COTTON WEAVING REORGANISATION SCHEME (CONFIRMATION) ORDER, 1959

HL Deb 28 July 1959 vol 218 cc633-46

11.35 a.m.

THE MINISTER WITHOUT PORTFOLIO (THE EARL OF DUNDEE) rose to move, That the Cotton Weaving Reorganisation Scheme (Confirmation) Order, 1959, be approved. The noble Earl said: My Lords, I beg to move that this Order be approved; and I have no doubt that your Lordships will wish me to explain this Order and the two following Orders together, although I understand that they have to be put separately. As I explained to your Lordships during our debate on the Second Reading of the Cotton Industry Bill, there are two things on which the President of the Board of Trade has to satisfy himself before he approves these draft re-organisation schemes and submits them to both Houses of Parliament. One is that arrangements have been made, and agreed between the employers and the trade unions, for compensation to displaced operatives. The agreement for compensation, of course, does not come into the Orders: it is relevant to them only because the President has to satisfy himself that an agreement has been made before submitting the Orders. In fact, the agreement on compensation is exactly what I indicated to your Lordships during the Second Reading debate, although at that time it had not been finally agreed to in all its details. There is a sliding scale depending on the age of the displaced operative; and it has been agreed that half the compensation is to be paid in a lump sum and the other half in weekly instalments.

The other matter on which the President has to satisfy himself is that the minimum number of machines—looms, spindles, or whatever they may be—to be scrapped under the scheme is enough to justify the expenditure of public money upon it. Your Lordships may remember that in the White Paper certain tentative estimates were given, not on the authority of the Government, but as informed guesses which had been provided by the trade itself—the Weavers' Association and the Spinners' Association. In the case of the weaving section, the manufacturers thought that it might be necessary, in the interests of the industry, to scrap as many as 70,000 looms. I indicated to your Lordships on Second Reading that that figure was only an initial guess, and that it might well have to be revised. The figure which has now been worked out by the special committee of the Cotton Board, after careful consultation with the industry, is 45,000 looms. That, of course, is a minimum. We hope and expect that it will be exceeded; but the President is satisfied that if this minimum figure is reached, it will get rid of enough redundant capacity to justify the expenditure of public money under the Act.

In the case of the spinning section, the minimum figure is 6 million mule equivalent spindles. If there are any ring spindles, which of course will be included in the scheme, a ring spindle will count as 1½ mule spindles. That is to say, if they were all ring spindles, 4 million would be a sufficient minimum; if they were all mule spindles, the figure would have to be 6 million. This figure is actually in excess of what is regarded as the true idle capacity in the industry at the present moment. The figure of idle spindles given in the White Paper was 7½ million, but from that you have to deduct 10 per cent. of the total existing capacity of 24 million spindles, which is the percentage normally idle at any one time. That gives you a true idle number of about 5 million. This minimum of 6 million is, therefore, in excess of that estimated idle number, although it is less than the figure given by the Spinners' Association and quoted in the White Paper, where they estimated that they might want to scrap as many as 12 million. But the 6 million figure now put in the scheme is, again, a minimum which it is hoped will be exceeded.

In the case of the doubling section, the minimum is 400,000 spindles. A considerably larger figure, as your Lordships will remember, was given in the White Paper, but that included a number of firms making sewing thread who are not now included in the scheme at all.

The rates of compensation are, I think, very easily understood. There are in every case three rates: standard, premium, and discount. The standard rate is that which is payable to a firm which scraps a certain number of its spindles or looms but continues in business with what is left. The premium rate is given to a firm which scraps everything and goes out of business. The discount rates are given in respect of looms or spindles which were idle before April 24 but which could have been brought back into use without undue expense, if they had not been scrapped.

In the case of the spinning section, the standard rate of compensation is 8s. a spindle, the premium rate is 10s. and the discount rate 6s. The compensation for carding engines will be found in paragraph 7 of the Reorganisation Scheme, where it says that the standard rate of compensation shall be

1. "(a) in respect of any number of carding engines not exceeding 1/600th of the number of mule equivalent spindles in relation to which the participant is eligible for compensation at the standard rate, £250 per carding engine;
2. (b) in respect of any additional carding engines. £50 per carding engine;"

In paragraph 8, your Lordships will see that rates are payable in respect of various types of carding engines and that the whole scale of possible compensation ranges from £50 to £406 according to whether it is premium, discount or standard rate.

