§ 9.45 p.m.
§ LORD DRUMALBYN rose to ask Her Majesty's Government whether they are aware of the serious contraction of sales of domestic electrical appliances on the home market in the past twelve months and of the consequent adverse effect on costs and on competitiveness in export markets; and whether they will now ease the present hire purchase restraints. The noble Lord said: My Lords, electrical and radio products are favourite whipping boys for every Chancellor of 160 the Exchequer who runs into difficulties. The point I am trying to make, in as short a time as I can this evening, is that they have now had enough chastisement and it is beginning to hurt; and hurt not only the radio and electrical industry, but also the interests of the country.
§ Perhaps I may remind your Lordships of what has happened so far as hire-purchase on these products is concerned. First of all, before June, 1965, a down payment of 10 per cent. was required and there was a repayment period of 36 months, together with a purchase tax of 25 per cent. Over successive stages this has changed to a down payment of, not 10 per cent. but 33⅓ per cent., a repayment period of 24 months in place of 36 months, and a purchase tax of 27½ per cent. The result of all this, since July, 1966, in particular, when the 33⅓ per cent. came into force, is that all electrical appliances subject to these restraints—except, I believe, toasters and percolators—have declined in sales. Cookers and storage refrigerators which are less severely treated, have been doing reasonably well.
§ Perhaps I may briefly refer to the story of washing machines, because that is a typical case. Washing machines and refrigerators are of course among the most important of our exports and of our home sales. In 1966 every country in the European Economic Community showed increases in home sales as compared with 1960. Britain did not. The increases ranged from 40 per cent. in Belgium to 400 per cent. in Italy, whereas in Britain sales in 1966 were 27 per cent. less than in 1960. Indeed, I think they were 39 per cent. less in 1966 than they were in 1964. The first quarter of 1964 was again heavily down—I think by some 19 per cent. So that the washing machines sales which in 1963 were worth £54 million were worth only £31 million in 1966.
§ I have been talking of home sales, and the position has nothing to do with saturation of the market. Penetration in the United Kingdom is 59 per cent. and sales per 1,000 homes in 1966 were 33. Penetration in Belgium is 68 per cent. and in Holland 75 per cent.—much more than in Britain—yet sales per 1,000 houses were 51 in Belgium and 99 in Holland. 161 The effect has been very great on exports, which have fallen more than imports—from £12 million in 1963 to £4 million in 1966.
§ The principal reason for this, of course, is that our two main factories, both located in Wales, are operating at below 50 per cent. capacity. I might add that in both of their areas there is a high level of unemployment and there is no shortage of unskilled labour which they would employ. Unemployment at Llandudno was 7.5 per cent., and I think that in Merthyr Tydfil it was nearly 6 per cent. The added cost of under-used capacity is estimated, in the case of one of them, to add £4 to the factory cost of a twin-tub washing machine and £8 to an automatic washing machine. This obviously greatly hampers exports; and the result is that, while we exported over one-quarter of output in 1964 we are now exporting only about 15 per cent. Exports to-day are less than one-third of what they were in 1963. This compares with the fact that Italy exported 42 per cent. of its output, Germany 24 per cent. and Holland 28 per cent.
§ My Lords, last month the Government made a concession in favour of motor cars. Car production in the first quarter was 25 per cent. down on 1964, whereas washing machine production in 1966 was 41 per cent. down on 1964 and, in the first quarter of this year, was 19 per cent. down on the first quarter of 1966. There is no evidence, I am told, of any disposition for sales to pick up. Everyone knows that not even this Government will hold restraints as they are forever. So few people are buying unless they absolutely have to replace, or unless they win with a Premium Savings Bond, or something of the kind; and rising incomes will not help because people cannot easily save enough to put down 33⅓ per cent. of the value.
§ The same applies to refrigerators. Exports fell by a quarter last year, and this year they have declined still further. Home sales are down by 6 per cent. on last year, and home stocks are increasing considerably. If one takes the exports of refrigerators, one finds they have fallen from 66,000-odd by over 10,000 in the last two years, and this year they are running at a comparatively low level. What is more, the values are much less; so that, while the exports are down 2 per 162 cent. in numbers, they are down 12 per cent. in value, and the home sales are down 18 per cent. in numbers and 28 per cent. in value. That is the position; and, of course, it is obviously adversely affecting our balance of trade and is going to make it very difficult to hold the home sales markets as against imports from other countries.
§ My Lords, I do not want to expand on this question. The remedy is quite clear: it is to reduce the deposit necessary for hire-purchase and to lengthen the repayment period. It seems that now would be an appropriate moment to do it. It would benefit the firms in question; it would help to make them more competitive in export; and there is a real danger that unless something is done fairly soon irreparable damage will be done to these industries. I commend this proposal to the noble Lord. I hope he will be able to convince his colleagues that the right moment to do this is now.
