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Cotton Industry

Volume 437: debated on Monday 12 May 1947

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12.6 a.m.

I beg to move,

"That the Control of the Cotton Industry (No. 78) Order, 1947 (S.R. & 0. 1947. No. 480), dated 17th March, 1947. a copy of which was presented on 24th March, be annulled."
I propose, with permission, to discuss at the same time the two other Motions on the Order Paper relating to the Control of the Cotton Industry (No. 9) Order, and the Control of the Cotton Industry (No. 80) Order. The purpose of the first Order is to enable a producer of yarn, who sells what is termed "controlled yarn destined for export" to receive a price above the "domestic controlled price." On the face of it, such an Order is undoubtedly sound, because it enables the producer to receive a higher price which formerly went to the merchant. This Order, and the related Orders, enable some of the price differential to be passed on to the producer. However desirable this may seem to be on the face of it, there are consequences which are not so desirable, and the reason for putting down this Prayer is to seek assurance on how the Orders will be implemented, and also an assurance that no hardship will be caused.

The Orders make a price differential between home and exported yarn. In the past, it has not mattered to the spinner where the yarn went, because he got the same price. However, now that export allocations are made, those firms producing yarn for the export market will have an advantage over those producing yarns solely for the domestic trade. The matter is not quite so simple as it would appear. Most firms have an export allocation, while the majority of the output is destined for the home trade. With the appearance of these Orders, there will be a desire on the part of spinners to obtain a revision of their allocations for export. There will thus be something of a scramble for export allocations so that the higher prices for yarn for export can be obtained by the spinners.

I should like to hear how the Minister intends to obviate this scramble, for. certain signs have already been given out, showing what is in the Minister's mind in this matter. For example, the Cotton Control recently sent a circular letter to all spinners asking for a return of all yarns exported in the years 1937, 1938 and 1939. The letter which accompanied this request suggested that yarn exports in the future will be, if I may quote the actual words, "rather free". Naturally, the industry is anxious to know what groups and types of yarn are going to be made rather freer under the terms of these Orders, because a great deal depends on which yarns are to be exported.

An interesting point arises from the request for these returns. They are being sought solely from spinners. Merchants are not being asked what they exported in the basic years. The effect of this is that those spinners who knew where their yarns went in the years 1937, 1938, and 1939, score an advantage over those spinners who sold direct to merchants without knowing the exact destination of their yarns. They are mostly the smaller spinners, whose book-keeping was simple, and who relied upon merchants to secure the ultimate sale of their yarns. I, again, ask for assurances and explanations from the Minister on this matter of the allocations to spinners. For it seems to me that —probably without any intention that it should be so—an unfair allocation may be adopted on the basis of the returns of those spinners who knew what they were exporting in 1937, 1938, and 1939. At least, the merchants ought to be consulted as well, though I am not in any way, in this matter, pleading the case of the merchants, but rather for fairness to the spinners in the implementation of these Orders.

Incidentally, the performances of 1937, 1938, and 1939 relate to a period which is now very long ago, and favour the large combines with complicated records, rather than the small man. These Orders have lain on the Table for a number of days. In fact, I think that today is the last day upon which they could be prayed against. The appearance of the Orders has naturally led to some enthusiasm on the part of the spinners, the idea being that they would be able to increase their export of yarns, of several types of which there is already a known surplus. They have formed the idea that yarn exports are going to be encouraged, and it would be interesting to learn from the Minister to what extent it is his intention to encourage the export of yarns, as indicated by these Orders. There is undoubtedly, at the present time, a certain surplus of fine yarns in this country, and as the industry has tended to go to finer counts, it would seem logical, of course, that only the finer yarns should be exported. There is, of course, in any case a tendency in the industry to spin the finer counts. The work is lighter and the conditions are better. It might be that we would not want to stimulate a movement which is already operating within the industry perhaps rather faster than it ought to be operating. It would be interesting to know whether it is intended, under the Orders, to restrict the export of fine yarns, and not to cover the whole range of yarns which is at present being spun.

