§ 3.20 p.m.
§ THE EARL OF DUNDEE
My Lords, it is almost exactly a year since the three reorganisation Orders, for the doubling section, the weaving section and the spinning section, of the Cotton Industry were approved by your Lordships. Your Lordships will remember that the timetable at that time for those three sections was a very tight one. The Orders were approved on July 28; the time given for applications to be made was only two months, September 30 being the last date; and the date by which machinery had to be scrapped was March 31 this year, because it was generally agreed that if a scheme was going to be of any use it must be started off quickly. But in regard to the finishing section, which is covered by the two Orders on the Order Paper to-day, it was agreed that, since it consists of so many different and complicated processes, a good deal more time must be allowed.
These two Draft Orders for the two parts of the finishing section of the industry have now been submitted to my right honourable friend the President of the Board of Trade, and before he can confirm these Draft Orders he has to be satisfied of two things. First, that an agreement has been arrived at satisfactory to both sides, the trade unions and the employers, concerning terms of individual compensation for operatives who are displaced as a result of the reorganisation. This has been done. In the case of the finishing section, several different agreements have had to be made with several different trade unions. The principle of these agreements is the same as in the earlier cases of the weaving, spinning and doubling sections of the trade. Compensation is to be paid partly by lump sum and partly by weekly payments. The amount of compensation varies sometimes with the age of the displaced operative and sometimes with his length of service. All operatives who might be displaced by these Orders are covered by the agreements.
The Government have no responsibility at all for the terms of the agreement. All the President of the Board 588 of Trade has to do is to satisfy himself that an agreement has been made between the employers and the trade unions, to the satisfaction of both parties. The other thing on which the President of the Board of Trade has to satisfy himself is that enough excess capacity will be eliminated to justify the expenditure of public money under the Act. The Cotton Board have estimated, from the figures they have been given, that between 32 and 34 per cent. of capacity in the finishing section of the trade is excessive, and it has been agreed that Government payments will not begin to be made until the amount of capacity which it has been agreed to eliminate has exceeded a figure of 20 per cent.
There is one difference between this and the older schemes. Under the three schemes which were passed last year, if the figure which the Board of Trade thought necessary was not reached, then the whole scheme fell to the ground and could not be proceeded with. In this case, if the 20 per cent. figure were not reached the scheme would still go on, but the industry would have to bear the entire cost itself—nothing would be contributed by the Government. I do not think that is likely to happen. There is no maximum prescribed, but I understand that, although there is nothing about it in the Order, the Cotton Board do not intend to allow machinery to be scrapped in excess of their figure of 34 per cent. of the total capacity of this section of the trade. That is another difference between this Order and the previous Orders. The Cotton Board or the special committee need not accept all the applications that are made to them; they can, if they choose, discriminate. That is necessary because of the quite different processes of manufacture in the finishing section. The Cotton Board's committee might decide, in the general interest of the industry as a whole or of the export trade, that one particular firm ought not to be closed down, and might refuse, therefore, to accept its application to be treated as redundant. Or, of course, if they got a large number of applications in excess of their figure of 34 per cent., then they would have to refuse some applications, in which case, other things being equal, they would probably admit those which they had received first.
589 In the case of the other sections, the measure of capacity was easy—either it was a certain number of looms or a certain number of spindles; and it was possible for one factory not to close dawn entirely, but to scrap a certain number of looms and spindles and to carry on with a reduced number. But in the case of the finishing section that is not possible. A factory—not necessarily the whole firm, but an entire factory—has either to close down or not to close down. Therefore the application to the Cotton Board must be in respect of one unit—a factory.
As to the dates, they are a little more elastic than they were in the case of the other schemes last year. When this Order is passed, applications may begin to come in on August 1 and they can go on until October 31. If, by October 31, enough applications have not been received, the Cotton Board may then extend the period. But, of course, it is possible that enough will have been received by that date. Applicants have to go out of business six months after their application is accepted, and the last date for scrapping of machinery will be December 31, 1961.
There is a slight difference between these two Orders. In the woven, cloth section it is provided that the industry shall divide itself into three subsections—the bleaching subsection, the dyeing, raising and finishing (only) subsection, and the printing subsection—in order that each subsection may pay for its own reorganisation; and there is assigned to each of these subsections a minimum quantity of capacity which must be scrapped if they are to qualify for Government assistance.
