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Whisky Exports

Volume 439: debated on Monday 30 June 1947

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Motion made, and Question proposed, "That this House do now adjourn."— [ Mr. Popplewell.]

11.34 P.m.

The House heard this afternoon a serious statement by the Chancellor of the Exchequer about our dollar situation. He was indicating that certain economies will have to be made by this country and also, possibly, an extra spurt in exports, mainly in textile goods, in order to close the gap. I have been for some time advocating that we can get more dollars so far as the price of Scotch whisky exports is concerned. On the 14th of this month, I think it was, "The Times" was good enough to print a letter from me, perhaps, I may read it quickly:

"In 1946 we exported nearly 4,000,000 proof gallons of whisky to dollar countries at a ruling wholesale export price of 5s. a bottle. The expected increase of U.K. whisky exports to the U.S. and other hard currency areas during the next 12 months, as compared with 1946, is 2,400,000 proof gallons. [HANSARD, 4th June]. The total is nearly 6,400,000 gallons, or, at six bottles to the proof gallon, 38,400,000 bottles. If we charged 25s., which is less than the price in this country, instead of the present 5s. a bottle, we should get five times as many dollars— that is, 192,000,000 dollars. In discussion with friends I am asked whether the Americans would buy it at this price. I do not know; but I do know that seven to nine dollars is the common price consumers pay in the U.S., and if we sell only half we would get two and a half times as many dollars and have twice as much whisky for home consumption."
A few days later I had a letter from a firm who described themselves as licensed valuers and gaugers in the City of London, one part of which I may read:
"I thought it might assist you with your arguments if you knew that six bottles of whisky are equivalent to 7 proof gallons in this country at 30 u.p. and 75 proof gallons in the U.S., where whisky is marketed at 25 u.p. Your calculations, therefore, will be 51,200,000 bottles instead of 38,400,000."
And that, of course, does improve my argument and increases the dollar yield from 192,000,000 to 256,000,000. The "Glasgow Herald," in commenting on this position said this:
"The magazine 'Time' reported last week that the Anchor Line ship "Egidia" had arrived with 2,500,000 bottles of "Scotch," and that there was now so much of it in cellars over there that prices had dropped to 30s. a bottle and a price-war is in prospect. 'The prospect of more shipments,' they said, 'brought no cheers from the retailers.' Against this, 'Harper's Wine and Spirit Gazette,' which sounds more authoritative, says that doubling of Scotch whisky exports during the next year 'will not satisfy the demand.' And they say that further price falls are unlikely."
I had a conversation with the Minister of Food about it the Monday after this letter was published, and he very kindly invited me to come along with him to meet the Scottish Distillers' Association, and they agreed with a great number of questions I put. They agreed it was true that the ruling price was 8 to 10 dollars a bottle. I asked if it were true that when anybody asked for a bottle of Scotch he had to buy two bottles of bourbon at the same time. They said it was true. They agreed something had happened in the last two months. This campaign started on this side of the Atlantic.

A notice in "The Times" of 20th June said that the Central Bank at Buenos Aires had ordered the closing of the market to Scotch imports, and it went on to say that Scotch was the drink that was drunk by the well-to-do classes, who would not think of drinking bourbon or rye. There might be something political in this campaign, as it might be possible for them to open the market again but in the meantime to try to impress on my right hon. Friend that the market was completely gone, on 23rd June, the "Daily Express," in a leading article, said that Argentina and France had stopped the import of whisky. The fact was that France had not started to import. There seemed to be a great desire on the part of the Press to prove my argument was wrong. Maybe it had nothing to do with the fact that Scotch traders advertised in this part of the Press. The Distillers' Association handed me some recent advertisements in the New York Press. I have looked at these advertisements very carefully. I will read the extraordinary heading of one of these advertisements. A firm called Nussbaum published an advertisement headed, "Who says Scotch prices are too high?" The assumption is that they are not too high. It is quite clear that this is an "anti" campaign which has been got up on the other side by the people who sell in the market for the Scotch Distillers' Association.

