by Government. On many occasions I have suggested to your Lordships that Bills which I have had the pleasure of introducing might meet with a non-Party approach. I have no such hopes in this case—indeed, it would be improper. But I hope that noble Lords opposite, and the country, will recognise that, while we may disagree so fundamentally from our predecessors in a matter of policy, we have not rushed into the business of the reversal of the previous Government's policy in this matter. There has been no haste in the introduction of the Bill. I am sure that noble Lords who sit on this side of the House have seen the necessity for this Bill, because it rests on our conviction that trade in those commodities which are the life-blood of industry in this country is best carried out by those who live by the industry and devote their lives to mastering the intricacies of it. And when we come to the cotton trade, I assure your Lordships that it is full of 182 intricacies. Furthermore, it is best carried out by those who are willing to take the risks involved in trading.
In the case of cotton, however, there is another reason why we thought it was important to introduce this Bill, and why we feel that the policy of restoring private trading is right. As your Lordships will know, I have a particular interest in Liverpool. I have been associated with its commerce, its insurance and its banking for many years, and I know something of the services that the merchants of Liverpool have provided in the past for the whole world. This has not been just a Liverpool Cotton Exchange; it was, in fact, the great international market for cotton—the market of the whole world. It was on that account that some of us felt particular pain, as well as regret, when, in pursuance of their political beliefs, the Party of noble Lords opposite thought it advisable to change this old-established process and to close the market.
§ LORD CALVERLEY
I am sorry to interrupt the noble Viscount, but was not this policy inaugurated by the all-Party Government during the war, and not simply by the Labour Party?
§ VISCOUNT WOOLTON
Perhaps the noble Lord did not follow me. I was talking about the Cotton Bill that was introduced in 1947, during the period when the Party of noble Lords opposite were in power. The beginning of trading in cotton by Government occurred during the war—the noble Lord is quite right about that. I have never disguised from your Lordships my view that during the period of the war Government trading was necessary. But I was referring to the establishment of public trading by Act of Parliament, under the 1947 Act; and that, I am sure the noble Lord will agree, was a Socialist measure. To return to the value that this international market had for this country. It brought great benefits of banking and benefits of insurance, and visible and invisible exports which were of considerable value. We have now lost those things, to a large extent, with regard to cotton in Liverpool. In my opinion, there is no reason why, over a period of time—and it will take sonic time—Liverpool should not regain its position in the world; or why, once 183 again, we should not have in this country the great cotton market of the world, bringing employment to the people of this country and, as I think, considerable prosperity to all who are engaged in this trade. This Bill is a step in that direction.
If I am asked for further arguments as to why we prefer private trade to public trade, then I fall back on the strict financial argument. Whilst it is quite easy for a public monopoly to make profits on a rising market, I believe that it is inevitable that, with a falling market, the losses they make will be greater than the profits they can make on a rising market. This is not an issue of competence. I believe that it is inevitable in this form of public trading. It is inevitable because the public monopoly trader must always, since he is a monopoly trader, protect himself from the criticism of not having a sufficient stock, and therefore holds stocks at a much higher level than private traders would.
I feel that the Raw Cotton Commission have done everything that they could do. I should not like it to be thought that the remarks I am making are a criticism of the competence of the Raw Cotton Commission, or of the skill with which they have carried out their work. I should like to pay tribute to Sir Ralph Lacey, who took over at a difficult time and has done remarkably good work, and to the members of the Commission and the staff, all of whom, I believe, have done everything that we asked them to do. But I must add this. At what a cost have they done it! The last published accounts, which relate to the period ending August 31, 1952, show a loss of£25 million on the year's working; and the accounts for the year ending 1953 (which I shall presently lay before Parliament) will show a further loss of £22 million. That represents nearly £50 million in two years in this one commodity. That is something which I am sure the noble Lord, Lord Lucas of Chilworth, whose whole training has been in the world of business and commerce, will find it difficult to swallow. I am anxious to be scrupulously fair about this, and not just to take the years that happen to be rather calamitous. Therefore, let me tell your Lordships that if you take the whole period of six years it is not 184 quite so bad: in that period there is a net loss of £41 million. Those are the facts; and this last fact, the great drain on the rest of the community, is one that I find quite unanswerable, although perhaps noble Lords opposite will take a different view.
Let me now come to the Bill. This Bill does two things. It takes away from the Commission their monopoly powers and the duties and obligations imposed upon them by the Act of 1947, as a consequence of the monopoly position given to the Commission by that Act. In place of this, it empowers the Commission for the rest of their existence to be a normal trader in cotton. It is necessary to give the Commission continuing powers to trade until they are wound up because of the process by which we have reached the stage of introducing this legislation. Your Lordships will remember that, because of the foreign exchange position which we found when we came into office, we were unable to say at once that we would remove restrictions which, quite apart from the position of the Raw Cotton Commission, made it quite impossible for the Liverpool futures market to operate. We therefore proceeded by stages, and with the help and consent of all sides of the cotton industry we made use of certain exceptional provisions of the 1947 Act to allow spinners a choice as to whether they would continue to buy their cotton from the Raw Cotton Commission or would proceed to trade on their own account. We had, however, to arrange that during this interim period the Raw Cotton Commission should continue to provide for all spinners the cover against fluctuations in the price of raw cotton which it is the normal function of a futures market to give. Under these arrangements, spinners made their choice for a year at a time, and in the first year about 30 per cent, of the cotton was bought directly—that is, not through the Commission. But when we came to the second year, the proportion then rose to over 50 per cent. We accepted the recommendation that for this second year—which is the cotton year in which we now find ourselves, and which will not end until the end of August—the Commission should continue to supply spinners who wish to buy from it. For this reason, we must put the Commission in the position to act as a 185 buyer. We owe that as a matter of faith to the spinners who wanted to stay in.
Your Lordships will perhaps ask me why these provisions are made retrospective to September 1, 1953, for none of us likes retrospective legislation. We must face the facts. We have made use of exceptional provisions in the 1947 Act. Let me tell your Lordships that we have scrupulously observed the procedure laid down in the Act for doing so, and I hope that we have been right. We think we had better be safe, as well as right. The fact remains that the Act of 1947 never contemplated the situation in which less than half of the cotton was supplied by the Commission, and we therefore felt that it was right to make these particular provisions retrospective to the date to which the situation began to apply.
The second thing the Bill does is to enable my right honourable friend the President of the Board of Track, and myself, as Minister of Materials, if at any time we are satisfied that it is in the public interest to do so, to make an Order for the winding up of the Commission. This Order must be laid in draft before both Houses of Parliament, and each House must be invited to pass an Affirmative Resolution approving it. It will therefore be subject to full debate before it becomes effective. I announced in the debate on the Address that it was our view that the Commission should cease active trading at the end of August of this year—that is to say, the end of the present cotton year—and should be wound up as soon as possible thereafter. That is still our view, and we intend to make arrangements accordingly. But, of course, when the time to make the Order comes, we shall have to apply ourselves to the question of whether any fresh circumstances have then arisen of sufficient gravity to make us feel that the public interest requires some postponement. I do not foresee any such circumstances, but it is well to take the necessary powers and precautions.
The remainder of this short Bill is devoted to machinery. I do not say that the machinery is not of importance, but I have already covered the two main points in the Bill. Your Lordships may have heard some rumours of discussions in another place on the subject of compensation for the Commission's staff. The Bill provides for compensation to 186 be paid to those members of the staff who lose their employment as the consequence of the Government's policy. Unfortunately, the Commission made compensation payments prematurely in some fifty-six cases. There can be no possible excuse for this, and I offer none, except that apparently the members of the Commission were just anticipating the benevolence of Parliament. We are quite certain that your Lordships would wish to give compensation to people who have been deprived of their jobs and who most certainly merited it. That, I agree at once, was no excuse for their doing it. But they have done it and, therefore, since none of us would wish to deprive the persons concerned of their rights, the consequence is this retrospective provision which now appeals in the Bill to cover this unfortunate, happening, of which I hope your Lordships will not take too severely critical a view.
I have talked about the reopening of the Liverpool Cotton Exchange, but this Bill does not, and could not, make provision for the reopening of that market. All that the Government can do is to put the market in a position to reopen. But it is our hope and our wish that when this Bill has been passed the Liverpool market will reopen, and it is our intention that the Commission's cover scheme shall cease to operate at the end of August. As I announced in the debate on the Address, the Government now find it possible to allow cotton from all sources, including the United States, to be imported freely for consumption in this country as from September 1 next. The only restriction Which we shall find it necessary to impose is that foreign operators, while having full access to the futures market for hedging purposes, will not be able to export from this country dollar cotton which they acquire in this country unless they make payment for it in dollars.
