Sitting of 24 March 1939

Preamble
The House met at Eleven of the Clock, Mr. SPEAKER in the Chair.

DEATH OF A MEMBER.
Mr. SPEAKER made the following communication to the House:
I regret to have to inform the House of the death of Sir David Douglas Reid, Baronet, late Member for the County of Down, and desire to express our sense of the loss we have sustained and our sympathy with the relatives.

PRIVATE BUSINESS.
North Metropolitan Electric Power Supply Bill,
Wear Navigation and Sunderland Dock Bill,
As amended, considered; to be read the Third time.

ORAL ANSWER TO QUESTION.

  EUROPEAN SITUATION.
  Mr. Attlee (by Private Notice)asked the Chancellor of the Exchequer whether he has any statement to make on the European situation?
  The Chancellor of the Exchequer (Sir John Simon): I only received notice of this Question within the last few minutes. It is, of course, quite natural that the Leader of the Opposition should put the Question, but I have no further statement that I can make at the moment.
  Mr. Attlee: May I ask whether the right hon. Gentleman will be in a position to make a full statement on Monday with regard to the position both in Rumania and Slovakia? May I also ask, can he indicate at all whether the Prime Minister will be in a position on Monday to make any statement with regard to negotiations with other Powers.
  Sir J. Simon: I am sure the Prime Minister has all these matters very much in mind. He has already told the House that he will make a statement at the earliest moment. I do not think the Leader of the Opposition will ask me to say more than that now, but we will take full note of what he has said.
  Mr. Wedgwood Benn: Is Colonel Beck's visit still to take place?
  Mr. Attlee: I will put a Question on Monday.
  Mr. Bellenger: Although nobody would want to press the Chancellor to make a statement unless it is in the public interest to do so, may I urge upon him the necessity of the Prime Minister making a very early statement, in view of the pace at which events are moving and the extreme danger which may occur to British interests in the near future?

  PATENTS AND DESIGNS (LIMITS OF TIME) BILL [LORDS].
  Read the First time; to be read a Second time upon Monday next, and to be printed. [Bill 98.]
  CHAIRMEN'S PANEL.
  In pursuance of Standing Order No. 80 (4), MR. SPEAKER has nominated Mr. Osbert Peake a member of the Chairmen's Panel in the room of Sir Charles Coupar Barrie, K.B.E., resigned.
ORDERS OF THE DAY.

  CHINA (CURRENCY STABILISATION) BILL.
  Considered in Committee.
  [SIR DENNIS HERBERT in the Chair.]

CLAUSE I—(Powers of Treasury.)
11.9 a.m.
Mr. Pethick-Lawrence: I beg to move, in page 2, line 2, after "interest," to insert:
"at a rate not exceeding two and three-quarters per cent"
I hope very much that the Government will see their way to accept this Amendment, which seems to me to be fully in accord with what we take to be their intention with regard to this Bill. Personally, I cannot see that our Amendment is in any way contrary to anything which the Government have hitherto done, and I regard it as a proper assertion by the House of Commons of its control in this matter. What is the position? As I understand it, these two British banks put up a certain sum of money to be used as half the basis of what is, in effect, an exchange equalisation fund. They are guaranteed against ultimate loss by a provision which I am not dealing with at the moment, and which is not in any way called in question. They are also provided with interest on the amount which they put up, by the two banks that are called the Chinese banks, and in so far as the earnings on the sterling which they advance are not otherwise met, the Chinese banks undertake during the first year to make up the interest to 2¾percent.
The British Treasury come in only if the Chinese banks fail to carry out their obligations, and I take no exception to the provision that the British Treasury should be called upon to stand the racket of the 2¾percent. if the Chinese banks fail to implement their bargain to the full extent.
This agreement only lasts for a certain period—I think 12 months—but it can be renewed by agreement of all the parties after that period. As I understand the position it may be the desire of the parties to vary this figure of 2¾ percent. in making a prolonged agreement after the period of 12 months has elapsed. The
1602
Government say that this in their opinion, might involve having to come to this House again, and they think it wiser not to specify the rate of interest in the Bill. I cannot see the force of that argument. The banks are getting, not a high rate but a reasonable amount of interest. This is, of course, in the nature of a short-term loan, and there are certain British short-terms loans at present available. There are the 2½ per cent. loans standing today in the market at about 95. Therefore, 2¾per cent. is a reasonably fair profit which these banks are expecting to make in providing this money.
Further, though this whole transaction is undoubtedly designed primarily for the benefit of British and Chinese traders, and indirectly for the Chinese Government, I do not think anyone can possible deny that the British banks who will be called upon to take part in it will gain their bit out of the improved trade which is expected to arise from the transaction. Therefore, the profit of 2¾ per cent. interest, which they are to get directly under the Bill is by no means the end of the advantage which accrues to them from this machinery. Moreover, there is nothing in the Bill to prevent the banks, by arrangement with the Chinese banks, if it should be really necessary at the end of the year, raising the rate of interest slightly. My Amendment does not say that the Chinese banks shall not increase the 2¾ per cent. at the end of the year. All it says is that the Treasury shall not guarantee more than 2¾ per cent., and, for the life of me, I cannot see why the Treasury should guarantee more. I think that will adequately meet the requirements of the banks. It is in accord with the usual procedure of this House that we should fix the liability of the Treasury in these matters, and it seems to me quite unnecessary to leave this margin.
The right hon. Gentleman, speaking on this issue the other night, said that we could rely upon the Treasury to make a good bargain. I am one of the last people in this House to throw any aspersion or doubt on the integrity of the Treasury or on its intention to protect the Exchequer. At the same time the ultimate control of finance rests, not with the Treasury, but with this House, and I think it is only reasonable that the House, in passing this Measure, should fix the amount of interest guaranteed by the

1603
Treasury. That does not necessarily, I repeat, fix the amount of interest which will be paid to the British banks, because the first claim for the payment of interest is made on the Chinese banks, and that claim will almost certainly be met, whatever the agreement may be, because China and her banks have a very high reputation for fidelity to their pledged word. Therefore, I hope very much that the Chancellor of the Exchequer will say that, after looking at this Amendment, he has come to the conclusion that the Government are prepared to accept it, but if, for some reason which does not commend itself to those who sit on this side of the House, he stands out for his original Bill, I shall ask my hon. Friends to divide on this Amendment.
11.18 a.m.
Mr. Tinker: Since the discussion the other night I have read the speech of the Chancellor of the Exchequer on that occasion to find out exactly where we stand in regard to this matter. He tried to assure us that there is very little likelihood that we shall be called upon to pay anything at all. In fact, he tried to assure us that there was no likelihood of it, because the Chinese people have the reputation of meeting their responsibilities, but he went on to say—and this is what we have to consider this morning:
"If, for any reason, the Chinese banks fail to pay this interest to the British banks, the Treasury, by the terms of the Bill, will guarantee payment of what is short in that interest to the British banks."— [OFFICIAL REPORT, 20th March, 1939; col. 1045; vol. 345.]
That is the implication which we have to meet this morning, and in view of world events it is just as well that the House of Commons should be put right on this matter. My right hon. Friend was not quite satisfied that we are not involved in guaranteeing more than 2¾ per cent. I should have put a much lower figure than 2¾ per cent. in the Amendment if it had been my Amendment, but we sometimes in a party have to obey the lead given to us, and therefore I support my right hon. Friend's Amendment, but I say that in a matter like this we want to be quite sure that we shall not be involved in anything more than this amount of interest, and that if it drags on further the British taxpayer will not be called upon to pay any excessive demand over
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and above 2¾ per cent. My right hon. Friend is very anxious to know what the position will be, and I hope the Chancellor of the Exchequer will be able to assure us that whatever happens we shall not be involved in more than the rate of interest mentioned in the Bill.
I would like him to tell us, if he can, that there is a possibility of its being reduced to something less than that, because it seems to be very hard on the taxpayers that they should have to assure this interest being paid, without any loss at all, and not have the amount limited in the Bill. It is a very good thing for the British banks to be given this very high rate of interest, and I trust the Chancellor of the Exchequer will be able to give us some assurance on this point. I am not at all satisfied with this matter, and I confess that I am very much upset about it. I can see that we must agree to it, but I do not like it, and I want to make my protest, so far as I am able, on the whole business.
11.21 a.m.
The Chancellor of the Exchequer (Sir John Simon): Any question of the control of public finance, whatever be the size of the sum involved, is a matter of importance, not only to the Treasury and the Government, but to the House of Commons as well, and I do not suggest that there is any reason to complain because the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) has raised this question. At the same time, while I pay all due tribute to his experience, both generally in the discussion of financial matters, which we know is great, and during the time when he served in the Treasury, I am sure he will be good enough to consider what I say without any previous commitment, because there really is, I think, very good ground for keeping the Bill in its present form. As regards what the hon. Member for Leigh (Mr. Tinker) said, I would remind him that it was made quite plain on the occasion of the Second Reading of the Bill that there was a universal feeling in this House that what we were trying to do in this Bill was a good thing to do and was in the real interests of peace and of showing our desire to support what ought to be supported. I would ask the hon. Member not to forget that, because it would not do for it to be said that

1605
we look on the whole thing with great suspicion merely because a particular Amendment is moved to a Clause of this kind.
This is the situation as I believe it to be. I accept, I may say, entirely the very clear and candid statement of the right hon. Gentleman opposite as to what is the arrangement at present made. The provision is exactly as he stated it, that the Chinese banks make themselves responsible, by agreement, for paying this rate of interest, 2¾ per cent., on the contribution made by the British banks. The contribution is£5,000,000, and 2¾| per cent. on that is£137,500, so that£137,500 is the sum that the Chinese banks undertake to pay if necessary to the British banks, who, after all, are putting into the fund£5,000,000, or securities representing£5,000,000, and necessarily, therefore, to that extent are standing out of any possibility of that money being employed in the ordinary course of their business.
What will happen at the end of 12 months is, of course, uncertain, and none of us can say. One would hope that by that time the great difficulties through which China is struggling will have lessened. One would hope that this fund will serve a useful purpose and help the Chinese currency, and we are pretty confident that it will help very materially, but it is conceivable that the arrangement may have to continue, and, as the right hon. Gentleman quite correctly said, it may be that if the arrangement has to continue, some sort of adjustment may have to be made—it might be in the composition of the body which is going to control the equalisation fund, or in some other way.
Of course, when we come to the question of guaranteeing a sum of money, it becomes important for the House of Commons to decide whether we should fix this amount of£137,500 so that it cannot in any way be exceeded without another Act of Parliament, or whether we should take the other view, which is that if it turns out that there was such a change in the prevailing rates as required and justified some adjustment here, that adjustment should be made by a modification of the agreement. Sometimes we all of us tend to claim to speak on these matters with a great deal of confidence as though we really did know what has been
1606
the past practice of the House of Commons in matters of this sort, I made inquiries before this Clause was drawn because this very point occurred to me before the Bill was introduced, and I am the last to desire to introduce looseness in our financial arrangements. I make the assertion on the authority of the Treasury, that there is no instance in which Parliament has authorised the Treasury to guarantee a rate of interest in respect of which somebody else is primarily liable where Parliament has thought fit to fix that rate of interest instead of leaving it to the Treasury to do their best, except, of course, in cases where the rate has been fixed for the whole duration of the loan.
This is a matter of£5,000,000. Hundreds of millions have been raised and the Treasury have had the duty of finding or guaranteeing the interest on the loan. I am informed that there is no instance in which, except where agreements as to the rate of interest were made to cover the whole period, Parliament has said, "We must fix in this Bill the rate of interest, which is the rate now arranged, and we must insist that there must be a new piece of legislation with all its stages if circumstances hereafter develop in which that rate of interest should probably be changed." Therefore, the right hon. Gentleman will see that we have not been doing this in ignorance or without due regard to Parliamentary traditions. I certainly would not willingly surrender any scrap of the ordinary supervision which Parliament exercises over these things. But it would be unfortunate if now in this Bill to assist the stabilisation of the Chinese currency we were to say for the first time that if anybody hereafter comes forward and satisfies the Treasury that the rate ought to be three per cent. in two or three years' time, there would have to be a new Act of Parliament and we should have to go over the whole thing again.
As I have consulted the authorities and have since examined it myself, I hope the Committee will see that we are not in this matter being lax or careless. It is not unreasonable if the House of Commons really take up this proposal with good will, as I am sure they do, to say, "A perfectly clear arrangement has been made now. It will involve 2¾| per cent. to be paid by the Chinese banks—because,

1607
of course, the Chinese Government are behind these Chinese Government banks— to the British banks, but the rate of interest may conceivably, one or more years hence, be modified. In order that this thing may go through, the British Treasury, with the authority of the British Parliament, guarantee that the Chinese banks will pay that interest." We shall not be called upon to fulfil this engagement if the Chinese Government continue in their practice of fulfilling their obligations as in the past. I have the greatest possible confidence that the Treasury will not be called upon to fulfil this guarantee because the Chinese Government are doing their utmost to fulfil their engagements, and will continue to do so. There is no country in the world which has shown a greater effort to deserve the reputation of being an honest bargainer than the Chinese.
I would ask the Committee in the circumstances whether they do not agree, on the whole, that it is right for us to follow what I believe to be the usual and universal practice, and say that in a case where the rate of interest has not been fixed for the whole period we authorise the Treasury, if it should become necessary, to agree to the precise figure which ought from time to time to be imposed. I have no reason to believe that it will be altered, and I should not consent to altering it unless the circumstances changed, but nobody can say that in the course perhaps of two or three years the circumstances may not change. Whatever is done would be reported at once to the House of Commons. We do not want to do anything behind anybody's back. I am only following the course that has been mapped out for me by my predecessors.
Mr. Wedgwood Benn: The right hon. Gentleman says that what is being done is in accordance with precedents so far as he knows. I understand from Subsection (3) of Clause 1 that any sums will have to be made good from the Consolidated Fund. This House has not the same control over the Consolidated Fund as it has over moneys provided by Parliament. Will the right hon. Gentleman say whether in the precedents he has mentioned any loss has been made good out of the Consolidated Fund, thereby depriving the House of an opportunity of dealing with the matter?
Sir J. Simon: I am much obliged to the right hon. Gentleman for calling attention to that point. I am told that that is the language which is always used. It has been so in the earlier cases.
Mr. Benn: But it does deprive Parliament of the opportunity of criticism.
11.33 a.m.
Mr. Tinker: We do not object to the Chinese banks having to pay 2¾per cent., but what I feel concern about is that if they should fail to meet their responsibilities we should have to meet that high rate of interest, and I say that we ought not to be called upon to pay more than we pay to the ordinary British investor. In the case of the Post Office Savings Bank we pay 2½per cent, interest, and I do not see why we should incur a greater liability in this case. I am wondering whether the right hon. Gentleman has any means at his disposal by which he could say, if the Chinese should fail to meet their obligations, that all that we should be called upon to undertake is the same liability as we have to our own people.
11.34 a.m.
Sir J. Simon: I think it would be difficult to state that in the language of a Statute, but the hon. Member may be comforted. Whatever the shortcomings of any Government or any Chancellor of the Exchequer, the Treasury is quite certain to be as keen as the hon. Member himself would be to see that the amount would be at the lowest possible rate. The point is that the future is, for all of us, uncertain. No one can really say whether two or three years from now the figure which the hon. Member regards as adequate will be the proper figure. I am most unwilling that we should make more of this point than we need, because it almost suggests that we are contemplating a change, and I am not contemplating anything of the kind. It would be a departure from the ordinary practice and load Parliament with unnecessary work if we said that whenever there had to be any change we must have another Act of Parliament.
11.35 a.m.
Mr. Pethick-Lawrence: In my original speech I said that I should ask my hon. Friends to divide in favour of this Amendment unless the Chancellor of the Exchequer gave reasons which seem to me adequate, and therefore I will make

1609
a brief reply. Apparently the Chancellor of the Exchequer bases his whole case upon precedents. I have not had the time or the opportunity to look into those precedents to see whether they really are cases which are on all fours with this particular proposal. They may be, and the Chancellor of the Exchequer thinks they are. I did not base my Amendment upon precedent. I did not say that the proposal in this Bill was unprecedented. I said that the House of Commons ought to retain its right of control, and when the right hon. Gentleman says that it may be appropriate to alter the rate of interest and all the rest of it, it really means, put in hard terms, that if affairs either in China or at home get worse, the British banks may take advantage of that position to put up the rate of interest. I am not making any criticism of the banks, but that is what it really amounts to, and I see no reason for allowing that. I believe the rate is quite adequate now, and if the Agreement had been made to last for longer than a year the banks would have been perfectly well satisfied with 2¾ per cent., which is a
Motion made, and Question proposed
rate in accordance with the short-dated loans which we have, and, in fact is a slightly better rate than prevails at the moment. I see no reason why I should withdraw this Amendment, and I shall ask my hon. Friends to vote for it.
11.37 a.m.
Mr. Annesley Somerville: The Amendment does lay down a good principle. There is a growing tendency for Departmental Bills to contain provisions which leave the Department with very wide powers, and this is an instance of it, but this is a very special Bill for a very special purpose which is approved by the whole House, and the Chancellor of the Exchequer has given convincing reasons why this Amendment should not be inserted. In particular, he has given the reason that the Treasury would be the last agency to grant a high rate of interest. For this reason I shall vote against the Amendment.
Question put, "That those words be there inserted."
The Committee divided: Ayes 33: Noes 72

Division No. 70.]

AYES.

[11.39 a.m.

Alexander, Rt. Hon. A. V. (H'lsbr.)

