§ 2.50 p.m.
§ THE MINISTER OF STATE, MINISTRY OF TECHNOLOGY (LORD DELACOURT-SMITH)
My Lords, I beg to move, That the draft Wool Textile Industry (Export Promotion Levy) Order 1970, a copy of which was laid before Parliament on February 2, be approved. The Wool Textile Industry (Scientific Research Levy) Order 1970 and the Wool Textile Industry (Export Promotion Levy) Order are closely connected and I hope that it will be agreeable to your 9 Lordships that we should deal with them together. There must, however, be two separate Orders, as the purposes of the two levies with which they respectively deal are quite distinct; and separate bodies have to account through the Ministry to Parliament for each of them. These Orders are laid for the approval of Parliament under the authority of Section 9 of the Industrial Organisation and Development Act, 1947. That section gave to certain Government Departments and to certain Ministers, of whom under the Minister of Technology Order 1969 the Minister of Technology is the appropriate one for this purpose, powers to provide that charges might be imposed by Order on persons engaged in an industry if it were expedient for funds to be made available for certain purposes connected with the industry. Scientific research and the promotion of the export trade, with which these Orders respectively deal, are two of such purposes.
Under this section of the Act two Orders dealing respectively with these two aspects of the wool textile industry were made at the request of the industry in 1950. There have been various amendments since then. The last was in 1966. Perhaps, my Lords, I might add that Orders under this section of the Act and of a similar nature in respect of scientific research are in existence for the hosiery and knitwear industry and for the cutlery industry. The wool textile industry is unique in having a levy for export promotion purposes under Section 9 of the 1947 Act. The purpose of the draft Orders before your Lordships' House, like the series of amendments to which I have referred, is in effect to bring the position up to date in the light of changes in the industry. The Orders are being introduced at the request of the Wool Textile Delegation, a body substantially representative of the whole wool textile industry. Their purpose is to restore the levy income to the equivalent level of 1966 by taking account of the changes in the industry since that date.
In general, the considerations which have to be taken into account apply to both the scientific research levy and to the export promotion levy. There is one special consideration in the case of the Scientific Research Levy Order and 10 perhaps it would be convenient if I dealt with that first. Until now the body for which funds are to be made available by the levy on the industry has been the Wool Textile Research Council. The Order now before your Lordships changes the destination of the funds to the Wool Industry Research Association. This change arises from a recommendation of a firm of management consultants that the governing structure of the Research Institute should be simplified by the elimination of the Wool Textile Research Council, most of whose functions were in fact a duplication of those of the Association. The Government are satisfied that the change will in no way result in less control over the use of levy funds.
The major changes, however, which affect both the Orders are that in the last three or four years there has been a considerable change in the use of manmade fibres in the wool textile industry, and, further, there has been a sharp fall in employment. These two developments could not be foreseen at the time of the last revision of the Order arrangements in 1966 and the present draft Orders are designed to recognise the extent to which they change the background against which the levy arrangements have to be made. The first of the results of these developments is that under the new Orders the industry, for the purpose of the Order, is more widely defined. This is done by including processing of fibres which are not at present subject to any levy but which are being increasingly substituted for fibres whose processing is covered by the existing Orders. Man-made as opposed to animal fibres are being increasingly used in the wool textile industry, either alone or more generally as blends with wool. At the present time about 25 per cent. of the fibre used in this industry is man-made and it is expected that this will increase to 40 per cent. by the mid-1970s. The result of the change which has been taking place has been a steady fall in the use in the industry of the animal fibres which were liable for levy. It was put to us by the Wool Textile Delegation that it was a serious anomaly that the processing of the wool content should attract levy while the processing of the manmade fibre content of the yarn, cloth, et cetera, did not. We have accepted this argument and rectified the anomaly in the Orders which are now before your Lordships.
11 The second major development in the industry is that there has been since 1966 a sharp fall in employment. The total numbers employed in the industry in 1966 were about 155,000. In November, 1969, the last date for which we have a figure, they had fallen to 146,000, and it has recently been forecast by outside consultants that by the mid-1970s the numbers employed will be down to about 121,000. Hitherto the levy has been very largely based on numbers employed. Clearly, if that basis is maintained there will be a continual fall in the yield of the levy unless the rate is periodically raised. In the light of this situation we have accepted the Wool Textile Delegation's proposal that the levy should no longer be based on employment but on a percentage of emoluments. The reduction in employment has been accompanied by a rise in productivity; and as productivity increases so does pay. Therefore to base the levy upon emoluments rather than on numbers employed seemed to us a sensible change in the basis. We have further made a change in the rate of levy charged on the weight of fibre supplied. I should make it clear that this refers only to fibres which are already liable for levy under the existing Orders. The draft Orders do not extend the supply levy to man-made fibres. We are satisfied that the reduction in the rate of levy payable on supply is fair as regards the levy yield between suppliers on the one hand and processers on the other.
