§ 2.43 p.m.
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN)
My Lords, I beg to move that the Draft Hosiery and Knitwear Industry (Scientific Research Levy) Order 1969, a copy of which was laid before Parliament on April 24, 1969, be approved. This Order, if it is approved by Parliament, will be made under the authority of Section 9 of the Industrial Organisation and Development Act 1947. The Act provides that charges may be imposed by Order on persons engaged in an industry if it is expedient for funds to be made available for certain purposes, one of the more important of which is scientific research. At the present time Orders under the authority of this section are in existence for the wool textile and cutlery industries. I now seek the approval of the House for a similar Order to be applied to the hosiery and knitwear industry, which in this context means, broadly, the knitting, dyeing and finishing and making-up of weft-knitted articles. The end-products of the industry include stockings and socks, tights, underwear, outer-garments such as jumpers and cardigans, weft-knitted fabric and other weft-knitted articles such as dusters and headwear.
Although this is the first time a scientific research levy has been sought for the industry, the Hosiery and Allied Trades Research Association (usually known as HATRA) has been carrying out collective research for the industry since 1949. This has been financed partly by voluntarily subscription and partly by a grant from the Ministry of Technology. The Association is currently supported by some 300 firms out of a total potential membership of over 1,000. However, in 78 terms of production member firms represent about 70 per cent. of the industry's turnover. The purpose of the proposed levy is to spread the cost of research, which benefits the industry as a whole through a gradual improvement in knitting techniques, on as equitable a basis as possible to all firms within the industry; and, in doing so, to augment HATRA's income to the extent necessary to carry out research on a scale suited to the needs of a highly competitive expanding industry, with considerable export potential.
The levy will be related to the turnover of the industry subject to deductions as defined in paragraph 6 of the Order. The levy will be payable in respect of six-monthly periods, and the charge will be 6s. 8d. per £1,000 of turnover (less certain deductions) during a base period of the previous six months. Based on the estimated turnover of the industry in 1967 and on the assumption that sales will continue to increase, the annual levy yield should reach at least £100,000 compared with the current subscription yield of £61.000. This should give HATRA a total income of £195,000 during the year beginning July 1, 1969, compared with £131,000 for the preceding year. This income will enable HATRA to increase their qualified staff to the extent necessary to carry out research into, among other things, automation of the making-up process, and the development of non-woven, non-knitted material, both subjects of vital importance if the industry is to maintain its strong position, both in overseas markets and at home, against increasing competition from imports. The Association will also be able to step up its current work on a wide range of subjects, including the study of fabric and yarn structures, shade variations in knitted goods, quality control and efficiency in water usuage and conservation. Greater provision would be made for the dissemination of information, both by literature and through the use of the "Hatravan" information and training van, and for improving its liaison services. These latter services are particularly important in an industry which has a large proportion of small firms, many of whom, especially in Scotland, are situated at some distance from HATRA headquarters.
It is against this background that in 1967 HATRA asked the Board to consider 79 making an Order introducing a levy for scientific research in the hosiery and knitwear industry. Their application was backed by a Joint Standing Committee consisting of senior officials from the two main trade associations—namely, the National Hosiery Manufacturers' Federation and the Knitted Textile Dyers' Federation—the National Union of Hosiery Workers and members of HATRA Council. At a general meeting on June 4 this year HATRA members reaffirmed their support for a levy by a majority of 2 to 1.
Besides the main trade associations and the principal union, the Board sought views on the levy proposal from 20 other organisations believed to be representative of substantial numbers of employers and employees in the industry, including the nine regional associations affiliated to the National Hosiery Manufacturers' Federation. As the result of the views expressed during these consultations, the Board reached the conclusion that the proposal to introduce a levy had substantial majority support within the industry as a whole, and my honourable friend the Minister of State at the Ministry of Technology (then Minister of State at the Board of Trade) announced to the House on April 3, 1968, the Board's intention to seek approval for the introduction of a levy.