One novel feature of this scheme is the provision for realisation companies, which are defined, I think, in each Order at the top of page 4. The Board thought it would be a help to small firms in this section of the, industry if instead of going through all the processes of applying to the Board and receiving a grant and doing the scrapping of their own machinery themselves, they were to sell their factories outright to a realisation company who would then do all the work for them. The realisation companies would be non-profit-making concerns. They would buy a factory which it had been decided to close down; they would 590 then get the grant, scrap the machinery, sell the scrap, buildings and other assets, and any loss which they were left with would be paid by an additional compulsory levy upon the whole industry. It is felt by the Cotton Board that in the case of some small firms this may save a lot of trouble, and possibly a certain amount of expense.
Your Lordships will remember that last year, just at the time when the Cotton Bill was introduced in Parliament, there was a sudden world improvement in the demand for cotton goods everywhere, with the result that this industry, which had been so acutely depressed, began to find that there was a much greater market for its goods and began to enjoy a marked revival. The Government at that time continually issued warnings to the cotton trade lest it should be tempted by this sudden excess of pressure to neglect the unique opportunity which was being provided by the Bill, to reorganise and re-equip itself and to modernise itself to meet the new types of competition which it has to deal with in world trade. I am glad to say that the industry heeded that advice. The first stages of reorganisation have proceeded on a larger scale than we had expected in the weaving and spinning sections, and I think there is every reason to expect that matters will proceed at the same tempo and in the same satisfactory way in the finishing section of the trade. I beg to move that the first Order be approved.
§ Moved, That the Cotton Finishing (Woven Cloth) Reorganisation Scheme (Confirmation) Order, 1960, be approved.—(The Earl of Dundee)
§ 3.29 p.m.
§ LORD LUCAS OF CHILWORTH
My Lords, I am sure all your Lordships are grateful to the noble Earl, Lord Dundee, for the explanation he has given of these two Orders. I would not claim to be an expert on matters pertaining to the cotton industry—a most intricate industry in regard to which these are more intricate and highly technical Orders. We on this side of the House do not intend to impede the progress of these Orders, but there are one or two questions I should like to ask the noble Earl and one or two comments that I should like to make. These Orders, and the schemes made under 591 them, certainly add up to something which it is necessary to do for the realisation or consolidation of the textile industry. But I do not know whether Her Majesty's Government have properly learnt the lessons of the first Orders as they apply to the spinning, weaving and doubling sections of the industry, and I wonder whether we shall find in practice that this is the right course.
I know that it is easy to be critical, but I am apprehensive that some of the happy thoughts that are evidently in the mind of the noble Earl may be falsified, as were the hopes on the first Orders that came before your Lordships' House. Both these schemes are inflexible, and what have we found? Through the operations of the first schemes we have found that there have been artificial shortages of some yarns. Will there be artificial shortages of capacity here? Your Lordships may think that that is a rather hypothetical question, but it appears to me that the scheme can be used in such a manner that those apprehensions may prove to be not altogether unfounded. Then I believe that Her Majesty's Government will have to face for these schemes a bill of about £2½ million—I think that is the amount of money that is in their minds—whereas, of course, the spinning, weaving and doubling sections of the industry "got away with" (although perhaps that is not quite the correct expression) £10½ million. If the noble Earl tells me in reply that on this occasion the Government have had far higher regard for the taxpayers' money that will not be a bad answer. But perhaps he will tell me why the amount of money is so much smaller.
The whole process of the scheme tends to be too long-drawn-out, especially as, under the conditions, there can be another approval period. If that is so, it may be a year or more before any important movement is made for the Rood of the industry. Perhaps the noble Earl will tell me whether my calculations in that direction are right. I am thoroughly unhappy about one thing the noble Earl mentioned. He said that under this scheme, unlike the previous one, whole units have to be offered for scrapping; that sections of plant and machinery in units cannot be sold off. Is that not 592 rather hard upon the small concerns, who, to use the noble Earl's own words, have to make up their minds whether they are going to stay in or get out. For the small firm there is no halfway house.