Then, in every case, there is a bonus of 5 per cent. if the application is made before August 31. In all three schemes, applications must be made before September 30, but naturally we want to encourage applications to be made as soon as possible, because it is a good thing that the industry should know before September 30 that the minimum number of applications has either been reached or is certain to be reached, so that firms which are doubtful about making an application or not and which would not want to make an application if they were afraid that the minimum might not be reached and the scheme might fall through, may be encouraged to make their applications. Therefore, to promote early application a 5 per cent. bonus is being given for applications made before August 31.

For the doubling section there is a slightly more complicated scale of compensation for spindles. The standard rate is 10s., 12s. 6d., or 14s., according to the size of the spindle. Your Lordships will find the scales set out in paragraphs 7 and 8 of the Scheme. Here again the same conditions apply: bonus of 5 per cent. is being given for applications made before August 31 and the latest date for application is September 30. In all cases, the latest date by which the scrapping has to be finished is March 31 of next year.

In the weaving section, the rates of compensation for looms are again divided into three—standard, premium and discount. The figures are set out in paragraph 7 of the Weaving Reorganisation Scheme, where it provides that looms not stopped at April 24, 1959, receive £60 if the reed spaces do not exceed 48 inches, £70 if the reed spaces exceed 48 inches but do not exceed 72 inches, and £80 if they exceed 72 inches. Those which were stopped at April 24 receive £45, £52 10s. and £60 respectively. The premium rates are set out in paragraph 8 on the next page.

I think that perhaps the only ground for doubt which your Lordships may have is whether the stated amount to be scrapped in these schemes is enough to make them worth while. On that point, I would remind your Lordships that in all cases the amounts given in these schemes are minima and we have every hope that they will be exceeded. After the most careful examination, the special committee of the Cotton Board feel that these minima are the right ones. May I conclude by saying once again what was emphasised on the Second Reading of the Bill? It is very important to the future of the cotton industry that all sections should take advantage of the opportunity which they now have to make their applications and get these schemes into operation by applying before September 30, because if they do not reach the minima by that time the schemes will fall to the ground and this opportunity of getting the industry reorganised will have been lost. I beg to move that the Draft Order be now approved.

Moved, That the Cotton Weaving Re-organisation Scheme (Confirmation) Order, 1959, be approved.—(The Earl of Dundee.)

11.40 a.m.

LORD SHEPHERD

My Lords, I am sure that the whole House will be grateful to the noble Earl for his detailed and clear explanation of the three measures which we are asked to approve. On the Second and Third Readings of the Cotton Industry Bill, both in your Lordships' House and in another place, we on this side did not oppose the Bill and we shall not oppose these Motions this morning, but in view of the very large sum of money involved, I do not believe that it is right that we should let these Orders go through formally. I think to be on the safe side I should declare a personal interest. I am a director of a company within a group which actually owns a weaving mill, and it may be affected by these Orders. I should like to make it clear, however, that I have no direct control or connection with the weaving mill.

I congratulate the Government and the Cotton Board upon producing these measures in a language which I may say is recognisable as English: it has not got all the legal jargon. I was wondering whether the noble Earl, Lord Dundee, a Scottish Peer, had anything to do with this. However, in spite of the simple language, the provisions are complicated, and I believe that there will be certain points which the cotton industry will need clarified. I would ask the noble Earl whether he would draw the attention of the Cotton Board to the need for an information centre to which the various sections of the industry and various firms may go for speedy and expert advice.

If I had had the opportunity of speaking on the Second Reading of the Cotton Industry Bill, my main criticism would have been that, while we are being called upon to agree to a large ex gratia payment to an industry which, on all the facts, has failed to meet the changing circumstances of its trade we have not been told at any time into what form or structure the industry will be converting itself. In fact, we have no indication that the industry will take advantage of this scheme. Bearing in mind those two criticisms, I cannot help feeling that the Bill and these Orders are remarkable pieces of paper. We on this side of the House have never objected to the use of public funds to assist private industry. What we have objected to is the method the Government have adopted. It is not so long ago that the Government made a grant of £50 million to Colville's in Scotland. We did not object in principle to the advancing of this money, but in that case we knew what the end product of the grant was to be: it was to be a modern steel mill. In these measures, however, we are called upon to approve a grant of £30 million to £40 million without any idea that the industry will take part, or, if it does take part, what will be the end product.