Grenfell, D. R.

Quibell, D. J. K.

Attlee, Rt. Hon. C. R.

Griffiths, J. (Llanelly)

Ritson, J.

Barnes, A. J

Hills, A. (Pontefract)

Smith, T. (Normanton)

Bellenger F. J.

Jenkins, A. (Pontypool)

Thorne, W.

Benn, Rt. Hon. W. W.

Lunn, W.

Tinker, J. J.

Benson, G.

MacMillan, M. (Western Isles)

Viant, S. P.

Brown, C. (Mansfield)

Messer, F.

Williams, T. (Don Valley)

Daggar, G.

Morgan, J. (York, W.R., Doncaster)

Wilson, C. H. (Attercliffe)

Dobbie, W.

Noel-Baker, P. J.

Windsor, W. (Hull, C.)

Edwards Sir C. (Bedwellty)

Pearson, A.

Gardner, B. W.

Pethick-Lawrence, Rt. Hon. F. W.

TELLERS FOR THE AYES.—

Gibson, R. (Greenock)

Poole, C. C.

Mr. Whiteley and Mr. Mathers.

NOES.

Agnew, Lieut.-Comdr. P. G.

Hannah, I C.

Royds, Admiral Sir P. M. R.

Allen, Col, J. Sandeman (B'knhead)

Haslam, Henry (Horncastle)

Samuel, M. R. A.

Allen, Lt.-Col. Sir W. J. (Armagh)

Heilgers, Captain F. F, A,

Seely, Sir H. M.

Bossom, A. C.

Heneage, Lieut.-Colonel A. P.

Shepperson, Sir E. W.

Bower, Comdr. R. T.

Hope, Captain Hon. A. O. J.

Simon, Rt. Hon. Sir J. A.

Brocklebank, Sir Edmund

Hewitt, Dr. A. B.

Sinclair, Col. T. (Queen's U. B'lf'st)

Brown, Rt. Hon. E. (Leith)

Hulbert, N. J.

Smithers, Sir W.

Browne, A. C. (Belfast, W.)

Hunloke, H. P.

Somerset, T.

Bull, B. B.

Lambert, Rt. Hon. G.

Somerville, A. A. (Windsor)

Cary, R. A.

Liddall, W. S.

Spears, Brigadier-General E. L.)

Cazalet, Thelma (Islington, E.)

Lindsay, K. M.

Stuart, Hon. J. (Moray and Nairn)

Clarke, Colonel R. S. (E. Grinstead)

Mabane, W. (Huddersfield)

Tasker, Sir R. I

Clydesdale, Marquess of

Macdonald, Capt. P. (late of Wight)

Thorneycroft, G. E. P.

Conant, Captain R. J. E.

Makins, Brigadier-General Sir Ernest

Turton, R. H.

Crooks, Sir J. Smedley

Margesson, Capt. Rt, Hon. H. D. R.

Walker-Smith, Sir J.

Dorman-Smith, Col. Rt. Hon. Sir R. H.

Markham, S. F.

Wallace, Capt. Rt. Hon. Euan

Drewe, C.

May hew, Lt.-Col. J.

Ward, Lieut.-Col. Sir A. L. (Hull)

Dugdale, Captain T. L.

O'Connor, Sir Terence J.

Waterhouse, Captain C.

Edmondson, Major Sir J

Orr-Ewing, I. L.

Watt, Lt.-Col. G. S. Harvie

Evans, E. (Univ. of Wales)

Perkins, W. R. D.

Whiteley, Major J. P. (Buckingham

Fremantle, Sir F. E.

Petherick, M.

Williams, H. G. (Croydon, S.)

Gledhill, G.

Raikes, H. V. A. M.

Windsor-Clive, Lieut.-Colonel G

Goldie, N. B.

Ramsbotham, H.

Grimston, R. V.

Rosbotham, Sir T.

TELLERS FOR THE NOES.—

Hacking, Rt. Hon. Sir D. H.

Rowlands, G.

Major Herbert and Mr. Munro.

"That the Clause stand part of the Bill"
11.47 a.m.
The Financial Secretary to the Treasury (Captain Euan Wallace): I wish to trespass upon the time of the Committee for only a very few minutes in order to put right some remarks which I made in the early hours of Tuesday morning, in so far as any hon. Member, on reading the OFFICIAL REPORT, may think that I had in any way misled him. The relevant passages are in Columns 1080 and 1081. It is conceivable that some hon. Members might not be entirely clear on the subject of audit, and I am most anxious that hon. Members should fully appreciate the position.
The question asked by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) was whether the Fund itself would be audited annually by the Comptroller and Auditor-General. I am not sure whether I made the position sufficiently clear in my answer that the accounts of the Fund will not be audited by the Comptroller and Auditor-General because these are the accounts of a Chinese currency fund. They will, I understand, be audited by a British firm of chartered accountants although, of course, the final decision in these matters will rest with the Management Committee after it is set up, which cannot be done until Parliament has passed this Bill. While the Accounts of the Fund will not be audited by the Comptroller and Auditor-General, he will have access to the auditor's reports and to all other information in regard to the operation of the Fund. That information has to.be furnished to the Treasury under the arrangement contemplated by the Bill and the Treasury will, of course, make available the information to the Comptroller and Auditor-General. What really happens is that periodic reports are furnished confidentially to the Treasury, and are available to the Comptroller and Auditor-General. They are not made public, but the Public Accounts Committee will get reports from the Comptroller and Auditor-General. I hope this explanation makes the position clear and that hon. Members will now let us have the Clause.
Mr. Pethick-Lawrence: It is clear that the right hon. and gallant Gentleman has slightly modified what he said on the previous occasion, and I take it that the modification does not apply in any way
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to what will happen when the account is wound up. In that case the audit will, I take it, be by the Comptroller and Auditor-General particularly in relation to any contribution from the Treasury which may have to be made at that juncture.
Captain Wallace: In that case a full report will have to be made; when the Fund is wound up the Comptroller and Auditor-General will receive the report of this firm of chartered accountants who have audited the account. The Comptroller and Auditor-General would not, therefore, do the audit himself, but he would have access to the report of the auditors, which really comes to the same thing.
Mr. Pethick-Lawrence: The point is rather a technical one. What I want to be clear about is whether the Comptroller and Auditor-General will, if and when the British public has to pay anything from the Exchequer, have such information as will enable him fully and adequately to check the accuracy of the figures involved so that he can judge whether the amount which the British Exchequer is being called upon to produce is, in fact, correct.
Captain Wallace: Yes, I think that is absolutely clear.
11.50 a.m.
Mr. Bellenger: The right hon. Gentleman has made a clear exposition of what the case may be, and it is this: the British taxpayer may be called upon to pay up to£5,000,000 for the guarantee which we are now giving, but will have only a limited right to investigate the accounts of this exchange fund which may involve the taxpayer in a loss of£5,000,000. The right hon. Gentleman knows that in the case of the British Exchange Equalisation Fund, which is for the purpose of keeping the British£sterling on a level keel, this House has full control through the Public Accounts Committee. [AN HON. MEMBER: "NO"] Well, I will read the right hon. and gallant Gentleman's own words from the OFFICIAL REPORT:
"There certainly will be periodic reports … They would be presented in much the same way as our Exchange Equalisation Fund to the Comptroller and Auditor-General.— [OFFICIAL REPORT, 20th March, 1939; col. 1077, Vol. 345.]

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Now, 1 understand, the right hon. and gallant Gentleman has modified that statement this morning, but I say to him that the control that this House has over the British Equalisation Fund, which is a somewhat similar fund to this equalisation fund which is now about to be set up— although our own Fund is much larger than the Chinese one— ought to be just as complete over this account. I put it to hon. Members who are concerned with the taxpayers' interest that we are being asked to give an unlimited guarantee up to£5,000,000, and that in return we shall have only a limited chance of seeing that the operation of this Fund is carried out in the best possible manner for the British taxpayer and not only for the Chinese dollar. Therefore, I regret the statement which the right hon. and gallant Gentleman has made this morning.
Sir J. Simon: May I say one word—
Mr. Robert Gibson: Before the right hon. Gentleman replies, may I draw attention to one point? My hon. Friend has suggested that the ultimate liability may be only£5,000,000, but does the Bill not envisage the payment of interest, which will depend, as has been said from the Treasury Bench, upon circumstances, and is the ultimate liability, therefore, not only the payment of£5,000,000 but the payment also of interest which may be very high, according to the circumstances from time to time?
11.53 a.m.
Sir J. Simon: Being for the time responsible, I take the deepest interest in securing that there shall be no misunderstanding. Hon. Members opposite have spoken as though this account were closely analogous to our own Equalisation Fund. I agree that in both cases they are in the nature of an account for ironing out undue fluctuations of currency, but the right hon. Gentleman will be the first to appreciate that there is a very great difference between them. The Exchange Equalisation Account is a British account, a purely British Government account, and everything that goes into or comes out of it is purely a British concern and nothing else. It is a rather different situation when you have what you may call a hybrid account—an account which cannot be called a British account and which is set up to assist a foreign currency. I believe that the Comptroller and Auditor-General will con-
1614
tinue to discharge, as he does with great strictness, the primary duty entrusted to him, that is to see that British money, our money which the taxpayer pays, is not paid away without statutory authority, but is disposed of properly and when he has doubts to inform himself of the circumstances. If there are any circumstances calling for comment he will make a report upon it, and the Public Accounts Committee will have that report. Of course, if there is any question of our being called upon to implement our guarantee, it will be essential for the authorities set up in this country for the purpose to see that the conditions are such that we really are liable. We have to bear in mind that this is not a British fund, and, therefore, is not really to be treated as a second Exchange Equalisation Account of our own. It is a hybrid fund, if you like, set up for a special purpose. But at the proper time and in the proper circumstances the constitutional authority will have to be exercised, if we ever have to find any money to implement the guarantee, to see that it is done strictly in accordance with the Act of Parliament.
Question, "That the Clause stand part of the Bill," put, and agreed to.
Clause 2 ordered to stand part of the Bill.
Preamble agreed to.
Bill reported, without Amendment.
Motion made, and Question proposed, "That the Bill be now read the Third time"
11.57 a.m.
Mr. Bellenger: I desire to say a few words on the Third Reading, and I shall attempt to be brief. I am concerned at the nature of the Bill, as will be evident from some of the points which I have put during its earlier stages and in Committee. The Chancellor has just told us that he is confident, or at any rate that he has considerable confidence that there is a great possibility, that we shall not be called upon to implement our guarantee, and he gave as one reason for his confidence the fact that hitherto the Chinese Government has faithfully observed its obligations. I say at the outset that I quite agree with that statement; but the question for the Chancellor to consider is whether the Chinese Government will always be able to fulfil its obligations in

1615
the future as it has in the past. I should like to quote to the Chancellor of the Exchequer some remarks made by the Chairman of the Hongkong and Shanghai Banking Corporation at the annual meeting of the Corporation which was held quite recently. This is one of the banks which are going to administer the fund, and my quotation is apropos of the point about the Chinese Government being able to carry out its obligations. The Chairman of the Corporation said:
"You can read between the lines how difficult and tense a time exchange bankers had throughout the first nine months of the year"—
that is to say, the year 1938.
"Even now there is an ever-present fear of what I may call 'external influences.' The Tientsin and North China exchange market has particularly suffered from these 'external influences,' and the outlook there remains under this cloud."
What, in effect, does that mean? It means that the Chancellor's confidence is somewhat misplaced, because, if these external influences operate more intensively in the future than they have in the past, it is possible that our trade with North China, which this Bill is beng introduced ostensibly to assist, may gradually pass away. I do not wish to put any obstacle whatever in the way of assisting the Chinese Government. It is interesting to note that the League of Nations have declared Japan, which is now waging war against China, to be an aggressor State, and the League of Nations suggested that financial help should be given to the Chinese Government. But they did that some time ago, and it is rather late in the day for the Government to come forward and suggest that we should give a guarantee up to£5,000,000. I suggest that this is rather a puny effort, and that, if we really want to help the Chinese, it would have to be put on a bigger scale than that. It seems to me that, if we are to help nations like China which are now suffering under foreign aggression, we should mobilise our resources on a much bigger scale than this.
I would ask the Chancellor, with reference to his remarks about China always fulfilling her obligations, what has happened in the case of other countries, like Czecho-slovakia, who will probably
1616
have to repudiate all her loans. Government and otherwise; and what has happened in the case of the Dawes Loan and the Young Loan? We have had to exert pressure on Germany in order to get our interest on these latter. How lone that is to last I do not know. On the Second Reading, great play was made by the Chancellor on the effect that the Bill would have in assisting Lancashire trade, and I know that that had a considerable influence with hon. Members on this side of the House as well as on his own side. But might I quote to him some further remarks made by the Chairman of the Hongkong and Shanghai Banking Corporation quite recently? He said:
"Significantly enough there has been a great increase in the export of raw cotton to Japan, from 234,000 quintals in 1937 to 964,000 quintals last year."
I think that is conclusive evidence that it is not Lancashire which is likely to benefit from this Bill, as the Chancellor told us on the Second Reading, but the probability is that Japan will be one of the beneficiaries of our 5,000,000 guarantee.
Sir J. Simon: Is the hon. Member in favour of the Bill?
Mr. Bellenger: Perhaps I may be allowed to develop my speech in my own way. Although sometimes we do not criticise the principle, we can certainly criticise the Bill itself. The Chancellor has done that himself in days gone by, so I hope he will allow me a little indulgence to-day. I promise him that I shall not be too long or too severe in my criticisms. I suggest to the Chancellor that the arguments he has put before the House in favour of granting this£5,000,000 guarantee to China are based on a false assumption that it will benefit British trade to the extent which he thinks it will. The Bill has been received with pagans of praise from his own side, and a certain amount of modulated approval from this side of the House, but I suggest, particularly to hon. and right hon. Members on this side of the House, that this is not the way to help British trade with China. I agree entirely that we should help China in the difficulties which she is encountering at the present time, but I believe, whatever the Chancellor may say, that this is an effort to bolster up certain interests but not primarily to help British trade.
12.3 p.m.
Sir John Simon: I should like to make one observation. The hon. Gentleman says, if I understand him aright, that I do not think that circumstances are likely to arise in which we should be called upon in respect of any portion of this guarantee. I certainly hope that we shall not, but the observation I made was particularly made with reference to the guarantee of the payment of interest. I would like, before we pass from the Bill, to put it on record that, as will be obvious to the hon. Gentleman, the Chinese Government have a record which justifies us in thinking that they will indeed pay the interest they have promised to pay, and I hope that that is not an observation which will come under the criticism of the hon. Gentleman. Whether or not we shall find ourselves called upon under our guarantee in respect of the main sum must, of course, necessarily be determined on whether the fund does or does not succeed in maintaining the position of the Chinese currency. I personally think that, in the opinion of the House as a whole, this is an effort which is well worth making, and, therefore, I will not pause to inquire whether the view of the hon. Gentleman is that the sum is unduly small or unduly large, or that the arrangement in not likely to benefit our trade but is likely to benefit Japan. The hon. Gentleman, has, in fact, imagined a very large number of alternative and mutually destructive propositions.
12.5 p.m.
Mr. Pethick-Lawrence: I agree with my hon. Friend behind that it would have been well if earlier we had taken active steps in support of China. Nevertheless, I know quite well that this proposal is one which is supported and greatly desired by the Chinese Government. I believe that, inadequate as it may be, it is well worth our doing, and I hope that this Bill will have a unanimous Third Reading.
Question, "That the Bill be now read the Third time," put, and agreed to.
Bill read the Third time, and passed.

