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Clause 26—(Exercise Of Powers Of Board Of Trade)

Volume 436: debated on Friday 18 April 1947

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I beg to move, in page 15, line 34, after by," to insert or under."

This is a drafting Amendment. Without these words the Clause would refer only to action taken under the Act itself, and not to action taken by regulations under the Act.

Amendment agreed to.

Motion made, and Question proposed, "That the Bill be now read the Third time."

2.43 p.m.

Since the Bill was read a Second time, two things which bear upon the subject have happened. First of all, the Government have, presumably, deployed all the arguments they could in favour of the Bill. They have got to the bottom of the official brief case, and the contents of that case have turned out to be extremely poor. That is the first thing. The next thing is that a White Paper on the economic situation for 1947 has been produced which, whatever its demerits on remedies may be, has at least shown the very great gravity of the foreign exchange position from which this country is now suffering. It also shows very clearly, and in the plainest language, that the stringency of foreign exchange is going to get much greater as the year progresses.

Without wishing to recapitulate in full the arguments which have been deployed during the Second Reading, I think it is necessary to examine again the main reasons which have impelled the Government to put forward this Measure, and to beg them, even at this eleventh hour, to withdraw it. As far as I can make out—it is not a very easy task to be sure—the burden of the Government's argument for introducing this Bill, according to the Paymaster-General in his speech during the Committee stage, was that the Bill had been brought forward in the interest of having a stable price for cotton in the United Kingdom. Of course, that argument is inherently false. It is, we must admit, quite possible to keep the price of a commodity like cotton stable in one particular country, but it has to be done by the taxpayer absorbing all the fluctuations which are inherent in an agricultural commodity of this kind. I would not deny that it is conceivable, under conditions of inflation, that the taxpayer may make a monetary profit. That is possible, but so heavily is the scale weighted against the taxpayer, when there is stability of the currency, that he is bound to make a very heavy loss over a period of years.

The terms of trade, so to speak, under which the Commission have to carry on its business, are so heavily weighted against the Government that heavy losses are bound to occur. If hon. Members opposite are returned in the next Parliament, they will very well remember what I am saying this afternoon. If I may use a medical analogy, what the Govern-are doing is to substitute a piece of wood for the mercury in the thermometer, to paint 98.4 on the wood, and then to put it into the patient's mouth and say, "You are all right, my boy. Your temperature is normal." To give another illustration, it is quite possible to keep the price of cotton stable, in the same way as it is quite possible not to see the burglar if one puts one's head under the bedclothes. But the fact of the matter is that the price of cotton is unstable because it is an inherently unstable commodity. It is subject to the rain, the wind, the sun, and the pest, and, so far, His Majesty's Government have not succeeded in extending their control over any of those four factors, and it will be a very long time before they attempt to do so.

The next thing is that there is a great Socialist predilection to imagine that the market price of any commodity, even if it be a stock or a share, is determined by some preternaturally clever, and generally dishonest, people in top hats, who have information which enables them to make intelligent guesses by which they exploit the rest of the community. Nothing is further from the truth. Most market prices are brought about by the exercise of very little intelligence. This is particularly true when one comes to look at a commodity like cotton. The market price is the synthesis of the hundreds and thousands of buyers and sellers every morning. Whereas the weaver who is tendering, or who has just had a successful tender, is buying futures, the grower may be selling them at the same time in order to stabilise his prices. For 20 years, I have been conducting this kind of business, not in cotton, but in metal, where the use made by my firm of the metal market was to avoid having to speculate in the raw material with which we were dealing—copper, lead and tin. That is the object.

But when the consumer buys more than the merchant is prepared to run on his books, then he must buy futures in order to hedge it, and vice versa. The whole object of a terminal Market of this kind is to form an easy clearing house, without the exercise of those preternatural powers which are essential if the Commission is to do its job properly. The object of the terminal exchange is to strike the market price every morning. In order that a single Commission, a small coterie of brains, should get the market price right, it is necessary for them to know the state of every order book in the cotton spinning, weaving and finishing industry each morning, and to know the number of sellers, and the quantities on the growing side as well. Such information cannot be collected by a single Commission. If it could, it would be out of date by the time they got it. There is only one way to get a commodity in international exchange in order, and that is by allowing a free market, and by allowing the plus or minus, the excess of buyers or sellers, and to strike that market price by this simple means. I will not go into the fact that the Government buyer is always a marked man. I said the other day that a Government buyer was looked at like the criminal looked at Inspector Lestrade. He had only to look at his boots, and he knew that he came from Scotland Yard. Nowadays, we look at the man to see whether he has a black despatch box with a crown on it, and we know that he is a Government buyer.

I admit that there has been speculation in the Liverpool cotton market. We all know that, but I do not think that the House would be anxious for me to develop the argument as to whether speculation is a good or bad thing, although, as a matter of fact, there is a great deal to be said for the stabilising influence of speculation on markets. Admitting, for the purpose of this argument, that speculation, as conducted in a staple commodity on a big scale, is a bad thing, which I do not—then the right way to handle the matter is to curb that speculation by demanding very large margins, or charge very high commissions for those outside the trade, rather than by destroying the medium which has been used so long and so successfully by all sections of the cotton growing and processing business. Because Lloyd's has sometimes been used for gambling transactions that is no reason to shut it up, because Lloyd's is absolutely necessary for the shipping business. The argument that because there has been speculation you should shut up the Liverpool Cotton Exchange is entirely misjudged. If speculation is felt to be harmful, the right thing to do is to impose high margins and high commissions for those outside the Liverpool Exchange, and not destroy the Exchange.

