HL Deb 08 December 1955 vol 194 cc1275-89

5.4 p.m.

LORD JESSEL rose to ask Her Majesty's Government whether they will consider the introduction of measures by which manufacturers who already have a ready home market for their products can be stimulated to try to sell them abroad. The noble Lord said: My Lords, the hour is getting late and it has been a busy week, so I assure your Lordships that my remarks on this important subject will be brief. I think it is true to say that most people in this country have absorbed the elementary economic truth that exports have to pay for our imports; yet at the present moment all the indications are that, although production—and by "production" I mean the total production of the country—is increasing, very little of that increase is going into exports. I should like to quote from the Bulletin for Industry issued by the Information Division of the Treasury last November. It was there stated: Output of metal consumer goods and passenger cars has been rising sharply. Exports generally in this group have changed very little, and exports in some items have fallen. The home market has thus taken the major share of the increased output—indeed, has in some instances taken more supplies while export markets have taken less. In November of this year there was a debate on this subject in another place, and the Minister of State at the Board of Trade said that our share of world trade had declined since 1951 and that our major competitors overseas had taken greater advantage than we had of recent favourable world conditions.

I will not weary your Lordships with more illustrations of the point that I am trying to make, but it is a disturbing situation. That is why I have asked Her Majesty's Government whether they have any positive plans for encouraging exporters. It is obvious that patriotism is not widespread enough. I could give instances of firms who, because they can sell the whole of their output in the home market, do little to try to undertake export business. Recently, on one of my train visits north, I got into conversation with a man who told me that he was a manufacturer of high-class toffee. He said that he employed 120 people and that if he could get more labour he could sell twice what he was producing at that time. I said to him, "Do you do any export business?" He said, "Oh no, why should I bother about exports, with all the trouble of arranging shipping, credits and agents, when I can sell at home everything that I can make?" I asked him, if he wanted to do any exporting, whether there were any countries which would be likely to buy his goods. He said, "Oh yes, the U.S.A., for instance; they are very fond of high-class English sweets." I do not know the name of this gentleman and, fortunately, he does not know my name.


He does now!


My guess is that he is not a newspaper reader, and certainly not a reader of the Reports of the debates in your Lordships' House; so I feel comparatively safe.

As I see it, the problem is: how can we push people of this sort into exports? Are we going to use the stick, or are we going to dangle the carrot? I suppose the Socialist answer would be some form of rationing of materials and licensing; "the gentleman in Whitehall" would decide who was to have steel for fabricating, who was to have butter and sugar for making toffee. But that is not supposed to be the Conservative answer, although at the moment bank managers appear to be deciding who shall have the money. I wonder whether the bank manager is really the best person to do this. I hope that the credit "squeeze" is being applied with discrimination. More than ever to-day, firms who are engaged mainly in the export business should have increased facilities and not have their overdraft reduced. If we do not believe in the policy of "the stick," what are we going to use as the "carrot"? Can Her Majesty's Government give some positive inducement to exporters?

It has been suggested that some tax relief given on profits derived from exports might meet the case. In a debate in the other place, to which I have previously referred in my speech, the Minister of State at the Board of Trade said that he would ask the Chancellor of the Exchequer to take note of the situation. I am sure the answer will be that this cannot be done. Any remission of taxation on profits derived from export sales would, in effect, be a subsidy, and for the last two or three years Her Majesty's Government have been urging foreign Governments to drop export subsidies. I understand that by the end of the year nearly all the O.E.E.C. countries will have done so, and it would therefore be almost dishonest if we were suddenly to embark on a policy of export subsidies. I am sure the official answer will be that the recent actions of the Chancellor of the Exchequer are aimed at reducing home consumption and thereby freeing further resources for products which can be exported. I hope this is true but I have my doubts; and even if the policy were successful the process would be very slow, and the problem is urgent.