WHEAT (AMENDMENT) BILL.
Order for Second Reading read.
12.6 p.m.
The Minister of Agriculture (Colonel Sir Reginald Dorman-Smith): I beg to
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move, "That the Bill be now read a Second time"
I have seen it stated in certain papers that if any farmers try to master the details of this Bill they are liable to get a headache. Why that has been confined to farmers I do not know. I confess that, in as much as it deals with technical matters, as a potential source of headaches it is not without its terrors for me. We start with the advantage of knowing that, at any rate, the technical details have received the approval of the Wheat Commission, which is a very representative body. The purpose of the Bill is to effect certain Amendments in the Wheat Act, 1932. The provisions of that Act are so well known to the House that it will be unnecessary for me to go into them in any detail, but it might be as well to recall some of the main features of the Act.
The main principle was that deficiency payments should be made to registered wheat growers in the United Kingdom in respect of wheat sold by them which conformed to a prescribed" standard of mill-able wheat. The deficiency payments represent the difference between the standard price of 10s. a cwt. and the price which at the end of the year is prescribed as the average price for all wheat sold by registered growers, less a deduction for administrative expenses. There was a further provision that if the quantity of mill able wheat sold during the year exceeds the amount estimated by the Minister as the anticipated supply, the deficiency payments should be scaled down proportionately. The funds with which to pay these deficiency payments are raised by a levy, called a quota payment, imposed on millers and importers of flour, and made payable in respect of all flour which they deliver. The rate of quota payment is fixed, and adjusted from time to time, to bring into the Wheat Fund the money to pay the deficiency payments. It is administered by the Wheat Commission, which consists of representatives of the millers, importers, merchants, producers and consumers, with an independent chairman and an independent vice-chairman.
I think the House will agree that, as far as the working of that Act is concerned, it has been a real success, It has at least resulted in a good increase in the

1619
adopted for these different residual pro-acreage of wheat in this country; it actually has brought about an increase of something like 50 per cent. The producers, not unnaturally, look upon the Wheat Act and the Wheat Commission with, shall I say, affectionate respect—respect because it is an Act of Parliament, and affection because they are beneficiaries under the Act. But I do not think the same reason can account for the undoubted good will which is extended to the Commission by all the other interests, which are not to receive but to subscribe, in terms of either money or services.
No small part of the credit for this good will is, I think, due to the personnel of the Commission itself. I would like to take this opportunity of adding my sincere tribute to the many others which have been paid to the work of that body during the last seven years. The House will recollect that the late Lord Peel, who served the State in so many capacities, was the Commission's first chairman. It was under his guidance that the Commission got a very enviable reputation for administrative efficiency, and the farmers were very sorry when Lord Peel died. Since his death, we have been lucky enough to secure the services of Lord Harlech, who has taken on the work of chairman. I am certain that that high reputation of the Commission is perfectly safe in his hands. But I think some of the credit for the working of the Act must be given to the Act itself. During my subaltern days I learnt that time spent in reconnaissance is seldom wasted. This Act was the result of long and painstaking consultations with the representatives of all the interests concerned. The time spent has been more than repaid. In principle, the Measure has commended itself very strongly to the producer, and in practice it has not been found irksome or unfair to any of the other interests concerned—except, perhaps, for some small mistakes, which the Government now seek to remedy.
The present Bill does not make any change in the principle of the 1932 Act. There were, however, some points raised in connection with the Act which led the Government to decide to deal with them by legislation where necessary. The first is in connection with the standard price. The second was the definition of flour and
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wheat offals. The history of the standard price is that the 1932 Act provided that a small independent committee should be set up in 1935 for the purpose of reporting to the Minister, after considering both the general economic conditions and the conditions affecting agriculture, as to the desirability of making any alteration in the standard price of 10s. per cwt. If the Committee recommended that it was desirable to make any change the Minister would have power to alter the standard price by order, subject to the confirmation of Parliament. In 1935 the standard price committee was duly set up, under the chairmanship of the late Sir John Beale, and they arrived at what they termed "a unanimous and very definite conclusion" that it was undesirable at the time to make any alteration in the standard price. They went further, and recommended that provision should be made for the standard price to be reviewed again after a period of years.
This recommendation the Government have accepted, and in Clause 1 they make provision for the setting up of a further Standard Price Committee, which it is hoped will be able to report in time for a decision to be taken as to whether any alteration shall be made in the standard price as from the beginning of the next cereal year, 1939. The Government go further than that and propose that for the future the Standard Price Committee should be set up every three years. I think the House will agree that with this type of Measure it is well that review should be made from time to time to see what the condition of the industry in fact is. That is the first point; the Standard Price Committee, and Clause 1 gives effect to our recommendation.
The second point was the definition of "flour" and of "wheat offals." There is again a history to that. The 1932 Act was drafted as an agreed Measure between the interests principally concerned, including the millers, the flour importers and the corn merchants. Under that Act "flour" is subject to quota payments levy while "wheat offals" are exempt. It was the intention of the Act that all commercial flour should be made subject to the quota payment. One difficulty has arisen out of the fact that the nature of the residual product from milling wheat varies from ordinary bran to a type of wheat offal known as fine middlings; there is a variety of commercial descriptions

1621
ducts and there has been no sharp differentiation between those commercial descriptions such as might be based on a generally accepted analytical criterion. Nevertheless it has been possible for those engaged in the trade, although there were these various descriptions of products, to classify the vast majority either as flour or as wheat offals.
It had never been questioned by the trade that it was the intention of the Act to levy the quota payment on all products which could be regarded commercially as flour, including low-grade feeding flour. At the beginning very little difficulty was found in administration in differentiating between flour and the normal residual products of milling wheat produced in this country or imported from abroad. But a snag did arise, as very often is the case, and it arose in the form of a rather special and small class of imported products which were intermediate in quality between offals and low-grade feeding flour. In order to classify this particular type of offal it was found necessary and advisable to adopt a yardstick in the shape of analytical standards. The Wheat Commission tried to adopt that course but it led to some differences of opinion, and eventually, as the House knows, led to litigation." The effect of the final judgment in this particular case was, to put it shortly in non-technical language, that the method of production of the substance concerned and the purpose for which it was to be used, and not the precise character of the substance, constituted the test of liability under the Act. In the opinion of the Wheat Commission this decision was directly opposed to the basis on which the original agreement had been reached between the interests concerned in 1932, namely, that all commercial flour, of whatever quality and for whatever purpose produced or used, should attract liability for the quota payment.
Therefore, after careful consideration, the Wheat Commission represented to the Minister that this decision would render the Act extremely difficult to work. As an outcome of these deliberations the present Minister of Health, then Minister for Agriculture, held a conference with the representatives of the importers of flour and wheat offals and of corn merchants, and the outcome of these discussions was that the various associations, representative of millers, flour
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importers, traders in cattle foods and corn merchants, entered into a gentleman's agreement with the Wheat Commission, whereby pending amending legislation, they undertook to use their influence to ensure that no attempt would be made to claim that low-grade flour should be exempt from quota payment.
Thanks to the way in which that gentleman's agreement was worked and the good will and sense of responsibility shown by all concerned, instead of having to try to rush amending legislation through Parliament in order to prevent a few people from taking advantage of the flaw which had been found, it was possible to examine the whole matter carefully and to arrive at a solution of the problem which is acceptable to all parties, and one which I hope will settle the matter once and for all. While the position was held by this gentleman's agreement the Wheat Commission as a representative body and as having the experts on it, was asked if it would formulate proposals to deal with the situation. The Commission got into consultation with the Government Chemist and they have evolved a definition of wheat offals which is based actually on analytical test, and Clause 4 of the Bill contains these definitions. They depend upon the ash content of the substance, supplemented where necessary by a sieving test.
Clauses 5 and 6 give effect to proposals for the assessment to liability of flour and wheat offals which have been agreed with the National Associations of millers and importers concerned. Briefly these proposals are as follows: If the ash content of a substance produced from milling does not exceed 2 per cent., the substance shall be held to be flour and shall be liable to the full quota payment. If the ash content exceeds 2 per cent. and does not exceed 2·7 per cent., then the substance is still liable for quota payment but at a reduced rate if it is destined for feeding livestock. If the ash content exceeds 2·7 per cent. and again is destined for feeding livestock, the substance escapes quota payment subject to the application of the sieving test when considered necessary. I confess that this does all sound highly technical to the lay mind. I am told that it must regarded as extremely satisfactory that we have been able to get an agreed definition of flour and of wheat offals which I am assured is simple, precise and easy to apply.

1623
While the Wheat Commission was dealing with these matters it also took up other points which had arisen and made several additional proposals to us. The majority of those proposals did not involve any vital change in the Bill but were designed either to remove doubts or to facilitate administration; but there were two proposals which were of real importance. The first one was a suggestion that the exemption from liability to quota payment of wheat meal should be repealed, and the second was a proposal that prepared wheaten breakfast foods should expressly be made subject to quota payment liability. The House will expect me to say a few words on these two points, because they have aroused a certain amount of controversy and we deal with them in the Bill.
The first is the exemption of wheat meal. Under the Act, wheat meal delivered by the miller for consumption without further manufacture as animal or poultry food is exempt from liability to quota payment. The Wheat Commission originally proposed to repeal this exemption and to make a provision that the wheat meal should be liable to quota payment at a reduced rate, which was roughly proportionate to its content of commercial flour. They submitted these reasons. They said that the original exemption had been designed largely as an administrative convenience so that they should not have to deal with a large number of small country millers who, as far as they milled wheat at all, produced only wheat meal. But the result of the exemption had led to a very large increase in production by the large provender millers, so much so, that the Commission urged that the exemption discriminated unfairly against millers and importers who had to deal with low-grade flour and middlings in competition with quota-free wheat meal. Further, there was an important danger that quota-free wheat meal might be diverted from its proper uses for the feeding of stock, a danger which was increased if the supplies of wheat meal on the market became very large, and also it was increased if the rate of the quota payment tended to be high. I need hardly say that these proposals were stoutly resisted by the stock feeders, and by the poultry industry in particular, on the ground that the addi-
1624
tional cost would be thrown on to them, and they, naturally, would be unable to pass it on.
The Government reviewed this situation and they decided to retain the principal exemption which was granted in the Act of 1932. This decision is absolutely in line with the policy which was expressed by the Government when the Wheat Bill was before the House in 1932, namely, that it was the intention of the Government that the poultry industry should not be directly handicapped by tie operation of the Bill. In the light of this decision the Wheat Commission reconsidered the position, and finally submitted proposals which, while retaining the principle of exemption, provide adequate safeguards against the risk of the quota-free wheat meal being diverted for uses other than for livestock feeding, and will, I think, be found to go far to meet the other difficulties.
It is important for me to stress here once more that these proposals are supported unanimously by all the Members of the Wheat Commission. The proposals themselves are indicated in Clause 7 of the Bill and amount to this, that wheat meal and other forms of flour destined for livestock must generally be diluted with at least their own weight of non-wheaten substances. The old term "wheat meal" disappears; but under the new provision relating to "wheat provender mixture" exemption is given to all mixtures containing wheat meal, low-grade flour, or any combination of them with one another or of wheat offals, without any restriction as to ash content, provided, first of all, that they are destined for livestock, and secondly, that they contain more than 50 per cent.of non-wheaten substances, such as barley, oats or maize. Also, cut wheat does not require to be diluted to escape quota liability and rolled or flaked wheat need only be diluted with one-third of its weight of non-wheaten substance in order to qualify, and also, under this Bill, it is proposed that complete exemption should be granted in respect of meal produced by grinding wheat which has not been sold by the grower, but has been sent by him to a miller for grinding and returned to him for feeding to his own livestock under the "multure,"— which I gather is pronounced "mooter"—system practised largely in Northern Ireland and occasionally in Great Britain.

1625
I would again stress that it has been the object of the Government under these provisions to safeguard to the fullest possible extent the position of the stock feeder and of the poultry keeper. Although it has been necessary, in order, first of all, to prevent malpractices, and, secondly, to avoid disparity of treatment as between one wheaten product and another, to confine the exemption of wheat meal to wheat meal forming part of a mixture, I believe that this will not create any hardship for the poultry keeper, or indeed for any section of the farming industry, and for this reason: I am informed that wheat meal is seldom delivered to stock feeders or to poultry keepers, except in manufactures containing a much higher proportion than the 50 per cent. of non-wheaten substances, the reason for that being that wheat meal by itself is not a good and suitable feeding stuff and in fact has to be mixed before it becomes of value to be used. The proposal there, as far as I can see, will involve practically no alteration in the existing trade practice, but it will in the course of time. We have been told this morning that we do not know what may happen in the future, and should these provisions in the Bill be found to be too hard on any section of farming enterprise, then, in Clause 10, there is provision for adjustment without the need for an amending Bill.
The second question was that of wheaten breakfast foods. The Wheat Commission suggested an amendment to extend the liability for quota payment to those wheaten breakfast foods which have not hitherto been regarded as falling clearly within the present definition of "flour." There have been protests to the Wheat Commission against the freedom of these breakfast foods from liability on several occasions by various associations representing both millers and bakers. It was argued on their behalf that this freedom from quota payment was illogical, because the wheat was in fact subjected in the course of manufacture to a milling process, and inequitable because bread, with which it was alleged the breakfast foods competed, bore the quota payment. On the other hand, the manufacturers and importers of these foods expressed a strong objection to any proposal that their food should be made liable for the quota payment, on the
1626
ground principally that their foods did not really compete against bread, but against other non-wheaten foods, such as corn flakes, which are made up of maize, and which could not in any case be made liable to the quota payment.
The Wheat Commission decided that in principle it was right that these wheaten foods should attract liability for quota payment. The Government, while fully appreciating the arguments which led the Wheat Commission to take this decision, have recognised that perhaps a good case may be made out on behalf of the manufacturers and the importers of these foods, and that it may be stronger in some cases than in others. The Government feel, therefore, that it is desirable that they should be advised on this matter by an impartial committee which will be able to investigate the facts and the conditions of each case.
Clause II provides for the imposition of the quota payment on home-produced wheaten breakfast foods at the end of a period of nine months after the passing of the Act, except where continued exemption is granted by Order of the Minister. Applications for exemption to be continued may be made by any manufacturer, and provision is made for those applications to be referred to an independent reference committee which will advise the Government on the desirability of making an Order. While, therefore, Clause 11 in form is a charging Clause, in effect it grants exemption from liability for a period during which inquiry can be made in specific cases. Imported breakfast foods cannot be dealt with in quite the same way. Clause 12, therefore, empowers the Minister to impose liability to quota payments on any imported wheaten goods if an application for an order is approved by the Reference Committee, and such an Order under this Clause would have to be allowed by Parliament.
Mr. J. Morgan: Will the right hon. Gentleman explain who will set up the Reference Committee? Will it be the Government, the Wheat Commission or any independent body?
Sir R. Dorman-Smith: There will be an independent body set up.
Mr. Barnes: Will it be the same Reference Committee?
Sir R. Dorman-Smith: I expect it will be on the same lines as the Import Duties Advisory Committee. There are other matters of some importance in the Bill, but I do not think I need go into them in detail. Clause 13, which provides for making schemes empowering the Wheat Commission to make allowances by way of refund of quota payment in respect of exported goods produced from flour, is an extension of the provisions in the 1932 Act which provide for repayments in respect of flour and bread exported as stores. Clause 16 deals with the power of the Commission to make by-laws for the settlement of disputes by arbitration, and Clause 22 empowers the Wheat Commission to make grants in aid of research and education in regard to the growing, the marketing and the utilisation of wheat. They are all points of considerable importance, but we shall have time to debate them in detail at another stage. The Bill represents a sincere attempt to remove anomalies and to straighten out difficulties which have become apparent during seven years' experience.
It is, of course, impossible, in dealing with a Measure like this, where so many interests are concerned, some of them conflicting interests, to give 100 per cent. satisfaction to all concerned, but we have had protracted consultations with these interests, both by the Wheat Commission and the Ministry, and the outstanding fact is that there has been unanimous support for the Bill by the representative farmers, millers, flour importers, merchants and consumers who sit upon the Wheat Commission. I commend the Bill to the House in the belief that it will remove various difficulties which have been found in the operation of the Act, and will render what has proved to be a valuable Measure still more workmanlike and more acceptable to the House and the country.
12.40 p.m.
Mr. T. Williams: I should, first of all, like to congratulate the right hon. and gallant Gentleman upon recovering his health sufficiently to be able to bring this Bill forward to-day. The clarity with which he has moved the Second Reading has almost alarmed me, because I did not think it could be possible for any one person to explain it as clearly as he has done. I am not sure, however, that he has clarified the minds of Members. That still remains to be done by Sherlock
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Holmes, who, I presume, will speak later. My first impression of the Bill, despite my real sympathy for the ex-Minister of Agriculture, was that if he had been responsible for its production, he deserved dismissal even before dismissal came his way. If, however, the right hon. and gallant Gentleman now occupying that important post was responsible for it, I think he ought to be dismissed at once. Certainly the draftsmen ought to be locked up or else granted a first prize for creating utter confusion, because the new definitions which have been imported into the Bill make the Bacon Bill look clarity personified, and even the "Law Journal" is asking for a text book to interpret that Measure. Apart from Clause 1 I should not think any one farmer out of the 350,000 farmers will ever get a thorough grasp of the Measure. We fought the original Bill in 1932 in principle because at that time we felt that it was a bread tax falling more heavily upon the largest and the poorest families, who were unable to buy steaks or chops and had to resort to bread as their staple diet. We felt that if£7,000,000 or£8,000,000 were to be collected from food consumers it might well be that the selection of some other commodity or commodities would be far better than increasing out of ail decent proportion the production of wheat.
I do not want to repeat any of the arguments that we submitted on the general principle of the original Bill. It is a highly technical Measure which costs about£60,000 per annum to administer. That is the measure of the complexity of the Bill. The Wheat Act has worked very well from the point of view of the fanner. I am not sure that I can say that it has worked well in other directions, but from the point of view of the farmer it certainly has worked reasonably well. Some reference to the original Act is necessary to lead up to Clause 1. The original purpose was to provide a guaranteed price for a specified output of wheat, the figures being 10s. per cwt. for a maximum of 27,000,000 cwt. in 1932. There has been one Amendment since and now the specified quantity is 36,000,000 cwts. The Wheat Commission were charged with very onerous duties. They had to be not only Solomons, but prophets, anticipating supply, prices and lots of other things. Having fixed the quota payment, they collected the money

1629
and distributed it among the various wheat producers and, as far as I can gather, broadly speaking, the farmers regard this as a classic example of national Government agricultural legislation and one which they would like to follow in certain other directions. But the House must never forget that since 1932 the consumers of bread have paid approximately£35,000,000 in deficiency payments and they are now paying approximately ¾d. on every four lb. loaf of bread purchased in subsidising wheat producers. So it is a two-sided Measure when we consider whether or not it has been an all-round universal success. The standard price of flour determines the price of bread. A concession was made recently to bakers which involved bread purchasers in about a ½d. on the four lb. loaf, and that, with deficiency payments, is equivalent to an increase over market or world prices of round about 1¼d. per four lb. loaf. Therefore, we are entitled to examine any suggestion of amending legislation which may further increase the price of bread.
Clause 1 is the only simple provision in the Bill. It looks innocent enough. When the committee has been set up to consider any alteration in the standard price I presume that it can recommend an alteration either up or down. The right hon. Gentleman has a ready reply to us; this committee may be a windscreen for increasing the standard price. I want to ask one or two questions about this committee and its functions, and also about the committee which was set up in 1935 as a result of the 1932 Act. The Act has now been in existence for seven years. Presumably the National Farmers' Union have discussed the question many times, and they must by. now know what is a fair standard price. What is the view of the Minister as to. a fair standard price? Is he satisfied that the standard price is equitable and fair to the farmer and to the consumer of bread alike? We really ought to know the Minister's opinion on this matter. I want to ask a question concerning the committee to be set up, because there are fears and anxieties that it might be a windscreen for the Government when the farmers are again tackling the Government for an increase in the standard price for wheat. If the committee were going to be an effective body, to fulfil effective purposes, I do not think that we should oppose
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Clause 1, we should be willing to give our whole-hearted support. The Clause reads in this way. When the committee has been appointed:
"After considering general economic conditions and the conditions affecting the agricultural industry, shall report to the Minister as to the desirability of making any alteration in the price"
Presumably they can make a recommendation either up or down, or no alteration at all. What is meant by investigating "the general economic conditions"? Does that involve the conditions of trade between ourselves and the Empire and foreign countries? Does it involve an examination of the relationship between industry generally and agriculture? Will the committee be called upon to investigate industrial workers' wages and the amount of the further burden they may be called upon to bear? Will it be called upon to examine what an unemployed man with a family can afford to pay in an indirect subsidy for wheat, or anything else, and will the committee be invited to consider the question of nutrition in a comprehensive sense? Its recommendations will not only affect the producers of wheat, about 60,000 persons, but will also affect 44,000,000 to 45,000,000 consumers of bread. We want to know whether an examination of the "general economic conditions" involves an inquiry of that kind and a report to the Minister giving chapter and verse for the recommendations it may make.
Then, again, the conditions of the agricultural industry have to be examined. I want to know exactly what that phrase involves, In the original Act of 1932 Section 17 declares that if a marketing scheme for wheat was brought into existence, the Wheat Commission could handle such a marketing scheme, in fact could handle all the administration of the Wheat Act, as they might deem advisable. We have had seven years of the Wheat Act, and so far there has been no marketing scheme brought into existence. As far as we can ascertain, the marketing of wheat is as slipshod, as haphazard and as inefficient in many ways as it was 80 and 100 years ago. I want to ask whether this committee in considering the conditions of the agricultural industry will also investigate whether or not a more effective and efficient marketing system for wheat would remove the necessity for increasing the Standard price for flour.