There is a feeling that to open the Liverpool Exchange would be detrimental to our foreign exchange position. I have heard that said, and I have seen it written, by Members opposite. That is fallacious. In the first place, the Government themselves have admitted that £1 million of foreign exchange is earned every year by the Liverpool Cotton Exchange. That estimate is a low one, and takes no account of the indirect profits accruing through banking, shipping and insurance, which used to flow into that market. But, always subject to exchange restrictions to prevent the export of capital, it cannot be wasteful to have a terminal market open, since what is retained as a result of its transactions shows the exact need for the manufacture of that quantity. So the argument that there is something which causes waste and overbuying in the existence of a terminal exchange is not sound. It is not possible to establish an international market in a commodity of this kind except in a country which, geographically situated like our own, is not a large grower, or a grower of cotton at all. Those who think that the Government have exported the international market from Liverpool to the United States are doing the Government a slight disservice. That market will not exist in America, because America is too large a grower and user to be used as an international market.

It is a thousand pities, when the object of everyone is to promote the free exchange of raw material, to expand international trade, when Members make speeches about international organisations, and call for co-operation between the nations, that the Government should destroy, by a stroke of the pen, one of the organisations which, for many years, has done a great job in the cotton industry, and has generally incurred the praises of all those who are engaged in it.

Lastly, on the general principle. I can think of no instance where a Government have established a monopoly in a commodity, not one pound of which they grow or control themselves. Surely that is extraordinary. It is one of the things which will cause the taxpayer a great loss. The Government have no cotton of their own in this island, with which to iron out the fluctuations in the market. They are simply speculators in other people's goods, with all the terms of trade against them.

So much for the inherent fallacies which have promoted this Bill. With regard to the loss of foreign exchange, the Paymaster- General said, earlier today, that, spread over five years, the cotton industry could not support £1 million, which we suggested might be the amount of compensation which those dispossessed of their business would attract. Yet, on the Government's own admission, the closing of the Liverpool Exchange will cost the country £1 million per annum in direct loss of foreign exchange alone. How are these two arguments compatible? The Paymaster-General has made no attempt to make his argument compatible. We all know that we are not only in an extremely tight situation for foreign exchange, but also that that stringency is particularly concentrated in the Western hemisphere countries, in the dollar in particular—14 per cent. of our exports and 42 per cent. of our imports coming from the Western hemisphere. How are we to believe that the Government really take this situation seriously, when they proceed to undo one of the means which gives us five to six million dollars per annum of direct exchange? How can we take these things seriously? Now we understand why there have been no remedies put forward in the economic White Paper. Here is an action by the Government which, for no sufficient reason at all, is being taken in the opposite direction. They are cancelling earning power, chiefly in dollars, to the tune of five million dollars per annum; they are cancelling, or greatly reducing, the indirect earnings which flowed into the country as a result of this free market—earnings in banking, shipping and insurance. No argument has been produced by the. Government, of any cogency, in support of this Bill, except to say that the Government believe that we shall be able, out of our intelligence, to buy cotton and distribute cotton more cheaply than a free market. The whole case rests on an assertion which has not been supported by detailed argument.

To sum up, we shall vote against this Bill, because the service to the spinner will be far less good than it has been. It is bound to operate at high cost to the tax-payer, because the terms of trade under which it will work will place a permanent handicap upon the operations of the Commission. Secondly, we shall oppose it because the loss of the foreign exchange is a frivolous reversal of what ought to be done today. Thirdly, the Board of Trade is supposed to be the guardian of our trading interests. On this occasion we see the gamekeeper turned poacher, and a piece of British trade for which they are the guardians is cast away, without any sufficient argument to support their action.

3.1 p.m.

Since this Bill was first introduced—and we were warned it was to be introduced—the whole economic background of the world, in commodities, has changed very considerably. I had hoped the Government's flexibility of mind might have changed with it. But what are the significant facts that have altered since then? First of all, this country has had a lesson in the effects of what nature can do. A severe winter, followed by floods, has already upset, inside these islands, the whole of our agriculture and nearly the whole of our economy. Is it not to be deduced from that, that the forces of nature on cotton growth throughout the world will be, as they always have been in the past, quite sufficient to bring about enormous fluctuations, based on the fact that there will be more cotton one year than the next? That will have a vast effect on cotton prices, and none of the machinery set forth by the Government in this Bill will alter that fact. I shall revert to that in a few moments, when I come to the Minister's main argument in Committee, that the chief advantage of this Bill was stabilisation.

What else has happened? There has been the advent into the cotton world of a new factor in Japan. Japan's new plans for cotton to be supplied by America, on terms not at all analogous to those at which we buy, will have an enormous effect on the cotton industry in this country. There is already a commission going from Australia to Japan to see what can be done in the way of trade between Australia and Japan. That again has to be taken into account from the point of view of the Lancashire cotton trade. Then we have, as pointed out by the President of the Board of Trade himself, the process of economic evolution which is taking place throughout the world, and countries which were hitherto only importers and not manufacturers are now starting to manufacture. That again must have its effect on the Lancashire cotton industry. I have seen signs of it increasing in India; it is beginning to happen in China, and I would not put it out of the question in Malaya in a very short space of time.

These facts lead one, inevitably, to the conclusion that cotton in Lancashire is on the danger list. It has not had time to recover from the effects of the war; it is hardly convalescent. In the Budget, it has been given one or two small and quite ineffective doses of febrifuge, but they are not enough to rescue it from its state of a very sick man. That is the burden of His Majesty's Government, which now introduces a Bill to be another and firmer blow to the Lancashire cotton industry. That is not only my opinion. I should like to quote the opinion of the newspaper "Time" which, as everybody knows, is a very well-informed journal on this matter. In their recent issue they say:
"A British Government Commission now does Britain's cotton buying. Britain's spinners now pay more for their cotton than spinners elsewhere with access to free markets."

I would point out to the hon. Member that that article is nonsense. On two days only the price of cotton 'to the spinners of this country has been above the American price to American spinners.