I am assured by the Liverpool Cotton Association that the market can and will work in these circumstances, and furthermore, that if at any time when the market has got into full operation we have, unfortunately, to reimpose some restrictions on the importation of dollar cotton, means could be devised which would avoid the closure of the market, provided that the restrictions were not too drastic and did not last too long. Of course, your Lordships will realise that 187 if they were too drastic, and if they were going to last too long, we should be having to take drastic and unpleasant action in many other parts of our economy as well as those concerning the cotton market. The Liverpool Cotton Association have announced that, subject to the passage of this Bill, they propose to reopen the futures market for dealing in October positions as from May 18. I was glad to hear this morning, in a private letter, that a great conference of foreign users of cotton will be held in this country at that time. That may do something to help our trade.
I am aware that there are fears in Lancashire—I should be surprised if there were not. After all, who would not like to be served by suppliers of raw materials who were prepared to carry stocks and to take losses on the scale which I have indicated to your Lordships this afternoon, and simultaneously to provide him with cover against fluctuations in the prices of raw materials—all at the expense of the taxpayer? But I do not think that Lancashire spinners need get unduly alarmed. I am convinced that the resources and enterprise of Lancashire are such that they will soon find that the freedom they will gain, to go out and get for themselves precisely the cotton they want, at the time they want it, and to make their own arrangements in a free and stimulating atmosphere of competition, will more than compensate them for any loss they may sustain by the removal of facilities so expensively provided by the Commission. It is in that atmosphere and those conditions that Lancashire built up a world-wide reputation for its cotton goods, and I have no fear for the future.
There is the fear that in the particular circumstances of the moment, in relation, for example, to long staple Egyptian and Sudanese cotton, this is not the right time to make any change. There never was a right time in the minds of some people to make a change—noble Lords opposite have often said that about us. Of course, there will be difficulties in this field, but they arise from the circumstances of the case; and they are just as great for the Raw Cotton Commission as they will be for individuals. In fact, I wonder whether, with the greater flexibility, an enterprising individual who will be able to go back to his great sources of 188 supply and, maybe, find those sources very willing to resume private trade, will not in the event prove to be better off. The difficulties which Liverpool will find in providing an adequate hedge for these types of cotton are no greater than the difficulties which the Commission at present find or which will prevail in every cotton market of the world. I am sure there would be no virtue in postponing the winding-up of the Commission because of what are, we hope, only temporary difficulties in one of the cotton markets of the world.
Then some fears have been expressed about the use of Colonial cotton, which has developed enormously in Lancashire in recent years. We all want to see this development but some have wondered whether it will suffer from the withdrawal of the Commission. Well, my Lords, I am one of those who believe in Empire Trade, and I am anxious to foster Empire trade; and one of the first things I did when I was facing this problem was to make that precise inquiry. I was informed that Colonial cottons have made their way in Lancashire on their own merits, and that they will certainly retain their position, if they sell at competitive prices. There are three long-term contracts outstanding with Nigeria, Nyasaland and Aden, and there may be some doubt as to what will happen to these. The answer is simple: the Government will implement these contracts; they have entered into them and they will implement them, if the Colonial authorities desire that they should do so. They will implement them even after the Raw Cotton Commission have gone out of business; and negotiations are now proceeding through the Colonial Office with these Governments in order to ascertain their wishes in the matter. Those are contracts into which we have already entered. Let me add that it is not the intention of the Government to enter into any other contracts with the Colonial authorities.
I think I have said everything that I might with value say about this Bill to commend it to your Lordships. As a Government, we had no alternative; we were obliged to bring in this Bill. It is an article of faith that we should restore private trading in this matter, and particularly in this trade which now occupies such a high position in Britain. It is a trade which has earned for itself a very great reputation in the past. I firmly 189 believe that, once freedom is restored to the trade, it will find itself in more prosperous conditions than it has enjoyed, even under the protective umbrella which noble Lords opposite were good enough to give it arising out of the necessities of war. I beg to move that the Bill he now read a second time.
§ Moved, That the Bill be now read 2.— (Viscount Woo1ton.)
§ 3.18 p.m.
§ LORD LUCAS OF CHILWORTH
My Lords, I am sure that we are all deeply indebted to the noble Viscount for the manner in which he has introduced this Bill to your Lordships' House. It was, if I may say so with respect, a masterly exhibition of restraint, because, knowing the noble Viscount as I do, I know how deeply he feels on this matter. I thought it was a moderate and modest speech, and I will try to follow his example. I ask the indulgence not only of the noble Viscount but of all noble Lords, because I occupy rather the position of the humble apprentice in front of the great master—for who knows Liverpool and the cotton industry better than the noble Viscount? I will try to be constructive in my approach. I do not agree with a great deal of what the noble Viscount has said. During the course of the remarks that I shall make I want to ask Her Majesty's Government some stern and plain questions. I intend no disrespect to the noble Lord who is going to wind up this debate when I say that I should have preferred the master to answer the questions—because they will require answering, and answering, as I hope, with as much honesty as I shall try to ask them.
The noble Viscount has rightly said that the Raw Cotton Commission was set up in 1947. But the Liverpool Cotton Exchange was closed down by the Coalition Government in 1940. The acute difficulties that were present in 1951 when the Party opposite came into power were such that they could not possibly bring back the Liverpool Cotton Exchange, no matter what speeches were made by the noble Viscount's right honourable friend the Prime Minister in the Election campaign or, in point of fact, by the noble Viscount himself. The President of the Board of Trade has admitted publicly that to have reintroduced the Liverpool Cotton Exchange in 1951 would have been disastrous. Those were his very 190 words. But are conditions to-day any more favourable? Is the dollar position so favourable, is the balance of payments position so favourable, that we can afford to open a market which will be tied to an American contract? I sincerely ask that question. I know that one spokesman of the Government—not the noble Viscount—has said that the introduction of this Bill is a sign of our growing economic strength. Have we grown so strong that we can do this? I beg leave to doubt it.
The noble Viscount has said that it may be too much to hope that we can bring a non-Party approach to this problem. I am going to make the attempt. As the noble Viscount has said, this Bill could be described as a part of Her Majesty's Government's intention to de-nationalise various things. I suppose it could be said that either you believe in nationalisation or you do not; that either you believe that bulk purchase by the State or by a State organisation on a long-term contract is the right way, or you believe that private enterprise, alone and unadulterated, is the only medium. But I do not believe the problem is quite so simple as that. I believe that events in the world to-day and in the future will make the dogmatic nationaliser and the equally dogmatic anti-nationaliser or de-nationaliser look extremely foolish. The noble Viscount has said that this Bill is "an article of faith"—that was, I think, the exact expression he used. The Government had to bring in this Bill; it was "an article of faith." Irrespective of whether the time is the right time, or whether the method is the right method, it is "an article of faith," the Ark of the Covenant of the Conservative Party— "We must bring it in." Now who is really being dogmatic and doctrinaire? We are not living in the same world to-day as we were in 1938. The noble Viscount believes that the salvation of this country is to make a dash for freedom—
§ LORD LUCAS OF CHILWORTH
—a clash for the good old days of before the war. I would have far more sympathy with that point of view if every other country in the world made a dash in the same direction, but that is not happening.
191 Here we have the complexities of international trade. Some of the conditions which the noble Viscount said existed when the Raw Cotton Commission was set up I quite agree have disappeared—we are supposed to be at peace. But other considerations, outside our control, have arisen. We live in a most peculiar economic age. Surely nobody knows that better than the responsible Ministers of Her Majesty's Government.
The first question I wish to ask the noble Viscount is: Is this the time for the noble Viscount to play the attractive role of Atalanta and chase after this golden apple? I seriously question it. That is why I am glad that this Bill—and after all, although it is a Bill of six clauses the meat is all in one—is permissive. It gives a discretion to the noble Viscount, in his capacity as Minister of Materials, and to his colleague, the President of the Board of Trade, that if they think it is in the national interest they may dissolve the Raw Cotton Commission, at some date unnamed. Is that an escape clause? I hope it is. Are the Government really saying: We hope it will be in the national interest to bring the futures market back into the Liverpool cotton arena at the end of August or September, in time for the next buying season, but we are not quite certain. Therefore we are going to leave it to the discretion of the noble Viscount, in his capacity as Minister of Materials, and the President of the Board of Trade, if they consider at that time it is in the public interest "? I have no quarrel with that. I think it is exceptionally wise and I hope the noble Viscount, perhaps at that time, will agree that it is wise.
I said that I was going to try not to adopt a Party approach to this matter. The noble Lord said to me just now that I had made a lot of money, or something to that effect. I have made many fortunes in my life. Many have been in anticipation of the future which has never been realised, and the others have been in retrospect of the past and by being wise after the event. The noble Viscount very fairly—I will grant him that—told your Lordships that the Raw Cotton Commission had lost £41 million. Well, my Lords, £41 million is £41 million, and it takes a lot of explaining away. I am not going to attempt to do that, although 192 the noble Viscount asked me what I thought about it. I will tell your Lordships one thing that I think I might have done. Like the noble Viscount, I stand here in 1954—a different date from 1947, 1948, 1949 and 1950. But, speaking now from this comfortable position, if I had been in control of the Raw Cotton Commission—which, thank goodness! I was not—I should have made a lot of money in the boom, instead of letting the profit go to the Lancashire cotton spinners. If I have a fault to find with the trading policy of the Raw Cotton Commission, it is that they sold too low and that the spinners of Lancashire made a lot of money which, by rights, should have gone into the coffers of the Raw Cotton Commission. The noble Viscount and I know from experience in our own businesses, that never was there a boom in this world that was not followed by some kind of slump.