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We want to know whether the committee will investigate the costs of the production of wheat. I remember making many speeches in 1932, good, bad and indifferent, probably most of them indifferent, on the Wheat Bill of that year, and I pleaded with the then. Minister of Agriculture to provide the House with the costs of the production of wheat on large and small farms so that the House could judge what would be a fair charge to the consumer. We want to know, and I think we are intitled to know, whether the committee will investigate the costs of the production of wheat.
There are in this country about 350,000 farmers, and 240,000 of them farm less than 50 acres, while 110,000 farm more than 50 acres. Many of the latter have such an area that they can utilise to the maximum extent agricultural machinery, but the small farms below 50 acres have not an area on which to utilise machinery on a sound economic basis. Therefore, the production of wheat on a small farm may be hopelessly uneconomic while a bigger farm, which can utilise machinery to the maximum extent, can be an economic unit. Will the committee tell the right hon. Gentleman so that he may tell the House what is the appropriate unit for the production of wheat for which a guaranteed price is provided by the consumers of bread? That is a question which ought to be answered, for the fulfilment of their duties by the committee determines the decision of the House on Clause 1. I have said that the consumer of bread is paying at the moment about£35,000,000 in an indirect subsidy to the wheat production of this country. Already we have paid£4,000,000 and£7,000,000; the payment has gone down by£1,338,000. This year it may be£7,000,000 or£8,000,000 for anything we may know because of the low price of wheat.
I think we ought to know from the committee whether we are spending this large sum of money on the right commodity or whether we should not consider the question of increasing the production of beef and milk, vegetables and eggs and fruit. An expenditure of£7,000,000 or£8,000,000 will go a long way towards solving not only some of the problems of agriculture but a long way towards helping the nutrition policy of
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this country. The Minister ought to tell us exactly what it is intended this committee shall do, and exactly what the committee set up in 1935 have actually done.
Clauses 2 and 3 are merely machinery Clauses. Clauses 4 to 6 are extremely simple, according to the marginal notes. For instance, the marginal note to Clause 4 is— "Amended classification of products of wheat." That is extremely simple. The right hon. Gentleman gave the clearest description he could as to why the Wheat Commission and the interests involved have recommended this change; but the Minister's explanation and the contents of the Bill are two very different things. I want to quote to the House one paragraph from this Clause, on which I hope the hon. Gentleman who is to reply will say something more. Here is the interpretation of "wheaten content":
"The expression 'wheaten content' means, in relation to any substance, so much thereof, whether being a part or the whole thereof, as comprises, and comprises only, those constituents of the substance which are derived from—

(a) wheat, or

(b) vegetable matter separated from that wheat in the course of cleaning that wheat, or

(c) mineral matter naturally associated with that wheat,

but excluding, as regards such vegetable and mineral matter constituents, any quanitity in excess of the following limits respectively, that is to say, as regards the former, four ninety-sixths of the weight of the other constituents of the substance included in the wheaten content thereof by virtue of this subsection, and, as regards the latter, such quantity as can be included without increasing the ash content (standard basis) of the substance by more than two-tenths per cent, as compared with what it would have been if no mineral matter constituents had been included"
No doubt that is perfectly clear to the Minister, but I do not think there is an hon. Member in this House, or beyond these four walls, who really understands that formula. Four ninety-sixths equal one twenty-fourth—that is "elementary, my dear Watson," it gives the clue to the situation. In Clause 6, there is a further addition to clarity, and I commend Subsection (4) of that Clause to the House as being the best thing that the draftsmen at the Ministry of Agriculture can do:
"In the case of flour that is destined for livestock and has an ash content (standard basis) exceeding two per cent. but not exceeding two and seven-tenths per cent., the amount

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of any quota payments to be made in respect thereof, in lieu of being calculated by reference to the standard amount as provided in paragraph (a) of sub-section (3) of this section, shall be calculated by reference to the following amount, that is to say, an amount equal to seven-eighths of the standard amount where the excess is not more than one-tenth per cent., to six-eighths thereof where the excess is more than one-tenth per cent. but not more than two-tenths per cent., and so on''
Again, that is crystal clear. No wonder that that very responsible organ, the "Law Journal," demanded a textbook to interpret the Bacon Act. They will need half a dozen textbooks to interpret this Bill, when they come in contact with it after it becomes an Act. I know that recently the Board of Education have been considering with the Ministry of Agriculture special courses, having a specific agricultural bias, for rural children. If Bills of this description are to govern the agricultural industry, it seems to me that it is not an agricultural bias that rural children will require, but a special course in higher mathematics. Even then, they would not be able to follow the legislation of the Ministry of Agriculture. Presumably the changed formula, it has satisfied all the interests, is the right and proper thing for the Minister to embody in the Bill, but the draftsmen ought to understand that this House is composed of very ordinary men and women, and that the farmers and those responsible for the agricultural industry are very ordinary men and women, too. There is no point in having this highly complex language which no ordinary individual can understand, and to which no one can do justice on the Floor of the House.
With regard to Clause 7, the Minister gave details with regard to wheaten substances fed to livestock. Here again, the changed formula may be quite a proper one. However, representations have been made to some hon. Members that the best and most nutritious mashes that are produced contain more than 50 per cent, of wheaten substances. I think the Ministry have changed their mind on this question on more than one occasion. I do not want to argue in favour of the producer of wheat who receives a deficiency payment and then feeds the same wheat back to his livestock, thus securing special concessions. If the Ministry are determined to make these
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exemptions with regard to wheaten substances that are fed to livestock, at all events they ought to allow what is regarded as the best possible combination of foodstuffs, whether it be 50 per cent., 60 per cent., or even 65 per cent.
The hon. Member for Thirsk and Malton (Mr. Turton) has been very generous this morning and has not made a single interjection during my speech. I am wondering whether he is well and hearty or not. I observe that in 1935—any year will do for my purpose—the total production of wheat in this country was 1,753,000 tons, of which 1,682,000.tons were regarded as being of millable quality. To all intents and purposes, the appropriate deficiency payments would be made for those 1,682,000 tons. Can the right hon. Gentleman tell us how many tons of those 1,682,000 tons of so-called millable quality wheat were turned into flour for human consumption, and what proportion of that wheat for which deficiency payments were made was returned to the farms to be fed to livestock? We made an argument on this matter in 1932, and I make the same argument now.
There may be a case for providing a standard price for wheat produced in this country that is turned into flour and made available for the production of bread; but I am not sure that we can justify making a quota payment for wheat of a certain quality which is not turned into flour and fed to human beings, but which is held on the farm or returned to the farm and fed to cattle. I do not wish to pursue that point further, but I hope that the Minister will supply his colleague with the figures so that the hon. Gentleman can tell us how much millable wheat for which deficiency payments were made was turned into flour and how much went back to the farm to be fed to livestock and poultry. The right hon. Gentleman explained the provisions with regard to breakfast foods in very delicate and doubtful language. There may be a case and there may not be a case, he said, but at any rate there is to be a reference Committee which will examine the problem before any payments are provided with regard to cereal breakfast foods. I want to ask one or two questions on this matter. We are led to believe that of the consumption of 82,000,000 cwts. of flour, all the cereal breakfast foods account for only about 250,000 cwts.

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The first question, therefore, is, will it be worth the Commission's while after all these investigations and the machinery that will be required, to demand payment for such a small quantity? For instance, if the deficiency payment for flour were as small as it was in 1937 or 1938 the total amount collected would not exceed£20,000. The second question I would put it this. Since these cereal breakfast foods are still in competition with other foods made of maize, barley, rice, oats and various mixtures, will it not adversely affect the sale of those particular commodities? It has been put to me that once the quota payment has been fixed it will not vary for 12 months, but in that period the price of maize and barley and rice may fluctuate from time to time and this would tend to put the producer of those cereal breakfast foods at a grave competitive disadvantage compared with the producers of the other breakfast foods.
The remainder of the Bill consists largely of machinery, and I do not see any necessity for wasting the time of the House upon it. I am not sure that I understand even one turn of the machine. I am not sure, indeed, that any hon. Members, including the two Ministers responsible for the Bill, know too much about its 40 pages. For once in a way, however, as it is Friday and the attendance in the House being what it is and the day being glorious, and everybody wanting fresh air, I do not feel disposed to continue this discussion. But I hope that the hon. Gentleman who is to reply will tell us much more about the duties of the proposed committee and will indicate just how the Government interpret the provision as to an examination of general economic conditions and the conditions of the agricultural industry. I hope the hon. Gentleman will explain in elementary language the exact meaning of Clauses 4 and 6 and how we are to get round this Einstein theory, with which the Government have presented us and enable us to understand more about the formula. Perhaps he will at the same time tell us whether the Government have considered the wisdom or otherwise of proceeding with Clauses 11 and 12, whether these proposals are considered to be financially sound, and whether it is worth their while to collect that sum of money. If we can get clear and explicit
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replies on those points, then we may give hon. and right hon. Gentlemen opposite a reprieve until the Committee stage.
1.9 p.m.
Mr. Lamberts: I think toe House, and the country, too, must realise that had it not been for the Wheat Act of 1932 wheat cultivation in this country must have gone right down. I am sure that the hon. Member for Don Valley (Mr. T. Williams), who speaks with so much knowledge of agriculture, a knowledge which he has obtained in his Parliamentary career, realises that it is impossible for any producer to grow wheat without some degree of certainty as to the price and last year, I think, wheat was double the price at which it is to-day. In wheat production especially, it is necessary to prepare for the future, and no man will cultivate wheat unless there is something like a stable price. To my mind, the Wheat Act was about the best agricultural Act passed by the Government because, instead" of dealing with marketing boards—for which I am sorry to see my hon. Friend still has a hankering—and quota restrictions, what it came down to was that the producer should be guaranteed a certain fixed price. Price is the essence of everything. You may wander into those devious routes of marketing boards and quota restrictions, but it all comes to a question of price. I am glad, therefore, that the Minister has taken the opportunity of amending the Wheat Act in such ways as have been shown to be necessary.
I should like to see a more permanent policy. I will not argue the agricultural question to-day, but what producers of wheat and cattle all suffer from at present is lack of confidence. There is absolutely no confidence when the bottom may be knocked out of the market. Wheat production does employ a large amount of labour, but it is my contention that you cannot in this country farm the land properly without a rotation of crops and cattle. In other countries the land has been ruined. In this country it has not been ruined, but it has been neglected simply and solely because there is not a reasonable price. I am sure the Labour party could not object, to a reasonable price for the producer, considering that the wage of the worker must depend on the price of the product. There is no getting away from the fact that unless the price of the product justifies it, wages

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cannot be paid. I rather agree with the hon. Gentleman that there should be some inquiry into the cost of production of wheat. I would like an authoritative statement as soon as may be on the cost of production of all agricultural products. That would be extremely valuable.
I congratulate the Minister very heartily on his lucid exposition of an extremely complicated Measure. Like the hon. Gentleman opposite, I do not understand it, but I would remind him that his party were responsible for passing the Marketing Act as a result of which I get forms from the Milk Marketing Board, the Pig Producers Board and other boards, forms which I do not understand and which could only be understood properly by a very clever barrister or other legal gentleman. I do not know whether my right hon. Friend would accept the suggestion which I am about to make. He is to have a committee of three to advise him. Would it not be wise to have three independent gentlemen who would examine the cost of wheat production and then award the producer a reasonable price. I am not asking that the inefficient farmer should be buttressed up, but I suggest that it would be preferable to have three gentlemen of independent status whose qualifications were beyond all doubt to find out a reasonable price. That would be of great advantage. Obviously the figure of 10s. a cwt. is just a "shot" at the price. It may be 9s. 9d. per cwt. or 10s. 3d. per cwt., and I suggest that instead of the Minister having power to fix the price, it would be better done by the committee of three.
I am a little apprehensive of what might happen supposing my hon. Friend who has just sat down became Minister of Agriculture. He would be faced with his own speeches, in which he has said that for 60,000 farmers you would penalise 40,000,000 consumers, and I would not like to leave it to him to fix the price of wheat. I am rather alarmed at what might happen. I observe the hon. Member for Doncaster (Mr. J. Morgan) sitting behind him. When he fought his by-election—I have the quotation from the "Farmers' Record" here—he brought up the same point, and I think it was that the local bread was taxed three farthings a loaf because of this subsidy. I do not think it was very generous of either of the hon. Members,
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because, after all is said and done, if there is one industry in the country that has a hidden subsidy, it is the coal industry, though I agree that the Labour party in 1930 evolved a much more efficient method of getting what is called a subsidy. I did not hear either of the hon. Members opposite say a word against that Act.
Mr. T. Williams: The right hon. Gentleman will agree that in this House, on a thousand different occasions, we on this side have demanded all the information possible regarding costs of production, distribution, and so forth, and the maximum we have ever called for from the Government is that when they are providing either a direct or an indirect subsidy, at least we ought to know something about the cost of production.
Mr. Lambert: My hon. Friend is becoming an accomplished dialectician. He says they have demanded to know the cost of production, but I have never heard the cost of production of coal being demanded, and my point is that were it not for the Coal Act, the price of coal to a large number of consumers would go down. Therefore, I am sorry that the hon. Gentleman has even cavilled at this Bill. The point that I was trying to put to my right hon. Friend was this: Would it not be wiser to have a committee, say, of three to ascertain the cost of production and to take the question away from the Minister this power of fixing prices? I make that suggestion very respectfully to the Minister, because I know that there will be a change of Government some time in this country. A good many farmers outside think that this Government or a Government as favourable to the agricultural industry will be permanent. It will not be, and, therefore, I wish to see something more permanent.
At any rate, I welcome this Bill. I would hope that my right hon. Friend could use some method whereby it is not placed upon the Minister to fix the price. I would much rather that he had an independent tribunal to give a fair price to the producer. That is all that we ask for. We only ask for a fair and reasonable price, because without a reasonable price and without reasonable confidence, wheat production cannot go on in this country. The Wheat Act of 1932 did give sufficient confidence to increase the production of wheat by 50 per cent., and I