The operation of the Orders is already proving somewhat peculiar. I have before me the case of a spinner who had a surplus of fine yarn and who, encouraged by these Orders, was able to find a buyer for the yarn in Switzerland. He applied to the Cotton Control for the necessary licence to export, and his application was turned down. No reason for this was given, and it was obvious that he would not have gone to the trouble and expense of finding a buyer in Switzerland if he had been able to find a buyer in England. Here we have a group of Orders designed to encourage the export trade in surplus yarns, but the administrative machinery is operating in exactly the opposite direction. It does not seem logical to issue Orders if it is not intended also, by the Cotton Control, to issue the necessary export licences. The point is that the machinery is not functioning in accordance with the intentions of the Minister, unless his intentions are different from what, on the face of it, they would seem to be.

There is also the question of what is the price differential established by these Orders, between yarn for home use and yarn for export. They established that price differential without stating exactly, what the differential is. The Order says that the yarn may be sold at a price
"exceeding the price for that yarn determined in accordance with the provisions of the preceding paragraphs."
Does that mean that the whole of the price differential is to be passed on to the producer? It does not say that the full price may be passed on, but only "a price." As certain licences have to be obtained from the Cotton Board, it would be reassuring to know whether the Cotton Board intend to limit the extent of the price differential, or whether the spinner is to get the whole of it.

There is the final point that many of these yarn surpluses arise through unbalance in the cotton industry. Warp yarns were recently held up by the fuel shortage, while weft yarns were produced in relatively greater abundance. It seems unfortunate that a state of unbalance should be permitted. It would be far better to take the necessary steps to redress the balance and so avoid having these yarn surpluses. In addition to that unbalance, there is also the bottleneck of doubling. If doubling capacity could be increased some of the fine yarns at present surplus could be used in this country, but it seems to be Government policy to export them. It is questionable, in those circumstances, whether these Orders are wise. We shall see when the Minister replies whether there is a satisfactory explanation for them.

12.18 a.m.

I beg to second the Motion.

There are a few questions which I should like to put to the Parliamentary Secretary to the Board of Trade. My hon. Friend the Member for Altrincham and Sale (Mr. Erroll) has pointed out that the spinners only are being asked for returns of exports for the years 1937–8–9. Those are very old figures now, and it is not very advantageous that the present export licences should be based upon orders of nearly ten years ago. Merchants have not been asked for any returns whatsoever. Large spinners had their own merchanting sections abroad can handle this new business, but the small businessmen who ordinarily sold to merchants, not knowing whether the yarn was to be used at home or abroad, and never knowing, if it was going abroad, to what country it was going—they have not the slightest idea whether they qualify for export at all. It would be most unfair that these small spinners should be penalised.

Notice taken, that 40 Members were not present; House counted and, 40 Members being present—

On a point of Order. Is it permissible to draw attention to the fact that the hon. Lady the Member for the Exchange Division of Liverpool (Mrs. Braddock) had only entered the House immediately before calling a Count?

12.30 a.m.

I was pointing out that under these new regulations the merchants had not been called upon to furnish the figures of exports during the three foundation years. Very often merchants were doing far more valuable export business than the spinners were at the time, and merchants had the knowledge and experience which were necessary to carry on the export of yarn for the small spinners. If the small spinners are allowed an allocation at all it will be something, although they will be sorely put to it to know what the merchants themselves will send abroad. I, therefore, suggest to the Parliamentary Secretary that he should carefully consider the advantage of asking the merchants for a return of their exports in the three basic years. By adding those to the returns of the spinners we shall get a real picture of the export business during that period and it will give a basis for the allocations which the Board of Trade are to make in the near future.

There are two other points about which I should like to question the hon. Gentleman. Obviously, it is of the utmost importance to get as much export as we possibly can, provided we cannot use the yarn in this country. Much of this yarn used to go forward in a highly manufactured way. It might be bleached or wound a particular way for a particular market, and very often only the merchants knew what was the complete content of the exports. That is another reason for encouraging the merchants to go into this. In other words, it is of vital importance to have exports of all kinds as well as to get as high a content as possible in the value of the export. I hope the Parliamentary Secretary will pay attention to that when making arrangements for these exports. When this Order comes into operation it seems obvious that there will be a great urge to produce a. superfluity of finer yarns, so that the spinners can get the higher prices for export. That may have an unfortunate consequence in the industry and may upset the balance, more than it is upset at present. Would the Parliamentary Secretary consider the advisability of having a pool for the excess of the export profits of the finer counts which would be divided over the spinning industry as a whole? That would tend to keep the balance of yarns much more satisfactory and stationary than would be achieved by letting the surplus high quality yarns go for export as suggested at present.