When I asked a friend of mine, a prominent industrialist, for his solution he said: "Give managing directors 100 tax free for every £10.000 worth of export business they do and you will get remarkable results." I do not think the Chancellor of the Exchequer will take that suggestion very seriously. I have not worked out details of such a scheme, and I must make it clear that I am not myself a managing director. There is certainly one positive helpful action which Her Majesty's Government can give: the Export Credits Guarantee Department should be told to be more venturesome in helping British exporters to offer long terms of credit. Further, the Department at present take too long to make up their mind. It is not the fault of the Department, for they are only obeying rules laid down for them; but I have heard of cases where, while the exporter has been awaiting an answer, and while investigations by the Department have been continuing, a foreign competitor has jumped in and taken the order from the customer, whose patience has become exhausted.

Another positive action which both sides in industry can take is the avoidance of strikes. Do your Lordships realise that during this year we have had more stoppages in industry than in any year since the war, and more than twice the total for the years 1950 and 1951 put together? These stoppages often lead to cancellation of expert orders and to loss of confidence in the ability of British manufacturers to deliver on time. Another factor which deters manufacturers from seeking export orders is the shadow of impending wage claims. A manufacturer cannot quote a firm price, especially when dealing in capital goods, when he does not know what his cost of production will be six months ahead. There is now keen competition in the export market, and the old clause about "prices ruling at the date of delivery" simply will not do now. I am neither an economist nor a financier, and it would be an impertinence for me to pretend to know the solution of the problems which I have raised. But I see very clearly that if the bulk of the efforts of the people in this country are devoted to making goods merely for each other, that is a sham economy which cannot continue for long. That is why I have ventured this afternoon to take up the time of your Lordships' House by asking the Question which appears on the Order Paper in my name.

5.17 p.m.


My Lords, the noble Lord, Lord Jessel, said it is late and he apologised for troubling your Lordships with this matter. But he has raised a matter of fundamental and prime importance: he has put his finger on the one thing that really matters—how to increase the export of goods from this country in order to meet our balance of payments position. May I say at once that I speak for myself alone? I do not even pretend to speak as a politician. My only excuse for speaking is that I have lived all my life in industry, and what experience I have gained. What lessons I have learned, have been gained and learned the hard way. It is from practical experience that I venture to address your Lordships now.

I pose this question to get to the heart of the problem. Why do not British manufacturers export? I believe that there are three answers. First, the risks are too great: secondly the costs are high; and, thirdly, the return is poor. The noble Lord, Lord Mancroft, who is to reply will perhaps know that it was reported the other day that the chairman of the British section of the International Chamber of Trade, a Mr. Steele, who is a Director of I.C.I., publicly said that if he was a small manufacturer, producing a good article, the last thing that he would ever attempt to do would be to export it. Why? Doubtless for one or all of the reasons I have mentioned. In my life Ii have found that the only way to get in creased effort is, as the noble Lord quite rightly said, to increase the incentive. It is no good this Government or any other thinking they can cure this problem with their present negative approach to it; for that will not work. Industry cannot be expected to drive forward when it is on its heels; and industry as a whole is knocked back on its heels periodically. In 1947 we were told that we were in a tough spot. "Tighten your belts and work harder" was the slogan. Later it was said that we had turned the corner. Then we were told to "Invest in success," and now again it is "Tighten your belts and work harder."

The noble Viscount, Lord Woolton, who has had even greater business experience than I, is sitting opposite. Suppose that he and I at any time in our business career had gone to our employees and said, "Look here, you fellows, I want an extra effort in sales. I want a record month. We have to sell more"; or, if we were manufacturers, "We have got to make more, and I am going to reduce your wages so that you have to work harder and produce more to get the same money as you got before." What would have been the result? Yet that is precisely what the Government are saying to-day.


I hope the noble Lord will elaborate his point.