The next thing was that I was handed a memorandum by the Scotch Distillers' Association. Perhaps I may mention that only five per cent. of the spirit drunk in the U.S. last year was Scotch. I suggest here—my right hon. Friend may correct me—that the demand is probably an inelastic one. The memorandum is rather long, and I will, with permission, circulate it in the OFFICIAL REPORT. [Interruption.] Surely, there is no objection to that. Ministers surely have not an exclusive prerogative in this matter. The House should know about it and I have no time to read it now.

I have here a comparison of price structures, one list at 60s. a case f.o.b., and one at 300s. a case f.o.b., which is the price I suggest. The interesting thing is that all the charges seem to show that freight, consulate certificates, Customs clearance, and so on, are all the same whether the price is 5s. or 25s. Marine insurance is only a little bit heavier; instead of being 18 it is 96 dollars per case, which is really quite negligible. Import duties, bottles 18 lb. at cents, countervailing duty, internal revenue tax, strip stamps, overprinting and freight charges, dock charges, cartage and warehouse charges are all the same in both cases. The State tax is the same for both prices also, and so is the import duty at 6 dollars per case. In regard to import duties it has been suggested that these and the state tax have been ad valorem. This is not so. They are charged on the commodity and not on value. Therefore, the position is this: you start off with 5s. or 25s. and you add all these figures, and you find that the cost per bottle before any profit is taken is 17s. 11d. in the case of the 5s. bottle and 37s. 8d. in the case of the 25s. bottle; that is, they are very nearly half instead of a fifth. I hope I am making myself clear.

Now the rackets commence. The boys handling it on the other side take their cut. The importer gets 10 per cent.; the wholesaler gets 15 per cent.; the retailer gets 33 per cent. In other words, the people who are advising the Scotch Distillers' Association, who in, turn, are advising my right hon. Friend the Minister, are the people who are raising the price of the 5s. bottle from 17s. 11d. to 31s., which is a profit, I think, of 13s. 1d. When you came to percentage increases, you find that a great difference between the two prices arises. The price of that 25s. bottle is raised from 37s. 8d. to 63s. 9d., which is just over twice as much as the 31s. which, they admit, is the price at which it is usually sold in the States.

I think it is very important indeed that the people who are mainly concerned about this matter are the people who are selling it, and not the people who are making it in this country. It is rather like the motor-car industry in this country before the war. Hon. Members will know that it was Great Portland Street which really had a great deal of control over the car manufacturers so far as the manufacture of motor-cars in this country was concerned. I am sure hon. Members on both sides of the House will not disagree with that. I would point out to the House, and to the right hon. Gentleman and the Chancellor of the Exchequer, in particular, that this is our main monopoly export. Nobody else in the world makes Scotch whisky. It is a thing we ought to use now as a real bargaining weapon So many people run away from the thing, because they say that if you double the price, you will halve the sales. But if you double the price you are going to get two-and-a-half times as many dollars, even if you do halve the sales. Therefore, I beg the Government to take this seriously, and to realise that it is a bargaining weapon.

There is another point, on which I am going to put down a Question to the Chancellor of the Exchequer. Is there not some commercial tie-up between the distillers here and the sellers in the United States? Is it certain that the distillers have no shares in the distributing concerns over there? Is it not possible that they are building up a large number of dollars in the States? It may be that these figures have been disclosed to the Bank of England or the Treasury under the currency regulations passed at the beginning of the war, but I do not know whether hon. Members have any idea how much the value is in pounds sterling, of what we sell to the States. I should think that if I were to put the question to them, most hon. Members would be millions of pounds out. The total figure we got in 1946 for Scotch whisky sold to the United States was just over £7,000,000. Not very much. With the increased allocation of barley just granted to the distillers by the right hon. Gentleman, it is expected that the sales will bring in £11,000,000.

I beg my right hon. Friend to take this matter seriously, as I am sure he does. I am not always impressed by some of the information given by the trade. My right hon. Friend, in answer to a Question in the House, said he found himself in a rather curious position as a Socialist, in telling private enterprise how to do its job. He may have been facetious, or he may have been serious, but before the war, people who sold coal on the Continent nearly always almost threw it away at ridiculous prices. I hope he was facetious. Not many Socialists would think that private enterprise was the last word in selling commodities abroad. It has been proved that there has been a great misuse of marketing by private enterprise.