A second point is this. The noble Viscount has mentioned contracting out. I am not going to chide him in regard to retrospective legislation; this Bill makes "an honest woman of the President of the Board of Trade or the noble Viscount, or both, and we are not going to argue about that. The noble Viscount and his colleagues have repented of their sins and we give them absolution, and that is all I am going to say about it. But let us not be under any illusion that contracting out started only twelve months ago; it started in 1951. Many of the buyers did not buy from the Raw Cotton Commission; they bought independently, and although the Raw Cotton Commission were robbed of their customers, they were not robbed of their obligations until this Bill was brought forward. I think it better to put the facts on the other side, although I do not say they explain the whole matter.
Another point is that from the day the Prime Minister made his speech in Liverpool, followed by the remarks of the noble Viscount, everybody on the Raw Cotton Commission was looking for another job. Do you blame them? I do not. They knew that one day they would get the sack—they were bound to, because the noble Viscount had said so. He had said that at some future date the Raw Cotton Commission was going to be dissolved. Exactly the same thing occurred in the British Transport Commission. I state this as a fact; I do not want to 193 make any Party capital out of it. As soon as the Government of the day said:" We are going to denationalise road transport," everybody in the British Transport Commission who had any sense and who had a good job, looked around for another one. After all, that is human nature. The noble Viscount and I would have done precisely the same thing. Sa, for the two years that the noble Viscount has been in power, the Raw Cotton Commission have worked under insuperable difficulties which even the noble Viscount and I, with all our wisdom, would have been hard put to to solve. I think we had better bear those facts in mind.
My Lords, to return to the Bill. I said I was going to try to take a non-Party approach; therefore I use this yardstick by which to measure the Bill, and not whether or no my Party created the Raw Cotton Commission. I do not say it is" an article of faith "so far as I am concerned. I ask: Does this Bill help the Lancashire cotton industry? Does this Bill ensure supplies of the right quantity and quality to the Lancashire cotton industry? Does it help our balance of payments position? Does it advance the development of our Colonies and our trade with our Commonwealth brethren, and will it promote their economic advancement and, in turn, allow them to increase their purchases from us? Mir Lords, in my answer to every one of those questions I beg to differ from the noble Viscount. I answer them all in the negative, and I hope to prove why.
I have said that Clause 4 is really the substance of this Bill. It reintroduces; the Liverpool Cotton Exchange and gives power to the noble Viscount and his, colleagues to dissolve the Raw Cotton Commission—in other words, we are going to put the whole of the cotton industry into the race to be run. Let us deal with the question of futures. Again, I compliment the noble Viscount on keeping his remarks free from all technical detail. I think he knows so much about this subject that, as we are all apt to do in regard to our own pet subject, he suffers under the delusion that everybody knows as much as he does. I would suggest that many people were mystified about what the noble Viscount meant when he spoke about futures—years ago I should have been mystified also. Futures is a very simple matter —at least, until some of the Liverpool 194 Cotton Exchange people get hold of it, and then it gets rather complicated. But it is really an insurance. When a manufacturer or a spinner enters into a contract to supply goods at some future date he, can enter into a futures contract to buy his cotton. If the price, of cotton at that future date falls, he makes more money than he bargained for on his trading contract, but he loses on his futures contract; while if the reverse happens and the price of cotton goes up, he loses on his trading contract but gains on his futures contract. In other words, it is simply an insurance against fluctuation in the price of his raw material.
When the Liverpool Cotton Exchange opens, it is going to be tied to a purely American contract. I do not want to exaggerate, but it is more likely to tie the Lancashire cotton industry to American growth than otherwise. Is that wise? Suppose we have a recession. Suppose there is a dollar shortage. The noble Viscount mentioned all these things, but his answers to the questions he asked himself were not, in my opinion, very satisfactory. What is going to happen if we have a dollar shortage? Suppose we have to ration dollars, who is going to share out the amount of dollars allowed by the Treasury to the Liverpool cotton people in order to buy American cotton? Who is going to share them out amongst all the merchants, and on what basis are they going to be shared? A very dangerous situation arises. The rules of the Liverpool Cotton Association have now been altered. Formerly, it was open only to private partnerships; now it is open to limited companies which can have up to 49 per cent. of foreign capital, And we know, as well as the noble Viscount, that a great effort—perhaps I should not say a great effort but an effort; I do not want to overstate the case—has been made to get American capital into the Liverpool cotton industry. Does this mean that not only are we to be tied to American supplies but that we are going, very likely, to be tied to particular American suppliers? I cannot think that that will be advantageous to the Lancashire cotton industry.
§ VISCOUNT WOOLTON
My Lords, I do not wish to interrupt the noble Lord, who is obviously being very fair, but I feel that perhaps he would want to be 195 careful not to suggest that it would be only American cotton that would be dealt with because the contract had an American base. As the noble Lord has said, this subject is so technical that it is almost impossible—indeed, it would be an impertinence—to burden the House with technical details of it. But the noble Lord knows that all the other grades of cotton have an association with American prices, and although a contract for futures may be on the American base there will be corresponding margins for other growths which will enable trade to be done in those places. I hope that I have not unduly interrupted the noble Lord, but I wanted to make it clear that we were not going to trade only in American cotton.
§ LORD LUCAS OF CHILWORTH
I am grateful to the noble Viscount. I want to be strictly fair. I was coming to the matter which he has mentioned. This subject is far too important and far too serious to be used as a shuttlecock between the two sides of this House. I know that well. But I want to point out the difficulties. Suppose that at some future date America imposes the export quotas once again. American industrial economy, as your Lordships know, is a peculiar thing, and America's imposition of the export quota was one of the factors that really upset the cotton industry over here and started the very serious position which has developed. Suppose it happens again; where are we?
Now I come to the point which the noble Viscount has just made. There will be no futures market on the Liverpool Cotton Exchange for Commonwealth or Colonial cotton. So who is going to import it? Who is going to import Colonial or Commonwealth cotton when it is not tenderable against a futures contract? I think it is right to say that the Chairman of the Liverpool Cotton Association has publicly stated that in twelve to eighteen months they might start considering having a futures market for Colonial and Commonwealth cotton. So, as I said originally, will not this set-up tend to make us still more dependent upon American cotton? And if we can have other growths in Lancashire, why have those who have contracted out for two years not purchased them? I am told on excellent authority that there is not enough cotton in stock in Lancashire, in 196 Liverpool, other than that carried by the Raw Cotton Commission, to keep the mills of Lancashire running for a week. The contractors out have had the opportunity to buy American-aid cotton for sterling and they have not taken it. The only purchasers of American cotton for sterling have been the Raw Cotton Commission. Now Lancashire will have to pay American dollars for cotton, whereas if they had had enterprise and foresight—and the noble Viscount has said that they have—they could have paid for this cotton in sterling during the last few months. So the noble Viscount must forgive me if I beg to doubt the willingness of these merchant adventurers.
I shall come back in a moment to the question of stocks, but I want to say something about long-term contracts and bulk buying. The noble Viscount, with strict accuracy, has informed the House that the Government intend to honour existing contracts for bulk purchases on long-term bases I think the noble Viscount said they are to run for anything from two to three years. He said that they will be honoured. I want to ask the noble Viscount, in terms, by whom are they going to be honoured, and how? Are they going to be honoured when he puts the Raw Cotton Commission to death? And, be it remembered, he himself is going to commit suicide at some not too distant date—I mean only, of course, that he is going to commit suicide as Minister of Materials: we hope that he will be with us for many more years to come. But the Ministry of Materials is going out of existence. Who is going to honour these contracts? I should like to know, and so would Lancashire, because the only hint that has been given came from the noble Viscount's right honourable friend the Minister of State at the Board of Trade, who had said that it should not be beyond the wit of man to devise some method for carrying on these contracts for their unexpired period. But it has been beyond the wit of Her Majesty's Government, up to now, to say how.
The noble Viscount, again with that strict fairness which has been characteristic of his whole speech, has said, "But we do not intend to renew." That is where we on this side of the House join issue with him. I think the noble Viscount said that the expansion of 197 Colonial and Commonwealth cotton-growing over the past ten years has been one of the great features of Colonial development. I say, without any equivocation, that that expansion has been due entirely to the long-term bulk-buying contracts of the Raw Cotton Commission. But for those contracts, which gave security to the Colonies in which these developments were being undertaken, there would have been as much cotton development in the Colonies to-day, in 1954, as there was in 1937 and 1938—and that was nil. Before the war, it was impossible to get a futures contract for Colonial cotton because there was no market and no stability.