That is not so under the Order. It applies to all ranges of yarns and not merely to the finer qualities.

The Order seeks to export all the finer yarns because there is a surplus of some of those yarns at present.

The hon. Member who moved this Prayer called attention to one factor which really does exist. He said there is a superfluity of finer yarns. How is the hon. Gentleman going to upset the balance of the cotton industry in order to get rid of a superfluity, even if that were the intention of the Order, which it certainly is not?

The intention is to take off the market the surplus of the finer counts. If the producer of the finer counts can obtain a higher price then obviously, other spinners and workers would probably try to drift into the production of finer counts, in order to qualify for export, and there would be increased export of finer counts which we do not want. We want to use all the yarns we can for production in this country as far as possible. Where there is at present a substantial amount of finer counts which cannot be used here obviously they should be exported in the best way possible in order to prevent an undue increase in the production of finer counts. I suggest that the Parliamentary Secretary should consider the formation of a pool so that all the spinners can benefit by this. I believe that that would not embarrass the production of yarn more than is the case at present.

12.28 a.m.

I am certain that hon. Members on the other side of the House who are praying against these Orders misconceive the situation as it exists and the intentions of the Government. The hon. Member for Eddisbury (Sir J. Barlow) has asked that our inquiries be directed not only to the spinners but to the merchants. I think that the House would agree that what we have done, in the letter referred to by the hon. Gentleman who moved the Prayer, was right. We have asked for returns of exports in the three year period 1937–1938–1939. If we had taken a later period that would have been unfair to those firms who were concentrated during the war years. The Cotton Control consulted spinners because they are not in direct contact with export merchants. In fact the Cotton Control does not know who the export merchants are. All the Cotton Control has tried to do has been to achieve a fair allocation as between spinners, and may I say here that we have had representations from spinners which led to the decision to make these Orders?

I am under the impression that what is wanted is not so much the annulment of these Orders as an explanation of the facts which led to their being made, and I should like to give that explanation in some detail. We desire to put right an anomaly which has existed since 1940. The three Orders relate to single yarn, double yarn and waste yarn, and exactly the same considerations apply to all three. The spinners work to fixed margins. They are bound under Statutory Orders to sell at a prescribed price, except in the case of direct exports, where the prescribed price has been a minimum and not a maximum. In other words, before the making of these Orders, spinners who sold their yarn direct to a foreign customer could charge more than the prescribed price, whereas the spinner who sold to a merchant who then resold to the foreign customer could not. During the war there was not much difficulty about this, but in the present sellers' market this state of affairs has been objected to both by spinners and export merchants. The spinners object very naturally on the ground that the whole of the profits on export sales have gone to the merchants who have done nothing more than procure the orders from the foreign buyers. In present conditions that means nothing at all, because the foreign buyer is only too anxious to place his order.

Strangely enough, the merchants have also objected. They say that the spinners have sought to by-pass them and establish direct contact with the buyers overseas instead of placing their contracts through what, in normal times, would be regarded as the normal channel, namely, the merchants. We sought to put this right by permitting the spinners to sell yarn for exports to merchants at more than the prescribed price. We think that we are meeting the objections of both the spinners and the merchants by enabling the spinners and the merchants to share in the profits on the exports in proportions they agree to among themselves. The spinners cannot be paid the excess over the prescribed price until it has been established that the yarn has been exported. Moreover, the relaxation only applies to yarn in the form in which it leaves the spinner. It does not extend to yarn which is to undergo further processing in this country before it is exported. It may be the desire of hon. Members opposite— although I do not think it is, having listened to what they have said tonight— to criticise our policy in allowing exports of any yarn at all. I can assure them that I would certainly not be a party to exporting yarn from this country if it could be used in this country to advantage. I quite agree with those who say that the right way to export textiles of any kind is in a finished form, wherever possible. I certainly would not be a party to exporting yarn, if that yarn could be usefully converted here.