A large concern, with multiple factories and multiple units, can offer one, or perhaps two or three units under the scheme for scrapping, and carry on its activities undisturbed. Of course, the noble Earl might answer by saying that that is the object of the scheme—to concentrate the industry into larger units and do away with the smaller ones. That may be. The scheme of realisation companies lends colour to this theory, because the Bleachers' Association, in the bleaching section, control half the trade of that section; and there are also the calico printers, who control about two-fifths of the printing section.
The definition of a "realisation company" is set down in paragraph 2 (1) (ii), on page 4 of the Order, and I believe I am right in saying that a realisation company can be formed by anyone. A big unit can buy up small ones for the purpose of closing them down. If the bidding by these powerful combines to buy up their small competitors for the purpose of closing them down goes on, then, as the noble Earl has said, in the ultimate the bill will have to be met by levy upon all the firms remaining in the industry. That, again, is going to be a very heavy burden upon the small firm which remains in. And I suppose the noble Earl would not disagree with the proposition that although this is to be a levy on the industry, apart altogether from State assistance, in the last analysis the consumer will have to pay; and that means higher prices for the goods. Then perhaps the noble Earl would explain to me something which, I believe, he partly explained. Paragraph 8 (2) of the Cotton Finishing (Woven Cloth) Order says:In dealing with applications for compensation under the Scheme in relation to production units in any subsection, the Board will be guided by the need to avoid reducing the capacity of that subsection or of any class of the activities of that subsection to a level insufficient to meet all reasonably foreseeable demands.Would the noble Earl be kind enough to tell me precisely what that means? What happens if an estimate is made? How 593 long is a "foreseeable demand". How long is the crystal-gazing to go on, and what happens in the end?
Lastly, I come to the question of the operatives' compensation. Even taking into consideration the difficulties of operating a new scheme, when the scheme was applied to the spinning, doubling and other sections of the cotton industry the time-lag in the payment of compensation to operatives almost bordered upon a disgrace. This compensation is for loss of the man's job. There are a great many technicalities involved. Can he get another job? What will his wage be? How old is he? But some of those people had to wait for over six months before they got anything. I do not think that that is right, and am sure Her Majesty's Government would not wish that. As the proprietor of the business gets a lump sum and the managerial staff have their compensation paid in a lump sum, why cannot the operative be paid a lump sum?
The noble Earl said that the payment was made partly by lump sum and partly by instalment. Now why? Surely the machinery is greater when instalments have to be paid. I should have thought that the operatives ought to be the first to be considered, and I would ask the Government to look at this again. I know that the payment of this compensation of operatives has been agreed between the various unions and the Cotton Board. But, my Lords, they had to give way to a hard bargain; let us face that. The noble Earl said that there is a ministerial responsibility, as it is set down clearly in sub-paragraphs (b) and (c) on the first page of both these Orders. It states that the Board of Trade have to be satisfied
- "(b) that arrangements have been made within that section for the payment of cornpensation in respect of loss of employment due to the elimination of the excess capacity; and
- (c) that bodies representing the interests of a majority of the persons employed in that section have agreed to those arrangements so far as they relate to persons whose interests are represented by those bodies".
But that compensation is paid by a levy on the industry. There is no grant from public funds; none whatsoever.
The Cotton Board are given the statutory power to collect this levy and to distribute this levy. The Minister's re- 594 sponsibility, as these Orders so state, is to see that there is agreement. Would the noble Earl agree with me that there is a ministerial responsibility to see that the scheme is then operated in fairness, and expeditiously? I do not think that the Minister or the Government can just wash their hands of that responsibility and say, "That is the responsibility of the Cotton Board". Those are some of the questions that I should like to ask.
We must see that this thing works fairly. There has been grave discontent in Lancashire over the way the other scheme has worked and has affected the operatives. The big combines and the other producers can look after themselves; they are powerful enough and they are influential enough, and, if the noble Earl does not mind my saying so, wealthy enough to look after themselves. But these men are out of a job. I do not think they should be put to the hardship, as was the case before, of not having one penny paid to them for six months. Perhaps the noble Earl can assure your Lordships that when he said they would be paid a lump sum and then instalments, he meant that the lump sum is going to be paid immediately.