Yes, I will. There is the increased profits tax. Profits are the wages of industry. So the producer has to work harder to get the same amount. Then there is the increased purchase tax. That means that the housewife must have more money to buy the same amount of goods. It is the same as saying to employees: "The way I am going to give you an incentive to work harder is to reduce the remuneration you will get from working." That does not add up to common sense. It seems to me that the only thing any Government can think of when we are in a tough spot is to increase taxation. Any one of us who has had one hour's experience of business knows well that to be successful in business it is necessary to do precisely the opposite. If you want results you have to increase incentive. As the noble Lord has quite rightly said, you have to increase the carrot that you dangle in front of the nose of the donkey and throw away the stick with which you beat the poor, wretched beast continuously. So what are the Government going to do in answer to the three pertinent questions I put? My answer to that question, "Why does a manufacturer not export?" is: Because the risks are great; costs are high, and profit is low. I am going to make some suggestion as to what I would do. I would say to the producers of this country, "I will give you income and profits tax remission on all profits you make in the export market." I sense what the noble Lord is going to say in reply. First of all, no doubt, he will say, "That is a blunt instrument. Who is the exporter? Is it the man who mines coal or smelts ore? The incidence of such remission would be indiscriminate." The same is true of the use of the bank rate. As the noble Lord has rightly said, the bank rate falls on the godly and on the ungodly indiscriminately. The other thing I expect that the noble Lord will say—and Lord Jessel has said the same thing—is: "This is subsidising exports; we cannot do that." I want the noble, Lord to tell your Lordships, if he will, what is an export subsidy? What is it? My simple mind boggles. I cannot discriminate between an incentive in the form of a tax remission to increase exports and the imposition of another tax on the same article to prevent it from being sold in the home market so that it will be available for the export market. To me that is an export subsidy, though it may be a roundabout one.

I will give your Lordships another case. The Chancellor of the Exchequer justified reducing the tax on silver candlesticks to broaden sales in the home market so that some exports of silver candlesticks would take place. We know very well that what really will happen in that direction is that the manufacturer will increase his home market, end make more profit, so that he has additional profit to subsidise his export price. Is that an export subsidy? Do not let us split hairs on this matter. Any inducement held out by means of steps affecting the home market to stimulate exports is an export subsidy; and, similarly, our chief competitors in every market are in some way or other subsidising their export trade. Openly, they are trying to give this up, but as they give it up openly it is going on through the back door. The noble Viscount, Lord Woolton, will remember that we had a debate in this House on shipping. In that debate I asked the question—I think I put it to Lord Mancroft quite bluntly—whether he considered that the "fifty-fifty" clause in relation to American foreign-going merchant shipping was an export subsidy. The noble Viscount, Lord Woolton, who was sitting on the Front Bench opposite said: "Yes." Of course it is. So I do not think we can be quite so gentle about this export subsidy.

I know that the noble Lord, Lord Mancroft, may say that if we do this kind of thing we shall get retaliation. I hesitate to bring this up, but did Australia wait to retaliate? When the embargo put on British goods is causing our exporters such terrific strain, we just cannot sit still in this country. Exports are vital to us. It is a case of "Export or die." We cannot dress ourselves up in kindergarten outfits like little girls going to a Sunday school treat, then go into this "all-in" wrestling match and think that we are not going to get our frocks soiled, Export trade is a matter of life or death to this country. This or any other Government can go on trying by the negative principle, the negative approach. That means always restriction, always increased taxation, till one might as well say, "Throw the wretched people in the gutter; the only way for them to increase their standard of living is for them to fight their way out again."

In doing this the Government are really denying one of the fundamental principles of human nature. It is the hope of reward that sweetens labour, and man is a spending animal. Do the Government think that putting increased purchase tax on motor cars will result in the export of one more motor car? Of course it will not. But this is the folly of the thing—someone at the Treasury needs to be told "the facts of life." One hundred par cent. of the commercial vehicles sold in this country are sold on the home market in a manner quite legitimate, whereby tax relief is obtained up to over 50 per cent. of their value. Eighty per cent. of the motor cars are sold in the same way. So the Treasury hand back to the purchasers, through the profit and loss account, over 50 per cent. of the tax they get. What the present Government's policy will do is this: it will throw this country back into that silly restrictive position, that restrictive mentality, that was the curse and downfall of our overseas trade between the two wars. It will not increase exports. Manufacturers will produce less. They will go back to that old silly idea which they tried before of making a lot out of a little instead of a little out of a lot. We have to get out of this trouble. The only hope that we have of curing it is to increase our exports by every means and every incentive that we can.