It is true that the Minister has power to rescind one or all of these Orders if, in his view, the section has not met its obligations or has acted against the public interest. What I am not clear about is this. If one section fails to satisfy the Minister, will the whole scheme collapse? Even if the other sections are permitted to carry on, failure of one will have a very serious effect on all the other sections of the industry. I am loth to suggest that the Minister should take compulsory powers, but I believe that he should have some powers to deal with a section whose actions may jeopardise the whole future of the cotton industry. There is far too much at stake, apart from public money, to permit the selfish interests of one section, particularly with so many people employed.

The noble Earl in his speech drew our attention to the dates by which firms will have to apply to participate. I can well understand the desire of the Government that early action should be taken by the industry, but I am wondering whether September 30, which is the date by which applications must be made by the spinning section, is not a little too close. Companies, as we know, are controlled by directors; but they have some obligation to their shareholders, and we are giving them only approximately two months to make up their minds whether they stay in business or go out. I question whether two months is really sufficient for a board of directors responsible to their shareholders to make up their minds. I would ask the noble Earl whether the Minister will consider an extension of this date, because I should not like it to be a case that firms might go out but cannot make the decision within the required time.

Anyone knowing the cotton industry well knows that it is divided into watertight departments. Yet each is dependent on the other. But there is nothing in the original Bill or in these Orders to indicate that the interests and requirements of one section have been taken into account when the plans of the other sections were prepared. Can the noble Earl say whether consultations have taken place between the various sections, and whether the Cotton Board are satisfied that the individual schemes of each section will not have an adverse effect on the others? Personally, I have no concern about the three Orders we are considering to-day, but later on in the year we shall be having Orders concerning the printing and finishing section. That section is the end of the process of textile manufacturing, and if there is any serious reduction in printing capability this will have a serious effect on the whole industry. I hope that before that Order is laid before Parliament the Cotton Board will carefully consider the requirements of the weaving section.

One obvious point to which the noble Earl drew our attention was the difference between the elimination target in the White Paper and the elimination required in the Orders. I listened carefully to his explanation. I hope it is not a case that the Cotton Board have set these limits, which are very low, in order that there should be no risk of any of these schemes failing. I am quite sure that the figures in the Orders for elimination of production are far to low, and even if these figures are attained, or anything near them, the industry will not be a great deal better off than it is today. Elimination of production is vital—and there I agree with the Government—but I believe that the key to success is the total elimination of units, and in particular the acknowledged and known inefficient and ancient mills of which there are far too many in this country. It is true that the Government have given various rates of compensation, and they have given a high rate for those firms which are going out of business completely, but I question whether they have given high enough rates, bearing in mind that many of the small firms who will go out of business—or which we hope will do so—will have considerable difficulty in selling stocks of grey cloth finished goods, and disposing of factories and of their other assets. I am wondering whether, in the smaller firms, the inducement that is being offered is really sufficient.

I should like to go one stage further when talking of elimination of units. I personally believe that we must have complete reorganisation in the industry. I believe that at least 80 per cent. of our industry must be what we call vertical—that is, under one roof. You have the whole process from raw cotton to the finished grey cloth or, in some cases, where you are dealing with woven goods, to the finished cloth. I have travelled around, and it was only a few weeks ago that I was in Hong Kong. When I saw the new mills that have been built in Hong Kong and I compared them with some of the ramshackle buildings that one sees in this country, I could well understand why they are so competitive. There they have these modern factories, built within the last five years, where there is no handling other than moving the finished part of the production to the next section. In this country it is a question not of moving it from one factory shed to another; it is one of moving it from one town to another. Having regard to all the handling charges, I do not think it can be denied that we are very inefficient. I hope that the companies will amalgamate so that we can get these large, vertical units, cutting out all the minor profits that at present arise between spinning, weaving and finishing, and having only one profit, and that is the final profit on the grey cloth. If we do that, I am certain that we shall be able to compete, at least with our competitors in Europe.