I do not agree at all that that makes it nonsense. That is taking it over far too short a space of time. The hon. Member will remember, that not so very long ago there was an adjustment of 4d. in cotton in one direction. That may easily take place in the other direction. I think the opinion is one based on considerable knowledge. I repeat that cotton is certainly on the danger list, and I can see nothing in this Bill which will help; in fact, it will do exactly the opposite. What were the Minister's arguments in support of this Bill the whole way through? They were, first of all, that it was wrong that gambling should take place in the Liverpool Cotton Exchange and elsewhere with a raw material which was so vital to this country. But the Minister himself, during the course of the Committee stage, quite openly said that the reason they wanted such very large sums of money available was that at some moment they might think cotton was cheap and they might want to buy a very large quantity. In other words, it is moral and all right for the Government to gamble with the people's money behind them, but it is wrong for there to be an open market used for "hedging" by anybody else. The Minister himself is going to "play the market". I think he should have been made "Playmaster-General" instead of Paymaster-General.

Let me deal with the other argument, which was that stabilisation was to be the great thing. The great benefit to be obtained by this Bill was stabilisation. But it is stabilisation inside a vacuum. It is useless to use the word "stabilisation" when, in fact, the price of the commodity with which one is dealing is fluctuating throughout the rest of the world. Sooner or later, if the Minister makes sufficient wrong guesses, the protective circles of money with which he has provided himself under this Bill will be exhausted. If his buying of cotton is bad over a sufficiently long period, then his stabilisation will cease to be a thing of reality at all, because he will have used up all the money from the funds which have been voted to produce stabilisation. A stabilisation fund is exactly parallel to the funds that are being used to stabilise the price of food and of other commodities—the £450 million which appear in this year's Budget. The £80 million or £90 million referred to in the Bill are to be used for exactly the same purpose.

The note of warning which the Chancellor sounded in respect of continuing to use public money for that purpose should be sounded in this connection as well. There is no doubt that this cry of stabilisation was completely and utterly unreal. The Government, having taken a certain line regarding rubber, opened the market, and permitted a reduction in the fees to be charged to outsiders for an article which is in exactly the same position, so far as the world is concerned—namely, that it is not in short supply—I cannot see why arguments which induced them to open the rubber market have not been used with regard to cotton. There is not one shred of difference, from the point of view of either the moral or the economic argument.

There is now a meeting on international trade at Geneva. Some of the representatives at that meeting must be having a considerable laugh up their sleeves when they see that the President of the Board of Trade, who represents this country at that meeting, to plead for international trade, and who is working very hard for it—I am convinced that he is sincere—also has his name at the head of a Bill which is about to suppress an international market which was definitely asked to be retained by every single member nation at Geneva at the moment. It would be extremely difficult to explain that away. How can we achieve this stability in any commodity nowadays? The Minister knows that with regard to tea, the country has been warned that there will probably be a rise in its cost. We cannot achieve stability in that commodity. We cannot achieve this stability in any commodity nowadays? The Minister knows that with regard to tea, the country has been warned that there will probably be a rise in its cost. We cannot achieve stability in that commodity. We cannot achieve stabilisation in commodities. For the Government of this country, which is not a producer but a consumer of cotton, to believe that stabilisation inside a vacuum will not be crushed into nothing by the force of nature in a few years' time is, to my mind, a sign of how their permanent wedding to theory has blunted their intelligence and their ability to look at the real facts of the case.

Many hon. Members on this side of the House feel very strongly indeed, and I would like to send out from these benches a message. Hon. Members opposite felt strongly about the Trade Disputes and Trade Unions Act, 1926. I can remember the right hon. Gentleman the' Secretary' of State for Foreign Affairs coming to this House and making an impassioned speech, saying how delighted he was, after 20 years, to be able to see that Act repealed. I should like to say with equal force and with equal strength and with equal sincerity that we on this side of the House send out a message to Liverpool that the day will soon dawn when we shall be able to do exactly the same thing, and reverse this pernicious Measure, and allow the opening again of one of the strongest and greatest instruments for international trade that there ever has been, and which was one of the things in this country envied by other nations. I sincerely hope the time is not far distant when we shall be able to put that promise into action.

3.11 p.m.

In the few moments during which I wish to speak I will address myself to one or two points which have been mentioned. With regard to the repercussions on international trade, one of the best and most heartening pieces of news—for me, at any rate—that I have heard since I came into this House was the news last week that 20,000 bales of Russian cotton had been landed in the docks in London as against 6,000 bales landed in the same period of time from America. That happened last week. My point about it is this, that, far from the closing of the Liverpool Cotton Exchange meaning a decline in international trade in cotton, I think that it will stimulate it.

At present, there is, without any doubt, a ganging up of the raw material people all over the world. That is correct. I saw this cotton when I was in America last year. That has been given to Japan by America to be used up on Japanese machines, and to be sold back to us here, if we are not careful, for dollars—stuff that is not fit to use in any mill that I know in England, and which, according to reports, cannot be used in any mill anywhere on the Continent either, it is so low in quality. The same thing applies to the Australian mission to Japan on wool.

I agree with the hon. Member for Bury (Mr. W. Fletcher) that we are in a very tight spot. Very often I am despondent about the small amount of knowledge that there is down here as to what is actually taking place behind the scenes in Lancashire and Yorkshire on the question of textiles. We are in a very dangerous position—very dangerous. If we persist in backing America and backing Japan to maintain 80 per cent. of Japan's exports in textiles, we are asking for suicide in Lancashire—and Yorkshire, too, ultimately. The time has come when something must be done about it.

With regard to making a working proposition of the Cotton Commission, I would say this at this stage, that to make it work we must retain the firms that have served the cotton industry so well in the past. I have said it before. I have said it at every stage, and I say it again. It seems to me an almost impossible job to drag an answer from the Board of Trade on the subject of what they intend to do with those firms, and what they are going to do with the men employed by the firms. The hon. Member for Kirkdale (Mr. Keenan) has made the same plea at every stage. We want an answer. We demand it. We want it. Why should not these people know where they stand? I am backed up by the fact that the retention of these firms will give satisfaction to the spinners in Lancashire. I would ask the Minister again to try to find out, if he cannot give some information on this subject, whether the Board of Trade is sympathetic to the real demand in Lancashire for this, which demand has been made by hon. Members on this side of the House and on the other side, too.

3.15 p.m.