I would beg the Government to think seriously about this matter. I am not troubled about the home market. I do not mind how much money is spent on the home market. As the noble Lord has said, prodictivity has gone up in this country marvellously. I think the noble Lord can tell me that it is about 20 per cent. over that of 1947. Look at the position of the worker. He has been told that if he would increase output, the rewards were there. The worker, the management and the machine increase output by 20 per cent. and then, when the extra money is in the worker's pocket, somebody comes along and says, "Yes, but you aren't going to spend it. We are going to put up the taxes." We are getting to the stage, if we have not already reached it, when a man will say, "All right, if can't spend my money, I won't work and earn it." And nobody has yet found out what to do with tree man who says, "I won't." Man is a spending animal and we cannot dangle before him the prospect of increased wages through harder work and then say that he is not to be allowed to spend the money and that it will be taxed. Again, that is a negative approach.

That is one side of the problem. Let me briefly touch on another; that is, the disincentive policy of the economists and theoretical financiers—and the theoretical financiers and economists ate our bugbear in this country to-day. Those of us who have risen from the workshop floor know very well that incentives, rewards for effort and industry, are the only way we shall get results. Whet disturbs me that a number of our British manufacturers do not study the export market enough. Before the war we nearly ruined ourselves by adopting the policy that the world had to have what it suited us to make. We were successful in our export trade while there was a sellers' market, but now that the buyers' market is coming along foreign buyers will not buy what it suits us to make: they are buying only what it suits them to buy.

Let me give an illustration of what I mean. I have been making some inquiries into this matter, and I find that the great motor car industry, which has done a marvellous job for this country, is in this position: that a German car, the Volkswagen, has sold more units in America in 1955 than the most successful British motor car has sold in America since the end of the war. Why? Because it suits the American public. The Americans want more powerful motor cars. We do not meet this need because there is no incentive to go out and sell, because the risks are so great. The noble Lord, Lord Rochdale, who is President of the National Union of Manufacturers, can tell a sorry story of some of the exports which have failed in this respect.

I do not believe that we shall price ourselves out of the market by higher wages, any more than low wages priced us into the export market. We must have productivity as well; and productivity means managerial incentive as well as worker incentive. It means risk; it means risking capital. We want people who will take risks to export, who will go into new markets and exploit them. That is why I support the noble Lord, Lord Jessel. Speaking from my own experience, I know of no other way than the way of incentives. If I could find any other way, I should commend it, but my own experience has told me that that is the only way, and I beg the noble Lord to take this fact to Her Majesty's Government. We have to increase the size of the carrots in front of the donkey's nose and throw away the stick that is beating the poor beast on that part of his anatomy where sticks usually fall.

5.35 p.m.


My Lords, I was particularly interested when I saw the Question in the name of the noble Lord, Lord Jessel, on the Order Paper. The terms of his Question touch upon one of the most difficult and important aspects of our economic life. We do not need in this House to go over the familiar ground of why we need to export, for, as the noble Lord, Lord Lucas of Chilworth, said in the course of a fine, fighting, Tory speech, we must export or die.


My Lords, I was at great pains to say that I was speaking for myself alone, and not as a politician but as an industrialist. It was not a Tory speech; it was the speech of a common-sense industrialist.


The two go together, surely. It was a fine speech anyhow, and so was that of the noble Lord, Lord Jessel. But whether the noble Lords have really given us a solution to this difficult problem remains to be seen. We readily agree that we have to export or die. We are also becoming pretty certain amongst ourselves that we are not exporting anything like enough, but, to do justice, I think we must say straight away that there are a large number of British firms which are making substantial and determined efforts to increase their export trade. During the first nine months of this year our exports were 6 per cent. higher than during the first six months of last year, and in October of this year our exports by value reached the highest monthly figure ever recorded—that was the sum of £268 million. Having regard to the increasing severity of international competition, I think we can all agree that this achievement reflects credit on everybody concerned in trade and industry, but, having regard to the increased level of our imports, the increased share of world trade earned by our competitors and the need to build up an adequate surplus in our overseas accounts, it is not satisfactory. Broadly, the position is, not that we are doing badly but rather that we are not doing well enough.