The noble Earl ended his remarks by saying that a year ago the Government exhorted the cotton industry to look to its laurels and not to be carried away by what was then a minor setback. If theGuardian, a reputable Lancashire paper, is to be believed, the exports of textiles are now falling and Lancashire will have to face more intense competition in the fields covered by these Orders—that is, in the finishing fields—than ever before. I frankly think that they will find that their competitors overseas will be doing these jobs of bleaching and printing far more in the future than in the past. So in wishing the industry well and wishing this scheme well, I sincerely hope that the Government will do everything they can to expedite it, so that the industry will not be placed at any disadvantage by the dragging of feet—whose feet I am not going to say—that proved such a bad feature of the three schemes your Lordships gave your approval to twelve months ago.
§ 3.44 p.m.
§ LORD BARNBY
My Lords, I would associate myself with the opening remarks of my noble friend who has just 595 sat down. We appreciate the detail in which the noble Earl has explained the document which is before us. I myself am interested in the textile industry, but not in the cotton textile branch. I should like to express wholehearted support of the two measures that are before us—that is, the two Orders—because I am profoundly convinced that they are to the interest of the industry as a whole and of the workers in the future, and of the consumers as a whole also. But in the case of various other things said by the noble Lord I would not find myself in association. I would quickly come to one, because it appears to suggest the fallacy that the compensation which is being paid out of public funds is really a kind of subsidy to the employers. As is obvious to anybody who thinks it out, since this scheme is going to rationalise the industry, then such payments as are made to produce greater efficiency in the industry will, and must, perforce, leave in the hands of the remaining units a stronger financial position with which they can buy new equipment and, of course, lower the cost which inevitably goes forward to the consumer. On those grounds I rather dissociate myself with that part of the noble Lord's remarks.
To return to the explanation of the noble Earl, unless I misunderstood him —and if I did misunderstand him I would earnestly ask him whether it is too late to hope that there might be some modification along these lines—he carefully explained that if the units offering themselves for concentration or elimination subject to compensation, did not come up to a determined minimum, then the whole charge would fall upon the industry. But this is the point I wish Ito make now—because in looking at the record of what the Minister concerned said, in the Report of another place, I find that it differed somewhat, as I understand it, from what the noble Earl has said to-day.
As to units falling short of what is considered appropriate by the authorities who constitute the Government's advisers right down the line through the complicated mechanism he has explained, do the mechanics lead to any procedure whereby at some point additional incentive can be offered, so that, in the interests of the industry, the minimum 596 number of units will come under the umbrella or into the net, whichever way we like to describe it? Is there any power whereby, through an additional amount of compensation, the minimum number could be induced to come in? That would presumably involve supplementary payment for every other unit that came under the umbrella. I say that, my Lords, because it seems definitely an advantage to the industry as a whole that this should be achieved and that there should be elimination on the scale that the Orders envisage. I therefore seek clarification by the noble Earl, if he can give it, on that point.
On the general question of the achievements under the Orders, their introduction is perhaps tardy. It would have been happier had these Orders come earlier. Perhaps even the jute industry might well have been better served had they come earlier. However, before sitting down I would just add that it seems a rather cynical fact that Parliament is now legislating to set up an authority which arbitrarily decides what action should be taken and what prices paid, when quite recently—I forget when it was, but the noble Viscount who sits on the Woolsack will well recollect it—there was such strong resistance offered against appeals in the Restrictive Practices Act. Whatever may have happened in other sections, when anything affecting the textile industries is being discussed, it is only right that the House should be reminded that, far from bringing salutary circumstances in which the consumer will benefit, the absence of those steadying influences which would be in the interests of the workers in the industry may well bring a kind of chaos which can delay the installation of improved machinery and better practices, which would be the shortest cut to bringing about what these Orders aim to do—namely, cheapen the ultimate cost to the consumer. My Lords, I repeat that I give my strong endorsement to both the Orders before the House.
§ 3.52 p.m.