What did the Colonial Secretary say about this? In another place, on January 30, 1952, he was asked a specific question about the development of Colonial cotton production, and he made an interesting statement which I beg noble Lords to read. Talking about the British West Indies, the right honourable gentleman said (OFFICIAL REPORT, Commons, Vol. 498, col. 175):The British West Indies are the sole producers of Sea Island cotton, the market for which is limited. Improvements here are concentrated on the introduction of new strains to improve quality, and expansion of output beyond 5.000 bales will depend upon market demand.''The right honourable gentleman went on to say this:Certain Colonial producers, namely Nigeria, Nyasaland arid the Aden Protectorate, have entered into long-term contracts with the United Kingdom Raw Cotton Commission, which, by offering a stable market for some years ahead "—note those words—serve to encourage expansion of production In addition advances by the Raw Cotton Come mission have been of considerable help it starting irrigated cotton production in the Aden Protectorate.That is what the noble Viscount now proposes to cut off. He has said that the Government do not propose to reintroduce long-term contracts. I would ask him: Do the Government think the Liverpool speculator is going to do what the Raw Cotton Commission did in the British West Indies—that is, bought, year after year, the West Indian cotton crop before ever it was planted? Are they going to do that? I fail to understand a Party like the Conservative Party, which has been so enthusiastic for Colonial 198 development. Here is one of the greatest Colonial developments we have had in recent history, and because of "an article of faith," the Ark of the Covenant of the Conservative Party, all that is going to be thrown away.
I have here some interesting figures about cotton development in the Sudan. I suppose there is no other place in the world where vie want our reputation to stand higher to-day than in the Sudan—I speak with deference in front of my noble friend Lord Henderson, who makes a speciality of foreign affairs. I know nothing about foreign affairs, but I am quite certain of this fact: that a great deal of trouble is caused in any country if another country practises commercial chicanery. I am told that there is not a bale of Sudanese cotton in Lancashire to-day except that which is held by the Raw Cotton Commission. Where is the cotton going?—to General Neguib's agents. I want to be careful. I do not want to cause undue trouble.
§ LORD LUCAS OF CHILWORTH
The noble Viscount is quite right: he knows that I would not. As soon as the Government's proposals came out, all the countries which had developed cotton, such as the Sudan, saw that the security of their market was going, and they turned somewhere else. There is not a bale of Sudanese cotton in the market to-day, because Alexandria is practically cornering it. What Britain is going to do without Sudanese cotton, I do not know.
Take the example of Uganda. Our imports of cotton from Uganda in 1951 amounted to £10 million, and Japanese imports from Uganda were £250,000. To-day our cotton imports from Uganda amount to £2 million, and Japanese imports have gone up by 500 per cent. I happen to be one of those who do not look too unfavourably on the Government's treaty With Japan. Perhaps that is because I do not earn my living in Lancashire. I do not think any Lancashire man, except perhaps the noble Viscount, Lord Woolton (and I do not know what lie would say privately), would agree with me. Let us admit, for the sake of argument, that the Japanese I treaty is for the benefit of the 199 country as a whole. Nobody, however, can say that it is for the benefit of Lancashire. If the noble Viscount, Lord Woolton, thinks that the Lancashire cotton operatives, and the individual factory owners in Lancashire, regard the introduction of this Bill as anything but adding insult to injury, I would beg him to go and consult some of them. The noble Viscount may say that this Bill has received the support of the whole of the cotton trade in Lancashire. If he refers to the spinning combines, he may be right. The Bill will work in favour of the spinning combines.
§ LORD LUCAS OF CHILWORTH
I said that if the noble Viscount did say that, he would be right, because the Bill will work in favour of the spinning combines. Under this Bill they will be able, with their financial resources, to push the small people out of business. They do not comprise the whole of the trade, but, if they so desire, they can have the swings of the futures and the roundabouts of large-scale trading-. But what has the Lancashire cotton operative got? He has got the swings of a job and the roundabouts of the" dole." I can assure the noble Viscount that Lancashire cotton operatives are apprehensive about this Bill.
I should now like to say a word or two about stocks. Who is going to carry them? The noble Viscount did not say. Are they to be bought ex-ship? I have just said, and on excellent authority, that there is not enough cotton in stock in Lancashire, other than that which is in the Raw Cotton Commission, to keep the Lancashire mills going for a week. The contractors-out who have had the opportunity of purchase in world markets for two growing seasons have not brought in a bale—and, I am told, do not intend to do so. What is the policy of Her Majesty's Government? I find it difficult to understand. I believe it is precisely what the noble Viscount, Lord Woolton, in his transparent honesty, has said this afternoon. It is "an article of faith"; they must set a race and a contest of "Every man for himself, and the devil take the hindmost"; they must have this, whether it is good or not, and, in the 200 words of a great ornament of the Conservative Party, "Damn the consequences."
That I believe, because I know that there is a sizeable number of Conservative industrialists outside the cotton industry who view the future with apprehension. As I have said before, we are living in very difficult times. There are some noble Lords who sit opposite who see the future trade of this country under an extended scheme of Imperial Preference. I do not agree. I believe that the future of the trade of this country lies in long-term bulk agreements. I do not see how we can exist in this country in the future unless we play with those who will play with us. We cannot expect to put up tariffs against imports; we are not in a position as a country to do that —it only increases prices, increases the cost of living and bedevils the whole of our economy. We have got to find ways of having favourable contracts with those who will have favourable contracts with us.
I well recall the noble Viscount, Lord Swinton, saying, on many occasions that the future of this country depends upon the growth of our Colonies—and this is the way the Government propose to do it! I happened to read the Second Reading speech of the President of the Board of Trade in another place, and one of the reasons he gave for this Bill was that we had to have either the Raw Cotton Commission, with all its monopolistic powers, and so on, or, on the other side, complete freedom. This is what the President of the Board of Trade said (OFFICIAL REPORT, Commons, Vol. 520 (No. 12), col. 1745):I very much doubt the propriety, and certainly the wisdom, of taking money from the general body of taxpayers and using it to guarantee businessmen, trading privately and for profit, against changes in the price of their raw material.I was hoping that the noble Viscount, Lord Woolton, would repeat those words; but he did not. I suspect that the reason he did not is because he does not agree with them. The noble Viscount must accept some responsibility for the food and agriculture policy of the Government—that is, to let the taxpayers' money be used for private profit-making. I argued in your Lordships' House, during our debate on the Cinematograph 201 Film Production (Special Loans) Bill, with the noble Lord who is going to wind up this debate. It was then admitted by the noble Viscount. Lord Swinton, that it was a policy of Her Majesty's Government to allow the taxpayers' money to be used for film production; that if it was lost, it was lost; that the film producer came first, and the taxpayers second.
I ask once again: What is the policy of Her Majesty's Government? I say that if this Bill is a sample of their policy, they will rue the day that it was introduced. I look forward to the day when the noble Viscount comes to your Lordships' House in the exercise of his prerogative under this Bill, and I shall listen with interest to see how, in the national interest, he justifies putting the Bill into effect. We shall not divide your Lordships' House this afternoon; we shall do what we have done before, and what is always our practice in your Lordships' House. The other place have passed this Bill, and we shall not divide against it. However, on the future stages of this Bill we shall try to do our duty, which should be the duty of noble Lords opposite. We shall try to ensure the future of the Colonial cotton-growing industry; we shall propose Amendments that will carry on these long-term agreements after they would have expired and we shall also make proposals to try to ensure that there will be a futures market in Commonwealth and Colonial cotton on the Liverpool Cotton Exchange on the day that that Exchange opens.
§ 4.8 p.m.
My Lords, I will endeavour not to keep your Lordships unduly long, but I am anxious to support my noble friend Lord Woolton on this measure. There was certainly one thing said by the noble Lord, Lord Lucas of Chilworth, with which I agree; that is, that a highly complicated and technical matter such as this should not be made a matter for Party politics. It is a thousand pities that that was ever allowed to become the case. We have been told this afternoon how, as a result of the war, it was necessary to close down the Liverpool cotton market in order to put in its place something that was more in keeping with the war-time economy of the day. But that that situation, followed 202 as it was by the deceptive sellers' market and wide margins, should be made the excuse for certain political interests to try to persuade the country that the establishment, as a permanent feature of this country, of monopolistic State-buying authority was the right way in peace time to provide that long-term stability of price which one heard so much about in 1947—something which has been the Eldorado of every industry in regard to its raw materials since time was—is more than regrettable.
Here was a case, I submit, where a negligible proportion of the people of this country appreciated what was being discussed, let alone felt strongly about it. Yet it was a matter that, for one reason or another, was built up into becoming a burning political issue. The pity of it, surely, is this. In 1947, when, with the sellers' market, price was not quite the vital consideration that it has inevitably become to-day, both sides of the House were fundamentally at one in what we wanted. Of course, to-day there is no question about that. We all agree that what we want to-day is concerned with price, because we all know that price can so easily exclude us from the world's markets. We all want the same thing, and I believe it can be stated very simply. We want our cotton industry to be in a position to be able to obtain its cotton under conditions and at a price no less favourable than that at which our competitors overseas can obtain it. The noble Lord, Lord Lucas of Chilworth, I think said exactly the same thing in another way.