A word about timing and the timetable of the placing of this Order before Parliament. The Wool Textile Delegation first applied to the President of the Board of Trade for an amendment to the existing Orders at the end of 1967. It took some time to clarify the new basis and to establish that it satisfied the criterion laid down in the 1947 Act that the incidence of charges as between different classes of undertaking in the industry was in accordance with a fair principle. It was not therefore until May, 1969, that we began the process of consultation with sectional organisations representative of substantial numbers of employers and employees who might be affected by the new Orders. Fifty-five such organisations were consulted and as a result of objections raised by seven of them detailed discussions took place, which led to some 12 substantial amendments to the proposed draft Orders.
The purpose of these amendments was to limits so far as is possible the incidence of the levy outside what are generally acknowledged to be the limits of the wool textile industry. I may here say, perhaps, that the drafting of these Orders has taken into account the observations which your Lordships made on a similar Order last year in respect of the hosiery and knit-wear industry in as much as a clause has been inserted exempting from the payment of levy any person whose charges for the designated activities as defined on an emoluments basis do not exceed £2,500 in the base year. These consultations therefore took some considerable time, but we were mindful that what was being done was a substantial change from the previous levy arrangements and we had to be fully satisfied that the incidence of the new arrangements as between the various sections was in accordance with a fair principle.
It might be argued that we allowed the process of consultation to carry on too long. This I cannot accept, for I am sure that it was right that every possibility of removing objections was examined. This has, however, had the disadvantage that the Orders are being introduced at a relatively late stage in the levy period. But I want to emphasise that no one will be liable to levy because of something done before the Orders come into operation. The Orders apply only to a person, who, on the date on which these Orders come into operation —that is to say, subject to the approval of Parliament, on March 16—is carrying on or thereafter begins to carry on a business comprising one of the activities designated in the Orders or is undertaking or begins to undertake the business of supplying as defined in the Orders.
I am sure that your Lordships will be of the view that funds should continue to be made available to the wool textile industry for the purposes of scientific research and export promotion. I am further satisfied that the amended charges as set out in the draft Orders reflect the changes in circumstance and are in accordance with a fair principle, and I commend them to your Lordships for approval.
Moved, That the Draft Wool Textile Industry (Export Promotion Levy) Order 13 1970, laid before the House on February 2, be approved.—(Lord Delacourt-Smith.)
§ 3.4 p.m.
§ LORD DRUMALBYN
My Lords, we are grateful to the noble Lord for the way in which he has explained these Orders to us. He has gone out of his way and taken some trouble to explain why the Orders are rather late, in the sense that they are due to come into effect on March 16 when they relate to the levy year beginning on October 1, which means that the year has been going on for some time without anybody knowing exactly how much they are going to be levied in respect of the year. I certainly agree with the noble Lord that the fullest consultation is of the greatest importance and I have no doubt that the Government were fully aware of the desirability of starting the levy not later than the beginning of the year. I was proposing to ask a question about this, but the noble Lord has explained the matter so fully that I do not intend to pursue it any further.
The noble Lord has not said much about what the levy is estimated to bring in. When the noble Lord, Lord Rhodes, introduced the last amendments on May 21, 1966, he said that the two levies were expected to bring in about half a million pounds—£214,000 for export promotion and £286,000 for scientific research. He drew attention to the comparatively small percentage of turnover involved—one twenty-seventh of 1 per cent. of the turn-over in the case of export promotion and one twentieth of 1 per cent. of turnover for scientific research. These are not large figures and the noble Lord, Lord Rhodes, indicated that he would have been happy to see them larger, particularly in respect of export promotion. May I ask the noble Lord, Lord Delacourt-Smith, what these two Orders will produce and what Government assistance, if any, is given?
On the last occasion, the noble Lord, Lord Rhodes, said that it was Government policy to let these funds stand on their own feet so far as possible, particularly the export promotion fund, although in 1966 there was a grant of £50,000 towards export promotion in the United States of America on a pound for pound basis and a grant of £82,500 for scientific research. Perhaps the noble Lord, Lord Delacourt-Smith, can bring us up to date on these figures.
14 I would fully agree that it is a great improvement to change these grants from a per capita basis of emloyees to a levy on total wages and salaries, if only because, as salaries rise, so the funds will tend to keep up with expenditure and it will be less necessary in future to bring in amending Orders purely to keep funds up to a viable level.
So far as the wool trade is concerned, I wonder whether the noble Lord would say something about the Government's estimate of the effectiveness of these two levies. From the Monthly Statistics, it looks as if wool trade exports have fallen in volume by about 10 per cent. since the last levy amendments were made. Perhaps the noble Lord would tell us what were the total of wool trade exports for last year. And I hope that he will say something about the effectiveness of this kind of promotion. He has made clear that the differences between the two Orders is that one refers to the National Wool Textile Export Corporation and the other to the Wool Industry Research Association.