I regard this as a very sorry day indeed for Lancashire and Cheshire. I have been a member of the Manchester Exchange for about 25 years. As some hon. Members know, it is attended regularly by everyone' interested in the cotton industry. Cotton merchants, spinners, weavers, and finishers and representatives of every other section of the industry go there on most days of the week and, in particular, on Tuesdays and Fridays. It is the focus point of this tremendous trade of the past and the diminishing trade of today. I have attended comparatively regularly for the last 25 years. I find that practically every section deplores what they consider this tragedy of the Cotton (Centralised Buying) Bill. I have listened to the Debates throughout the whole of the stages of this Bill hoping to find some really convincing reason why this would be an improvement to the trade. I have found no convincing reason from any Government speaker. I think the nearest reasoning which I have come across was that of the Chancellor of the Exchequer who quoted what he thought were two great authorities on this subject. He quoted Sir Frank Platt and spoke most eulogistically of him and his work, saying that he was head of the Lancashire Cotton Corporation. The Chancellor paid great attention to his views. I would point out that whilst Sir Frank Platt, whom I know well, has taken a prominent part in the work of the Lancashire Cotton Corporation he never has been the head of that organisation.

Some three years ago the Chairman was Mr. On, who takes a very antagonistic view of this Bill and who has shown it repeatedly, specially in a long letter which he wrote to "The Times" in April of last year. The present chairman of this large organisation, Sir John Grey, has not on any occasion given any, indication that he is in favour of centralised buying. In fact, it is rumoured that although Sir Frank Platt is known to be in favour of centralised buying the large number of spindles represented by the Lancashire Cotton Corporation did not vote either for or against when a vote was taken on this question some months ago. Indeed, that large organisation together with another large firm, decided to abstain from voting. In spite of that, the vast majority of spinners—practically 80 per cent.— voted against centralised buying.

We have seen Government bulk purchasing work admirably during wartime in regard to certain commodities. There are special reasons, which I have not time to discuss at length, which make that type of buying a success. We have yet to see centralised buying of this type prove successful in peacetime. We have already experienced the great difficulties of the centralised buying of food in the Argentine, and the similar form of purchase of rubber from Malaya and tea from India and Ceylon. We have seen some of the buying edifices in those parts of the world crumble and sometimes crack. Others are groaning under the strain. There is nothing to show that bulk buying is anything like the certain success which the Government suggest. I do not wish to take very much longer because many others wish to speak, but I would point out that there is ample evidence that the vast majority of people in all sections of the trade in Lancashire deplore the step which the Government are taking. It is a step which has been taken purely from political and not from commercial motives. No evidence has been produced to prove that it is commercially sound. It is being done in a spirit of ignorance and vindictiveness for which the country will, I believe, one day pay very dearly.

3.21 p.m.

I shall vote for the Third Reading of the Bill with the fullest possible support of the working-class electorate of my constituency, in which the Cotton Exchange building is housed, and also with the fullest support and backing of the whole of the working-class in the Liverpool area. I say that with perfect honesty and sincerity. I know that the position the workers in Liverpool have taken for many years with reference to the Liverpool Cotton Exchange has been one that has been stated by them, namely, that the Exchange was nothing but a parasitical organisation through which huge individual profits were made, at times when people in the lower sections of the industry had to remain out of work for long periods, if there was any difficulty in the cotton speculation that went on in the Exchange. I know that we are speaking here from two entirely different angles. Hon. Members on the opposite side speak entirely for those who have been able to make large fortunes—

I am speaking quite definitely for the people of the working-class in Liverpool, who have been out of work on many occasions. They have had to remain out of work for long periods without question of compensation of any sort for their unemployment. At the same time, the people for whom hon. Members opposite speak have gone short of absolutely nothing that they have required.

I rise to place on record a rather interesting incident which took place in the Liverpool area in the autumn of last year. I was rather disturbed when I received a report of something that had happened in the Liverpool area. I am certain that Clause 4, which is the penal Clause, is absolutely necessary, although I hope it may not have to be used against cotton brokers engaged in the Liverpool area. When the Bill was being discussed, all sorts of comments were made in the first instance about how it would affect Liverpool. The cotton brokers, who number 200 or 230 members, decided to have a meeting to discuss what was probably going to happen. A private meeting was rapidly called. It was discovered when the meeting was opened that, by some peculiar chance, a Press reporter had got in. After the reporter had been asked to leave—which he did—a rather serious discussion took place about the position in which the brokers would find themselves when the present Bill became an Act of Parliament.

The matter was fully discussed, and the chairman asked for questions from the brokers themselves, and quite a lot of questions were asked. When the questions were nearly finished, one gentleman got up and asked the chairman whether something could not be done about it. The chairman answered; "That is what we are trying to do. We are finding out what can be done about it. What exactly do you mean?" The speaker asked whether there was not any action they could take about it. The chairman asked: "I do not know what sort of action you are suggesting." The speaker went on; "Can we not take some revolutionary action?" The chairman got up then and said: "If it is revolutionary action you are talking about, I'm with you." The brokers also got up and cheered the view that there should be some revolutionary action. I know they did not know that I knew this, because they thought it was a private meeting. They do not yet realise that in Liverpool I can generally get to know anything that is going on there, private or otherwise. I think that this is the first time a record of this particular meeting has been made anywhere.

It is for that reason that I was pleased to see Clause 4 in the Bill, because it may be necessary, if this suggested revolutionary action takes place, for this Clause to be used to curb the activities of those who may think it possible to sabotage the position in relation to the Bill. If this Bill, and the centralised buying of cotton, is able to produce for the State the tremendous profits which have been produced for individuals out of the purchase of cotton, it would be a great asset to the State, and particularly to the Socialist State. I hope that when this Bill has been passed and put into operation those people in Liverpool, who have had very little out of cotton, from the point of view of the work which they have had to do in relation to it, will be certain of permanent employment and a better standard of existence.

3.26 p.m.