But we want more than that. We want to acquire our cotton in the style, quantity and so forth, that is best suited to the particular machinery owned by each individual firm. I know that the noble Lord, Lord Lucas of Chilworth, and his colleagues will agree with me that those are the desirable conditions for which we are all looking. But I should have thought that there are many noble Lords on the opposite side who, if they were honest with themselves, would recognise that the Raw Cotton Commission, for all the skill, energy and effort that its members have put into it does not provide the answer to the question that we pose. I am glad to see that the noble Lord opposite agrees with me so far. I make that point particularly, because I should like to join with both noble Lords who 203 have spoken and pay a tribute to those who have had to operate the Commission under the extremely difficult conditions laid down for them by Parliament in 1947. They have probably done the work exceptionally well—I believe that many individuals in the industry will agree with me there. But the fact remains that their achievements have been at the expense of the taxpayer. We have been told that immense losses —tens of millions of pounds—have been incurred, and those losses amount, in my view, to the very thing that we in this country criticise and frown upon so much in other countries—namely, export subsidies, because, surely, that is all they amount to.
We cannot overlook the fact that such a large proportion of the industry, who were perfectly free either to buy from the Commission or to buy privately, opted to buy privately. Surely, no firm makes a decision of that nature on political grounds. It makes it simply on what will be to the advantage to its industry and those connected with it, whether it be shareholders, employees, or anyone else. From my investigations in Lancashire, I am convinced that there is ample evidence to show that, where firms have decided to opt out and buy privately, the advantage that they looked for has been more than fully achieved. I would not deny for a moment—one could not possibly do so—that the change envisaged with the passing of this Bill bristles with many difficulties. It is right that noble Lords opposite should bring out these problems (it is right that we on this side should do the same) and discuss them. Obviously, it will take time before we can find a machine which will suit the changed circumstances of to-day, to which the noble Lord, Lord Lucas of Chilworth referred, as compared with those of 1938. Perhaps it will be a quite different machine from that which exactly suited the circumstances before the war. But that is no reason for delay. If I had any criticism at all about this proposal it would probably be that the decision has been so long delayed. But I believe that that would be an unfair criticism, because I know only too well the immense amount of work, study, examination and report that have been put into this matter, in order to make quite sure 204 that every possible contingency has been foreseen, considered and, so far as possible, allowed for.
There are one or two points upon which I should like to make a few observations in particular. I suppose that it will not be disputed by anyone that Government buying provokes Government selling. I believe that to be as true of cotton as of any other raw material. Some noble Lords opposite may object to that statement. For myself —and I hope my noble friends will agree with me on this point—I regard such a situation as dangerous. It can all too easily lead to a state of affairs when what are sound trading conditions may be twisted and made subservient to other matters, to the serious and, what is more regrettable, quite unnecessary disadvantage of the country's economy. Let us consider some overseas countries which are large producers of cotton. They might, for one reason or another, decide to withhold the release of that cotton. It might then come about that that cotton would suddenly be released on to the world markets at a price which could cause considerable fluctuations and, perhaps, embarrassment to a young Liverpool market before it had had time to get on to its feet. I am not saying that such a thing will happen; but it is a possibility, and certainly provides no reason for further delay. This is a matter that must be carefully watched, and is something, that we may not have entirely in our hands to control during the first year or so of the new régime.
Towards the end of his remarks the noble Lord, Lord Lucas of Chilworth, said a good deal about financing of stocks. He suggested that the smaller firms might be unable to finance the stocks—at least I understood him to say that—required to carry on their business. I agree that this might will be a problem. Prices are far higher than they were prewar, and therefore to finance their stocks the firms will need to set aside a far greater proportion of their capital. For a year or so, until the Liverpool market has fully got on to its feet, it may be wise for firms to hold slightly larger stocks than they will ultimately do or have been accustomed to do in the last few years. But is there really any fear that after a year or so the Liverpool market will not be able to more than meet 205 the requirements of the firms and the needs of the cotton industry? I am certain that there will be no lack of financial facilities available for any efficient firm whose support can be justified on any reasonable commercial basis—and surely that is the only possible basis on which trade can be contemplated or permitted under to-day's conditions.
The noble Lord, Lord Lucas of Chilworth, said a good deal about the question of the conserving of our dollar resources. The safeguarding of our dollar resources has over the last few years come to be regarded very much as a responsibility of the Government of he day; and I should have thought that one might expect that if Her Majesty's Government were prepared to take a risk of this nature, it was reasonably certain that the matter had been fully explored and found satisfactory. Obviously the point needs to be watched. We have to recognise that the industry will buy its cotton only where it pays it best to do so and in the way in which it will most easily be able to compete in world markets. But a free market will surely give the industry that additional and essential flexibility that no monopoly could possibly be expected to do under any conditions whatsoever. I feel that, once the Liverpool market has been re-established, it will prove to be not a loser of dollars but a not unlucrative source of dollar revenue to this country.
There are one or two other matters to which one might refer. Lord Lucas of Chilworth said a great deal about the basis of futures contracts. I ventured to mention this myself in your Lordships' House during the debate on the Address, after the noble Viscount, Lord Wooltor, had made his statement on what was proposed. I understand now, however, that the hedge which is likely to be offered by the Liverpool market will be no less favourable than that which the Raw Cotton Commission offers in its cover scheme to-day. I do not want to say much about the vexed problem that has arisen over Empire cotton. I understand from Lord Lucas of Chilworth that we shall hear a great deal more of that during the Committee stage of this Bill. I would, however, make this point: that whether or not it is necessary for the Empire growth to be subsidised in some way, I should hardly have thought that 206 it was the responsibility of the Lancashire industry to provide that subsidy.
§ LORD LUCAS OF CHILWORTH
Will the noble Lord forgive me for interrupting? Will he explain what he means by a subsidy?
The noble Lord asks me what I mean. It is a question of paying for these growths coming from the Colonies a higher price than would be paid on a purely commercial basis.
§ LORD LUCAS OF CHILWORTH
The noble Lord must have misunderstood me. What I said was that we wanted to be sure that there was a futures market for the growths from the Colonies and the Commonwealth. That was the burden of our complaint—the fact that there is not one at present.
That, of course, would be another question altogether—the question of futures contracts for Commonwealth growths. I understood him to question whether we should be buying so much dollar cotton—whether we should not be supporting the Empire growths.
§ LORD LUCAS OF CHILWORTH
What I said was that it was in the vital long-term interests of this country to enter into long-term contracts with Colonial and Commonwealth growers so as to encourage their development as cotton growers.
§ VISCOUNT SWINTON
Does the noble Lord really mean that bulk purchasing and a futures market are the same thing?
§ LORD LUCAS OF CHILWORTH
If the noble Viscount had not been indulging in conversation when I was speaking, he would have heard exactly what I said.
I yield to no one in my belief as to the importance of Commonwealth growths; and if the various Commonwealth countries that grow cotton are doing so now on the basis that they; an market their cotton at the rates, prices, and so forth, that the world suppliers regard as favourable, then they will be able to sell more cotton without necessarily having long-term contracts. But that, I have no doubt, will be discussed at some considerable length when we come to the detailed con- 207 sideration of this Bill on the Committee stage. Doubt has been expressed as to whether there will be enough operators and available skill to give the market a fair chance. All I want to say is that the longer the delay generally is allowed to go on, the more this might be regarded as a real danger. But if the determination which I have certainly sensed in Lancashire, to make sure that this new mechanism does its work and fulfils its function, means anything at all, then I am absolutely certain of the outcome. I would merely congratulate my noble friend, in conclusion, on persuading his colleagues—if they needed any persuasion—to take this step and arrive at a decision which, I agree, is, if not an easy decision, an essential one. I am sure Her Majesty's Government will not regret the day on which they made it.
§ 4.28 p.m.
§ LORD BENNETT OF EDGBASTON
My Lords, it may be asked by noble Lords in the textile world why one who for the whole of his working life has been in metal industries should intervene in this debate. There is a saying that the onlooker sees most of the game. I do not entirely agree with that, but I know that the man who is right down at the bottom of a scrum, pushing away for all he is worth, knows little about the game as a whole until someone tells him about it afterwards. I thought it might be useful, therefore, if I spoke for a few minutes, as an ordinary industrialist, about how we regard this particular Lancashire problem, because the metal industries have had similar troubles to go through, and they have not wrecked us yet. Your Lordships know that we have been moving towards freer markets in commodities. There were difficulties to start with, but they were faced; and as a result we find that we are better off than we were before—which is a consideration in these days. Stocks are adequate, and wherever I go I find that there is no desire to go back. Lancashire might perhaps take heart from that.