§ LORD SHACKLETON
My Lords, I shall not detain your Lordships long on this matter, but it seems rather fortunate that, a year after we passed the Act and introduced measures for the main part of the cotton industry, we should have an opportunity to look at its working at the 597 same time as we are considering these further Orders in regard to the finishing end of the trade. I think we ought to consider how right it is to persevere with the policy which apparently became necessary in a very different situation of world trade. As the noble Earl said, there has been a boom—a world-wide boom—in textiles, and this has taken place at a time when the reorganisation of the cotton industry has also been taking place. The situation is totally different today. What the noble Lord, Lord Hawke, quite rightly described, when we debated the Cotton Industry Bill, as the weakness of the cotton industry—namely, the continued state of weakness in the selling market; weak selling has always been the most difficult factor in maintaining a viable cotton industry—has wholly changed in the last year, and to-day we are in a very strong sellers' market and a relatively weak buyers' market.
We are faced with further implementation of a scheme which is going to cost the taxpayers a good deal of money. I rather disagree with my noble friend Lord Lucas of Chilworth, if I understood him rightly, when he suggests that less money is being spent on this scheme than was anticipated. Indeed, expenditure on the retirement of machinery at the spinning and weaving end of the industry has been greater than the minimum that the Government anticipated, and this was foreseen in the Bill.
§ LORD LUCAS OF CHILWORTH
My Lords. I think my noble friend rather misunderstood me. I said that I thought the Government expected to get a bill for the Orders which are now before the House of about £2½million.
§ LORD SHACKLETON
Whatever happens, it looks as if the total cost is going to be more than the £30 million that the Government originally estimated, and perhaps we can hear from the noble Earl on that point. It is relevant to discuss what advantage the community is getting from this. As regards the boom that is going on—and, of course, it is affecting consumer goods generally; although now, as a result of the Government's policy of credit restriction, there are certain declines, certainly in the hard, durable goods line—the real factor bringing about the improvement in the cotton industry in 598 this country is last year's hot summer; and what will happen this year is something which we cannot forecast. We do not know what sort of a summer we are going to have this year.
My Lords, I am still an optimist; I am going to take my holiday. However, last year's hot summer has had a perfectly simple effect; and it is in these ways and against this sort of background that industry has to conduct itself. Last summer's frocks got a pretty good airing and are worn out. People are inclined to buy more, and the distributive trades, the retail trade, have had to stock up. They have had to stock up against a background of a certain growing shortage; and therefore they have tended to overbuy. We are in a situation to-day where, as my noble friend said, certain lines are in danger of becoming in short supply. There are certain types of specialised yarns which are necessary for certain cloths—gingham is a case in point—which are in fact hard to come by. This relative scarcity is having the usual effect—and this is the perfectly normal way in which the market works: there is a growing tightening in supplies. Against this background, we also see a slight hardening and an increase in price.
So far, the evidence is that there has been little sales resistance, but we have not yet reached the full extent of what may come in the way of increased prices. These increased prices are coming at a time when, on the whole, we had hoped that we were going to get greater efficiency in the cotton industry—rationalisation by more efficient use of the machinery available. Furthermore, we shall not get the undoubted advantage which we thought was coming from the breaking up under the Monopolies Act of the restrictive agreement with regard to yarn. That should have led to a reduction in prices, but the reduction has not been apparent. Moreover, I am not sure exactly what effect this is having on our export trade. It is quite true that there is a healthy tendency for the cotton industry to move more into better quality cloths for export, but the lower end, the "loom fodder" type of cloth, is beginning to disappear—and, of 599 course, in the process we are losing certain traditional markets. It may well be that we were bound to lose those markets; but we are to-day a net importer. We import more cotton cloth than we export, and we import very nearly as much yarn as we export. This is an extraordinary state of affairs for a country so much of whose life has been built on the cotton industry.
Again, this may be argued as a natural development in the world: that we have got to face the fact that places like Hong Kong—and, one day, Japan—will be coming more and more into the world markets and will move into this field. But to-day, far from there being a surplus of labour in the cotton industry, certain of the traditional areas which have suffered most in the past from a positive shortage of key people are facing similar conditions; indeed, it has not been possible to expand production in those units which have been continued because it has been impossible to recruit these key people. I have heard of a case where it was intended to put on a particular shift, but they could not do so because they could not get a tacker or loom overlooker. And this is a process which we are proposing to continue.