The hon. Lady is usually controversial, and I do not propose to follow her in the controversial remarks which she has made. I want to bring back the argument to the more serious points. The first point which, I submit, is to be made against this Bill is the fact that it will involve the State in a colossal gamble. When we first began discussion of this matter, any mention of gambling or speculation was greeted with a sort of pharisaical horror on the benches opposite. The Paymaster-General admitted, during the Committee stage, that it could not be denied that the Commission would operate in a speculative way, and he referred to the unpredictable and speculative nature of the crop. He made it clear that the Commission would buy when it thought that prices were low. He admitted completely that it was a speculative business. Coupled with that speculation, the Commission is to carry a huge stock of cotton, which is a dangerous position for a speculator to be in. It is not only to carry this huge stock of cotton, but, if I understand the cover scheme aright, it will also have to carry an enormous stock of manufactured goods, and of finished and semi-finished materials. The State is to carry these tremendous stocks, when undertaking at the same time highly speculative transactions.

The second point is that we were told that it would not hedge cotton. Today the Paymaster-General has gone further, and rather indicated the probability—he certainly admitted the possibility, and he rather, I think, also suggested the probability—that the Commission would hedge. Where are they going to hedge? I would say in passing that I think most people would agree that they would be very wise to hedge. But, if they hedge, where are they to hedge if not in New York? It is only practicable to hedge cotton on a market where you can also tender. That means that if they hedge, they must be prepared to tender on New York, and either be prepared to ship back or keep in New York large stocks of cotton. If they do that, what about the warehousing, insurance and contracts and arbitrations necessary? And will not they, in fact, be setting up, or taking a large part in, a market in New York precisely similar to the market in Liverpool which they have extinguished? Every one of these transactions to which I have referred will cost dollars and I submit to the House that it is a farcical situation. Owing to the nature of these transactions, the Commission is going to play a major part in a market like that which the Government propose to destroy, and is going to have to pay dollars to do so.

The Paymaster-General admitted that the industry was going to have to pay for all this. He repudiated any idea that the taxpayer might have to subsidise the operations of the Commission. He said quite definitely that there was no question of a subsidy by the taxpayer. In other words, if the Commission is wrong on its unhedged gambles then the industry was going to have to pay. That means that the industry which is endeavouring to sell its goods in world markets is going to be put out of competitive business. I submit that we come back in all these matters to the export trade, and anything that is going to make our export trade more difficult to carry out is a blunder. So the first series of points against this proposal are that it is speculative; that speculation will be unhedged; if it is hedged it is a transaction of hedging; that will cost dollars, and any loss that there may be has got to be borne by the industry itself.

The next series of points against the Bill in my submission is that it is a bulk purchasing scheme and its consequences will be the normal consequences of bulk purchasing. We have had in the linseed oil scandal a perfect example of the result of bulk purchases. We have had created against us a bulk selling organisation and I suggest that that is the inevitable consequence of bulk purchase. In the case of the linseed oil business, there was an intermediatory authority in the shape of the Argentine Government intercepting the profit.' In other words the primary producer got no further inducement to produce. Such a state of affairs is not going to bring additional advantages to this country.

Reference has been made to the principle of the widening of the basis of world trade. I have a quotation from a speech by Senator Vandenberg which I had hoped to quote: In it he expressed quite clearly his view on behalf of those for whom he is entitled to speak that if there is going to be a series of bilateral trade agreements between countries by way of bulk purchase then the United States will have to review its whole position on its present proposals for the widening of the basis of world trade.

Next it is going to involve the destruction of a delicate piece of trade mechanism. Speaking at Geneva only a day or two ago the President of the Board of Trade made this statement:
"We have to reconcile two great economic facts. One, the value of the stable and traditional channels of trade, more delicately balanced than some seem to realise, judging from the suggestion for its direction into new channels at short notice."
That statement seems to indicate a glimmer of light entering into the outlook of the President of the Board of Trade in this matter. Here we have a most delicate piece of international trade mechanism which is to be destroyed.

There is this further disadvantage in the case of bulk purchasing schemes that individual service cannot be maintained. I think that I speak here with the support of the hon. Member for Ashton-under-Lyne (Mr. Rhodes). The Commission will be too big to study individual requirements. The broker could study the individual outlets for his cotton, mill by mill. There has been, as the Paymaster-General mentioned on a previous occasion, a certain standardisation in America. Certain universal standards have been adopted but within those standards there are very large variations of the grade and staple. It is essential for the individual spinner to receive individual attention and to be able to have the particular cotton which suits him scientifically and carefully provided.

I believe that the members of the Control staff and of the Commission staff have no conception of the complexity of the task with which they are being confronted and we have today had striking confirmation of that from the speeches made by the hon. Member for Ashton-under-Lyne. As a spinner he obviously views with horror the disappearance of the cotton merchants from Liverpool and I say again that this Bill does mean their disappearance. The other functions of acting as sellers' agents for American shippers and as buying brokers for spinners are not 'the function of the cotton merchant primarily, and this Bill provides for the extinction of the cotton merchant as a merchant in cotton and the consequence will be that the spinner will not get precisely the cotton he wants.

That, I submit, has been conceded by the Member for Ashton-under-Lyne. And again we come back to the question of the export trade. We have had a very serious warning about Japansee competition and it is vital if we are to recover our export trade that the spinner should get exactly what he wants. A commission—by the very nature of its existence and because of its size—cannot have that individual knowledge of individual outlets for the cotton that the merchant had in the past.

The only argument in favour of this Bill, when all the discussion has been sifted, is the fact that it may lead to the stabilisation of prices, but that is only an advantage if the price is stabilised at a competitive level. Any fool can stabilise at 25 per cent. above world prices, and the one thing which has never been explained to the House or to the Committee is how the price can be stabilised at a competitive level. We want to know how that is to be done. It is in fact fantastic that a country which grows not one pound of this commodity and which uses only 10 per cent. of the world crop should be able to stabilise the price. If, we stabilise our price above world levels we come back to the question of the export trade, which will suffer most seriously in consequence.