There is one last point that I wish to make in regard to compensation. I believe it is the case that a firm may receive compensation and go out of business. But there is nothing within these Orders or the Bill to prevent such a firm, after a reasonable time—I have no idea what is the time—from starting up again in the textile business. I do not believe that that is the desire of this House or of the Cotton Board. If the Cotton Board and the Board of Trade see any, shall we say, redevelopment of firms who have taken compensation and appear to be re-entering the cotton business, they should take steps to prevent it. What we have to do, if we are to get an economic price, is to eliminate excess production; and that can be done only by limiting the number of units while at the same time working at full capacity those retained.

I have nothing further to say, at least this morning, except to wish the cotton industry success in its undertaking, and to emphasise what the noble Earl has said. This is possibly the last opportunity of the industry to put its house in order. The industry is extremely fortunate that it has a Government who are prepared to come to its assistance in such a way. It is a remarkable assistance, when we consider the way the Government treat the Colonial Development Corporation—a Corporation which brings help and assistance to our Colonies and yet has to pay a high rate of interest and has to pay back the money. This industry, with all its failures, is getting a very large sum of money, and for many it will be tax-free. I hope that the industry will lake advantage of it and that, with a smaller industry, it will be prosperous and happy

12.5 p.m.

LORD DARWEN

My Lords, your Lordships have a great deal of Business before you to-day, and I propose to make only a few brief remarks on the Orders and ask one or two questions. When I spoke in the Second Reading debate on the Cotton Bill, in common with other speakers on this side of the House, I expressed a good deal of misgivings. For one thing, I thought the Bill was very vague. But I am greatly reassured in reading through these Orders, which I find give substance and detail to the powers that have been granted under the Bill. Moreover, they seem to me to be well devised and open to little in the way of criticism. I think the Cotton Board is to be congratulated in succeeding in recruiting an excellent team, and that team, in turn, has succeeded in getting the best kind of co-operation from the employers' federations and the unions. This reflects credit on all.

When I first read the Orders, I was considerably perturbed at the very low minima. I am still not satisfied, in spite of what I have heard fall from the noble Earl, that these minima will be sufficient to make the scheme workable. On the other hand, I am convinced that the Government's reason for fixing or agreeing to the Board's very low figures are excellent. I think they are good reasons, and they convince me. I take the view that the scheme would not achieve its object if these minima were not, in fact, exceeded. That means that the Government are taking a gamble; but in my view they are perfectly justified in taking such a gamble—indeed, in fixing or agreeing to these low minima they are, I feel, taking the wisest possible course. A strange situation will, of course, arise if the number of applications is very large. This could mean that the advantage to those electing to remain in the industry would be to a great extent offset by the corresponding heavy burden of the two levies—one for scrapping, and the other for compensation. So we have a possible situation arising that the more select the industry, the more contracted it becomes, the greater the burden of the levies falling on the privileged few who remain.

I have made my comments. I come now to my questions. The first question I should like to ask the Minister is this. In the spinning industry spinners are to be compensated for scrapping preparatory machinery, that is to say carding engines. No such allowance is to be made in the weaving industry for their preparatory machinery, such as winding machines, pirn winders (which are a relatively modern type of machine), warping mills and tape machines and sizing machines. All these are expensive items of machinery, more expensive than the looms themselves, and I wonder whether it would be correct to infer that compensation for these machines is included in the loom rates. The second question is: what measures do the Cotton Board propose for ensuring that machinery on which claims are made is, in fact, capable of being made operational without undue difficulty or expense? That concludes what I have to say.

12.11 p.m.

THE EARL OF DUNDEE

My Lords, may I take Lord Darwen's questions first? He wanted to know how we should ensure that a loom or a spindle in respect of which a claim was made could be made operational without undue difficulty or expense. That is a decision which, in the last resort, the special committee of the Cotton Board would have to judge, and I think they might judge either by examining the history of the machine or by inspection. They have an expert staff who could be used to inspect the machinery, and I have no doubt that that is the course which they would take if they considered it necessary. They are the authority who would have to decide that question. The noble Lord also asked about preparatory machinery. In the case of looms, we feel that if the loom is scrapped our objective will have been achieved, whatever happens to the preparatory machinery. I think he is right in saying that the compensation agreed on in respect of the looms is calculated with some regard to the other machinery which will have to be dispensed with at the same time.