Is it right that we should do so? After those gloomy remarks I would say that the Government are, in fact, right to press on with this. These Orders are an improvement on earlier ones. The Government have now conceded what they refused to concede before—the desirability of some discrimination. I think there is a need, in the finishing end of the trade in particular, to ensure that the Cotton Board keep close watch on the closing dawn of different units, as is provided in these Orders. There are dangers. There have been discussions of what would happen if there was a take-over bid for a well-known concern, the United Turkey Red, which might be taken over only to be closed down. And this is a company which recently received a grant in order to keep it going under the development areas scheme. So I think it is right that discrimination should be operated. I am sure that the Government are in consultation with the Cotton Board on this matter. Here again there is a risk, and I do not doubt that the Government will deny it. But they have put discrimination in, not so that 600 a monopoly shall be created but so that a supply shall be available. The arguments are against monopoly but certainly to avoid the danger of scarcity.
Turning briefly to the question of payment of compensation, I support what my noble friend said. It has not been a happy business in Lancashire. The scheme was designed to pay compensation to those workers who left the industry. They have received this compensation as a lump sum, in the same way as managers and employers, but they received it as a delayed lump sum, although it was they who most of all needed it right away. I hope that the Cotton Board will look at this point. So far as I can tell from the Order, there is nothing to prevent them from using their influence. While this is, of course, a matter of negotiation not between the Cotton Board and the cotton unions, but between the employers and unions, the Board should be able to bring their influence to bear in this matter.
I think it would be right to congratulate the Government on the speed with which they have moved. It is true that the fact that favourable circumstances in the world have eased the situation, but had that not been so there would have been greater need for the scheme. But we have to accept the gloomy fact that we shall be paying large sums of money for what is virtually a policy of restriction. I only hope that the industry in Lancashire, and in other parts of the country, which has shown a great deal of co-operation and awareness of its responsibilities, will continue to appreciate that the British taxpayer is paying a great deal for this and that, on the whole, the British consumer has yet to see much benefit from it.
§ 4.4 p.m.
My Lords, though these are called Finishing Orders, I presume that we are dealing with the finishing of man-made fibres as well, because they are being produced by the same people. Thirty years ago, when I was actively engaged in this trade, there was a huge capacity in this end of the trade. I understand that it is being gradually eliminated, but that there is still excessive capacity. What is excessive capacity depends on a number of comparatively unknown factors. There is the question of future demand for cloth in general.
601 We might be able to get some idea of that. There is the question of future imports, and there is also the innate habit of the trade to fluctuate in demand. It might be possible to estimate the overall future of demand for cloth in this country, but I defy anybody to decide whether the women of England ten years ahead are going to want it printed or dyed, or merely bleached. This depends enormously on fashion. And the type of machinery for the different finishes is quite different.
It is quite impossible to estimate what future imports will be. I believe that within the next twenty years the United Kingdom will have to revert to tariffs and quotas, but under the present state of Free Trade it is impossible to estimate what imports will be. The fluctuation in demand to which I have referred has always been the Achilles' heel of the industry, because the shelves of the wholesalers and retailers are never half full—they are either over-full or empty. A short time ago they were empty. There has been a terrific boom in textiles, but I have little doubt that, before long, the shelves will be over-full and that we shall have something in the nature of a recession, The only remedy for this form of fluctuaticn, I am convinced, is the ability to form selling agreements and to hold these selling agreements. I hope that it will be possible to, do this under this reorganisation, and that the Monopolies Commission will not be turned on to these people. Between the two wars these selling agreements were an attempt to keep the industry from bankruptcy-—and to some extent they succeeded, though they were frustrated the whole time by one or two weak sellers.
I do not share the fears of the noble Lord, Lord Lucas of Chilworth, about the small men. The small men were always the menace to the whole trade, and if they decide to take compensation and go out I do not think that it will be at all a bad thing, from the point of view of the whole trade. I think that people have been led to expect too much from these schemes in the way of price reduction. We have to remember that old machinery, which has been written down to nothing, is being replaced with new machinery, which is very expensive. The result is that, though the new machinery 602 may cost a good deal less to run, by the time the overheads are included there will not be so much saving as people have been led to believe.