The matter of the loss of dollars has already been referred to, and I do ask the Government, even at this eleventh hour, to think again on this matter. I do not really believe that they or their advisers knew quite what they were embarking upon when they started on this proposition which, as was admitted, was full of political content. I think they prejudged it; there was no public examination or inquiry. I do ask them even now to change their minds on this matter. After all, changes of mind are not out of fashion these days. One is led to believe that considerable deletions have been made from the Transport Bill, and even on the matter of conscription we understand there has been a substantial change of mind. I suggest that the Government should follow the present prevailing fashion and that on this matter of such complexity they should think again and hold their hand even at the eleventh hour. I believe that this Measure is disastrous to Lancashire's export trade and a cruel injustice to Liverpool. It will involve the destruction of a great international market, and if the Government persist in this they will one day, if they have the welfare of the country at heart, bitterly regret what they have done.

3.40 p.m.

I should like first of all, in winding up this Debate, to comply with the request to say something about those matters which I undertook during the Committee stage to reconsider, but about which we have placed no Amendments on the Order Paper today. The right hon. Member for Aldershot (Mr. Lyttelton) asked, in connection with Clause 8, that we should consider an Amendment making it obligatory on the Commission to present its annual report and statement of audited accounts at the same time. I understand that my hon. Friend the Secretary for Overseas Trade has communicated with him on the matter, and that he has undertaken to consider presenting the report and statement to Parliament at the same time.

On consideration of Clause 9, it was proposed that the words "in the raw state" should be inserted to make it quite clear that what the Commission were selling was raw cotton. I have already alluded to that, and have said that we are quite satisfied, on taking advice again, that it really is not necessary to introduce these words in the Bill. The Bill already lays upon the Commission the clear obligation to deal in raw cotton. In regard to Clause 18 (3), it was suggested that it was unnecessary to include provision for the power of the Commission to repay advances. We have taken legal and Treasury advice, and we are advised that it is necessary to put this in the Bill, to put beyond the doubt the power of the Commission to repay advances when they wish to do so.

Is the Paymaster-General satisfied that it will be ultra vires for the Commission to deal with anything but raw cotton?

Yes, Sir. In regard to the research Clause, it has already been agreed by the Committee that the Commission may have power to research or to finance research in the processes of manufacture. In regard to the remainder of the transactions of the Commission, it is clear that it is limited to raw cotton.

May I now say a word to my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes)? I feel that he was disappointed with what I said in reply to his previous remarks, and yet I cannot understand why. The last thing I desire is to appear in any way to disregard the significance of the remarks he may make on this subject. There is obviously no one in the House who knows more about the textile industry than he does, and I have sympathy with his views on the subject. I have already said that when the Commission is established, work will remain for these firms. There is nothing in the Bill to prevent them engaging in re-export of cotton, or acting as brokers if the spinners are prepared to use them in that way. I do not know what more I can say than I have said already.

What we are a little concerned about is to what extent the Commission will be concerned with transhipment.

The Commission is obliged to see to it that cotton is provided for transhipment and the re-export trade, which it can do through the merchants.

Would my hon. Friend say whether the Board of Trade will give a direction to the Cotton Commission to see that these firms will be employed?

We cannot direct the Cotton Commission to see that the firms are employed by spinners, or purchasers abroad to see that firms are enabled to sell cotton abroad. All that we could do would be to direct the Commission to use their services in some way, as agents. They are acting now as agents for foreign shippers. I do not see how the Commission, or the Board of Trade, can insist on the retention of these firms in business. Some will continue without doubt, but others may find competitive conditions too difficult, and in that event no one can prophesy what they will do.

The right hon. Member for Aldershot said that he felt the Government had got to the bottom of the official brief case. The right hon. Gentleman is rather fond of referring to the fact that Government spokesmen do have the advantage of obtaining the advice of civil servants. But let there be no doubt whatever in anyone's mind as to whether the Government believe in this Bill. We do believe in it, and the longer we studied it and examined the actual operations of the present Control, the more satisfied we were that we ought to keep the Control going. I am proud to be associated with this Bill, and to have had the honour of piloting it through all its stages in this House. Having said that, let me reassure the hon. Member for Bury (Mr. W. Fletcher) that I do not intend to play the market, as he forecast. The responsibility for dealing in raw cotton will be that of the Raw Cotton Commission, and I am not seeking an appointment to that body.

It is common ground between the Opposition and the Government in this matter that the business of cotton growing and selling is subject to fluctuation, is inevitably speculative—if speculation means that you cannot foresee, with certainty, the supply and demand of a commodity produced by thousands of growers and consumed in thousands of spinning units all over the world. Of course, that is speculative enterprise, and anybody who deals in cotton is bound to speculate in that sense of the word. I defy anybody to find in any speech that I have made on this subject any suggestion to the contrary, any suggestion that speculation, in that sense, is indefensible or undesirable. I wish Members would distinguish between inevitable and necessary speculation on a spot market and the kind of outside speculation—by those who have no business in the cotton industry at all—which becomes associated with the free futures market. In a situation where you are engaging in business from which risk is inseparable, there are only two ways of evening out the inevitable fluctuations. One is to have a market of numerous buyers and sellers of futures, each betting, as it were—and I do not want to use the word "betting" in a contemptuous way—on his own judgment—

—of the movement of supply and demand, and thereby providing facilities for the producer and the user to hedge their risks. That is a fair description. That is one way to do it, and the way in which it was done during the 19th century. The other way is to have a single buyer, holding all the stock, and using it as a buffer. The former method, we suggest, was expensive in manpower, and never eliminated fluctuations. It merely took the financial risk arising therefrom off the shoulders of the user. The method of the single buyer using the stock as a buffer, is cheaper in man-power, and gives, I think, longer periods of price stability. In the long run, if we have an economically run Commission, employing 25o people, it will give us cheaper cotton than a free market of more than 3,000 people. That is the basic reason why one must be cheaper than the other; it will take fewer people to run the same service.

The cheaper cotton will give us a competitive ability in foreign markets in manufactured cotton and will easily make up for any loss of foreign exchange we may incur, as a result of the closing of the futures market. As I suggested in the Second Reading Debate, these gains in foreign exchange are no so valuable as some may think, because they consist of "hot money" transactions, and of obtaining money on short periods from America, or other centres in which people are prepared to put money into this market for the time being.