Having regard to the amount of profit made by the people in the United States who handle and sell the stuff, they are in a powerful position. I suggest that if ever there was a case in which bulk selling could be argued for, it is this. The increase in price from 17s. 11d. to 31s. seems to indicate a quite fantastic profit Nobody in this country gets 33⅓ per cent. just for retailing. The right hon. Gentleman may talk about restaurants and the selling of wines, but he will have a very bad case if he does. The trade, I understand, is very angry with me for pressing this. Why should they be? Are they taking a long-term or a short-term view? Are they the proper instrument to use in deciding whether dollars should be brought into this country? I beg the Government to look into this. They are threatening all kinds of further hardships to the people of this country owing to the failure to close the gap.

I am only talking now of dollars and the hard currency areas. About two-thirds of the amount we export goes to dollar countries. The other third goes to the soft currency areas, like Egypt and India, where we have great sterling balances. We sell it at 5s. a bottle and they immediately clamp £1 on it on the doorstep and sell it at quite exorbitant prices, as hon. Members know who have been there. We are throwing this commodity away and I beg my right hon. Friend to reconsider the matter. Here is a commodity which is popular and may have a snob value in certain circles—I believe it is so in the Argentine and the States. My right hon. Friend may know from his visits to the United States how pleased his hosts are when they offer him Scotch. People are not going to be talked out of it, or lose their taste for it by bourbon selling at a lower price, say, of half a dollar. I beg my right hon. Friend not to be quite so readily impressed by the Distillers' Association.

11.51 p.m.

I am obliged to my hon. Friend the Member for Nuneaton (Mr. Bowles) for raising this question, because it should be ventilated in the House, and it is a case which, at first hearing, impressed me, and still does impress me. It is important because anything which can earn us extra dollars is of importance to every one of us, especially to me, the biggest spender of dollars on foodstuffs in the country. Therefore, I regard it of great importance to look into it and satisfy myself whether there is anything in it and if so how much, and, not content with my generalised statement on the matter which I gave my hon. Friend earlier, we discussed the matter with the distillers at an earlier date, and I had a thorough discussion with my hon. Friend later.

What I said in my answer to him was that it seemed strange to me to urge capitalist sellers to raise their prices. I entirely agree with him that we can very often make suggestions which are valuable to private enterprise as to how they should conduct their affairs, and make suggestions in the national interest, which they are not usually l0th to follow, particularly in raising their prices, when they see it is in their interests to do so. But there was a prima facie argument that they would not benefit by raising prices at this time. I agree that we should not be content with that, and we have looked into it.

Their price—export wholesale price— the kind of foreign currency which we get in the United States, is 5s., and the hon. Member for Nuneaton says that this compares with a price in this country of 25s. 1 do not think that is quite right. It really compares with a price of 4s. 3½d., which is rather a different thing. It is the distiller's price to the wholesaler in each case, and that is a fair and relative comparison.

The difference between 4s. 3½d. and 25s. 9d. is obviously the Excise Duty. The one thing I cannot advocate in Parliament is some sort of export duty or something of that kind.

The selling price in this country is 25s. 9d. of which the Excise Duty is 18s. 4½d. How is the selling price in the United States made up? The selling price at the moment in the United States varies between 5 and 6 dollars, composed of 5s. to us—the distillers and the manufacturers, Over and above that, 4s. 8d. is paid on insurance, freight and charges of that sort. There has to be paid the sum of 12s. 10½d. in duty—that is, American duty—and the distributors' margin is 18s. 2d. and 12s. 6d. That comes to a price of about 30s., though it varies with different brands. Hon. Members may say that the distributors' margin is too wide. That may be true, and many distributors' margins in many countries are too wide; but I doubt whether there is anything we can do to start reforming the distributive system of the United States of America. [An HON. MEMBER: "We might start on our own."] As the hon. Member says, we might start on our own, and that would be a big enough task. But that is what the American Government consider a fair practice margin, and it is laid down as a fair practice margin in the United States. Therefore, when one accepts a final selling price of 30s. in America, one finds there is nothing we can do about the difference between that and the 5s. price which we get.