I believe that the process is a right and inevitable one, but it is not all joy and sunshine. As regards the degree of the process, one can regard it only as a rough-and-ready method of reducing the size of an over-large industry. But to pretend that it is a scientific method of creating production capacity that will exactly meet demand in the future would be false pretences. There is only one way by which that could be conceivably clone, and that would not be possible in a free country: it is by dictating the consumer's choice and regulating imports. And that can be done only behind the Iron Curtain. Nevertheless, I support these two Orders.
§ 4.10 p.m.
§ THE EARL OF DUNDEE
My Lords, I am grateful to my noble friend who has just spoken for his very competent support of these Orders and also to all other noble Lords who have in general, I think, supported what we are doing. I will reply to as many of the questions that have been asked as I am able. The noble Lord, Lord Lucas of Chilworth, who has kindly apologised for not being able to stay, asked a question about artificial shortages, which I think he partly answered later on by quoting the passage on page 8 of the Order which allows the Cotton Board to reject applications for scrapping from the finishing section. They have no intention of allowing shortages of essential finishing capacity to develop. I do riot think that they make these decisions by crystal-gazing. The Cotton Board are, as the noble Lord, Lord Lucas of Chilworth, suggested, very competent people, and they have to take account—they are the people best fitted to do so—of the future trends of the market and decide whether it is in the interests of the country and of the industry as a whole that any particular application for scrapping should be accepted or refused.
It may interest your Lordships to know that in regard to the other sections of the trade, although the amount of scrapping has been much larger than estimated (I think over 100,000 looms, compared with 45,000, and 12 million 603 spindles, compared with 6 million), and although there has not yet been time for the new machinery and equipment to be installed, which is the main purpose of the whole operation, production has increased. I expect that the cause is more shift-working, but it is encouraging to know that, in spite of all this scrapping, production has increased.
I was not quite sure what the noble Lord, Lord Lucas of Chilworth, was trying to discover about expenditure. He was right in saying that the estimate of Government liability in respect of this Order in the finishing section of the trade is £2½ million. If I understood him aright, I think he wanted to know why it was so much less than the £10 million liability so far incurred in the other sections. The answer, of course, is that the finishing section is much smaller and there is much less value being scrapped. I do not see anything to be surprised at in the fact that Government liability in this section should be smaller than in the others. The best estimate which can be given of the total Government liability under the Cotton Act is still £30 million. The greater part of that, of course, will consist in the 25 per cent. grant for new machinery, most of which has still to come. We cannot do much more than guess how much will be approved. But the estimate of £30 million has not yet been officially revised; that is still the kind of figure which we contemplate as the total Government liability under all processes of reorganisation.
The noble Lord, Lord Shackleton, wondered whether this was really worthwhile in the national interest. Of course that is a matter of opinion, but surely the real results, in the shape of benefit to our export trade, cannot be realised until the final and most important stage of the reoganisation process has been finished, or at least has progressed—namely, the re-equipment of the industry with new and up-to-date machinery. As your Lordships will remember, we stated in discussing the Cotton Bill that the Government thought it would be worthwhile that they should intervene in this way, with this kind of help, in order to ensure that the industry should be equipped to produce high-quality cotton goods with up-to-date machinery, because we believed that in those conditions the cotton industry could survive, 604 could compete with the rest of the world and could play a great part in our future economy.
The noble Lord, Lord Lucas of Chilworth, thought it unfair that a small firm should not be allowed to scrap part of its machinery. I find it difficult to visualise any firm in the finishing section of the trade which could do itself any good by scrapping part of its machinery, because the machinery is not divided into units like spindles or looms. It is probably just one large factory with coordinated machinery inside, and it would not be possible to scrap part of it without destroying the whole thing. There is certainly no intention of discriminating in any way against the smaller firms.
In view of what the noble Lord, Lord Lucas of Chilworth, said about realisation companies, I think I had better repeat what is provided under the Order for the setting up of these companies. The noble Lord seemed to think that a realisation company might consist of a large combine which would buy up small firms and scrap them. That is not at all what is provided for in the Order. What is done is to enable the yarn-processing section and the three woven-cloth subsections to set up these realisation companies; and the incorporation and constitution of these companies must be approved by the Cotton Board. They are not combines, butad hocnon-profit-making bodies which have to be approved by the Cotton Board for this special purpose of facilitating and accelerating the scrapping of redundant factories; and when that function is completed, the realisation companies will, of course, cease to exist.