I have been studying the debate in another place because I was there at the time when the preliminaries of all this went through; and I sensed, as I read the Report of the debate, a natural fear on the other side that this change may 208 have a bad effect on employment. I have the greatest possible sympathy with anyone in the country, particularly in Lancashire, who has a fear of unemployment, because Lancashire, we all admit, had a troublesome experience in the days gone by. It was almost our main source of exports before the First World War. Then, due to the fact that we had supplied large quantities of textile machinery all over the world, the troubles began. When this machinery began to be put into operation, we noticed the effects. At first other countries filled their own markets—which were formerly ours —and then they came into the export markets which we had cultivated and of which they wanted a share. The point I want to press upon my noble friends from Lancashire who are worried about employment is this: that it was not due to lack of raw material that Lancashire had this trouble. In war time, there was full employment, and cotton supplies were controlled by an arrangement, with which we all agreed, made by the Coalition Government. Then came the post-war period, and there was a world shortage of textiles. We all urged Lancashire to get after the market, because there was valuable business in the consumer goods markets—and they did. Then we had an unfortunate world recession in 1952, after the end of the Korean war, when the whole world stopped buying textiles, and Lancashire suffered very badly. We all suffered and had to get over the trouble.
But the difficulty with Lancashire, as I understand it, is that Lancashire has so many towns which are based upon one industry, and one industry only. Industry is not spread. I know, because my own companies were invited to go there during the war and were begged to stop there at the end of the war because Lancashire wanted to diversify her industries. When an area depends upon one industry only, and that industry has a bad time, a wave of distress passes through the district. We missed it in the Midlands because our industries are widely spread. I have the greatest sympathy with Lancashire in their fear that that sort of thing might happen again. But the textile industry is like the others: it is facing intense and growing competition. One thing it needs, above all else, if it is to be able to compete is to get raw materials at the right prices, at world 209 prices. The Raw Cotton Commission have statutory obligations as to stocks. They have had to buy in order to maintain those stocks, and when it came to selling there has been the necessary averaging of price. That is all very well when prices go up during the period of a sellers' market, but when the picture changes, and we swing over to a buyers' market, it is a different question. To-day, dissatisfaction is felt in Lancashire because of the fear that they will have to pay more for their raw material than they did before.
May I read what was said by Lieutenant-Colonel Schofield, who is the Member of Parliament for Rochdale, in another place (OFFICIAL REPORT, Commons, Vol. 520 (No. 12), col. 1816):It is bad enough for us to have to compete with the low wages of Japan, but if British spinners are ever again forced into having to pay more for their raw cotton than the Japanese have to pay for theirs, any efforts to meet Japanese competition would be absolutely hopeless.He went on to say:In 1950,"—that is during the period when we could afford to take risks because of a sellers' market—in fact British spinners were having to pay anything from 5d. to 8½d. per lb. more for American cotton than world prices.If I were a Lancashire cotton spinner and found myself in that position, I think I should begin to get worried. So, after the Hopkins Report, it was decided to allow certain purchases to be made outside the Commission. In the first year, I am told, some 30 per cent. of spinners contracted out, and in the second year the proportion was between 50 and 60 per cent. There is a growing feeling that that system of the Government taking part and the free market taking the risk cannot go on for ever.
We are therefore faced with the problem of what is to be done. Are we to go back to monopoly? Are we to go on drifting along, as some people would suggest, and see what turns up, or are we to return to free buying, which means opening the Liverpool Cotton Exchange? Naturally, your Lordships will not expect me to argue in favour of going hack to monopoly. The second alternative, as I have tried to show, is not proving to be satisfactory. For one thing, it is costing us, as the noble Viscount, Lord Woolton, said, and as has been agreed, between 210 £20 million and £25 million a year. Why is that? Reasons have been given: because of the insurance which the Raw Cotton Commission have to pay in their statutory obligation to carry stocks and to provide cover. The losses made have been at the taxpayers' expense—in other words the rest of industry is helping to carry some of Lancashire's burdens. We have to carry our own burden—the Government see that we do—and we feel that we should not have other people's burdens, as well as our own, placed on our shoulders. In another place it was suggested that if the present set-up prevents unemployment, it is worth it. But, of course, it alone will not prevent unemployment. In any case, we have a feeling that Lancashire is big and strong enough to carry its own burdens. We believe that it can do so if given the chance, and we feel that this Bill will provide the opportunity for it to do that.
The Liverpool Cotton Exchange, when it gets going, will provide those private experts whose business it is to use their skill to see that they buy at world prices and give the necessary coverage ahead. There are some people who say, "Why do the Government not go on doing it for them?" That is not the way of this nation. We have not made our way in the world by letting Governments or anybody else do it for us. Our whole success is due to the fact that we are merchant adventurers; we are the descendants of the adventurers of the Elizabethan Age We do not go out privateering, but we adventure in business; our whole prosperity to-day is based upon the fact that we are adventurers, and we have to go on adventuring. We do not want coddling and carrying. The main thing that I learned from discussing it with friends in Lancashire who know is that they will be able to do this; and, knowing them, and knowing their tough nature, I believe that they will succeed.
What are the objections that have been put forward? One is," The big combines will be all right, but the small buyers will suffer." Do not believe it. There is always an organisation for looking after the small buyers. There are some people who do not want the big business but who want the small business; and they go after it. We find it so in the Midlands, and I do not see why it 211 should not happen elsewhere. There are always people to take care of that. Remember also that it was the small spinners who started the outcry and the movement which brought about contracting-out. They did not seem to be frightened of it. In the first year, they formed the majority of those who took advantage of it. As regards stocks and finances, at present we are probably overstocked—I think most of us would be if the Government would carry our stocks for us. When a man has to carry his own, it has a salutary effect. Some say that large finance will not be available, but I am sure it will. I see here some old friends of mine who are bank directors, and they would tell your Lordships that the banks are used to handling this sort of thing and taking cover and making all the arrangements. It is their business, and they want to do it. I do not believe that there are any sound businesses in Lancashire which arc failing because they cannot get the finances for their stocks. Dollar costs have been mentioned. I agree with the noble Lord, Lord Rochdale. I think we can trust the Chancellor of the Exchequer, the Treasury and the Bank of England, who are our watchdogs, to look after that; and if they are satisfied, I can assure your Lordships that I am not going to worry.
The last point that keeps cropping up is one about which I have a certain amount of concern—namely, the question of our commitments to our friends of the Commonwealth. Again I have to refer to what was said in another place—this time to an authoritative statement made by the Minister of State, Board of Trade, who said (OFFICIAL REPORT, Commons, Vol. 520 (No. 12), col. 1853):Another point which, I think, has a bearing on this is the fact that the Colonial Marketing Boards are to-day much better off than they were some years ago and are in a position to stand on their own feet and continue their development work. I think it important that the two biggest colonial producers, Nigeria and Uganda, have, through their marketing boards, expressed themselves as quite happy about the future in regard to the arrangements made.My Lords, they ought to know. The second quotation is as follows (col. 1854):Any possible risk to Commonwealth cotton would come not from the fact that 212 there is only an American contract for futures, but from the removal of the dollar restrictions. There, again, all the evidence is that there is very little to fear and every hope that the use and the prosperity of Commonwealth cotton will go steadily ahead.I shall be most concerned in regard to that last point. I understand that the other side will be putting forward their recommendations, and no doubt they will be carefully considered. I am sure that that is a point with which we have the utmost sympathy, that nothing should be done to hinder the development of Colonial cotton. Presuming that to be so, I believe that this Bill provides a fairly good solution for Lancashire, and that Lancashire ought to "get away with it."
May I quote what was said by the Member for Oldham, East, in another place—
§ LORD BENNETT OF EDGBASTON
I will paraphrase it. What he said was that before the war Liverpool bought its cotton more cheaply, even after adding the costs of insurance and freight in bringing it over, than others could buy it in America. If they could do that before the war, I think they still have the ability to do it again, and that in the long run Lancashire has nothing but benefit to gain from this arrangement. I have much pleasure in supporting the Second Reading of this Bill.
§ 4.44 p.m.
§ LORD AMHERST OF HACKNEY
My Lords, to-day we are discussing the provision of raw materials for one of our greatest industries. I have therefore listened with great interest to the speech of the noble Lord, Lord Lucas of Chilworth, because I felt that it was up to him to show us why the great cotton industry should be the one industry which should swim against the stream. The raw materials of practically every other industry have already been decontrolled. That process was not one which was started by this Government, but by the previous Government, in regard to rubber and various other commodities. Therefore, I feel that noble Lords opposite must make out a very strong case indeed why this particular industry should be the exception. I think I am right in saying that at one time the noble Lord 213 said that he considered that in many cases bulk purchase was essential for the economic purchase of raw materials. I am afraid that that opinion does not seem to fit in with the general pattern of trade at the moment.