May I ask if the right hon. Gentleman does not remember a statement made at the conference we attended suggesting that there was a need to frighten the American public, and also that it was thought by many that a lot of the American public did not realise the profit being made by the middlemen?

I could not agree with that. I would say that the only thing we could do would be to raise the price of 30s. to the final American consumer if we thought we could sell the whisky and still do that. But I do not believe that we could raise the 5s. price we receive without the final price to the American consumer going up. If the final price to the American consumer went up to more than 30s. there would still be the same margin. It is true, as the hon. Member pointed out, that five or six months ago, as soon as control was taken off in America, the price shot up to 9 or 10 dollars. It was at that time that I first heard this suggestion, and I first spoke to the representatives of the Dis- tillers' Association and suggested to them that they might raise their prices Their prices were raised a little—very little— and it seemed to me at that time that there was a strong case for raising them further, because it looked as if the traffic would bear a higher price. I thought at that time that they might be wrong in refusing to raise the price. I think that if the hon. Member had raised this matter six months ago, I might have been inclined to agree with him and to have considered putting pressure on the distillers to raise the price; but frankly, looking back on it now, I think that if I had done that I would have been wrong and they would have been right, as things have turned out, because the sharp rise to 10 dollars in American prices proved to be shortlived and prices have now come back in many cases to less than 6 dollars.

There are advertisements—and it would be difficult to say that they are fakes and do not mean anything—in which a New York seller of whisky advertises in a large and expensive New York paper that he is willing to sell whisky at these prices. I see whisky advertised at 4.98 dollars. That price is mentioned in two advertisements, and there is a more expensive brand at 6.98 dollars. That is a fairly wide variation, but in many cases it is freely advertised at a price well under 5 dollars. Therefore, when I see the price, on the basis of 5s. 0d. charged, raised normally to 6 dollars, I am afraid there is little to get out of that. The extreme price boom in the United States in whisky, as in other things, is over. Personally, I am very glad it is over, and I think that, on balance, it will benefit this country.

We think this fall in price is very important indeed to this country. The prices which we maintain for most of our exports are limited by a very sharp fall in many prices in the United States so that although there was a strong prima facie case for doing the thing 12 months ago, and I might well have urged the whisky distillers then, they proved longsighted in their own interests, which coincided with ours, in not pushing the price up to the maximum the traffic would bear during that period. They had only a period of a few months and they proved wise in leaving the price what it was, which is probably the right price for retail prices as they have settled down in New York today. No one would be keener than I if I could see a way out of getting more dollars out of any of our exports. But I should have thought the distillers had made a case to show that if they put up their prices today, they might very easily destroy this very important market and, far from making more dollars, we should get fewer. Therefore, I say with great respect to my hon. Friend and with gratitude to him for raising this issue, because it is important that it should be aired, I am confident that the distillers put up an unanswerable case for maintaining the present price.

It is a happy coincidence that, having passed from Scottish problems, we now come to whisky problems, and I think we are all indebted to the Minister of Food for the frank confession he has made. As one of those who accept most fully the Socialist planning thesis, he admits that at an earlier stage he would have told the distillers they ought to have charged a higher price, and had the hon. Member for Nuneaton (Mr. Bowles) brought this matter up six months ago, the tone of his reply would have been different. [An HON. MEMBER: "Eighteen months ago."] It does not matter how long ago. His reply today has been that the distillers, whom he regards as actuated by the motive of additional profit, have, on the whole, turned out to be right. I do think the hon. Member for Nuneaton was public-spirited in raising this matter, because we are all most anxious to earn the maximum number of dollars from this very important export. In the two or three minutes that remain to ask questions, it is a little discouraging to know that there is no opportunity to reply, but I ask them because they are important. There are two countries to which we have had great and important whisky exports in the past which have, as I understand, in the recent past announced that they are not going to make exchange available for imports. One is India—

The Question having been proposed after Ten o'clock'on Monday evening and the Debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Order made upon 13th November.

Adjourned at Four Minutes after Twelve o'clock.