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hope that we shall be able to deal with this Act so as to give confidence to the wheat producers in the future.
Mr. De la Bère: It would be interesting to know the Opposition Liberal point of view on this subject, but unfortunately, there are none of that party present.
1.20 p.m.
Mr. John Morgan: I feel, of course, very sympathetic towards, and perhaps not so inclined to take a rise out of, the right hon. and gallant Gentleman the Minister of Agriculture about the complexity of this Bill, because I realise that it has been under way for something like two or even three years, and that it must have given the people concerned a good deal of trouble in order to arrive at what could be regarded by them as a satisfactory piece of proposed legislation. But in his own statement he made a point which struck me as a reminder, in considering the whole of this legislation, that it is reaching a point where, as the right hon. Member for South Molton (Mr. Lambert) also indicated, it can run into dangerous waters. It is reaching a stage where, for what it does in the economy of farming and of the country as a whole, it is becoming a very serious item, an item which is possibly paralysing the treatment of other phases of agriculture which stand on a much better footing from the point of view of the national interest.
For instance, the Minister, in his opening statement, said that the Wheat Act had resulted in an increase of the wheat acreage by 50 per cent. In other words, you are paying£9,000,000 this year for the privilege of growing 50 per cent. more wheat, on, say, 1,000,000 acres; in other words, the subsidy is not directed at an acreage which is economic, but is directed at raising the production of wheat from 50 per cent. additionally; in reality, you must charge the subsidy per acre to those additional acres. You are paying, in fact, something like£9 an acre subsidy for those additional acres. The sum of£35,000,000, which is the cost for five, six, or seven years of raising the production of wheat by 50 per cent., would have bought those acres right out in less than the seven years during which you have been operating this scheme. I am not saying that I am opposed to assistance or guarantees to wheat or any other agri-
1640
cultural productߞI stand firmly by the idea of guaranteed pricesߞbut I am anxious to see that when Governments come or Governments go uneconomic sides of agricultural development do not eat into the good will or the hard cash available to them in a country such as ours.
I can imagine that the Minister, judging from the Debate yesterday about nutrition and the obvious case for the development of protective foods, in this country has a market waiting to his hand; and£9,000,000 spent in the protective foods for the school child in this country, all home-produced food, would do a great deal. It could be directed at certain specially distressed areas in this country in such a way as to give every unemployed man a square meal a day, using only home-produced food, except, of course, that where necessary such things as rice and supplementaries of that kind would have to be imported.
The right hon. Gentleman asked why we made such play, in my election for instance, with the fact that every loaf of bread is costing ¾d. in subsidy, and why did not we bring out the point that coal is also subsidised in an effective way. May I point out that milk is subsidised in the same effective way as coal. Milk is a product on all fours with coal, for we can produce 100 per cent. of our requirements. Wheat, however, is a commodity of which we produce for effective purposes only about 20 per cent. of our requirements. Therefore, to allow a product such as wheat to carry assistance of these dimensions is a dangerous thing for the farming industry as a whole.
I do not intend to go into the complexities of the Bill. I understand that it means that for certain reasons only the same amount of money is to be raised. The farming industry is not submitting a larger Bill at this moment, but the basis of collection is to be widened for reasons best known to the administration. The point is, however, that if there is no further assistance, the farming industry is to be charged with a heavy increase of new administration costs—the very thing which the right hon. Gentleman opposite is not disposed to accept from his side. No more money is being obtained under this Bill for the farming industry, but we are getting an enormous addition to the superstructure of the administration for the same money. We

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ought to regard that with a certain amount of suspicion, because that is the main effect of the Bill. I am glad that my hon. Friend made the point that Clause 1 provides for the discussion of the actual quota rate, either up or down as the circumstances at the time of the investigation indicate. It may be assumed in many farmers' minds that it is for the purpose of going up; it may also be assumed that it is for the purpose of revising it downwards. Therefore, that can be regarded as a satisfactory Clause.
What the farming industry should begin to ask is whether the operation of the Wheat Act is really working out at this stage to the real strengthening of farming in this country without jeopardising its good relations with the consumer. I received yesterday an answer to a question which indicated that the Act as it is operating is rather weakening the farmer in the control of his real individual marketing position. I asked for the price of wheat prior to the introduction of the Act, and I was told it was 6s. 3d. per cwt. I also asked for the price for the same date in January last year and was told that the English wheat price had risen to 8s. 5d. I then asked what the imported wheat price was, and was told that on the same date on which the English price was 6s. 3d. the Canadian wheat price was 7s. 9d., or only a difference of is. 6d. per cwt. By last January, however, the Canadian wheat price—the same wheat taken for purposes of comparison—was making 14s. 3d., yet the English farmer was able to secure in the market only 8s. 5d. The disparity had risen very markedly and indicated a weak selling position and that the fanner was not getting an economic price for his wheat. Somebody else was possibly getting it. Why did he not get his full economic price? Under the Act the idea is that the farmer is induced to fight for his higher price by the fact that he can secure a higher price than the average for the year for every farmer, by good selling on his own individual part, but I am satisfied that a large number of the 79,000 farmers are actually parting with their wheat at prices lower than they should do, even with prices ruling as they are, because of the fact that they are assured of the subsidy. And wheat deals are discussed with them on that basis, sometimes affected by the fact that they have other
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business arrangements also with those with whom they deal. The general tendency is to weaken the farmers position when selling his wheat.
The Wheat Commission has been a very well administered body, and I am glad the Minister took this opportunity to pay his testimony to it as a business organisaiton. I, too, share the view very strongly. And so I believe that in face of the growth and the concentration of the buying interests for wheat it would be better for the Wheat Commission actually to sell the wheat for the farmers and buy it straight out from them at the guaranteed price, without the necessity of 79,000 farmers trying to get variable bids for their wheat individually. The Wheat Commission would probably sell it far better from the country's point of view and from the point of view of the general charge upon the consumer which this fund creates, than the 79,000, farmers operating in the higgledy-piggledy way that they are doing at the present time. I suggest, therefore, that there is possibly a way out from the dilemma of a steadily weakening position and the growth of the milling interests. In these matters they are mainly two principal firms. The Cooperative Wholesale Society are not substantial buyers of home-grown wheat. The millers' own scheme is steadily closing down the inland mills and that is a very serious matter for the farmer and countryside. It is possible under that scheme for one of these combine concerns to open up a new port mill. They have to acquire quotas for their new port output, and they acquire them very often by buying up two or three inland mills, closing them down, and then using the inland mill quotas to start up another port mill. That fact is again placing difficulties in the way of the farmer selling his wheat satisfactorily in his local markets, and at the same time it is cutting him off from the source of supply of foodstuffs on a basis which he has found so satisfactory in the past.
I come to another aspect of the matter which I do not like. Over the last seven years the main effect of what has been done has been to strengthen the grip of the milling interests upon the wheat position and the flour business generally in the country, and the general effect of these present proposals will be to do pre-

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cisely the same thing as regards feeding stuffs. That is an aspect of things about which I am very seriously concerned. We now have the anomaly of farmers selling their wheat to merchants at£4 to£5 a ton and buying back the milling offals, that is the residue of the wheat they have sold, at£6 to£7 a ton. I am confident that the main effect of the proposals before us will be to strengthen those same milling interests over the whole field of feeding stuffs, because the very provisos put in to protect the farmer will cause him to throw in his hand and trust to compound meals because of the difficulty of getting guarantees. He will not be able to satisfy himself that the ingredients as required under this Bill to be in the mixture are actually there. He is told that in every mixture of wheat meal there must be at least 50 per cent. of some other substance. How is he to determine whether he has got 50 per cent. or that the ingredients are of the quality that he would like them to be? It would be extremely difficult for him to do so and he may be forced to buy some kind of compound feeding stuff to be safe or to save bother.
Looking at things from the farming point of view, I ask myself, Does this Bill bring more money to the industry? The answer is, No; but it does bring an increased amount of administrative machinery. Further, not only does it not bring more money into the industry but for the first time it actually spreads part of the charge upon sections of the farming industry—poultry and pig producers and the like. In other words, for the first time the industry is being asked to pay part of the cost of the subsidy, and in a form which I think the farmer will find that he does not like. What is the real reason for this Bill? What losses have the Commission suffered? Have they any idea of how much leakage has taken place or have they any estimate of the liabilities for leakage under the former Act and its provisions relating to this part of the wheat product? Then I ask myself whether, whatever be their estimate of the loss they have sustained under the former Act, the effect of the steps they are going to take will be worth the cost, taking into account the fact that some of the steps will involve losses in other directions. For instance, the poultry keeper will undoubtedly suffer a
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loss in the quality of some of the feeding stuffs he can buy at the present time. For example, if an imported feeding stuff is of a higher quality than that laid down, will the merchant importing it be required to take from it some of the flour content before he can sell it to the poultry farmer?
Not only is the poultry fanner or the pig farmer liable to get a poorer feeding stuff but the question arises, Does the consumer get any benefit out of this? The consumer gets nothing. Actually the consumer gets a lower grade flour introduced into the trade. He gets no actual improvement in the ingredients for bread. The whole transaction is going to be brought down to a very narrow defined basis, with a tendency for the general quality level of the product to be reduced. Of course bread, as such, may get a certain easement from this because of the spread-over to feeding-stuffs of the charges which can be levied under this Act and which are collected by the Commission, but the consumer of bread will find that these easements turn up again in the increased cost of home-produced eggs or bacon. Therefore, it becomes not merely a bread but also an eggs and bacon tax, to the extent that the poultry keeper and the pig farmer will find that their costs have been increased. Because of the involved way in which these transactions necessarily proceed, with the inspections and the administrative machinery involved, there will be an increase in the price of the feeding stuffs used by the poultry keeper, and that increased price will not fall upon his competitors overseas. They will still be able to buy freely without restrictions, as they have been able to do, and to that small or large extent, as the case may be, the poultry keeper will find that he is at a slight disadvantage against his competitor. over the water. I do not feel very happy about this adjustment.
I ask myself what objection there can be to egg producers and pig farmers getting as high a grade of feeding-stuffs as they can possibly secure. What if they are getting low grade flour or very fine middlings as a feeding stuff at a feeding-stuffs price? What objection can there be to this, even it is regarded as a loophole from the point of view of the Wheat Commission? I cannot see any objection. If this charge has to be paid by the con-

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sumers of products inside this country I would point out that bread is not in competition with any bread coming in from outside. Our bread is made in this country and consumed here. But eggs and bacon are open to competition from abroad, and to the extent that we increase the burdens upon the producers of them we are worsening their relations with their competitors overseas. Nobody is trying to sell bread from overseas, though admittedly trying to get flour into the country, and to that the millers object. The complaint is also made that by compelling the user of feeding-stuffs to have in his mixture at least 50 per cent. of some other feeding-stuff he may not be able to buy as well as he could if he were free, and I feel that point ought to be made in this Debate. Of course, I must refer to the position of the cereal breakfast food manufacturers. The same argument applies to his case. The point was raised by my right hon. Friend as to why they should be placed in a worse position, seeing that they are subject to competition from people outside using materials that cannot be grown in this country, such as maize and rice, and so on.
On every hoarding to-day we see the advertisement "Bread is energy". That advertisement was not on the hoardings before 1932. The significance of it is that when "bread is energy"—well it is somebody's bread. Somebody is able to put up that notice from one end of the country to the other in their special interests, and I have a feeling that bread is to-day fighting for its market. We are consuming about 60 lbs. per head per annum less of cereal products to-day. To that extent we consume less cereal foodstuff per annum per head than we did in 1914, although it is true that there is a larger population. So the pressure is on for the sale of bread. Among the alleged competitors with bread are the breakfast foods like Wheatex, Vita-wheat and the Shredded Wheat type of food. I do not believe that is really the case, but even if it were true I suggest that these products represent a more refined type of feeding and ought not to be discouraged. If the people who are interested in the sale of bread want to put impediments in the way of the cereal breakfast foods, this side of the subject ought to be a matter for suspicion and close concern by those who are promoting the Bill.
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Looking through the Bill I feel that there should have been a more straightforward way of dealing with these loopholes than bringing the industry increasingly under control, not for the sake of new money but simply in order to get control. On this side of the House we are supposed to be bureaucrats in our intentions, but we believe that any such proposals should be resisted, especially taking into account the fact that millers are getting fewer, and that statutory authority of this kind tends to be used by business interests further to entrench themselves in the control of our food requirements and the supply of raw materials for the making of food. I think the moment has come when we must ask ourselves the plain question whether the Wheat Commission might not pay a straight price to the farmer for his wheat and handle that wheat themselves. They would know how the wheat was treated and what was done with it, and no loopholes would arise. Farmers would be relieved of this problem, the point made by my right hon. Friend would be met and it would be known what wheat went back to the farm for use on the farm. A rebate could be secured to the public exchequer for it. It is not desirable to encourage a man entering into arrangements with merchants, on a basis of his long understanding with them, to allow him to have the wheat go back to him— if not the same wheat very much the same quantity of it—in order that the quota payments might be secured by him as well. The suggestion I have made would provide a safeguard in that case. I do not believe that this Measure will check further developments in the attempt to evade the payment of this quota subsidy, and I believe that some other form of administrative control will be asked for before long.
We have reached the stage when we are paying an enormous price for this subsidy on wheat. We pay something like£9 an acre subsidy, or more than nine times the average rental value of the land, on the acreage brought into cultivation for wheat under this scheme. It is asking too much even if we should regard the subsidy has spread over the whole 1,800,000 arces grown, and call it a subsidy of£4 10s. per acre. If a proposal were brought into this House to subsidise good grass land to the tune of£4 10s. per acre, it would not be looked

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at for more than five minutes, yet there is more case for the development of good grass land in this country than for the extension of our wheat acreage, in view of the world wheat supplies that are likely to be available. One has to bear in mind that under new legislation proposed by the Government the same man may be drawing the£4 10s. an acre wheat subsidy and the barley and oats subsidies at the same time. I raise these points not because I want to see farming hampered but because I believe that the growth of this type of assistance will impede the proper use of our land and will prevent us giving proper treatment where it could be much more valuable utilized by the community, as a whole. In the end, such treatment would give the farmers a much better source of income than can be secured under this legislation. That is the reason why I am drawing attention to the tendency at the present moment to over-subsidise wheat.
Though I think that we shall not obstruct the passage of this Measure in any way at this stage, I feel that this is the moment to consider where this legislation is leading us and what is its real effect; I suggest that it is leading us to some extent away from a proper approach to the general problems of agriculture. If the Minister, who I think hopes to introduce some comprehensive legislation, can place wheat production in line with economic production in other directions, I think this side of the House would be willing partners in giving to the home production of wheat the necessary guarantees, up to the reasonably economic point. On the other hand, to try to force wheat production into a general scheme of agricultural development with a£4 10s. subsidy per acre is likely in the end, and before long, to lead the industry into collision with the consuming interests, which cannot indefinitely stand 1¼d. on the loaf plus other impositions that may arise from other similar legislation.
1.53 p.m.
Mr. Turton: With the hon. Member for Don Valley (Mr. T. Williams) I congratulate the Minister on the clarity with which he dealt with this very complex Bill, and I would like to congratulate the hon. Member also upon the equal clarity with which he addressed the House on this subject. I cannot congratulate
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the hon. Member for Doncaster (Mr. J. Morgan), because I found great difficulty in following some of the arguments with which he has engaged the House. For a long time he was saying that we were spending£9,000,000 in subsidy, and then he said that it was£9 on every acre for the producer, when there were 1,750,000 acres of wheat grown in this country. That argument is extremely difficult to understand. He went on to speak of£9, and then he got down to£4 10s. per acre. He left us in a complete miasma and muddle of arithmetical calculations.
Mr. J. Morgan: I am sure that the hon. Member does not want to confuse the position. I drew attention to what the Minister said in his opening speech, that the effect of this Measure was to increase the wheat acreage by 50 per cent., and said that if there was to be a 50 per cent. benefit from the Measure the subsidy would cost£9 10s. on that acreage.
Mr. Turton: I think that the House will still fail to follow the arithmetical calculation of the right hon. Gentleman.
The hon. Member and the hon. Member for Don Valley have reverted to their complaint that the measures for helping wheat are bread taxes, but I would remind the House of the salient fact that the price of bread on 1st November, 1929, was 9d. per quartern loaf and that the price on 1st November, 1938, was also 9d. per quartern loaf. The country will judge the success of this Measure by the fact that the price of bread has remained exactly the same during that time. I am glad that the hon. Member for Don Valley admitted that by the help of this Measure the acreage under wheat, and agricultural wages, have tended to rise. These are effects of the Wheat Act which the House and the country cannot escape. But, as the Minister has said, the time has come to review the working of the Wheat Act. I fully support the provision for the revision of price. I think it is only fair to the country, to the agricultural industry, and to the workers in the agricultural industry, that there should be a revision of price now and every three years. I hope that those powers will be worked so as to enable the price to be increased in order that higher wages may be paid to those engaged in the agricultural industry; for quite clearly the review of the Committee under Clause 1 must

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allude to the wages paid or to be paid in the agricultural industry.
I do not know what answer Sherlock Holmes is going to give to "my dear Watson" on that point, but I remember that the wording of the conditions now laid down in Clause I is exactly the same as the wording in the Act of 1932, and it seems to me to be so wide as to cover all the points that hon. Members desire to cover. I do not think it is possible to work out exactly the cost of production of wheat on any one land with any degree of accuracy. On some farms there has to be a bare fallow before the wheat is planted, whereas on others the bare fallow is not necessary, and naturally the costs in these two widely different cases must differ tremendously, because in the one case there is no return for a year from the land that is fallowed. The hon. Member for Doncaster will recollect, when he talks about£4 10s. or£9 per acre, that it this, for many farmers, is not merely a question of one year; it means that they have to provide the labour for two years on the piece of land in question.
1 would like to give the House one cost of production figure that was given by a leading farmer in Yorkshire at an agricultural conference which, I very much regret, the hon. Member for Don Valley could not attend because he met with an accident before the conference began. Mr. Harold Thompson, a member of the Potato Marketing Board, gave the cost of production of wheat in Yorkshire, having arrived at the figure after very careful consideration, at£10 per acre. Taking the average yield at four quarters per acre, the farmer, to make his cost of production and no more, would require a price of 50s. per quarter. I should like to see how that figure compares with other parts of the country, but I think that round about 50s. per quarter is what it costs the farmer at the present rate of wages, which, I am glad to say, averages 2s. a week more than it did two years ago. The country and the House must face the fact that agricultural wages in this country have to be raised, and one of the best ways in, which that can be done is by the use of the Wheat Act.
In 1930 and 1931, before the Act was passed, the whole of agriculture was clamouring for some such Measure, and I believe that even the Socialist Government, who were then in power, were not
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hostile to the idea. I do not believe that the Wheat Act is a party Measure. The Socialists in the House always try to engender party hostility when they are dealing with agriculture, but I always try to do what I can to lower the temperature of the debates on agriculture. I do not think the party opposite are so hostile to the Wheat Act as might be gathered from some of the arguments of the hon. Member for Doncaster. That Act was passed to deal with the problem of the Eastern Counties of England, where men were leaving the land in large numbers, when farms could not be cultivated, and when smaller and smaller acreages of wheat were being planted. I think the time has come when we should review it as is proposed in Clause 1 of the Bill. I should like to say a word about Clause 4 (Amended classification of products of wheat). Like the hon. Member for Don Valley, I find some difficulty in understanding all these curious phrases, notwithstanding the fact that in my earlier days I had a certain amount of legal training. I hope that the Minister of Pensions will explain to us one fact. Sub-section (3) of Clause 4 says:
"Milled wheaten substances shall be divided for the purposes of the Wheat Acts into the two following categories, namely—

(a) 'flour '…..

