§ 4.23 p.m.
§ The MINISTER of STATE, BOARD of TRADE (Lord Brown)My Lords, with permission, I should like to repeat a Statement which my right honourable friend the President of the Board of Trade has made in another place on the Textile Council's Report on Cotton and Allied Textiles. It is as follows:
"The Government have now completed their examination of the Textile Council's Report on Cotton and Allied Textiles. The Report addressed a number of recommendations to both the Government and the industry, and these have been the subject of continuing consultations with the Council.
"The recommendations to the industry concerned in particular the need to increase the rate of re-equipment, to extend multi-shift working, and to develop closer technical and commercial links between the different stages of production and marketing. I attach great importance to these three requirements, and I am working closely with the Textile Council on their implementation.
"The main recommendations to the Government concerned future policy on imports and financial assistance to encourage re-equipment.
"On import policy, the Council recommended that the present quota system should be replaced by a tariff on imports of cotton textiles from the Commonwealth preference area at a rate not less than 85 per cent. of the most-favoured-nation duties. On cotton cloth, the main item of trade, this would mean a duty of 15 per cent. The Council believe that a tariff would be a better solution both for the industry and the country than a continuation of quotas. It would offer a margin of protection that was both stable and 802 predictable, so enabling the industry to plan ahead with confidence. A continuation of quotas, on the other hand, would not give the industry the confidence or the incentive to undertake the investment needed to make it more competitive.
"Imports of cotton textiles into Britain, the greater part of which enter duty-free, have now reached 53 per cent. of total domestic consumption. This is a far higher proportion than in any other major developed country. In these circumstances we have the alternatives of re-negotiating the present unsatisfactory quota arrangements, or adopting a tariff which would be broadly in line with those of other developed countries. The Government have decided that the right course is to introduce, as from January 1, 1972, a tariff on imports from the Commonwealth preference area on the lines proposed by the Textile Council. From that date the existing general quota system would be terminated; and the Government would consider the use of quotas only on particular products under the Long Term Cotton Arrangement of the GATT, and only if total imports of cotton textiles rose significantly above the present level and caused disruption to the market in those particular products. These decisions would, of course, be subject to any modifications that might be required if we joined the E.E.C.
"In reaching this decision I have taken account of the fact that a number of countries in the Commonwealth have rights to duty-free entry into the U.K. market; and I shall now initiate the necessary discussions with the Governments concerned. I am equally conscious, on the other hand, that cotton textiles have long been treated internationally as a special case; and this decision will not create a precedent for further departures from our traditional policy on Commonwealth trade in advance of any general charge of system which may be required by our entry into the E.E.C.
"The effect of the new arrangement should be to reduce imports from the developed countries which have benefited markedly from the existence of quota restrictions on imports from 803 the developing countries. There is no reason to think that, with the possible exception of India, the developing countries of the Commonwealth generally will be able to export less to Britain over a tariff of this amount than they would under a continuation of the quota system. So far as India is concerned, the Government will, when the time comes to determine the level of aid to India after 1972, take into account, against the background of India's general aid requirements at that time, any adverse effects on her exports arising from the tariff.
"I turn to the question of financial assistance to the industry. The Textile Council proposed that firms in the traditional textile areas should be offered the 40 per cent. rate of investment grant which is payable in the development areas. The Government have decided against this both on general grounds of regional policy and because in present circumstances, including in particular the position on public expenditure, we would not be justified in singling out this industry for financial assistance on such a scale.
"The Council also proposed that plant worked on a multi-shift basis should qualify for a higher than normal annual allowance for depreciation. The Government attach importance to any proposal which might increase the utilisation of new machinery, and the Inland Revenue are prepared to consider an application by the Textile Council for an increase in the depreciation allowances on textile machinery.
"In addition, the two consultants whom I have appointed to advise me on mergers between medium and small sized firms in the industry are in close touch with the I.R.C. They have seen more than 70 firms, and enough progress has been made to enable the I.R.C. to begin discussions on prospective mergers.
"The proposal to replace quotas by a tariff forms an essential part of a developing policy designed to help this industry to survive and compete in an international environment. I have already announced decisions on the structure of the industry which should give the large firms the stability they 804 need to proceed with their internal reorganisation and integration, while encouraging a much-needed process of amalgamation among the small and medium firms. To-day's decisions carry the policy a crucial stage further. Successive Governments have failed to come to grips with the industry's basic problems; and the industry itself has failed to adapt sufficiently to changing circumstances. I hope that the decisions that I have announced, provided they are accompanied by a clear determination on the part of both sides of the industry to carry out the changes recommended by the Textile Council, will enable the Lancashire textile industry once again to take its place in the forefront of British industry."
§ Lord DRUMALBYNMy Lords, I should like to thank the noble Lord for repeating that Statement. I am sure we shall all echo at any rate his last sentence. It is an unusually long Statement. I do not complain of that, because it deals with a very complicated matter, but I am sure we shall all want to digest it before commenting upon it in any detail. However, may I ask the noble Lord one or two questions? I am sure we were all glad of his assurance that the substitution of import duties for quotas in this case will not create a precedent for further departures from our traditional policy on Commonwealth trade. Of course, a very considerable change is involved here in Commonwealth Preference, and we are glad to have that assurance.