Let me make the Government's policy perfectly clear to your Lordships. Our policy is to bring about a substantial increase in United Kingdom exports by creating the conditions in which manufacturers and traders will be encouraged to seek greater business abroad. There, I am certain, I shall have the agreement of the noble Lord, Lord Lucas of Chilworth. The Government are aware that over recent months the excessive pressure of demand at home has been drawing resources away from the export trade and reducing the willingness of individual firms to make the determined efforts required—and they are determined efforts that have to be made—to secure additional export orders, especially in the newer and more difficult markets.

The primary object of the successive measures taken by the Government during the course of this year, up to and including the Autumn Budget and the measures connected with it, has been to restrain the pressure of domestic demand and thus both to encourage and to facilitate greater efforts in the export markets. Let me briefly remind your Lordships of what these measures have been: the raising of the bank rate to 4½ per cent. in February of this year; restrictions on hire purchase in February, which were increased in July; the Chancellor of the Exchequer's request to the banks in July to achieve a substantial reduction in advances; measures to contain Government and local authority expenditure and to restrain the capital expenditure of nationalised industries; and finally, the Autumn Budget in October, with its increases in purchase tax and profits tax.


Every one negative.


Every one designed, however, to create the situation in which the exporter has greater incentive to get on with exports and to reduce his efforts in the home market. The Chancellor of the Exchequer has said, and repeated more than once, that the Government remain firm in their resolve to curb home spending so as to make room for more exports.

I come to the first suggestion that has been made—and frequently made—this vexed question of export subsidies. I am sorry that the noble Lord, Lord Barnby, is not in his place to-day. I believe he would have given us his views on this subject once again. As I have frequently told your Lordships, the Government are opposed to the use of export subsidies or similar export incentives directed to stimulating exports artificially. It would be against our interests to stimulate a race between countries in the use of these devices. Not only would it be extremely costly, but in the end I should think that everybody stands to lose from this sort of "beggar-my-neighbour" contest. The Government's policy as the noble Lord, Lord Lucas of Chilworth, is aware, is to try by direct negotiation and through international co-operation to get other countries to drop schemes of this kind, rather than introduce them ourselves.

We have had some success in this task. In answer to a question in your Lordships' House on October 25, I referred to the obligations which limit and look to tie eventual abolition of artificial incentives and subsidies, accepted by the members of the Organisation for European Economic Co-operation, to which the noble Lord referred, and the General Agreement on Tariffs and Trade. The German Government have agreed--and my noble friend Lord Jessel referred to this—after discussion with the Chancellor of the Exchequer last year, to allow their scheme for a special remission of profits tax to exporters to lapse at the end of this year. I know that we have not had complete success with every country; there are one or two running sores which we have discussed in this House on many occasions. But we are persevering. I think we are on the right lines and I am sure this is the right way to tackle the problem.

My noble friend, Lord Jessel, suggested, and the noble Lord, Lord Lucas of Chilworth, also toyed with the idea, that we should stimulate exports by lower rate of tax on earnings from export trade. I know it is a difficult thing to decide what actually is an export subsidy. The noble Lord, Lord Lucas of Chilworth, asked me whether I had a definition of an export subsidy. I am afraid I have not. I will try to find out if the experts have one. But it struck me, while listening to the noble Lord, that an export subsidy is anything that your rivals may regard as an export subsidy. That is where your trouble will be. I find it hard to see what form any such tax differentiation could take which would not be open to just those objections which we have brought against rather similar arrangements adopted by some other countries and which in our view amounted to giving artificial aid to exporters. I think that is a more important objection than the difficulty in administering it. That difficulty exists, of course, but I believe the one I have just mentioned is more important.


Would not the noble Lord say that taxing the home market to prevent purchase is an artificial subsidy to exports?


Admittedly, the dividing line may be file. That, I should have thought, was quite permissible, but the form that has already been suggested would clearly give rise to objection.