(b)' wheat offals "….."

That seems to be a fairly clear description, but Clause 7 says that:
"No quota payments shall be made in respect of any of the following milled wheaten substances produced in the United Kingdom, that is to say, wheat provender mixture, flaked or rolled wheat mixture, cut wheat, and multure meal"
I quite see that Clause 7 deals with milled wheaten substances produced in the United Kingdom, while Clause 4 deals with all imported wheaten substances, but I should have thought it was not beyond the wit of the Parliamentary draftsman to make one definition of milled wheaten substances which would apply both to imported milled wheaten substances and to those produced in the United Kingdom. If the object of having two definitions is to hamper the use of imported milled wheaten substances for feeding stuffs, I do not think that that is a thing which the agricultural industry or this House would desire. We none of us want to see the price of feeding stuffs rise, either for agriculture generally or, in particular, for those farmers who do not grow wheat,

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who are mostly poultry farmers and are big purchasers of feeding stuffs.
I am very grateful to the Minister for doing what he has done to secure that a great deal of the milled wheaten substances used for the feeding of livestock shall be exempt, but I hope he will see whether he cannot go a little further, especially having regard to the needs of the poultry industry. A great many milled wheaten substances are on offer which contain more than 50 per cent. of wheat. I have here two extracts from advertisements which appeared in poultry papers during the last month. One of them advertises a mixture containing 60 per cent. of weatings and home milled bran, and the other states that the mash which gives the richest yield of winter eggs is one which contains 65 per cent. of weatings and home milled bran. I do not propose to inquire into the question of ash content and all the other definitions in the Bill, but apparently, from the wording of these advertisements, the mixtures referred to will be liable to quota payments. Here is another advertisement in which Mr. Eggbert, on a visit to Mr. Shufflpodger's farm, extols the merits of 40 per cent. of weatings and home milled bran in the mash, but that was after the text of the Wheat Bill appeared. We should like a clearer definition on this question of feeding stuffs, and we should also like a little more sympathetic treatment for the users of wheaten substances containing a greater proportion of wheat than 50 per cent., especially in view of the very difficult position of the poultry industry at the present time.
I would like to make one or two comments on the working of the Wheat Act during the last seven years. I think the Wheat Act has resulted in a greater degree of benefit to the farmers of rich soils than to the farmers of poor soils. That is the difficulty that attaches to it, by reason of the fact that the payment is per cwt. of wheat produced and not per acre of wheat grown. If the intention is to encourage the use of labour on the land, it is unfortunate that the greater benefit should go to the districts where they get very high yields of wheat, while the farmers in districts of light soil do not get the same benefit from the Act. Another matter that I have found it difficult to understand was touched on by the hon.
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Member for Doncaster. While it is true that a great deal of the wheat grown in this country does not go into the manufacture of bread, but is used for the manufacture of feeding-stuffs, yet directly the farmer uses wheat grown on his own farm as feeding-stuffs he is disqualified from receiving deficiency payment. As a result, you get the farmer laboriously taking his wheat to the merchant and laboriously bringing back an equal quantity of somebody else's wheat from the merchant. Our aim is to encourage farmers to grow wheat of millable quality as long as it is grown on the land and the labour is employed, I do not see why the fanner should not receive his deficiency payment for that wheat. This procedure must mean added transport costs and costs of feeding stuffs to those farmers. We ought to bear that in mind.
The other point, about wheat used not for feeding stuffs but for seed, causes real hardship in the agricultural industry. If a farmer uses his own wheat for re sowing, he immediately loses all deficiency payments. On the other hand, if he exchanges it with his neighbour he receives a deficiency payment. This means that a farmer who is growing a new sample of seed, for which he probably has to pay a great deal in the first instance, cannot, without sacrificing deficiency payment, resow that seed. It may well be that he will find it impossible, except at great expense, to buy similar seed or exchange similar seed in the surrounding district. That is especially true at the present time, when we have a great many Danish and Swedish wheats that we are trying out with great effect in this country. This penalises the initiative of the farmer who introduces those seeds to a district. I should not have thought it would have been very difficult to allow farmers to receive a deficiency payment on all the wheat they used for sowing again on the land. It is not hard to stop fraud in this case. One knows, from 4th June returns, how many acres a farmer is going to have under wheat, and one knows the weight of seed per acre.
With regard to breakfast foods, in which the hon. Member for Doncaster is interested, I do not want to say much but, I cannot understand why, when we are proposing a quota on wheat used for the consumption of man, we should benefit what is really the richer portion of the community, who use the wheat in

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the form of cereal breakfast foods. There may be some good reasons which do not appear from the hon. Gentleman's speech, but if bread is going to pay the quota payment, foods like Vitawheat, that you find on all hotel tables, should pay their quota also. But I do not like the definition in the Bill of a "cereal breakfast food" Why should it be a "breakfast" food? I imagine I can eat Vitawheat for any other meal that I take in the day, and I hope that the Minister, with that love of English for which he is famous, will perhaps call it a "cereal food," rather than a "cereal breakfast food" I believe he is introducing a new definition. The Lord Chief Justice will, in due time, have to consider what is a "breakfast food" and I hope that, before the Minister risks the rather pithy comments of the Lord Chief Justice, he will consider leaving out the word "breakfast." The Minister and the hon. Member for Don Valley paid deserved tribute to the work of the Wheat Commission. I would like to pay a tribute to the corn merchants who, at no charge at all, have carried out the provisions of the Act. They have done that because they believed that the Act was of tremendous importance to that agricultural industry in which they have so large a stake. We all agree that this Act has worked well, is working well, and will continue to work well. At no extravagant cost to consumers, it has meant a large increase in the acreage devoted to wheat.
We must not forget that, thanks to this Wheat Act, we shall have a greater reserve of wheat grown in this country to rely on in any emergency. Let me, on that, say one word about the price of wheat being exceptionally low, and the quotation given by the hon. Member for Doncaster. He said that that is due to faulty marketing. I think that is true. If something could be done to stop farmers from throwing their wheat on the market directly they have harvested it in the autumn, it would be to the advantage of this country. We want not only to store our wheat in those new elevators, but to have a store in the stackyard, so that we can rely on it in any emergency. At the present time the farmers are pressed for money, and directly they get their wheat harvest in they thresh it and cash it, in the hope of getting an advance soon. If the Minister can do anything to encourage farmers to keep their wheat on
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their farms unthreshed, I believe it would be an advantage and would make the Bill even better. I should like to give my whole-hearted support to the Bill and to thank the Minister for the clarity which distinguished his address to the House.
2.16 p.m.
Mr. Barnes: The first part of the speech of the hon. Member for Thirsk and Malton (Mr. Turton) I thought was rather revealing. He welcomed Clause I of the Bill as a means of increasing the standard price. I observed that he never even referred to the powers under this Clause to reduce the price. The hon. Member has no illusions about that. He looks upon this as a device, and no doubt considers the other side, the escalator Clause, as a mere method of placating those who may offer a little opposition to the Bill. Later on the hon. Member referred to the figure of 50s. a quarter that is required as the standard price. That brings out the point that the wheat growers of this country have always wanted that figure and are determined to get it by hook or by crook. That leads to a point that I should like to make about the Minister's concluding remarks in moving the Second Reading of the Bill. He stated that all sections of the industry, and the consumers, supported the Bill.
Sir R. Dorman-Smith: Those represented on the Wheat Commission.
Mr. Barnes: I would not like that to go forward as a general statement from the Minister without correction. I should not like anyone in this House to assume that the reference to consumers means that the Co-operative movement would support Clause 1 of the Bill. We were opposed to the orginal Bill, and we were opposed to this taxation principle, that a consumer of a commodity has to pay a charge which should rightly fall upon the State. It would be a very grave mistake for anyone to assume that the Cooperative movement has in any way changed its attitude to the principle of levying this subsidy and tax on the consumer. Before I leave that subject I wish to make the position plain to the House. We can quite readily conceive that from time to time, in the interests of the nation, it may be desirable to increase production of some particular crop in this country. From time to time a case could be made out for the

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desirability of securing a proper balance of our production of commodities, and for some particular crop to receive a little assistance. But that should be a decision of the State in the interests of the whole community. There is no justification whatever for holding that the sum which is necessary to discharge that liability due to national policy should be imposed upon the consumer of that article.
As my hon. Friend the Member for Don Valley (Mr. T. Williams) has said, since the inception of this Act in 1931, down to the estimated figure for July of this year, the consumers will have paid to the growers of wheat in this country approximately£35,000,000. The hon. Member for Thirsk and Malton tried to make play with a little point about the well-to-do consuming breakfast foods, but he ignored entirely the fact that bread is the staple diet of working-class families. Therefore, if in the first instance you impose the full payment of this subsidy on the cost of the loaf, this£35,000,000 is not paid by a class of people much better off than the consumers of bread, and you are levelling a tax on an essential commodity not only of the breakfast table, but of the dinner table and the tea table as well. It follows that the larger the family and the greater the number of children in a family, the greater the burden of this tax on the family. So from all points of view it would be far better, if in the interests of the State we desire to increase the production of wheat, that the cost should fall upon the Treasury in the same way as the cost of producing a ship or an aeroplane falls on the Treasury.
I put forward that contention because if such a policy were followed the criticisms of my hon. Friend the Member for Don Valley, my hon. Friend the Member for Doncaster (Mr. J. Morgan) and of the hon. Member for Thirsk and Malton, would immediately disappear. In the payment of these subsidies the Treasury would never tolerate the evasions that are taking place under the Act. The Treasury would never permit a farmer at one instant to draw this payment out of the Treasury fund and then to get the same wheat or an equivalent quantity back at a reduced price for the purpose of feeding his livestock. That would never be
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permitted. It occurs only because the minister in this case, and the Government, for the purpose of exploiting the consumer must of necessity throw the whole machinery of administration back within the trade itself, and within the trade itself it is impossible for the Wheat Commission to create the machinery that would prevent' farmers "getting round" payments and doing things of that description.
My next point is that the Minister did not attempt in any way to make out a case for the establishment of this Committee. He admitted that in 1935 the previous Committee had been established, but as a matter of fact it reported that no case had been made out for any change in the procedure. Now the Minister comes forward with Clause 1, which is really out of place in the whole scheme and structure of the Bill. The Bill represents an "experience" Bill, arising from the administration of the 1932 Act, and the difference between Clause 1 and the rest of the Bill is most marked. Clause 1 is simply stuck in for the purpose of giving a further subsidy to the farmers. The Minister did not attempt to make out any case for the insertion of Clause 1 in an experience Bill arising out of the first Act. I gather from the statement of the Minister that the standard price committee proposed in Clause 1 is to have a different personnel from that of the Reference Committee to be created under Clause 11. Am I correct in that assumption?
Sir R. Dorman-Smith Sir R. Dorman-Smith indicated assent.
Mr. Barnes: I observe that there are very legitimate safeguards with regard to the Reference Committee contained in the First Schedule to the Bill. The committee that is to adjudicate on differences arising out of the industry and between parties in the industry has to satisfy the Minister that its members have no interest in any agricultural or commercial undertaking. The details are set out very clearly in the Schedule, but I cannot understand why these same conditions are not to apply to the standard price committee to be set up under Clause 1. The Minister of Agriculture is to appoint this committee, and one naturally assumes, and I do not quarrel with the fact, that the main purpose, by bias, interest, desire or sympathy of the Minister of Agriculture will be to favour agricultural interests.

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It is for that purpose that the Department exists, and one does not quarrel with that sympathy which arises from a specialised interest in any particular department of trade, but here the Minister is to appoint three persons who are to determine whether the standard price shall be increased or not, and which the consumer will have to pay.
It would have been far better if the Board of Trade had been the Department to appoint three persons of that description. Whichever Department of State appoints them, surely as these members will have to examine the general economic conditions of the country as well as agricultural requirements, there ought to be some kind of directions in the Bill to the Minister similar to what has been done when we have been appointing livestock or sugar commissioners, or similar to what the Minister himself has introduced with regard to his own reference committee. Unless one can get information on the point, I cannot see why there should be no conditions or instructions to the Minister in dealing with this committee. Although we cannot understand all the general experience changes of the Act, at least they represent a very valuable guide to Parliament in dealing with legislation affecting agriculture in this country. My view has always been that it would have been much better if the whole approach to British agriculture, instead of being on marketing board lines, which emphasises the powers of the monopoly position of the owner-producer, had been along the lines of getting the general good will and collaboration of all the interests in the trade.
I turn to the purpose of the subsidy itself. I find that the general trend of the policy of the National Government to assist British agriculture in the form of doles or subsidies from public funds is not really accomplishing the purpose of establishing a virile, efficient, stabilised and economic system in this country. In this commodity alone consumers have been called upon to pay£35,000,000 in seven years, and if you take the general effect of these subsidies on agriculture in this country from 1932 to 1937, the total acreage under crops and grass in Britain has declined by 5,000,000 acres. That is proof that this method is not increasing the total acreage of land cultivated in this country. The hon. Member for
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Thirsk and Malton, when he was pleading for this 50s. a quarter brought in the usual comment that it would enable the payment of higher wages to the agricultural workers. It is too late to deceive anyone by that argument. A very small amount of these enormous subsidies has found its way into the wages and pay-packets of the agricultural workers. I am not going to say—because I never believe in the exaggeration of a case— that they have not played a part in avoiding a further depression of the wage rates of the agricultural workers, and I do not deny that they have very likely been a stabilising factor and that, on the whole, there has been a slight increase, but it is idle to base a case of this description on the kind of illusory plea that it is going to enable the farmer to pay a better wage. If that were the chief concern of hon. Members opposite, there would be no difficulty, as it could be done at far less cost than is the case to-day, and we could give a better wage to the agricultural worker. In that same period, from 1932–1937, there has been a decline in the number of workers employed in agriculture to the extent of 100,000, and-that is a factor which appears to be left out of account when we are dealing with schemes and policies of this kind.
Mr. Turton: Surely there is all the more reason to increase the subsidy to enable higher wages to be paid so as to stop that drift from the land,
Mr. Barnes: No, that is where we part company. No one has been able to stop the National Government from carrying out their own policies. They have had full opportunity to carry every Measure they might wish in this House on behalf of British agriculture. I am pointing out that during the lifetime of this Government, with a full opportunity to apply its agricultural policy, it has followed the line of doles from public funds by the straight jacketing of industry, by its marketing board policy, by its levies and quotas and machinery of that kind, and it has not arrested the decline in the cultivation of the soil, and there are a 100,000 fewer workers on the land. I speak as one who recognises not only the economic value but the physical and social and political value of labour on the land, because, unless you have a very large agricultural population, you are losing the reservoirs for replenishing the virility of your town population.