If the hon. Gentleman will look back on the Government's pronouncements, he will see that they admitted that the net gain each year in direct foreign exchange is equivalent to about £1 million. Therefore, his arguments about "hot money" are entirely wrong.

There was such a period before the war, but, in the present situation and in the present difficulties of exchange, it would not be prudent to encourage that kind of transaction to any large extent. Therefore, for years to come, we could not hope to earn anything like that amount from that type of transaction.

That is what I am saying now, and I hope I am saying it loud enough to be heard. This type of transaction, whatever it gained us in the past, would not, in the years to come, gain us much. The gain from cheaper cotton, which would have its effect in the long run in our competitive power in the foreign markets for manufactured cotton, would outweigh the loss of that "hot money" gain.

On the other Bills which the Government have brought before this House, the Opposition have been saying, "Do not put the clock forward so fast. Why do you hurry on? Why are you trying to do all these things one after the other? "In this particular case, they are pleading with us to put the clock back, and are saying, "Please ignore all that has been done during the war; ignore the fact that you have got your cotton on satisfactory terms; ignore the fact that you have reduced the number of people necessary to import and distribute it in this country, and go back to a 19th century laissez faire system, which we are taught to believe in the text books had certain advantages, and gave advantage to our particular friends." I suggest that their attitude to this is as doctrinaire as anything they have ever accused us of being and that they are trying to get back to a 19th century system which is out of date, and are asking the Government to put the clock back.

I rest my argument further upon the fact that we have proved that we are not doctrinaire in this matter at all. We restored the entrepôt coffee market for the advantages which we might gain from foreign exchange in that market. We restored the fur market, which was one of the first things my right hon. Friend the President of the Board of Trade did when he came to office. We reopened the rubber market. We are not doctrinaire, and, in re-establishing the rubber market, we secured, by agreement with the Treasury, those restrictions upon undue speculation about which the right hon. Gentleman spoke—high margins, and that kind of thing. A balance of advantage was struck in each case, according to the nature of the source and various types of the raw material under consideration and according to the variety, or otherwise, of the consuming industry. The great difference between rubber and cotton in this respect is that rubber in this country is consumed by a large number of different industries, whereas cotton is consumed almost solely by the spinning industry. Thirdly, there is the amount of foreign exchange which might be expected to accrue from the transaction. In the light of these three main criteria, which I have not time to develop now, we made up our minds in respect of each commodity concerned, and so we shall continue to do.

In conclusion, I say that the economy of manpower in this particular type of distributive service, the proved success of the splendid work of public servants, during the past five years, in operating this type of control, the necessity for stability of price, the necessity to place in the hands of the experienced men of the cotton industry the control of the supply of their own material, justifies this Bill. We are placing at the service of the cotton industry a twentieth century instrument to meet a twentieth century situation, and I' have pleasure in commending the Bill to the House.

3.56 p.m.

I have no intention of talking the Bill out, but I say that it is disgraceful that so few Members have been able to take part in the Third Reading Debate today. This is a Measure which affects seriously our marketing of cotton, and British trade in general. The Liverpool Cotton Exchange has brought trade to many people in the past. A vital mistake was made when a bad Amendment to Clause 8 was accepted, which had the effect of reversing a good Amendment made to Clause 1. My hon. Friend the Member for Bury (Mr. W. Fletcher) said, in a much more able way

Division No. 123.]


[3.59 p.m.