Is it not a fact that we are importing a considerable amount of yarn from overseas at the moment?

It may be the case. It may be that at any one time we have a surplus in this country of a particular type of yarn and a shortage of another kind of yarn which can be imported. If the hon. Member will listen to my remarks, he will see how we have worked this out. We have always had a certain amount of trade in unbleached yarns, mostly to the Dominions, and particularly to Canada. In 1946, the value of exports of unbleached yarn was about 3 million, out of a total for all cotton textile exports of £60 million. There would be difficulties if we were to say to the Dominions, particularly to Canada, which has been of such great assistance to us in so many ways during the last seven or eight years, that they can no longer receive from us the yarn on which they have based a certain amount of their own industry. That would not be an expression of gratitude to that Dominion for all they have done for us during the difficult years from which we are just emerging. I would be prepared to make some sacrifices in order to maintain that goodwill.

In 1946, we exported to our overseas customers, mainly the Dominions, and principally Canada, yarn to the value of 19 million lb., as compared with 123 million lb. in 1938. They are taking today the very minimum of their normal requirements. They have always depended on us to supply them with their yarn requirements. Although our own yarn using industries are most anxious to obtain increased supplies of yarn there is not— and, in the nature of things, there could not be—such perfect adjustment between spinners and yarn users that yarn surpluses would never arise. It may be that at one time you will have a surplus of one kind of yarn and the shortage of another. But you cannot divert a surplus to a particular section of the industry which was using yarn in short supply with any good effect at all. In those circumstances, it would be wrong to forbid the export of surplus yarn.

These Orders do not affect the total quantity of yarn exported. We can control that by export licensing. Relaxation cannot increase the total quantity of yarn exported. It merely enables the spinners —most worthy people, whom we are anxious to encourage—to share in the profits of the quantity which, anyhow, would be exported. I believe it is felt by hon. Members opposite that there should also be relaxation, to a large extent, in respect of bleached yarn, cloth, and, possibly, made up goods. In principle, we are sympathetic, but the difficulty which faces us in all cases of price control is to find any way of relaxing the present system without jeopardising essential home productions. It is fairly easy to follow any unbleached yarn, and to see that it is exported, or, if it is not exported, that the spinner does not get an excess price. But it would be quite impossible to follow yarn which was to be subjected to further processing. We are, at present, confronted with a very serious shortage of textiles of all kinds, and there would be a tremendous incentive on the part of the buyers of yarn, or cloth, to allege that they wanted the material for export, in order that they might get priority in delivery, and, in fact, would use the product on the home market. As every hon. Member knows, the market for these commodities, for cloth and made-up goods, is so pressing that the prices which would be offered would act as a very considerable incentive, but apart from that, apart from the possibility of abuse, there is a more fundamental objection.

Prior to the recent fuel difficulties, manufacturers had an order book with dates of delivery between five and eight months. Due to these fuel difficulties, their order books are probably longer. Five to eight months have probably become anything up to twelve months. If the export orders were made more attractive by a higher price attaching to them, manufacturers would scramble for them, would deliver them first, and would, of course, be most reluctant to accept orders for other purposes, and as the export orders in total amount to something like one-sixth of the total production, that would mean a very serious hold-up on other production. If I might take an extreme case, production for the utility production might be held up for a month or six weeks while priority was given to export orders, and the resulting shortage of textiles in the shops might very well wreck our whole coupon rationing scheme, which has confronted us with very considerable difficulties as a result of the hold-up in production during the last two or three months. There are other cotton products where continuity of production is essential, and a serious interruption in the flow of supplies to those manufacturers would have very serious effects on this country. I might cite belting for the coal mines, and supplies for hospitals; paper-makers require cotton felts. All of these industries would be affected. At the present moment yarn production is nicely balanced as between the competing demands under a detailed allocation scheme, and it is essential that we should maintain this balance if we are to avoid industrial dislocation.

The hon. Member for Eddisbury asked me whether I would consider a point he put to me. If the cotton industry can suggest a scheme whereby price relaxation can be carried further than these orders carry it without endangering essential home production, I should be only too pleased to consider it, but meanwhile I do not feel justified in releasing exports from price control or in creating an incentive to give priority to them so long as the present general shortage of textiles persists.