I should like to ask the noble Lord whether he would also give an assurance that, in moving over to the policy of duties in place of quotas, he is aware that this is going to place a very great deal more importance on what I think is called the Customs Duties (Dumping and Excise) Act, and it would be more important to make certain that that Act is used wherever appropriate. It has recently been amended and is important in this context. Thirdly, I should like to ask about the effect of these moves on the consumer of textiles. Can the noble Lord give any indication of what a duty of 15 per cent. on this very large proportion of cotton textiles is likely to mean in terms of the consumer? I think I will leave the noble Lord to answer those questions before I ask any more.
§ Lord BROWNMy Lords, with regard to the point about the substitution of tariffs and the implementation of a tariff policy against Commonwealth imports, I should like to reassure the noble Lord that it is very specifically not intended as a precedent. On the second point, the Board of Trade has now had nearly a year's experience of the new antidumping regulations and feels quite satisfied that these are adequate for the protection of the industry against unfair practices in this respect. We have gained experience and are already able to deal with these matters with even greater expedition than we have been able to deal with them in the past. We are not concerned on that account. On the question of the consumer, these are of course predictions, and the noble Lord will understand how difficult it is to make these predictions, but the experts have examined this matter and the economists have looked at it, and it is believed that the prices of imports from Commonwealth sources, which will now have to bear tariff, will drop by about the amount of the tariff. In other words, there is not expected to be a rise in prices resulting from this change.
§ Lord DRUMALBYNMy Lords, I wonder whether I may ask another question. The noble Lord has told us that it is expected to make this change in the system from quota to tariff on January 1, 1972. I assume from what he has said that it is not going to be necessary to adjust the quota, or certainly to renegotiate the quota, in the meantime. Is this so? Will the quota stay at its existing level until then? May I lastly ask a question about the noble Lord's statement that the Inland Revenue are prepared to consider an application for an increase in the depreciation allowances on textile machinery? Has this already been examined and is the level of the application to be made already known? Is this in fact saying that the Inland Revenue will agree to something that has already been decided on?
§ Lord BROWNMy Lords, the present quota arrangements expire in 1970 and will have to be renegotiated, therefore, in the interim period to fill the gap until January 1, 1972. We do not regard this as a difficult operation. On the question of depreciation allowances, I think it is 806 known that the authorities already have statutory authority in special cases to increase annual depreciation allowances up to 25 per cent. I understand that the present maximum depreciation allowance for three-shift working in the textile industry is 20 per cent., with lower amounts for two-shift or one-shift working. I cannot give an undertaking that the Inland Revenue will accede to the demand for 25 per cent., but the matter has been one of discussion and I leave the noble Lord to read the music behind the words, if I may put it in that way.
§ 4.37 p.m.
§ Lord BARNBYMy Lords, the Statement made by the noble Lord, Lord Brown, was very comprehensive, covers a lot of ground and contains some startling suggestions. It will need a good deal of study by those who are familiar with the textile industries. I have no particular knowledge of the cotton textile industry because, as the noble Lord will be aware, the wool textile industry have elected to refrain from taking part in the Textile Council; but of course it is an allied industry, and whatever is decided for the cotton textile industry may have repercussions on the wool textile industry. It is quite a startling move that you should go from quotas to tariffs. It is one which I do not deplore—
§ Lord SHACKLETONMy Lords, may I interrupt the noble Lord? The noble Lord is beginning to debate this Statement. We are fairly relaxed about this sort of thing, but I think this is becoming rather a debate. Could the noble Lord put questions?
§ Lord BARNBYMy Lords, I readily accede to the request of the noble Lord the Leader of the House. However, the question which I was going to put with regard to obsolescence allowances required a preamble, otherwise one could not make the question clear. The point I want to emphasise is that the textile industries have been the subject of an altitude that they have been expendable, and this is now an attempt to improve the situation. The noble Lord made a distinction with regard to the obsolescence allowances. The point of my interjection is to ask him, if he will, to give particular thought to and to make recommendations with regard to, this fact. Although he said there was going to be increased obso- 807 lescence allowance for three-shift operations, it has long been the case in the textile industry that the obsolescence allowances, or the statutory allowances by the Inland Revenue, are far below what they should be if they are to permit a proper replacement of machinery.
With due respect to the noble Lord the Leader of the House, I think this is a proper moment to bring up this question, which has long been a matter of great disadvantage to the textile industry. When the development of new prototypes is so rapid, there should be a higher obsolescence allowance. That is what I want to take the opportunity of saying on this very long Statement. It is unusual for a Statement to be so long and it takes time to digest, but I do not want the point I have raised to be overlooked.
§ Lord BROWNMy Lords, I understand the noble Lord's question was: would I take note of the situation in the woollen industry, and the answer is that certainly I will take note. It will be a matter for consideration by the Board.