I am grateful to the noble Lord, Lord Shepherd, for the support which he gave to these Orders, and I will try briefly to reply to one or two of the particular questions which the noble Lord asked. The last one of all was about firms re-entering the cotton business. There is no method by which one could stop a firm from coming back and starting all over again; but, of course, in the first place, in order to go out of business it has to scrap the whole of its machinery. And we shall therefore have gained our objective of eliminating redundant machinery so far as that firm is concerned. If, much later on, the firm decides to start again from scratch with new machinery, which of course is very expensive, that is entirely its own affair. I do not think we ought to make a rule preventing a firm from coming back again later on entirely new conditions. What we are concerned with here is to get rid of redundant machinery now.

The noble Lord also asked whether, if one scheme failed through the minimum not being reached, the others would fall to the ground. The answer is that they would not; they all stand on their own feet. If one failed and the others achieved the necessary minimum, the others would go on. But that is a position which we very much hope will not arise. I think it would be a very disastrous thing for the industry if any one of these schemes were to fail through there not being enough applications.

The noble Lord thought that in some cases September 30 might be a little too soon for a firm to decide whether or not it was going to come in. When the White Paper was explained, and when the Bill was discussed, we always emphasised—and the industry has agreed with us—the necessity of doing this thing quickly. The period was settled in agreement with the industry, which has always felt that a long period would be inimical to the success of the scheme. The industry has known about the schemes since they were published on July 13. It will have had two and a half months to consider them, and that period is regarded as sufficient, both by the industry itself and by the Cotton Board, which has discussed the matter with them. I will take note of what the noble Lord said about the need for an information centre, although I do not know how far the Cotton Board fulfil that function already.

Then the noble Lord asked whether there had been consultation between the sections. I do not know if there has been consultation between one section and another; but of course these schemes are all prepared and drafted by the special committee of the Cotton Board, which is the Government's agent in this matter. The Cotton Board, moreover, are equally in touch with all three sections and would naturally consider the interests and position of one section in preparing their scheme for another.

With regard to the future reorganisation of the industry, of course that does not arise at all on these Orders, since their only purpose is to secure the preliminary object of scrapping excess machinery. The subsequent re-equipment grants do not come into these Orders, except very indirectly on the point about "claw back," which I explained on Second Reading, and I do not think I need trouble your Lordships with it again. Whether or not many firms will later on proceed to reorganise themselves vertically I should not like to say. I think the noble Lord is probably right in thinking that in many cases that is the right way of doing things; but there are two opinions about it in the industry, and whether it will be done in a large number of cases I do not know. But the first thing, the essential thing, is to get redundant machinery scrapped and that is really all that these Orders are concerned with for the moment.

12.19 p.m.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, might I, before the Motion is put, say that I told the House when the main Bill was going through what my sort of political interest had been in this matter since 1939, and I thoroughly agree with my noble friend Lord Shepherd that we cannot at this stage oppose these Orders, and we do wish that, as this policy has been settled, it may come to success, However, I want to stress, and I am sure the noble Earl will agree, the importance of the industry as a whole taking its chance now; otherwise, we may be only beginning the feasts at the funeral of an industry instead of seeing a real reconstruction. The highly free trade competitive basis upon which cotton was built in the early days of the industry, around the sacred phrase of the division of labour in the world and very cheap cotton (involving very bad conditions for overseas workers—and not very good conditions for people here, either) has in the end brought its own results; and the only real way the industry will be able to compete in the future is to reorganise its basis. If the Government can do anything now, as a halfway step, to promote the amalgamation of those who control these different sections, even though they cannot at the start get all things from the raw cotton to the finished article, under the one roof, it will at least be a start to reducing the overall cost to be charged against the final product before settling the price—because at present we are being priced out of a great many markets. I hope that something will be done in that direction.

In the meantime, the Government having gone as far as they have done, I should like to thank the noble Earl for his courtesy in this hurried period of the last few weeks during which he has endeavoured to give us all the information he can. We still do not think this policy goes really far enough in recon- struction, but we hope that it will bring a change for the better.

On Question, Motion agreed to.

House adjourned during pleasure and resumed by the Lord Chancellor.