Both the noble Lords, Lord Lucas of Chilworth and Lord Shackleton, gave voice to feelings of dissatisfaction about the slowness of payment of individual compensation to operatives. I should like to assure your Lordships that it is not a question of the Government wishing to wash their hands of any responsibility. The point is rather that it would be most undesirable if the Government were to interfere in agreements which have been entered into and drawn up between the trade unions and the employers as the result of long and careful examination of the problem. I have no doubt that the delay is due to the careful and 605 complex arrangements under which the terms of compensation have been agreed. What happens is that the levy for the purpose of compensation is paid by the trade to a committee consisting of representatives of employers and trade unions who administer the funds and pay out compensation with the aid of a firm of chartered accountants. One can easily understand that there may be delays in calculating the exact amount of compensation to which any individual may be entitled, but I am informed that already more than £2½ million, which is over half the total estimated sum due under the three earlier schemes, has been paid out. I should think that the delay is not likely to be protracted indefinitely after the work of ascertainment has been done. I should expect that, after certain initial delays, the process of payment would be likely to be accelerated. But I think we must firmly refuse to admit any kind of Government responsibility in this matter, because Government responsibility would immediately involve Government interference with these agreements which have been freely entered into between the two sides of the industry.
The noble Lord, Lord Barnby, if I understood him rightly, wanted to know whether, in the event of the 20 per cent. quota not being reached, some further inducement could not be offered by the Government in order to persuade more firms to scrap one or more of their factories. It is not possible to pay out any more than is provided for under the Act—that is, two-thirds of the compensation for redundant machinery which is scrapped and 25 per cent. of the cost of installing new machinery. It may be that there is some additional indirect inducement in the form of these realisation companies, because it is possible, if a firm wants to go out of business, that it may do better for itself by selling to the realisation company and letting them go through all the subsequent pro, cesses than by trying to do everything itself. Perhaps the existence of these realisation companies may induce some firms which might not otherwise have done so to make an application for allowing themselves to be scrapped. But I do not think it is likely that the minimum percentage of 20 per cent. will not be reached. I think it is probable that it will be exceeded. If there are any 606 other questions in regard to this about which your Lordships are anxious to know more—
§ LORD BARNBY
My Lords, in thanking my noble friend, may I interrupt him at this stage? He has admitted that it might be possible for the companies set up to offer some additional inducement. What I attempted to seek explanation on was this—referring again to the introductory remarks made in another place. In the event of firms not submitting their names rapidly enough for elimination, does the machinery provide for those in authority to offer, at some point before the termination date, some supplementary inducement which would bring more in? According to the explanation, it seems that, should the termination date be reached without the requisite number, then the Government will have no compensation to pay.
§ THE EARL OF DUNDEE
My Lands, the Cotton Board cannot offer any greater financial inducement than is provided for in the Act. They can extend the termination date. If by October 31 they have not received sufficient applications to enable Government help to be paid, they could then—which they could not do under last year's schemes—extend the date for a further period. The reason for being more lenient is that the finishing section of the trade is much more complex than the others, although it is smaller and its units are much more scattered and diverse. The realisation companies cannot themselves offer any more financial inducement, but the fact that they are being able to do all the business, and the fact that a firm may gain financially by getting a realisation company to do their work for them instead of doing it themselves, might, of course, be an 'inducement for some people to apply who would not apply otherwise.
§ LORD SHACKLETON
My Lords, could the noble Earl not give the House any more exact figure of the total cost of this scheme? He said that it was expected—I think his words were—that far the greater part of the expenditure would be on re-equipment. But already the Government are committed to over £13 million on mere compensation which, so far as I can see, comes to 43 per cent. of the total of £30 million.
§ THE EARL OF DUNDEE
My Lords, I think the figure for the weaving, spinning and doubling sections is about £10 million, and £2,400,000 estimated for the finishing section would bring it up to approximately £12½ million. These figures have been given already. I do not think it is possible to make a detailed estimate of the amount of grants which will be payable for re-equipment. All I can say is that so far the Board of Trade has not revised its original estimate of £30 million which was given last year, but, of course, that was never intended to be a precise figure.
§ On Question, Motion agreed to.