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I do not want anyone to assume that I approach this from the standpoint of not valuing the necessity of a higher proportion of the population being born and bred and built up on the soil of Britain, but I challenge the method that has been employed. The National Government have followed this policy for seven years, and it has not produced the results at which they have asserted they were aiming.
My final point is that the consumer, through a complicated piece of trade machinery, is called upon to pay this subsidy. If it was imposed by the Finance Bill, we should have an opportunity every year to discuss it as we do the sugar and tea and other duties. The fact that each recommendation of the standard price- committee must come before Parliament for a confirmatory order is a small concession to those who oppose the whole principle of this method of raising the subsidy. I trust that, if that machinery is put into operation, we shall not have our usual.experience of it coming on at a time when Parliament cannot discuss it properly.
2.39 p.m
Sir Ernest Shepperson: Like most other Members, I am craving sympathy for the headache that has been produced in us by this Bill. We are looking for the aspirin which will be applied to the headache later. I congratulate the Minister on the Bill and I wholeheartedly welcome its principles. I was engaged in considerable activities in connection with the Act of 1932 before it was brought before the House and I considered it then, and consider it now, as one of the most useful and successful Measures that have ever been applied in the whole history of agricultural legislation. It has been an unqualified success. I do not agree that the cultivation of wheat is destroying the fertility of our land. The Act gave a figure of 10s. a cwt., or 45s. a quarter, for all wheat as the standard price. It provided that in three years time a committee should meet and advise the Minister whether that figure should be revised. The figure of 45s. a quarter was fixed on the then cost of production. In 1935 the committee did not find that there was any material alteration in the conditions of the production of wheat and the figure remained the same, but between 1935 and to-day there has been a material altera-
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tion. Costs of production have gone up and we hope and believe that the committee, when it meets, will take that into consideration and that the wheat grower may get a price nearer the 50s. suggested by my hon. Friend the Member for Thirsk and Malton (Mr. Turton).
In agricultural Measures brought before this House there is both a debtor and a creditor side. It is to us a creditor side that we should be given the hope of an increased figure. The right hon. Gentleman the Member for South Molton (Mr. Lambert) and the hon. Member for Don Valley (Mr. T. Williams) have asked the Minister whether he could not devise some scheme of finding out what are the costs of wheat growing. He knows the difficulty perfectly well, that costs vary from one part of the country to another and according to whether the wheat is grown without the application of manuring ingredients, thus robbing the soil of fertility, and so being grown more cheaply than wheat produced by a farmer maintaining the fertility of the land and carrying on the process of agriculture as he ought to do. We desire a figure to meet the altered cost of production. That is the creditol side, but there is a possible debtor side and that is Clause 7.
The position, as I understand it, is that a farmer can buy wheat and send it to a miller and the miller can grind it and send it back to the farmer. That wheat is not subject to a quota payment. A farmer can also buy wheat in the open market and grind that wheat himself, without it being subject to a quota payment. To-day a farmer can buy wheat and grind it himself without being subject to a quota payment, but if he buys wheat and sends it to a miller who grinds it for him, then the wheat is subject to a quota payment. If that is the case, I suggest that it rather penalises a small farmer. The large farmer will have his own mill and can buy wheat in the open market and grind it himself. The small farmer is unable to afford the capital cost of a mill, and if he buys wheat in the open market and sends it to a miller, the wheat will have to pay a quota payment. If my reading of the position is correct I suggest that it penalises the small farmer, and I hope the Minister of Agriculture will consider the point. I want to say, as a wheat grower and speaking on behalf of wheat growers, that I wholeheartedly

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welcome the Bill which is to amend the excellent Act of 1932.
2.47 p.m.
Sir Robert Tasker: In introducing the Bill the Minister of Agriculture referred to one part of our anatomy as being affected by the Bill. When he was speaking I was rather conscious that another part might also be affected—the stomach. It seems to me that provisions like Subsection (4) of Clause 4 and Sub-section (4) of Clause 6 might be excellent reading for a lawyer, but they are quite unintelligible to the layman. I am sure that the Bill will bring great joy to lawyers, although not perhaps equal satisfaction to His Majesty's Judges. I want to refer particularly to Clause 5 where a reference is made to
"manufacturers of food being food produced in the United Kingdom of classes commonly known as cereal breakfast foods"
I think it would be a great pity to single out these foods and suggest that what are called "cereal breakfast foods" with a wheat content of more than 10 per cent. should be liable to a quota. That will apply to many kinds of food. It is true that another Clause of the Bill empowers the Minister to give redress. Clause 12 enables any person to make
"an application to the Minister that quota payments should be rendered payable in respect of imported goods of any class which ordinarily have a wheaten content."
It seems to me that if such a provision is imposed in regard to one kind of food, it must be done for all kinds. Hon. Members will have received a document which impressed me somewhat in which the people engaged in this industry call attention to what is termed under the Bill "breakfast foods" They say:
"These foods are sold in competition with other foods made from maize, rice, barley and oats. A careful estimate of the volume of trade done over the whole class of cereal foods in this country shows that it is only one-fourteenth of the trade of the whole class of these products"
As I understand it, to raise the cost of the wheat used would have no effect on the price of cereals used by these competitive products. That seems to me to be rather unfair in one direction. Then there is a reference to the volume of these cereals, which is estimated at 250,000 cwts. per annum as against 82,250,000 cwts. of wheat. It, therefore, follows that the weight of these other cereals is less than one-third of one per cent. of the
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weight of the flour sold. Why is this particular kind of industry, therefore, singled out to be penalised by the Bill? I would draw attention to the desirability of encouraging the manufacture of those kinds of food which can be kept for an indefinite period. We are all talking about the precautions which we must take in case of a possible conflict, and surely one of the wisest precautions we can take is to encourage the manufacture of any foods which can be kept for an indefinite peroid. Who can say what are ordinary breakfast foods? Are we to say that, they are ham and eggs only? What is to prevent a man taking this kind of food at midday or in the evening? I think that is rather a weak point in the Bill. The term "cereal breakfast foods" is wholly inadequate, and, indeed, is rather baffling. If you are going to talk about breakfast foods why not bring in chops and steaks?
Mr. H. G. Williams: And beer.
Sir R. Tasker: I would remind the hon. Member that they sometimes drink water in Croydon. It seems to me that if one kind of food is brought in because it contains a certain wheat content, all kinds should be included. Then as to the quota. I suggest that the quota cannot be passed on to the public. Whatever the price might be to-day, if the food is kept for five or six months the price is static so far as the manufacturer is concerned. It is taxed many months before and it is not known what the quota will be at the time of delivery. The manufacturer would, therefore, have to stand the loss or enjoy the advantage of a profit. If it is a loss then the revenue would suffer. It seems to me that it is hardly worth while to include in the Bill something which would be so detrimental in its consequences. I ask the Minister whether there will not be an opportunity to reconsider the question of cereal breakfast foods, and whether the Government will not do something favourable to encourage the manufacture of these foods rather than to discourage it.
2.56 p.m.
Mr. De Chair: I want to put a question to the Minister, and I put it now because I do not want him to say, if we have a Bill dealing with oats and barley later in the Session, that I ought to have raised the question when the Wheat (Amendment) Bill was before the House, My question has reference to the pay-

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ment of assistance to those farmers who are registered as oats and barley growers under the 1937 Act in respect of their wheat crop for 1938. I understand that there is some technical difficulty in this matter. When the Minister recently announced that shortly there would be introduced a Measure of a long-term nature dealing with oats and barley, and that a retrospective payment would be made to those wheat growers who were also barley growers, enabling them to get assistance for barley, he spoke about the Measure enabling the three cereals to benefit concurrently. I understand that there is some technical difficulty in enabling those who are already registered as barley growers to get assistance in respect of their wheat crop. It will be manifestly unfair if those who are now benefiting under the Wheat Act are to be able to get barley payments retrospectively for 1938, and the same thing does not work the other way round; for in that case, there will be people registered as barley growers who will get only one-half of the assistance which those fortunate enough to be previously registered as wheat growers will get. Therefore, I want to ask whether it will be possible, at a later stage of the Bill, to include some provision which will make it possible for those who are now registered as barley growers to get some payment at least equivalent to that which they would have got under the Wheat Act had they been registered also as wheat growers in 1938.
2.59 p.m.
Mr. Henry Haslam: I want to express my congratulations to the Minister on the introduction of this Measure. It is a most fortunate omen for the right hon. Gentleman's tenure of the Ministry of Agriculture that he should have made a start with such an excellent Bill. Unlike my hon. Friend the Member for Leominster (Sir E. Shepperson), I found that the lucidity with which the Minister explained some of the complicated details of the Bill tended to relieve one of a headache. I heartily support Clause 1 of the Bill. It has been argued that a decline of some 5,000,000 acres in the acreage of cultivated land means that the Act has been a failure, and that the Measure ought to be repealed rather than prolonged. But surely the fact is that there has been an increase of 50 per cent. in the acreage under wheat. My feeling
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is that it would have been highly desirable if we had had an equally successful Measure with regard to other commodities. Therefore, far from desiring that the Measure should be repealed, we ought to desire to extend it as far as possible. I speak for a part of the country which has greatly benefited from the Act; perhaps I ought even to say that that part of the country has been saved from desolation by the Act, for thousands of farmers in Lincolnshire and in the East of England have been saved by the Act from giving up their farms and going into the bankruptcy court. That Act has been an outstanding and a highly successful example of agricultural legislation, and I very strongly support its continuation.
3.1 p.m.
Mr. H. G. Williams: I want to say at the outset that I rejoice in Clause 1, which if I remember rightly, a number of us tried to persuade the Minister to adopt in 1932. I have risen mainly to deal with the point that was raised by my hon. Friend the Member for Holborn (Sir R. Tasker). I also have received a considerable number of representations concerning the effect of Clause 5 of the Bill, and the inclusion within the quota scheme of wheat used for breakfast foods. I understand that the manufacturers of these breakfast foods do not buy flour, but wheat, and treat it themselves. So far they have been exempted from the quota payment. I can understand the Minister and also the agricultural community desiring to do this, because the wider the quota payments are spread, the less will be the quota payment in respect of each class brought within the scheme. On the other hand, the cereal breakfast foods made from wheat compete with cereal breakfast foods made from maize and rice. If the wheat used for these breakfast foods comes under the quota payments, the cost of production is bound to be raised somewhat, and as the other competing cerial breakfast foods are mainly imported, this is a serious matter. It will mean imposing a penalty on a manufacturing industry in this country which is competing with a manufacturing industry carried on abroad, which will not suffer that penalty. If my right hon. Friend is in a position to arrange with the Import Duties Advisory Committee that they shall accord to the manufacturers of these wheaten cereal breakfast foods the

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rate of protection applied to competing products made from maize and rice, I do not think those manufacturing the wheaten cereal breakfast foods in this country will mind very much. If, however, the competition of these other products continued, and the makers of the wheaten cereal breakfast foods had to pay the amount involved, which, would probably be about 10 per cent. at the moment, it would be a substantial disadvantage to them. The provision would not necessarily come into operation at once, and there is a tribunal to which an appeal could be made, but nevertheless, I ask my right hon. Friend to look into the matter once again, having regard to the effect on industrial employment in this country which might result from the operation of Clause 5.
3.4 p.m.
Mr. A. V. Alexander: I do not wish to delay the House for long, because the criticisms that have been made by my hon. Friend the Member for Don Valley (Mr. T. Williams) and my hon. Friend the Member for South East Ham (Mr. Barnes) have covered a great many of the points to which I would have wished to direct attention; but there are one or two general remarks that I would like to make about the Bill. First of all, I think it is agreed that the method adopted in the Bill for giving aid to a section of agriculture by means of a levy upon the product, has worked smoothly. Although I am opposed to a levy of any kind collected from the consumer for this purpose, I am bound to say that it is less objectionable than other methods adopted by the National Government in the last few years for giving assistance to various sections of the agricultural industry, such, for example, as the actual restriction of supplies by artificial methods, import quotas and the like. The effect on the consumer of a subsidy of this kind worked by a levy, is probably less detrimental, on the whole, than the effect of the creation of a shortage of supply by quota operations for the purpose of raising prices and making profit.
Let us not be unaware, however, of the real effect on the consumer of this scheme. I was rather astonished at the speech of the hon. Member for Thirsk and Malton (Mr. Turton). He suggests that the public need not worry too much about this talk of higher prices because if we took the
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price of bread in 1929 as being 9d., and had regard to the fact that it was 9d. a few months ago, there was nothing to grumble at. But that overlooks all that has happened in the meantime, and if the hon. Member will examine the course of prices between those two periods he may find something to militate against his argument. I find it necessary to keep a check upon some of these prices and I notice that the price of bread in 1931 when the Labour Government were in office was 7d.; in 1932, it was only 7¼|d.; in 1933, it was 7½d., and the price has been going up steadily since the imposition of these quota payments collected on the flour. In 1934, it was 7¾ d.; in 1935, it was 8¼d.; in 1936, 8¾d.; and in 1937, with the rise in world prices, it went up with a bump to 9½d. It is still 8½d. and likely to rise again. Of course, the object is to see that when world prices are high there is no relief to the consumer and when world prices are low there is still no relief to the consumer. He is asked to pay round about the same price in order to provide a subsidy for the farmer. That is the real object of the scheme and we should be misleading the public if we did not make it plain. If the public say, "We would prefer to do it" if they accept it, then it is on their own heads, and that is another matter.
Having said so much, I wish to express this conviction. While it may be preferable to deal with aid to the industry by way of subsidy rather than by restriction of supplies, I feel that that subsidy ought to be raised from general Exchequer funds and not by a tax upon the consumer in general, the incidence of which is unfair to the working class section of the community. There is no reason why it should not be possible to raise it in that way. Looking at the future of this commodity, it seems to me that the prospect for the consumer of bread is bleak indeed. You have the experience quoted by my hon. Friend the Member for Don Valley this morning. You are paying on this quota scheme ½d. per quartern loaf, and more. I think the subsidy per sack of flour at the moment is 6s. 6d., so that really the effect upon the consumer of bread is ½d. per loaf, plus some small fraction. You have already had your attention called to the fact that the revision of the price scale for baking allowed by

1667
the Food Council has, since the introduction of the original Wheat Act, changed the price upward by ½d. a loaf. There had been a revision in the Food Council's basic scale of 4s. a sack, but last year we discussed a Bill on night baking, which was so emasculated that it finally produced little more than a trade board for setting up a minimum wage in the baking operatives industry. The baking trade board have been sitting and are proposing a revision of wages in their trade, and already the trade are saying, "We ought, now that the Food Council have decided automatically to give us 4s. increase in the price scale, to be able to say that if wages go up, we can add that automatically to the price of bread," so that if that should mean from ⅛d. to ¼d. per loaf, very soon you will have the consumer of bread asked to pay, for purely artificial reasons, either for subsidy, or for variation of price by the Food Council, or for a new imposition under the operations of the baking trade board, 1½d. a loaf and maybe 1¾ d. That is a very substantial increase on so important a food to the working class.
I think, therefore, that we must look at Clause 1, when we come to the Committee stage, in the light of this bleak prospect to consumers of bread, for let there be no mistake in the mind of the House, after the discussion that we have had to-day, with all the back-bench Members supporting the Government from the agricultural areas—and, of course, with the right hon. and gallant Gentleman the Minister, the most modern exponent of syndicalism in the country, put in his position as the president of the trade union of the farmers' industry—let there be no doubt that the object of Clause 1 is to take power to raise the standard price. I think that is the position, and we shall be interested to hear the Government's reply. At any rate, we have heard the advocacy all the way round to-day from agricultural constituencies of a price which is not less than 50s. a quarter.
I hope we shall have an answer from the Minister to the very salient question which was put by my hon. Friend the Member for Don Valley. We have had nothing to justify this—nothing at all. I have here the report of the Standard Price Committee which was issued at the
1668
beginning of 1936 or at the end of 1935. They had had nearly three years' experience of the working of the Act, and there was nothing in the report of that committee which would justify a variation. There is no indication, either that there has been since then any tendency to restrict the wheat production acreage with the standard price at 45s. It is simply this continuous pressure on the Government from the farming industry, as the chief supplicants for doles in this country, for new doles the whole time. Here is the Minister of Pensions, in one capacity sitting as the watchdog of the Government and keeping down as low as possible, not the doles but the pensions of those who fought in the War, and in the other aspect of his service to the Government all the time handing out largess to a particular section of the community who can generally be relied upon to be firm supporters of a Conservative or a Conservative Coalition Government.
That is what has led to the situation in which we are paying out in one form or another to the agricultural industry something like£40,000,000 a year. [Interruption,] I shall be glad when we go into Committee to argue that in detail, and I do not think I shall have much difficulty in proving the figures. We shall have great difficulty in finding any other industry which is being treated in that way, or any evidence that the expenditure of that subsidy to agriculture is really finding its way into the pockets of the agricultural worker. [Interruption.] The hon. Member for South Croydon (Mr. H. G. Williams) has not been in the Debate very long and he is very quick to intervene as soon as he comes in. We have heard a good many speeches on this matter which he has not heard, and perhaps he will keep quiet for a minute. When the standard price committee reported in 1935 they included a reference to the position in regard to the wages. During the first three years working of the subsidy there was hardly any substantial variation in the wages of agricultural workers.
It is true that in the last year and nine months there has been some measure of improvement in the standard rate of wages to agricultural workers, including those in the wheat producing areas, but we never hear when that case is put the other fact, that the output per agri-

1669
cultural worker in that period increased by 30per cent. I wonder whether we can see anything like 30 per cent. increase in the wages of agricultural workers, more especially in the production of this particular commodity where machinery is being increasingly used. The real fact is, of course, and I see it for myself as I go about the countryside, that this subsidy is not keeping in general production the arable land of the country. It is increasing wheat production, but as long as farmers can get sufficient money for their needs from this source they are content to let other portions of their land go out of cultivation, and the worker is not getting anything like the improvement in his standards that he ought to be able to get out of it. These are the points to which we shall have to give criticism when we come to the Committee stage of the Bill. We think they are proper subjects for criticism.
In regard to Clause 1, if we are to have a committee which is to make inquiries, they ought to be able to cover in their inquiries those points to which my hon. Friend directed attention in his opening speech. I should be interested to hear from the Minister of Pensions what terms of reference to the standard price committee he has in mind. We have heard in the last few minutes two short speeches from Members opposite about the proposal to bring at a little later date within the scope of the levy what is termed in the Bill breakfast food with a certain wheat content. There has been a great deal of argument in the trade about this for a long time, and I am bound to say that I am much firmer in my view in favour of this proposal than perhaps some of my hon. Friends. We in the Co-operative Movement have an experience of the sale of different classes of food which is, perhaps, unrivalled in the country. We do know that breakfast foods of this character are more widely purchased by people with the larger incomes than by the working class. We also know that the extent to which this wheat subsidy plan falls with hardship upon the consumer of bread will depend to a large extent upon the area of the operations of the subsidy.
The fact that the quantity of wheat contained in many of these breakfast foods is comparatively small is not really an effective argument. The point is that if you can get from£60,000 to£70,000
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more from bringing them within the charge you very often, in a period of wide fluctuations in prices, prevent an actual increase in the subsidy over a given period, and give protection thereby to the consumer of bread, which is eaten more by the working classes. If it is right, in the interests of the wheat grower, to tax wheat foods in order to subsidise the grower, there is no logical argument why wheat-content commodities produced in this country or brought into the country, should not, in company with the plain whole grain which comes into charge for the subsidy directly it is milled, all be included. In the long run I believe that will mean a slight, but a very slight, improvement in the position of the working class consumer of bread in relation to the subsidy. I hope, therefore, that from that point of view the Minister will not be shaken in the determination to keep that part of the scheme within the Bill.
Mr. H. G. Williams: Would the right hon. Gentleman say what is the quantity of that class of breakfast food produced by the particular organisation with which he is connected?
Mr. Alexander: I should not be able to say without notice, but certainly we have very great experience of its sale.
Mr. Williams: But the production of it?
Mr. Alexander: We have very great experience of its sale and we do know a great deal about it.
Mr. Williams: But do they produce any?
Mr. Alexander: I daresay they produce a great number of products from it, but not specially the certain class of food that perhaps the hon. Member is interested in.
Sir R. Tasker: I am not interested in it.
Mr. Alexander: I have not referred to the hon. Member as having a financial interest. I said, "Interested in," meaning he could put up a good case for it. Surely he has no objection to that. I feel that the general criticism of the scheme is that the subsidy method is not keeping the land of the country in what I call good heart and production. It is increasing the actual acreage under wheat but is not keeping in cultivation the general arable land of the country, and the