I am sorry to have been so long, but I wanted to give a detailed explanation to the House. May I, in conclusion, quote from the "Manchester Guardian" in its issue of 22nd March, 1947? I do so because the "Manchester Guardian" speaks with very great authority on these matters. It has a specialised staff which has made a study of these things for quite a long time. It said about these Orders:
"Hitherto producers who sold and shipped controlled yarns direct to customers abroad could charge higher prices than those prescribed in Control Orders. Producers, however, who sold yarn to customers in this country who then exported it could only charge the controlled prices. This was a serious disadvantage to the spinner who could not himself undertake the sale or shipping of yarn abroad. Under the new system, however, prices above those laid down in the Control Orders may be charged by spinners who sell yarns to customers in this country for export without further processing or winding. As prices at which Lancashire yarns are sold to overseas importers and consumers are now usually considerably higher than those fixed for sales in the United Kingdom, the new arrangement gives the spinner the opportunity of benefiting from the difference in prices which has hitherto benefited the exporter."
I am quite certain it would be the desire of every hon. Member of this House that if advantage is to be gained it should be gained by the man who does the work, and not by the man who does nothing but get the order in circumstances where it is easy to get an order.

12.45 a.m.

We have listened to a lengthy explanation, but the Parliamentary Secretary has not cleared up all the points about which hon. Members on this side of the House are concerned. In the first place, he has not made clear the position of the merchant under the new dispensation. Why are these inquiries only to be made to spinners? What is to happen to the merchants' trade? It is true that the merchant has no entitlement to this exceptional profit, but surely it is reasonable that his trade should not be taken entirely out of his hands. We should like to know exactly what the Parliamentary Secretary intends to do about the merchants. Then the Parliamentary Secretary refers to exports of yarn, and says that we can control this by allocation or quotas, but what is to be the allocation of yarn for this period or the next period? The trade at present is in something of a quandary, over exports. It does not know where it is going, or what the intentions of the Board of Trade are, and I am afraid the Parliamentary Secretary has not made the position very clear.

The hon. Member asked what we are doing about the merchants. I do not know whether he has seen the letter—obviously the hon. Member for Altrincham and Sale (Mr. Errol) has—but in this letter the figures asked for were for either the yarn exported direct or yarn sold by them to merchants or agents. In other words we have sought information about the merchants, and we are endeavouring to see that justice is done to all.

Surely that is not very satisfactory, because it is possible and indeed likely that the spinners will not be able to give the names of the merchants. It was so long ago.

The hon. Member for Ashton-under-Lyne (Mr. Rhodes) is more confident about the merchants getting a square deal than I am. I feel the merchant is likely to be robbed of his just dues under this Order. What I am anxious to establish is what is to be the position so far as the export of yam is concerned. I should have thought that in the present difficulties nothing should be done to increase the export of yarn. We are faced with an immense shortage in most yarns, and it is important that nothing should be done which increases the allocation of yarn for the overseas trade. I should like the Parliamentary Secretary to tell the House whether there is a surplus of yarn in any cotton.

On a point of Order, Mr. Speaker. Is it relevant on an Order which merely shifts the commission from the merchant to the spinner to discuss the whole of our cotton exports, to discuss the whole of our allocation, and to discuss surpluses and their disposal?

Normally one could not go outside the Order, but I gather the hon. Member was referring to what the-Parliamentary Secretary said.

I was endeavouring to clear up some of the points raised by the Parliamentary Secretary, and I hope I was not going outside the ambit of his reply. I am concerned to know whether or not there was an exportable surplus of yarn. I have a copy of a letter written by the late Parliamentary Secretary which indicated that owing to the fuel crisis. there was not a surplus. Therefore it is most important that the trade should know exactly where it stands. I hope the Parliamentary Secretary will be able to tell us exactly what is the yarn export position at the present time.

I think we have had a good explanation from the Minister, and I beg to ask leave to withdraw the Motion.

Question put, and negatived.


Resolved: "That this House do now adjourn."—[ Mr. Simmons.]

Adjourned accordingly at Nine Minutes to One o'Clock.