§ 9.53 p.m.
§ LORD STRABOLGI
My Lords, I should like to say just a few words, if I may, to support what the noble Lord, Lord Drumalbyn, has said, with particular reference to refrigerators. I do not want to go over the ground that the noble Lord has covered or repeat the admirable case that he has put up. I should merely like to stress another side of the case, and that is the importance of the refrigerator to the hygiene and the general health of this country.
The refrigerator, of course, is one of the most useful and important of modern inventions. I understand, though, that only 44 per cent. of households in this country own one. It seems to me absolutely essential that the number of households owning refrigerators in this country should be increased. It is also essential from the export point of view, because you can have a healthy export market only if you have a healthy home market. I cannot understand, my Lords, why the refrigerator still seems to be treated as a luxury, whereas in actual fact it is a necessity. I assume that it is considered a luxury by the Government since the purchase tax has been increased from 25 per cent. to 27 per cent. and, as the noble Lord, Lord Drumalbyn, has pointed out, the hire-purchase restrictions have been made yet more difficult. The result is a contracting market, decreasing 163 export figures and diminishing home sales, so that families—and, particularly, the lower income group families, who are mainly the ones who lack refrigerators—are now finding it more and more difficult to get one. Therefore I hope the Government will pay considerable attention to what the noble Lord, Lord Drumalbyn, has said, not only from the point of view of home sales and of export sales but also from the equally important point of view of the health of the country.
§ 9.56 p.m.
§ LORD WALSTON
My Lords, I can assure my noble friend that the Government will pay a great deal of attention, as we always do, to what the noble Lord, Lord Drumalbyn, says. He always speaks in a restrained manner and with a full knowledge of the facts. Therefore one must pay attention to this. Although I accept fundamentally the figures he gave me, I should like to correct what might be a misapprehension on the part of some of his hearers that the picture is entirely gloomy. I grant that the general picture is gloomy, but there are some bright spots. In the figures which have been provided by the British Electrical and Allied Manufacturers Association the comparison of total deliveries between 1965 and 1966 shows that although many important products such as washing machines are considerably down, 21 per cent., on the previous year; spin dryers are 12 per cent. up; tumble dryers are 26 per cent. Up; dishwashers are 20 per cent. up; space heaters up to 3 kws are 2 per cent. up; hair dryers are 29 per cent. up, and so on. There are some rather brighter spots.
§ LORD DRUMALBYN
My Lords, I, too, have these figures before me. Will the noble Lord cast his eye through the last column which shows the change in the first quarter of 1967 compared with the first quarter of 1956?
§ LORD WALSTON
Yes, my Lords, I have cast my eye there. I forbore to mention that percolators are 44 per cent. up; but that is an unfair point. There is a general decline there. But I think it is always dangerous for various seasonal reasons—and I am sure the noble Lord would agree—to take too short a period as an indication. It is better to take a full 164 year. I accept the main point of the noble Lord. There has been a marked decline in the purchase of these products taken in toto and also, I am sorry to say, a marked decline in exports.
My Lords, let us not look on the picture as being one of unrelieved gloom, particularly in respect of the smaller electrical domestic appliances. It is quite true that these industries are experiencing difficulties; but hire purchase is by no means responsible for the whole of the decline. After all, home market deliveries and exports and imports have all been declining steadily from the 1963 peak. This clearly cannot be caused by the recent increase in hire-purchase restrictions. Quite why there has been this marked contraction, I do not know. There are many reasons put forward. Some people suggest market saturation. The noble Lord has turned that one down; but that, I believe, has something to do with it.
This problem, however, must be looked at in the context of the overriding consideration of the state of the national economy. The increase in the severity of hire purchase restrictions in July last year became necessary because of the paramount need to protect the balance of payments. It was put on, and affected, a whole range of industries, because a whole series of measures had to be taken to reduce home demand first of all, and, in so far as was possible, to encourage exports; not necessarily in exactly those industries where home demand was being restricted. The object of the intensification of hire purchase controls was simply to restrict consumer spending at home. There can be no doubt at all that the slackening of domestic demand has helped the balance of payments; that is one of the reasons why our position is happier to-day than it has been.