1671
Minister, for whatever reason this has been put forward, with all the support of a great trade union of fanners in this country, will not be providing a cure for the position of agriculture until he can- get down to a policy for agriculture as a whole. This scrappy method—taking commodity by commodity—this method of subsidy by commodities—is simply keeping the farmers well content—as long as they can go on putting their hands into the till as soon as they can put up a superficial case in regard to any particular commodity; but such methods will never reconstruct the productive processes in agriculture in this country so as to keep the land in good heart, keep the workers on the land with good pay, and not exploit the working class consumer.
3.25 p.m.
The Minister of Pensions (Mr. Ramsbotham): The hon. Member for Don Valley (Mr. T. Williams) in his opening remarks very kindly invited me to be the Sherlock Holmes of this Bill. I would remind him that that great detective appropriately enough lived in Baker Street. I will do my best to unravel the mystery contained in the Bill, but I am sure that at the end of the detective story we shall find that nobody has been murdered—neither the consumer, miller, nor farmer.
The first point which the hon. Gentleman made and to which the right hon. Gentleman referred, was the proposal in Clause 1 to constitute a committee. The hon. Member for Don Valley gave me the impression that this was some sort of new departure, something which had never been set up before. In order to make this matter clear, in case other hon. Members have received the same impression, I would point out that in Section 2 (3) of the Wheat Act, 1932, a committee was set up. I will read the Section, which says:
"In this Act the expression' standard price' means the price of ten shillings per hundredweight:
"Provided that, not later than the first day of March, nineteen hundred and thirty-five, the Minister shall appoint a Committee of three persons, who, after considering general economic conditions, and the conditions affecting the agricultural industry, shall report to the Minister as to the desirability of making any alteration in the standard price…"
It is precisely the same committee, with precisely the same reference, as that which
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was appointed in 1935. That committee, appointed that year under the chairmanship of the late Sir John Beale, arrived at the unanimous and very definite conclusion—I am quoting the committee's own words—that it was undesirable at that time to make any alteration in the standard price in 1935. They recommended that provision should be made for the standard price to be reviewed again after a period of years. That recommendation has been accepted by the Government and we are making provision in Clause 1 for another committee, according to that recommendation of the committee set up under the Wheat Act, 1932, and appointed in 1935. There is nothing more novel, sensational or serious in that proposal than I have outlined.
If the hon. Member for Don Valley is disturbed about the terms of reference, I would remind him of the terms of reference of the last committee. It is apparent from the report of the Standard Price Committee that those terms were very wide. From the table of contents hon. Members will see that those terms dealt with general economic conditions, world wheat situation, domestic agricultural conditions, agricultural wages, mechanisation and the limitation of anticipated supply and so forth, a very wide range of subjects. The hon. Member is unnecessarily suspicious of this committee, in view of the fact that it is set up following the recommendation of the other Committee, and under the terms of reference, which I have outlined, of that Committee of 1935.
Mr. T. Williams: Is any subsequent committee set up for this purpose to be called upon by the Minister, in the light of those terms of reference relating to general economic conditions, to inquire into production?
Mr. Ramsbotham: No doubt my right hon. Friend will obtain a report from the committee as he did from the 1935 committee. The hon. Member next drew my attention to two Clauses in the Bill which are admittedly rather complex, and which, on the face of them, seem to require a good deal of understanding. Sub-section (4) of Clause 4, which deals with "wheaten content," is admittedly complicated. Really what it lays down is that wheat may contain 4 per cent. of other matter and still be regarded as commercial wheat. That is the gist of what

1673
the sub-section says in legal form. It says that, up to the limit of 4 per cent. of extraneous matter—a few grains of other cereals, for example—the wheat and extraneous matter shall be regarded as the "wheaten content" The use of the figure "four ninety-sixths" is merely another way of saying that. [Interruption] The detective must not be interfered with while he is on the trail, or the prisoner may escape.
Mr. Alexander: I thought that Sherlock Holmes always answered Dr. Watson's questions.
Mr. Ramsbotham: It depends on the question. The difficulty with regard to Sub-section (4) of Clause 6 is not as regards the two divisions, namely, flour on the one hand and wheat offals on the other; the whole difficulty is as regards the intermediate stage, where the article is a wheat offal, but yet has a certain commercial flour content. Before the Paul judgment it was settled, I think, more or less by agreement, which class of flour was which, but since the Paul judgment a difficulty has arisen because the courts appear to have laid down that the user was to be the test of quota liability rather than the manner or the method of production, and for that reason a great deal of attention has been given by the interests concerned to framing some sort of objective test which will put the matter beyond doubt. Hitherto, it has not been an easy problem, as I daresay the right hon. Gentleman opposite will agree, for the millers or manufacturers of these products to know for certain whether they were manufacturing a product which attracted quota liability or whether they were not.
The test laid down in this Bill is that of ash content. Under the terms of the Bill, broadly speaking, commercial flour includes any that has an ash content up to 2.7 per cent. From 2.7 per cent. to zero would be commercial flour; above 2.7 per cent. would be wheat offals; but between 2.0 per cent. and 2.7 per cent. there is, as it were, a no-man's land. In other words, wheat offals with an ash content of between 2.0 per cent. and 2.7 per cent. may have value as a commercial flour, and the Bill provides that in that case, instead of paying the full quota, it will pay on a sliding scale. The scale is set out in Clause 6. I may give the hon. Member for Don Valley an
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example of how it works. Take the example of a flour having an ash content of 2.54 per cent. In that case the appropriate rate would be one-quarter of the standard rate; that is, is. 7½d.
There is another basis on which this flour can be tested for liability. It may have an ash content (standard basis) exceeding 2.7 per cent., but it may be discovered that there is a separable part which contains flour with an ash content of 2 per cent. or under, and the wheaten content of which weighs more than three-tenths of the weight of the wheaten content of the flour. In that case, it is provided by the Bill that the liability shall be calculated by reference to each cwt. of the excess of the weight of the wheaten content of the separable part over three-tenths of the weight of the wheaten content of the flour. For example, a wholly wheaten flour having an ash content of 2.97 per cent. might be found to have a separable part with an ash content of less than 2 per cent. weighing 38.33 per cent. of the weight of the flour. The excess of the weight of the separable part over 30 per cent. of the weight of the flour is 8.33 per cent. and 8.33 per cent. of the full rate of quota payment at the present time would be 6½d.
Now I come to the question which was raised of wheat for poultry feeding. It was rather a point of principle. The hon. Member did not agree with the proposal that wheat which attracted deficiency payment should be available for the feeding of poultry, and so forth. That is a point which arose under the 1932 Act, and I have no doubt he argued it forcibly on that occasion; but he ignores the main point. It is not so much the user that is behind this Act. The real point is that we wanted to get, and we want to get, the wheat industry in this country maintained, and indeed stimulated, and the method employed by the Wheat Act is, on the whole, the fairest by which that object could be attained. For that reason, it is immaterial what the destination of the wheat may be, because what we want to do is to get the wheat grown.
Mr. Barnes: If a farmer has been growing wheat for feeding livestock, he is not justified in getting a subsidy on that.
Mr. Ramsbotham: The hon. Member has misunderstood the Bill and I do not blame him. Clause 3, on the question of

1675
artificial sales, deals with the point which he has in mind, and it is a very important point.
The question has often been raised of unfairness or hardship to the consumer. We have heard of this on various occasions. I think it ought to be generally realised that the effect of this quota payment over the last seven years has worked out at something less than a farthing on the 2-lb. loaf on the average, and that is not a very severe imposition. As the right hon. Gentleman opposite knows, when the quota payment is greatest the price of bread is lowest, and vice versa. To-day, for example, the quota payment is higher than it has ever been, and yet bread is about 1½d. a quartern loaf cheaper than it was in the spring of 1937. When there are the highest wheat prices there are no quota payments at all. So it is not very sound to relate the quota payments directly to the incidence of the impost upon the consumer.
Mr. Alexander: The consumer pays all the time. If you give a guaranteed price to the fanner when the world market price is very low, why do you not keep the guaranteed price to the farmer when the market price is very high? Then the consumer would be getting something out of it in return, but at present he gets nothing.
Mr. Ramsbotham: That has been said on many occasions. But surely the consumer does get something. He is getting in his own country a very valuable source of wheat supply, and that is worth something. From the defence aspect, therefore, the consumer benefits. I am not arguing that there is no impost on the consumer. Of course there is. On the other hand I think that the consumer is recompensed on the whole. Indeed I quote as authority for that statement the report of the Wheat Commission on the administration of the Act. I might add that the Wheat Commission contains two very distinguished members of the Co-operative movement. This is what they say:
"As a set-off to the charge levied under the Wheat Act upon all flour delivered in the United Kingdom whether for human consumption or for the purposes of other trades and industries, the encouragement given by the Act to wheat growing has resulted in some gain to all consumers of wheat grain and wheaten products."
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They go on to say:
"The additional supplies of home-grown wheat produced under the encouragement given by the Act have been an important competitive factor in the United Kingdom wheat market; and they must have tended to keep the average price of all wheat (imported and home-grown) at a somewhat lower level than would be the case if those additional supplies had not been produced."
It cannot, therefore, be fairly said that the consumer has not got considerable benefit out of the Act to compensate for an admitted increase as a result of the quota. Of course from the farming point of view there is no doubt about it. The Wheat Commission say:
"As more than 40 per cent. of the wheat grain and wheaten products consumed in the United Kingdom is absorbed in the form of feeding stuffs for animals and poultry, it is a fair observation that the livestock and poultry industries have, with the lower cost of wheat grain and wheaten feeding stuffs, benefited—indirectly but appreciably—from legislation that was intended primarily for the direct benefit of wheat growers."
From the point of view of the wheat growers, the livestock dealers, and indeed the consumers, every section directly or indirectly benefits from the Act.
A point was raised in regard to the incidence of this Act on poultry. I believe it arises from a misconception. I would call attention to Clause 7, Sub-section (2). It is assumed by poultry interests that this Clause means that they are to be prevented from making a suitable mash for their chickens.
My hon. Friend the Member for Thirsk and Malton (Mr. Turton) referred to certain advertisements in which some percentage like 60 was recommended of weatings and so much bran for the mash, and it is assumed that now that percentage will be in excess of the percentage laid down here and will attract quota liability. It will only attract quota liability if the ash content of the mixture is under 2.7 per cent. I think that my hon. Friend will bear me out when I say that I have never heard of weatings with an ash content of that nature. As far as the point which he put is concerned, I do not think that there is any need for anxiety, because the percentage of the meal which he has mentioned would not attract quota because it is almost certain to have an ash content of over 2½ 7 per cent. On the other hand, there is nothing to prevent the mash consisting of a higher quality of substance with an ash content up to 2½7 per cent.

1677
provided it does not exceed 50 per cent., or one-half of the weight of the substance. There, again, I think it is most unusual for any poultry mash to have as much as 50 per cent. of the mash consisting of substances with a very low ash content such as wheat meal might have.
Mr. Turton: Will my hon. Friend explain the relation of Clause 7 to Clause 4?
Mr. Ramsbotham: I think my hon. Friend has put the phrase rather vaguely with regard to the relation of Clause 7 to Clause 4.
Mr. Turton: In sub-section 3, of Clause 4, "wheaten content" is subdivided into two substances, and again in sub-section (1) of Clause 7 it is subdivided into four different substances.
Mr. Ramsbotham: What Clause 7 endeavours to do is to show how much of these substances, with ash content not exceeding 2.7 per cent. could be mixed in a mash without attracting further liability. I do not think that there is any thing mysterious about that. On the question of breakfast foods, on the one hand, we have at the present moment the bakers making bread attracting quota liability, and other people producing food with a wheat content who escape liability. In their turn, these people say, "We compete with people who do not use wheat in the composition of their foods. They use maize or some other substance" My right hon. Friend went into all the interests in this matter, and the result is the proposals contained in the Bill. It is for that reason—that both sides of the case must be fully examined—that a nine months interval during which these foods will continue to have complete exemption is allowed. A reference committee is set up under Clause 23 so that the various kinds of food in question will not be made liable to quota without very careful consideration. As regards the actual terms of reference, it is true some of these foods may be eaten at tea or dinner or other occasions, but "breakfast food" is a trade term and there is nothing to prevent anyone using a breakfast cup for his tea or any other meal that he chooses. People are now accustomed to breakfast foods, no matter at what hour of the day or night. I have dealt with the main points that have been raised and I hope,
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though I may not have solved every clue, that it will be possible to solve them when we reach Committee stage and to deal with all the points that the right hon. Gentleman has referred to. We shall certainly then have ample opportunity of going more fully into these highly technical matters, and I hope the House will now give the Bill a Second Reading.
Question, "That the Bill be now read a Second time," put, and agreed to.
Bill read a Second time, and committed to a Standing Committtee.

ARMY AND AIR FORCE (ANNUAL) BILL.
Read a Second time.
Bill committed to a Committee of the whole House for Monday next [Mr. Grimston.]

WHEAT (AMENDMENT) [MONEY].
Considered in Committee under Standing Order No. 69.
[Sir Dennis Herbert in the Chair.]
Motion made, and Question proposed,
" That, for the purposes of any Act of the present Session to amend the Wheat Act, 1932, it is expedient—

(a)To authorise the payment out of moneys provided by Parliament of the expenses of any committee appointed under the said Act of the present Session to report as to the desirability of making any alteration in the price which is for the time being specified as the standard price of home grown millable wheat for the purposes of the Wheat Act, 1932, and of any committee so appointed to advise the Minister of Agriculture and Fisheries and the Secretaries of State concerned with agriculture in Scotland and Northern Ireland, respectively, as to matters relating to their functions under the Wheat Act, 1932, and the said Act of the present Session.

(b)To authorise the payment into the Exchequer of any sums payable under the said Act of the present Session by the Wheat Commission to a Government Department" [King's Recommendation signified.]—[Mr. Grimston.]

3.54 p.m.
Mr. T. Williams: If this Resolution is allowed to go through, shall we be prevented from submitting Amendments to the terms of reference under Clause I in Committee?
The Chairman: That is a question which I cannot answer now.
Mr. Williams: Perhaps the Minister of Agriculture can help us?
The Chairman: I think it is a question which must be decided by whoever is in the Chair in the Standing Committee.
Mr. Alexander: It is rather an important matter. We have complained about the generality of the terms of reference in the Bill. The Money Resolution deals entirely with the authorisation of payments at the expense of the Committee to be set up, and we do not want to be handicapped afterwards by the terms which will prevent us moving an extension of the terms of reference to make sure that the matters which have
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been raised this afternoon can be the subject of inquiry.
Sir R. Dorman-Smith: I am informed that it will make no difference.
Question put, and agreed to.
Resolution to be reported upon Monday next.
The remaining Orders were read, and postponed.

ADJOURNMENT.
Resolved, "That this House do now adjourn"— [Mr. Grimston.]
Adjourned accordingly at Four Minutes before Four o'Clock until Monday next, 27th March.

  AGRICULTURE (LAND FERTILITY SCHEME).
  AGRICULTURE (LAND FERTILITY SCHEME).
  HERRING INDUSTRY.
  HERRING INDUSTRY.
  UNEMPLOYMENT (DISALLOWED BENEFIT).
  UNEMPLOYMENT (DISALLOWED BENEFIT).
  DRUNKENNESS (CONVICTIONS, RENFREWSHIRE).
  DRUNKENNESS (CONVICTIONS, RENFREWSHIRE).
  REFUGEES (ARRIVALS AND DEPARTURES).
  REFUGEES (ARRIVALS AND DEPARTURES).
Preamble
The House met at a quarter past four of the clock, the EARL OF LUCAN on the Woolsack.
CZECHO-SLOVAKIA (RESTRICTIONS ON BANKING ACCOUNTS, ETC.) BILL.
Brought from the Commons; read 1a; and to be printed.
CHINA (CURRENCY STABILISATION) BILL.
Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act, 1911; read 1a; and to be printed.

CONSOLIDATED FUND (No. 1) BILL.
Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act, 1911; and read 1a.
House adjourned at eighteen minutes past four o'clock.