The noble Lord also explained that it had been thought advisable to adjust the position of man-made fibres so far as research is concerned. He said that there is a growing proportion of man-made fibres in textiles and presumably this will be the case for textiles exported as well as for those used in this country. Therefore it would seem logical for the man-made fibres to be subject to the export promotion levy in the same way as wool textiles, by which I take it is meant the pure wool textiles. I wonder whether the noble Lord can say a little more about this, because if it is the case that the proportion of man-made fibres is now 25 per cent. in wool textiles, and is likely to increase to 40 per cent., it seems that the man-made fibres manufacturers should be associated in the export promotion levy.
Perhaps the noble Lord will also tell us (I think it would be wrong to part with these Orders without this information) what results have been achieved from levies for scientific research in the past three years, and what has so far been achieved by grouping together research on textiles composed partly of wool and partly of other fibres. Lastly, I would ask the noble Lord whether the exclusion of the manufacturers of other 15 fibres from the export levy does not tend to handicap the export promotion of textiles composed both of wool and man-made fibres.
§ 3.12 p.m.
§ LORD RHODES
My Lords, perhaps I can say in answer to the noble Lord, Lord Drumalbyn, that the £50,000 which was put up by the industry on a pound for pound basis was, as I understood it, a once-and-for-all contribution to make a particular defence in the American market which had been so badly eroded by the Japanese infiltration of fine worsted market. But I should have thought that the justification for these two Orders, and for the money that has been spent on research and export promotion, is obvious. Out of the mouth of the Minister comes the fact that the number of people who are to be employed in this industry will be less. There is no suggestion that the value of their exports is going to fall.
The comparatively small amount that the Government give in assistance to the wool industry for export promotion is more than justified by the industry's export performance. I understand that in 1969 this great industry was back where it stood in the better years and contributed, in terms of exports, £158 million. I have waited in vain for a little pat on the back from the Minister, and I hope that he will avail himself of his second opportunity to speak to say something to this industry, and to tell it that it has done well—because it has done well.
It is a striking example of a refutation of the demand for size that everybody thinks will bring us to a point of efficiency that we have never seen before. There are thousands of firms in this industry, or connected with it, which firms in most countries in the world, despite advantage of having wool on the spot, good water, good labour and so on, have not yet been able to emulate. I think it is highly creditable that this industry stood four-square and has been able to export the amount it has exported during the years since the war. It is one of the real pillars of strength to which the Board of Trade look, and a word from the Minister would not be out of place. The House certainly ought to give these two Orders its blessing. They are com- 16 mon sense; they have been recommended by the wool trade, and that is good enough.
§ 3.15 p.m.
§ LORD DELACOURT-SMITH
My Lords, I am conscious that in speaking in your Lordships' House on the subject of this industry I am speaking in the presence of a man with great knowledge and experience of the industry in the noble Lord, Lord Rhodes. I endorse wholeheartedly what he has said. I have been asked a number of questions by the noble Lord, Lord Drumalbyn, and I will do my best to respond. We are talking of an industry which has a turnover of something of the order of £315 million, and which meets 95 per cent. of the requirements of the home market. I am afraid I am unable to give precise figures of exports, but the industry is exporting a substantial amount —to the order of about one-third of its total production. Indeed, I think that what has been said of the industry in itself constitutes a powerful argument for the two Orders now before your Lord-ships, because in export promotion and in the application of scientific knowledge the funds which have been raised under Orders of a similar kind in the past have made a valuable contribution.
I was asked what the estimated yield of the Orders would be. It is expected that the Order for export promotion will raise something like £200,000, and the levy for scientific research something like £250,000. We are not, therefore, very far away from the figure of £500,000 which was mentioned on an earlier occasion by the noble Lord, Lord Rhodes, in introducing similar Orders at an earlier date. With regard to the contributions made for these purposes from other sources, the Government, as part of their general programme of assistance to research associations, provide about £100,000 for research in the wool textile industry. So far as export is concerned, the position has changed somewhat. The special arrangements which applied are no longer in existence, but the Government provide export assistance to industry as a whole by way of their financial support for trade fairs, store promotions, co-operative advertising and in a variety of other ways. The wool textile industry can benefit from this general help in the same way that other industries can.
17 I now come to what I think was the last point raised; namely, the position in regard to the relationship between man-made fibres and animal fibres. Perhaps I can clarify the position a little further. The man-made fibre producers, as such, are not being made subject to levy; no levy is being charged on the supply of man-made fibres. The fibre becomes chargeable only after it enters the traditional wool textile processes, and man-made fibres will be leviable only from the carding process. Earlier processes, such as extrusion, are not included in the Order. It seems to be reasonable and fair that the processing of man-made fibres in the industry should be leviable in the same way as animal fibres: for, after all, much of the research expenditure is concerned with the problems of using and blending man-made fibres with the animal fibres. The same firm spins and packages hand knitting yarn made from wool and hand knitting yarn made from man-made fibres. Expenditure on export promotion does not differentiate between all wool and wool/man-made fibre blends.
I am grateful to the noble Lord, Lord Drumalbyn, for the spirit in which he received these Orders, and to the noble Lord, Lord Rhodes, for what he had to say. I trust that the House will show its appreciation of the contribution to our economy which this industry has been making by giving approval to these Orders.
§ On Question, Motion agreed to.