§ LORD LUCAS OF CHILWORTH
My Lords, I hesitate to interrupt the noble Lord, because I know how disconcerting it can be. The noble Lord must have misheard me. I said, in effect, that I was not a slave to bulk purchase, but that I could see bulk purchase and long-term contracts as the only real safeguard for the development of the Colonial cotton grower.
§ LORD AMHERST OF HACKNEY
I am sorry I misunderstood what the noble Lord said. I thought he implied that, apart from the Colonial cotton grower, it applied to industry in general.
§ LORD AMHERST OF HACKNEY
My Lords, I feel that if the Raw Cotton Commission were functioning as had originally been intended, then we should think very seriously before we interfered at all with what it was doing. For the last two years, however, the monopoly, which was, after all, the keystone of the Commission, has been undermined by common consent and, as has already beer stated, the position now is that half the buying is Government buying and half is private buying; and, as a result, we get what is possibly the worst of both worlds. Again, as has been said, over the last six years the Commission has been functioning at the enormous loss of £41 million. We do not blame the Commission for that; we feel that owing to the duties laid upon it that was inevitable. If, among the firms in Lancashire, there were an overwhelming demand that the Commission should be kept in being, then it would be an obvious mistake to do anything about it; but after all, 30 per cent. of the buyers have contracted out in the first year, and nearly 60 per cent. (double the number) in the second year, and one must agree that at the moment the firms who contract-out do get cover from the Commission. It is certain that they will get no worse cover under the Liverpool Cotton Exchange, because it will be identical.
Apart from that, the principle exists that every industry should be responsible 214 for providing its own raw materials, and I think a strong case has to be made out before one can say that the great cotton industry should be an exception to that rule. It is an industry which has thrived on initiative and enterprise and has built up markets all over the world, and now we are saying that at least it should be able to look after its own raw materials. Noble Lords opposite point to the small spinners and to the possible difficulties they may have in getting raw material, and say that that may lead to unemployment. I can think of no industry which has no small firms. Most industries have big combines, but many industries have as many small firms as there are in Lancashire, and they manage to look after their own supplies of raw materials. I cannot see that there is any danger there of unemployment, provided that the firms are reasonably sound and can get the credit which any normal, sound small firm can get from the banks.
But there is one matter upon which I should like an assurance. It is fifteen years since the Cotton Exchange functioned, and I should like the Government to assure us that there are sufficient people skilled in the trade who are still able and willing to come forward and run that market. It is most important that when a commodity market has been established a large enough number of competent people should work in that market to ensure that competition is free and genuine. So I should like an assurance on that point. I feel that there is no reason why the Liverpool Cotton Exchange should not become in the future, as it was in the past, the greatest market for cotton in the world. Before the war it was the market which was least affected by local conditions. The other big markets, such as New York, Alexandria and Bombay, were very much affected by their local crops, and Liverpool was the biggest free market where one type of cotton could be most accurately weighed against another. That factor, in itself, should help to encourage the use of the cottons from our Empire, because it will help to make them competitive against the American products.
Lord Lucas of Chilworth argued that bulk purchase was the only way to ensure the growth of cotton in the Empire and Commonwealth. I think it is true to say that, even before the war, before the 215 days of bulk purchase, there was a considerable increase in the growth of cotton, for instance, in the Sudan and in Uganda. I believe that between the wars, though it may not have been as rapid, there was a general increase in the growing of cotton. So I feel that the main hope of the Empire cottons is that they will sell on their merits against the American cottons. I think that when the Liverpool Cotton Exchange is working our spinners and other users of cotton will get an adequate supply of the types of cotton they want at the cheapest possible prices, so that our industry can be as competitive as possible. This is a vitally important matter in the world to-day. I think, also, that the Cotton Exchange itself will be a dollar earner and will build up yet another of those great commodity markets of which this country has so many which are famous.
§ 4.53 p.m.
§ LORD BURDEN
My Lords, I should not have ventured to intervene at this late stage of the debate but for a remark which was made by the noble Lord who has just sat down. If I understood him correctly, he said that he was sure that any reasonably sound firm would, if it were necessary, be able to get credit from a bank. With the greatest respect, I ask whether he speaks upon that point with authority, and if we shall have an assurance from those who are answering on behalf of Her Majesty's Government that there will be a directive by the Chancellor to the banks to ensure that credit facilities shall be forthcoming in these instances, with this de-nationalisation, in the same way as credit facilities were provided for in connection with the de-nationalisation of road transport.
§ LORD BURDEN
With all due respect to the noble Lord, I think that an answer should come from the Government Front Bench.
§ LORD AMHERST OF HACKNEY
If I were asked, I should say that there is no doubt on the point whatsoever.
§ 4.55 p.m.
§ LORD MANCROFT
My Lords, it now falls to my lot to wind up what I think your Lordships will agree has been an extremely interesting debate. Lord Lucas of Chilworth, in the course of a speech to the preparation of which he had obviously devoted a great deal of care—which I think the House appreciated—went so far as to say he had hoped that it would have been I who would start off this debate by moving the Second Reading while my noble friend, Lord Woolton, would wind it up. It is not for me to make any comment upon that observation, though I will say that I wish I had the technical experience and the ability of Lord Woolton with which to deal with the numerous questions which have been fired at me. My knowledge of the textile trade, I am afraid, is confined solely to wool, and even that to a limited degree. It does not extend to cotton at all. This, as your Lordships will have discovered by the end of this debate if you did not know it already, is a highly technical subject. Indeed, perhaps it is the technicality of the subject which has been the cause of so much silence on the Benches behind Lord Lucas of Chilworth this afternoon. I mention that particular point only because on one or two previous occasions we on this side of the House have been twitted by noble Lords opposite for our silence, particularly on the occasion of the Motion concerning National Insurance which was moved by the noble Lord, Lord Beveridge. We had come to listen to the wisdom of Lord Beveridge. In the same way, I am certain, noble Lords on the Back Benches behind Lord Lucas of Chilworth have come to-day to listen to Lord Woolton's wisdom and not to talk.
The noble Viscount, Lord Woolton, when he moved the Second Reading, admitted that this is also a highly political topic, and he expressed the hope that political dogma would not rear its head too often in our discussion, but rather that the genuine pros and cons of the case might be discussed. I think they have. Certainly no accusation could be levelled against the only spokesman on the other side of having dragged politics unnecessarily into his remarks. He did nothing of the sort. He made, however, the perfectly valid point that the Bill is being introduced by Her Majesty's Government as an act of faith. Of course it is. This was in the Conservative Party's 217 Manifesto which was such a factor in our victory at the last Election. It is in keeping with one of the strongest tenets of our political faith—namely, a dislike and suspicion of State trading.
There, Lord Lucas of Chilworth should have stopped, instead of which he went on to make out that this was, on the part of Her Majesty's Government, an act of blind, unreasoning faith. Of course it is nothing of the sort. I think it was Mr. Adlai Stevenson who during the great election campaign in America a year or two ago described some Republican Senators as having to be dragged screaming and struggling into the twentieth century. The noble Lord tried to paint the same picture of Lord Woolton. I think he described him as Atalanta. If I remember rightly the picture which adorned the walls of my schoolroom, Atalanta was a very slim and flimsily clad lady, and that is hardly a description which I personally should apply to my noble friend Lord Woolton. The picture which Lord Lucas of Chilworth paints is of Lord Woolton chasing the apple back to the year 1938. Of course, nothing could be further from the truth. This political programme was designed in 1951. It was; not an act of blind faith, and for that very reason we did not produce it straight away, because conditions obtaining in Liverpool when we came back to office were exactly as Lord Lucas has described; they were grave. It was not a correct moment to launch a bold new experiment, or, in this case, re-experiment. We have waited until we think the moment is right for the benefit of industry, Lancashire and the cotton trade, to reintroduce these proposals. That is an act of calculated and carefully planned faith. It is not an act of blind faith.
In the course of his remarks, the noble Lord went on, Cassandra like, to let out all sorts of doleful fears, grievances and anxieties. There is an old oratorical trick whereby a speaker puts up a large number of ninepins only to knock them down himself. The noble Lord did not do that. Far from it. He put up a large number of ninepins but my noble friend, Lord Bennett of Edgbaston, came and knocked them down—and cut them up into firewood as well. I think my noble friend answered nearly every one of the major worries which are in the noble Lord's mind, but the first is such a serious one that I should like to return to it, even 218 though every noble Lord who has spoken dealt with it. That is the fear of a return to unemployment in the Lancashire cotton world. Nothing could be graver than that fear and nothing, of course, was more to the forefront of the Government's mind when they considered this matter. The Government are firmly of the opinion that no unemployment will be caused in Lancashire by the winding-up of the Raw Cotton Commission and the return of trade in cotton to private hands. The Federation of Master Cotton Spinners' Associations, who are the principal employers' association, share this view. I know that noble Lords opposite, their colleagues in another place and the textile unions, have expressed fears—in particular fears that some of the smaller mills would have to close because, once the Raw Cotton Commission stocks were no longer available, they would have no spot stocks on which to draw and would be unable to obtain supplies of particular growths (notably the long staple cottons—for example, Sudanese and Egyptian). But although particular growths of cotton may be or are in short supply, there are substitutes for them, and there is nothing to stop spinners going out and buying what they need, either directly or through merchants.