Then we turn to the question of physical controls. This Government, in particular, is opposed to the use of physical controls to stimulate exports. I believe that exporters have gained a real advantage from this Government's policies of trying to free the economy. We have tried, so far as possible, to give exporters freedom to buy their raw materials wherever they have found it commercially most suitable to do so. Again, I do not think we must create artificial shortages—that is not a way in which you could possibly encourage the exporter. I do not think we can contemplate the detailed intervention in the affairs of industry which controls of that sort would involve. The frustration that would arise is hardly calculated to bring about the atmosphere to which I have been referring, that in which we hope enterprise will be stimulated. As both noble Lords have said, it is enterprise that we want above all.

The Government try to assist exporters in every possible practical way. They provide through the Board of Trade and overseas officers a range of services designed to assist the exporter with information and advice about the prospects and problems of selling his goods in overseas markets. In order to realise the extent of that information and the amount of facts that are provided, your Lordships might be interested to know that in the course of one year alone the Board of Trade answered 12,000 inquiries as to the commercial standing of firms abroad. That is the sort of information and service which the Board of Trade are happy to provide. My right honourable friend the President of the Board of Trade is only too happy to draw the attention of exporters, and potential exporters, to opportunities of increasing their trade, and to encourage them to discuss their export difficulties with the Board of Trade and their regional officers; and they very readily do. They make a great deal of use of the services which the Board of Trade make available.

Another illustration of the practical help provided for exporters is the comprehensive system of credit insurance facilities offered by the Export Credits Guarantee Department. My noble friend Lord Jessel talked about delays, and he asked whether the Department could not be more venturesome. If he has any particular case in mind, I will certainly look into it. I will also look into the general question of delays to see what can be done—if his accusations are justified. Many exporters use these facilities with advantage and come willingly to discuss their problems with us. I believe that more use could be made of the facilities of the Board of Trade.

I want to end on this note. These services by which help is given to exporters are no substitute for salesmanship; they are merely aids to salesmanship. The noble Lord, Lord Lucas of Chilworth, talked about the practical side of it. I have not, I am afraid, a practical interest in business, though I share the noble Lord's dislike of the bugbear of theoretical economists that he talked about. I hope that when the election to the leadership of his Party takes place shortly he will not find himself in serious trouble.


I shall be saved that embarrassment We are not allowed to vote.


Of course; I had forgotten that. Although I have not had any practical experience of business, as some noble Lords have, I have a knowledge of salesmanship, because for some years I had the honour to be the chairman of the Incorporated Sales Managers' Association, and I am very conscious of the great importance of determined salesmanship in the export trade. I do not want to make sweeping generalisations that I cannot support with facts or figures, but it struck me that there were still far too many business managers who had the idea firmly in their heads that their goods would sell themselves or that the quality of British workmanship would sell their goods without any attempt at salesmanship. Quite often one found firms that ought to know better, whose directors had never been abroad; who were relying for their salesmanship on some agent they had never spoken to; who had never visited their own markets and seen the peculiarities of their own markets; who never realised, for instance, how the western markets of Canada and America place a great deal more importance on the packaging of goods than we do; who did not realise the importance of sticking to the time of a contract; and generally, unlike the Volkswagen concern mentioned by the noble Lord, Lord Lucas of Chilworth, were never aware of the needs of their markets because they had never seen them. In fact, their salesmanship was slipshod to a fault. That is not the universal rule, of course, but my experience shows me that there are too many firms who are content with sloppy salesmanship. I believe it is that which will provide the answer to the problem which we are discussing this afternoon. It is not the only answer, and the Government will certainly provide every possible assistance they can.

I am only too happy to have listened to the suggestions put forward. I am sorry to have been rather dampening in the effect of what I have had to say about some of them. For the reasons I have given, we must still rely on salesmanship and the efforts of the Government to provide that atmosphere where salesmanship will flourish and the export trade will continue to expand, as both noble Lords have suggested it must, to save us from the difficulties which we shall certainly meet if we cannot go on balancing our payments and increasing our exports every year, as we are not yet managing to do sufficiently.