The Order has been drafted following detailed consultation with organisations representative of manufacturers in the industry. The opinions of the small but important minority of organisations who criticised the levy have been carefully considered and, wherever practicable, modifications have been made to allow for their comments on the levy proposals. The most significant of these have been a reduction in the rate of levy proposed from 0.065 per cent. to 0.033 per cent. (that is to say, 6s. 8d. per £1,000) of net turnover and the provision for deduction from turnover of certain selling and distribution expenses, including those incurred in maintaining offices overseas for export promotion purposes. The fact that it has not been possible to meet all requests for modification of the levy provisions does not reflect any lack of appreciation of the differing needs of each sector of the industry. It does reflect the need to produce provisions which are as fair as possible to the widest possible sec- 80 tion of the trade without becoming so complicated and so capable of misinterpretation as to become unworkable.
The hosiery and knitwear industry is a growth sector with a fine record of exports. Between 1967 and 1968 production rose from £327.6 million to £387.5 million, and recorded exports from £27.6 to £37.6 million. I believe that with the wider range of scientific research made possible by the increase in income which the levy would provide for HATRA,, the industry will be better equipped to meet increased competition at home and at the same time maintain and expand the substantial level of export it has already achieved. I beg to move.
§ Moved, That the Draft Hosiery and Knitwear Industry (Scientific Research Levy) Order 1969 laid before the House on 24th April be approved.—(Lord Brown).
§ 2.52 p.m.
§ LORD DRUMALBYN
My Lords, I should like to thank the noble Lord for the full explanation he has given of this Order. Unlike many of the Orders that come along, this does not seem to have been one that was agreed to on all sides, although I am bound to say that I have received no representations against it. I think, however, that the House would like to know in what way the minority interests are protected. First, is there going to be a reorganisation of the governing body of HATRA to make certain that the smaller producers are represented on it—particularly the producers in those areas in which there is more opposition to this scheme than in the country as a whole? Perhaps the noble Lord could tell us about that. Secondly, could he tell us what was the real basis of the objections? Was it simply an objection to contributing at all, in terms that the objectors did not see the advantage of the research that was being carried on; or were there objections to the way in which the contributions were calculated; or what? I understand that the Board of Trade has made modifications to the original scheme to meet objections as far as possible. We welcome that.
The noble Lord referred to grant. From the figures he gave, it looks, by rapid calculation, as if the Ministry of Technology grant is being increased from £70,000 to £95,000. Is that so? At any 81 rate, he did not refer to the continuation of the Ministry of Technology grant. Would he be good enough to confirm that that is being continued in favour of this scheme? I would agree that the research schemes which were set up in the past—particularly those for textiles and cutlery, and of course a different kind of scheme in cotton—under the Industrial Reorganisation Development Act have proved their worth. It would be churlish not to welcome a scheme like this, even though it is opposed. At the same time, I think we are justified in asking the noble Lord to assure us that not only were the objections met so far as possible but that the minority interests are going to be represented and that there is good expectation that they can be reasonably satisfied with the outcome.
§ LORD AIREDALE
My Lords, there is one point I should like to make with regard to this Order. I calculate that the minimum levy which will be collected at any one time under the Order will be £1 13s. 4d.; that is to say, 6s. 8d. per £1,000 on the minimum turnover of £5,000. Can the Minister give the House an estimate of the administrative cost of collecting a levy of 33s. 4d.; and how much of that money will be left, after the cost of collection has been met, for scientific research, which is the whole object and purpose of this Order? Having regard to the administrative cost of collecting money nowadays, I have the feeling that there would not be very much left for scientific research out of any levy collected amounting to less than about £5 at a time.
§ LORD BROWN
My Lords, the noble Lord, Lord Drumalbyn, asked a series of questions. I will attempt to answer them. He asked whether there will be reorganisation of the governing body. I can assure the noble Lord that this is taking place. Discussions are proceeding now. The intention is to provide, if possible, regional representation on the HATRA Council. I think this will effectively look after some of the smaller interests to which he referred. The story of the objections is very complex. I do not quite know how to deal with this succinctly. They have been of a wide variety. There were three very large firms in the industry which each had some objections, but each had varying grounds for them. In some cases those grounds 82 have been removed, largely by the amendments made.