The noble Lord, Lord Lucas, made this point and my noble friend, Lord Rochdale, whose speech we all enjoyed so much, also made it, and, I think, answered it. Many of the smaller mills are in a strong financial position to-day. They will be able to finance their own stock holding and the banks will play their part. The noble Lord, Lord Burden, asked a question and I do not know whether my noble friend Lord Woolton and I heard him correctly. The noble Lord suggested that the Chancellor of the Exchequer was to give directions to the banks on how they were to conduct their business in regard to the position in Lancashire.
§ LORD BURDEN
My Lords, may I put this to the noble Lord before he waxes so eloquent with his usual rhetoric? The Chancellor of the Exchequer has indicated to the banks what advances they could make in various directions and it was left negatively that no other advances were to be made.
§ LORD MANCROFT
That is an entirely different question, and well the 219 noble Lord knows it. I can assure noble Lords who raised this point that those in Lancashire who have considered this matter do not share the fears of noble Lords opposite and their colleagues else-where that the small mills will have the trouble which is envisaged.
§ LORD LUCAS OF CHILWORTH
My Lords, the noble Lord, Lord Mancroft, cannot just shuffle off one lot of questions on the noble Lord, Lord Bennett of Edgbaston, and now shuffle off this answer on to the small spinners. I should like to address my remarks to the noble Viscount, Lord Woolton. We understand that there has been a Treasury embargo upon financial advances. Are we to understand that trade in this country is free from any embargo and the banks are free to lend money for stocking or for any purpose whatsoever in the course of trade?
§ VISCOUNT WOOLTON
My Lords, I can say that surely this does not arise out of this Bill. I am not going to be led into making a statement now about what the Chancellor of the Exchequer has done about trade in general. Let us confine ourselves to the business of the House to-day. Let me give this assurance to noble Lords opposite: that in conversations I have had with the representatives of the cotton industry, no fears have been raised about whether they will have sufficient financial resources available to them, either of their own or through the banks, to conduct the necessary business that will result from the opening of this Exchange. I think that is as far as I can reasonably be asked to go.
§ LORD LUCAS OF CHILWORTH
It is a perfectly friendly question. I do not seek to make capital out of it.
§ LORD LUCAS OF CHILWORTH
The noble Lord, Lord Amherst of Hackney, said that the banks would advance the money; it is their business to advance the money. All we are asking is: has the Chancellor of the Exchequer given a directive to the banks that they should finance the holding of cotton stocks? Surely, the holding of cotton stocks which will have to pass from the Raw Cotton 220 Commission to private trade is very germane to this Bill.
§ VISCOUNT WOOLTON
I agree. But there is no reason to suppose that the banks will not provide sufficient facilities in the ordinary course of their business, and that is what my noble friend really says. The noble Lord does not need to ask, "Will we give them instructions to do so?" If the cotton industry is satisfied that they can get the money, it is all right. If they find they cannot, I have no doubt that they will make an immediate appeal to me as the Minister responsible, and I will deal with it in conjunction with the Chancellor of the Exchequer. I urge both noble Lords not to raise unnecessary fears in the people's mind. I am sure they do not want to do so, and I hope that what I have said will allay the fears which they themselves have.
§ LORD BURDEN
My Lords, may I point out that it was the positive statement by a noble Lord behind the noble Viscount that prompted me to raise the point. Because just as one ought not to raise unnecessary fears, so noble Lords opposite ought not to raise unnecessarily hopes that may not be fulfilled.
§ LORD MANCROFT
My Lords, let us change the subject. The other point on the financial aspect which was worrying the noble Lord, Lord Lucas, was the exchange risk. That point was answered by the noble Lord, Lord Rochdale, and also by the noble Lord, Lord Bennett of Edgbaston. There may probably be some increase in dollar expenditure as a result of reopening the futures market. I must admit that the extent of this is difficult to calculate, depending as it does upon price relationship between American and other growths at any one time. As the noble Lord, Lord Rochdale, told us, it will enable merchants to buy more favourably and to enter more competitively into the markets. It will give much greater flexibility and the competition it will bring will inspire increased business.
The noble Lord, Lord Lucas of Chilworth, asked me this specific question: When will the Liverpool futures contract be extended to cover Colonial cottons? The Liverpool Cotton Association have given an explicit undertaking that within one year of the reopening of the futures 221 market on the basis of an American contract, they will reconsider, in a joint committee of spinners and merchants, the question of providing a contract against which Colonial growths would be tenderable. After very thorough discussion, the Federation of Master Cotton Spinners' Associations and the Empire Cotton Growing Corporation accepted the necessity for opening the market with a strong contract based solely on American cotton. That was the point with which I think the noble Lord was concerned and of which he was critical. Both these bodies were particularly concerned to devise the best hedge possible for Empire cottons. The essence of the argument in favour of a strong contract with which to open the market is that confidence must be established in the contract. After all, American cotton is the dominant crop in the world and largely determines the world price. A mixed contract, against which a variety of cottons could be tendered, would mean that nobody would know what cotton he would have to accept on the maturity of the contract; and this would, I believe, tend to debase the contract's value and deter operators from using it. The Liverpool Cotton Association are convinced that the contract they propose will, at least initially, give the best hedge against price movements of the various outside growths. It will, in any case, be in no way inferior to the cover provided at present by the Raw Cotton Commission for such growths, which is itself based on the price of American cotton.
The noble Lord, Lord Lucas of Chilworth, went on to ask whether the outstanding long-term contracts for Colonial cotton would be fulfilled, and by whom. As I think the House now knows, the Raw Cotton Commission have three outstanding long-term Colonial contracts: with Nigeria until the 1955–56 crop, with Aden until the 1956–57 crop, and with Nyasaland until the 1957–58 crop. The Government have already given an assurance that these contracts will be fully implemented, if this is the wish of the Colonies concerned. The Ministry of Materials has power to take an assignment of the contracts from the Raw Cotton Commission, and can then fulfil them itself or through agents. This, my Lords, the Ministry would be prepared to do. There are other possible methods: for example, the Colonial 222 Marketing Boards might wish to begin marketing some of their cotton privately, before the expiry of the contracts, and this would have to he considered as part of the whole problem. The present: position is that the Colonial Office have asked the Colonial Governments concerned for their views on how they would like the contracts treated, and we have not yet received replies to this question. I think that was the chief point on the Colonial situation referred to by the noble Lord.
I will add this, if it is any consolation to him. The Government believe that Colonial cotton, which in recent years has established a sound popularity for itself in Lancashire, will continue to sell on its merits, provided always that its price is related to its intrinsic spinning value. The industry in Lancashire shares this conviction, and there is therefore no question of the sacrifice by the Government of Colonial cotton interests "to the mercy of private speculation." Nothing could be further from the truth. Uganda has already shown what can be done by private marketing, and there is no reason to suppose that the other Colonies will not be equally successful when the time comes. I can only ask the noble Lord to examine carefully the Report for the year ending March 31, 1953, of the Empire Cotton Growing Corporation. The noble Lord probably has a copy, but if not, I shall be happy to lend him mine. The figures for the cotton crops for the last thirty years, from 1921 to 1952, show throughout all the Colonies concerned a most gratifying and welcome development. I think that that is a sufficient answer to several of the fears voiced by the noble Lord.
Time is going on, and we have a programme before us. Before concluding, I should like to answer one question raised by both the noble Lord, Lord Rochdale, and the noble Lord, Lord Amherst of Hackney, concerning the ability of the men of Liverpool to run this market efficiently. After all, they have been out of it for fifteen years, and those doubts seem to me to be quite genuine. The Government have discussed this matter with them carefully, and we have received a direct and categorical assurance that the market will be able to find the necessary men with the requisite experience to run the market in the way 223 Liverpool would like it to be run. I hope that that will satisfy the two noble Lords in their reasonable anxieties.
I conclude by saying this. Any difficulties which may arise in the future—and he would be a rash man who would suggest that no difficulties will arise—would be just as likely to face the Raw Cotton Commission as the Liverpool futures market. The only difference is that, with the futures market, private and not public funds will be at risk. We are handing back with confidence the future of this great market to men who in the past have proved themselves more than capable of running it, and more than capable of running their own industry. The second point is this. In my submission, the proposals of the Government represent at the moment the only possible course. It is a question of going back to monopoly—and I think the noble Lord, Lord Lucas of Chilworth, least of all, would expect to hear members of this Government suggesting that; of standing still—which is quite impossible; or of going forward to full freedom. It is that act of carefully calculated faith that is embodied in the Bill to which I now confidently ask the House to accord a Second Reading.
§ On Question, Bill read 2, and committed to a Committee of the Whole House.