Adams, Richard (Balham)Greenwood, Rt. Hon. A. (Wakefield)Pargiter, G. A.
Adams, W. T. (Hammersmith, South)Greenwood, A. W. J. (Heywood)Parker, J.
Alexander, Rt. Hon. A. V.Guest, Dr. L. HadenParkin, B. T.
Allen, A. C. (Bosworth)Gunter, R. J.Paton, Mrs. F. (Rushcliffe)
Anderson, F. (Whitehaven)Guy, W. H.Peart, Capt. T. F.
Ayles, W. H.Haire, John E. (Wycombe)Pursey, Cmdr. H.
Ayrton Gould, Mrs. B.Hale, LeslieRandall, H. E.
Baird, J.Hall, W. G.Ranger, J.
Barstow, P. G.Hamilton, Lieut.-Col. R.Reeves, J.
Barton, C.Hannan, W. (Maryhill)Rhodes, H.
Battley, J. R.Hardy, E. A.Ridealgh, Mrs. M.
Bechervaise, A. EHastings, Dr. SomervilleRobens, A.
Belcher, J. WHenderson, Joseph (Ardwick)Roberts, Goronwy (Caernarvonshire)
Benson, G.Hicks, G.Rogers, G. H. R.
Berry, H.Hobson, C R.Sargood, R.
Beswick, F.House, G.Scott-Elliot, W.
Bevan, Rt. Hon. A. (Ebbw Vale)Hudson, J. H. (Ealing, W.)Shackleton, Wing-Cdr. E. A. A.
Bing, G. H. CHughes, Hector (Aberdeen, N.)Silverman, J. (Erdington)
Binns, J.Hynd, H. (Hackney, C.)Silverman, S. S. (Nelson)
Blackburn, A. RJanner, B.Simmons, C. J.
Blenkinsop, A.Jay, D. P. T.Skeffington, A. M.
Blyton, W. R.Jeger, G. (Winchester)Skinnard, F. W.
Bottomley, A. G.Jones, D. T. (Hartlepools)Smith, C. (Colchester)
Bowles, F. C. (Nuneaton)Jones, Elwyn (Plaistow)Smith, H. N. (Nottingham, S.)
Braddock, Mrs. E. M. (L'pl, Exch'ge)Jones, P. Asterley (Hitchin)Smith, S. H. (Hull, S.W.)
Braddock, T. (Mitcham)Keenan, W.Snow, Capt. J. W.
Bramall, Major E. A.Kendall, W. D.Soskice, Maj. Sir F.
Brown, George (Belper)Kinley, J.Sparks, J. A.
Brown, T. J. (Ince)Kirby, B. V.Steele, T.
Bruce, Maj. D. W. T.Lee, F. (Hulme)Stewart, Michael (Fulham, E.)
Butler, H. W (Hackney, S.)Lee, Miss J. (Cannock)Stubbs, A. E.
Callaghan, JamesLewis, A. W. J. (Upton)Symonds, A. L.
Castle, Mrs. B. A.Lindgren, G. S.Taylor, H. B. (Mansfield)
Champion, A. J.Lipton, Lt.-Col. M.Taylor, R. J. (Morpeth)
Chater, D.Longden, F.Taylor, Dr. S. (Barnet)
Chetwynd, G. R.Lyne, A. W.Thomas, D. E. (Aberdare)
Clitherow, Dr. R.McAdam, W.Thomas, I. O. (Wrekin)
Cocks, F. S.McAllister, G.Tiffany, S.
Coldrick, W.McGhee, H. G.Tolley, L.
Colman, Miss G. M.Mack, J. DTomlinson, Rt. Hon. G.
Comyns, Dr. L.McKay, J. (Wallsend)Turner-Samuels, M.
Crawley, A.McLeavy, F.Vernon, Maj. W. F.
Daines, P.Mallalieu, J. P. W.Viant, S. P.
Davies, Ernest (Enfield)Manning, C. (Camberwell, N.)Walkden, E.
Davies, Harold (Leek)Manning, Mrs. L. (Epping)Walker, G. H.
Deer, G.Marquand, H. A.Wallace, G. D. (Chislehurst)
Dobbie, W.Mellish, R. J.Wallace, H. W. (Walthamstow, E.)
Dodds, N. N.Messer, F.Weitzman, D.
Dumpleton, C. W.Millington, Wing-Comdr. E. RWells, W. T. (Walsall)
Edwards, A. (Middlesbrough, E.)Mitchison, G. R.Whiteley, Rt. Hon. W.
Edwards, W. J. (Whitechapel)Montague, F.Wilkes, L.
Evans, E. (Lowestoft)Morgan, Dr. H. B.Willey, F. T. (Sunderland)
Evans, S. N. (Wednesbury)Morris, Lt.-Col. H. (Sheffield, C.)Willey, O. G. (Cleveland)
Ewart, R.Moyle, A.Williams, D. J. (Neath)
Fairhurst, F.Naylor, T. E.Williams, J. L. (Kelvingrove)
Williams, W. R. (Heston)
Field, Captain W. J.Nichol, Mrs. M. E. (Bradford, N.)Wills, Mrs. E. A.
Follick, M.Nicholls, H. R. (Stratford)Yates, V. F.
Gallacher, W.Noel-Buxton, LadyZilliacus, K.
Ganley, Mrs. C. S.O'Brien, T.
Gordon-Walker, P. C.Paget, R. T.


Mr. Pearson and Mr. Collindridge.

than I can do, that this Bill will do nothing whatever to help our dollar exchange position at the present time. On the contrary, it will hurt it. This country is being deprived of a great market, which may well go to Antwerp and New York and so cut out our people for all time. For that reason, I shall oppose the Bill.

Question put, "That the Bill he now read the Third time."

The House divided; Ayes, 179; Noes, 72.


Aitken, Hon. MaxDower, Lt.-Col. A. V. G. (Penrith)Morrison, Rt. Hon. W. S. (Cirencester)
Amory, D. HeathcoatDrayson, G. B.Neill, W. F. (Belfast, N.)
Assheton, Rt. Hon. R.Duthie, W. S.Neven-Spence, Sir B.
Astor, Hon. M.Eden, Rt. Hon. A.Nicholson, G.
Barlow, Sir J.Elliot, Rt. Hon. WalterNield, B. (Chester)
Baxter, A. B.Fletcher, W. (Bury)Noble, Comdr. A. H. P.
Beamish, Maj. T. V. H.Fraser, Maj. H. C. P. (Stone)Poole, O. B. S. (Oswestry)
Boothby, R.Fraser, Sir I. (Lonsdale)Price-White, Lt.-Col. D.
Bowen, R.Gage, C.Prior-Palmer, Brig. O.
Bracken, Rt. Hon. BrendanGalbraith, Cmdr. T. D.Reed, Sir S. (Aylesbury)
Braithwaite, Lt.-Comdr. J. G.Hannon, Sir P. (Moseley)Robinson, Wing-Comdr. Roland
Brown, W. J (Rugby)Headlam, Lieut.-Col. Rt. Hon. Sir C.Snadden, W. M.
Buchan-Hepburn, P. G. T.Howard, Hon. A.Stanley, Rt. Hon. O.
Bullock, Cant M.Hudson, Rt. Hon. R. S. (Southport)Sutcliffe, H.
Byers, FrankHutchison, Lt.-Cm. Clark (E'b'rgh W.)Taylor, C. S. (Eastbourne)
Challen, C.Lambert, Hon. G.Teeling, William
Channon, H.Linstead, H. N.Thorp, Lt.-Col. R. A. F
Clarke, Col. R. S.Lloyd, Selwyn (Wirral)Touche, G. C.
Conant, Maj. R. J. E.Lucas-Tooth, Sir H.Vane, W. M. F.
Crookshank, Capt. Rt. Hon. H. F. CLyttelton, Rt. Hon. O.Walker-Smith, D.
Crosthwaite-Eyre, Col. O. E.Macpherson, Maj. N. (Dumfries)Wheatley, Colonel M, J.
Crowder, Capt. John E.Marlowe, A. A. H.Williams, C. (Torquay)
Darling, Sir W. Y.Marples, A. E.Willoughby de Eresby, Lord
Davies, Clement (Montgomery)Marshall, D. (Bodmin)
Dodds-Parker, A. D.Morrison, Maj. J. G. (Salisbury)


Commander Agnew and
Mr. Studholme.

Bill accordingly read the Third time, and passed.