The summation of the statistical strength of objection was that the objections to the Order, in terms of the number of persons employed by the objectors, amounted to 20 per cent. In other words, 80 per cent. of the employment of the industry, if I may put it that way, were in favour of the Order. Much of the objection, which we are taking a great deal of notice of, came from some of the Scottish firms who are in the high-price goods class. Their selling costs and their advertising and overseas promotion would have ranked in the sales turnover for levy had we not, in the light of the objections, made substantial amendments. I cannot tell the House whether those amendments have entirely removed their objections but I am sure they have gone some way towards doing so.
In order to make the matter clearer I will itemise some of the amendments made in the face of very varied objections from a large number of quarters. I have already referred to the reduction of the rate of levy from 0.065 per cent. down to 0.033 per cent. Then there is provision for deduction of certain selling and distribution costs, maintaining offices, payments to a third party for advertising, salesmen's salaries, et cetera. As I have already said, these were made in deference to the views of the large Scottish manufacturers. Then there is deletion from the levy proposals of what is known technically as rachel warp knitting when carried on by a weft knitter, which is another process altogether. It seemed doubtful whether much research by HATRA would be devoted to this type of knitting; so that was deleted. There are also those who make stockingette for use as dusters, et cetera. The result of amendments made there will be that only a small proportion of their production will be leviable. Manufacturers of narrow fabric—up to 18 inches in width—will not have to pay on the turnover generated by such manufacture.
The provisions were redrafted to exclude firms belonging to the clothing industry who make up processed knitting fabrics, since it was not considered desirable or practicable to extend the levy to makers-up outside the weft knitting industry itself. This does not exclude 83 the function of making up if it is done by somebody who has done weft knitting, but it does exclude making up and other processes when it is done quite separately from those who make the material itself. Perhaps that is sufficient by way of example to demonstrate that a great many amendments have been made. It may be that the noble Lord will want to ask more questions in which case I shall be happy to answer them.
With regard to the grant from the Ministry of Technology, I concede that the figures that I have given are a little puzzling, and I took the trouble to discover how they were made up. The grant from the Ministry of Technology will probably be of the same order as in the past, about £36,000. There will be about £44,000 earned in fees by HATRA for services rendered. There will, we hope, be continuing the £7.000 amount of voluntary contribution from people outside the immediate industry concerned. The levy itself will, we hope, raise about £104,000. These figures should make a total of approximately £195,000.
I now come to the point raised by the noble Lord, Lord Airedale—and he was good enough to give me notice of it, which has given me an opportunity to go into the matter. I must confess that when he wrote to me about it his point met with a good deal of sympathy from me. I am sympathetic in principle to the idea that he is putting forward, but now that I have gone into it I have this to say. The minimum turnover which ranks for levy is already £10,000 per annum, £5,000 for each levy period. I am informed that no extra staff will be employed by the division of the Board of Trade responsible for collecting the levy and that the cost of printing, envelopes, stamps, stationery and so on, per firm, to whom they have to address themselves is approximately 1s. 7d. per company. What is, they think, a rather enlarged estimate of the total cost per annum of looking after the collection of this levy is about £3,300 a year. This has to he set against a levy collection of £104,000, and it is probable that the figure will be considerably less in the years after the first period, which always has initial difficulties.
My Lords, the point I would make—and perhaps the strongest reason for my suggesting that the noble Lord's point 84 is not so valid as it seemed at first to me—is that the Board of Trade will have to address itself to each one of these thousand firms in the first place to discover what is their turnover. They will have to be asked, and they will have to be asked each year, because the number of small firms in the industry is very high. There is great room for expansion because imports are very substantial and we hope that, with the help of HATRA and the emerging economic situation, turnover will rise in a number of cases very rapidly so we shall have to address ourselves to a thousand firms each year and it will not save much expense not to levy them.
The last point is this. If we were to raise the limit to something like £30,000 we should to some extent defeat the purpose of the Bill, because the urge is to get the burden of research carried by a much larger proportion of industry than is at present carrying it, in terms of numbers of firms, and if one raised the level of levy it would have the result of cutting out a very large number of small firms and it would appear inequitable. I hope that the reasons I have given will satisfy the noble Lord, and I assure him that I have approached the consideration of this point with sympathy, as I think he knows.
§ On Question, Motion agreed to.