The situation in all the industries which are subject to hire purchase control is, of course, kept continuously under review, and it certainly is not the intention of Her Majesty's Government to keep the present controls at their existing high levels indefinitely. I can assure the noble Lord that as soon as the state of the economy allows it, the present restriction will be removed, or at least lightened. As noble Lords will remember, my right honourable friend the President of the Board of Trade announced 165 one relaxation on June 7: that was the relaxation for the car industry. The reason this industry was selected was because of its exports which are so outstandingly large, both as a proportion of its total output and absolutely. We felt that otherwise they might be threatened by the usual seasonal fall in home sales. The case of the car industry is unique and the relaxation given last month was the maximum that we thought it possible for the economy to bear with safety. I am sorry that at the present time we cannot do anything for the domestic electrical appliance industry, but I repeat that when the state of the economy allows further relaxations in the control, the problems of the electrical appliance industry, as well as those of other industries—it is not alone in this—will, of course, be borne very much in mind.
I am sure noble Lords will appreciate that it would not be right, or indeed possible, for me to forecast when further relaxations can safely be made, or which will be the industries or group of industries, which will benefit the most. In the meantime, I very much hope that the improvement in the industry's position which usually takes place in the second part of the year will be enhanced during the coming six months by the modest stimulation which has been given to the economy, and which is expected to follow from slightly rising incomes and the recent concessions on cars.
§ 10.3 p.m.
§ LORD ERROLL OF HALE
My Lords, once again I should like to thank the noble Lord, Lord Walston, for replying to the able speech of my noble friend Lord Drumalbyn, but I must say that we on this side of the House are very disappointed at the tone of his reply. There is nothing at all for an industry which is suffering deep and growing depression, when there is a perfectly clear example of the value of these relaxations, because the Government have already conceded the position in the case of the motor car industry. But they refuse to help the towns where the principal factories of the domestic electrical appliance makers are situated namely, those which are suffering an abnormal rate of unemployment.
The Government will help the prosperous Midlands, but not Merthyr Tydfil, or North Wales, or the hard- 166 pressed domestic electrical appliance industry centred on Dundee and Fifeshire. That, of course, will not be allowed to expand, or even to mop up the existing high levels of unemployment, on the alleged ground that the economy cannot afford it. How much is the economy having to spend on unemployment pay at the present time? Far more than any disruption to the economy which would be caused by the modest extensions of hire-purchase rates to these particular industries. I suggest to the noble Lord that, while we cannot in this case ask him to remove the draft Order, he could at least go back to the Department and ask them to look at it again, and perhaps change yet another part of the Board of Trade; namely, that part that is responsible for the location of industry—does the noble Lord, Lord Beswick, wish to intervene?
§ LORD BESWICK
My Lords, I was merely asking if it was usual, after the noble Lord had answered a debate, for another noble Lord to get up and speak.
§ SEVERAL NOBLE LORDS: Yes.
§ LORD ERROLL OF HALE
This is a most interesting doctrine to learn from noble Lords opposite: that only one person on our side is allowed to speak. The noble Lord makes a proposition, the Minister makes a reply and nobody else is allowed to speak. What are we coming to?
§ LORD GLADWYN
My Lords, surely the procedure is that the noble Lord introduces the Question, any other noble Lord can intervene, and then it is for the representative of the Government to wind up.
EARL ST. ALDWYN
My Lords, I wonder whether I might enlighten the noble Lord. When noble Lords opposite were sitting on these Benches and they put down Unstarred Questions it was very nearly the normal procedure for one of their spokesmen to come in after the Government had made their reply.
EARL ST. ALDWYN
I will turn it up. I can remember at least three occasions when I was sitting there that this happened.
§ LORD ERROLL OF HALE
The country was, in any case, run better in those days. It certainly makes sense to me, even if it is keeping other noble Lords waiting for their subject-matter. Surely it is only right, if the noble Lord raises a matter and the Government make a reply, for a further comment to be made on the noble Lord's reply. Does he mean that he does not want comments made on it? Does the noble Lord wish to rise yet again? I am content to sit down if he wishes to. The noble Lord, Lord Beswick, is getting so restless.
This is a very important matter for thousands of people. We raised it on this side of the House this evening because we realise the difficulties of the domestic electrical appliance industry and the considerable hardship that exists in the towns where their principal factories exist. We are disappointed at the reply of the noble Lord, Lord Walston. We hope that he will look into the matter more fully than he had perhaps had time to do before this debate. I hope that he will look not only at the figures of output which he quoted, but also at other figures which are worth quoting; namely, the serious fall in deliveries, comparing the period of three-year credit stability with the period of imposition of restrictions in mid-1965 to mid-1966.
In the three years 1962 to 1965, the quarterly deliveries of washing machines were at the rate of over 303,000, but in the year 1965 to 1966, June to June, they had fallen to under 200,000; and on the average in the last three quarters they were down to 160,000 per quarter. This is the nature of the decline that has taken place. The Government have little in their armoury which they can use to help to restore the industry, but they have one matter which they can use; namely, the removal of the severe restrictions on hire-purchase which operate at present. I do ask the noble Lord if he will be good enough to see whether some further relaxation can be given.