We have chosen this occasion to bring forward the subject of bulk buying and State trading because it seems to be particularly opportune. I think the importance of the subject requires no emphasis on my part because I believe that today about 50 per cent., or perhaps 55 per cent., of the total imports of the country are bulk-purchased by the Government. As the value of our total imports is something over £2,000 million, we are obviously discussing a subject of very great importance.We think it timely to bring up this subject because up till now commodity prices—and I mean during the period since the end of the war—have either been rising or have remained steady lately after having had a substantial rise. The Chancellor of the Exchequer has on more than one occasion dilated on the high cost of imports and stressed the deterioration in the terms of trade. Of course, during times of rising prices bulk buying is not subjected to the severest test. There are signs, however, that we are now entering upon another phase in the economic cycle. For example, experts expect to see a sharp fall in the price of food grains; they expect to see a record crop of wheat in the United States and it is confidently predicted that the carryover in wheat will be two to three million bushels in that country. If those predictions prove correct, some of the food experts will certainly have to make revisions in their figures and possibly revise their opinion that the world cannot feed itself. This probable fall in the price of bread grains is a very significant index. Furthermore, there has been a sharp fall outside this country in the price of the non-ferrous metals, and nonferrous metals used to be—and I think they still are—a valuable index and a warning about general business conditions, because they enter into so many industries. I hope I shall carry the Committee with me as far as this: no one would dissent from the fact that the probabilities are that we are now entering a different phase of the economic circle. It is against this background that we have to discuss the subject of bulk buying and State trading in these commodities. I make no bones about it: I think it unfortunate that the subject of bulk buying should have entered the political field, as it is mainly a commercial and trading matter.
Then why did you put it there?
I was just about to explain, if the hon. and gallant Member will permit me. One of the main reasons why it entered the political field is that at one time the Chancellor of the Exchequer, the President of the Board of Trade, and other hon. Members opposite put forward the idea that no democratic planning, whatever that may mean, is possible without bulk buying. This theory was advanced in respect of bulk buying at the time when the Liverpool Cotton Exchange was abolished, a step to which we took great exception at the time and a step which now, I believe, the Government themselves very much regret having taken. At any rate, they are not very vocal about it. Whether we are partly to blame or not, I do not know; that is not the subject of my argument. I only say that it has entered the political field and the reason I have given is, I think, the main reason—that it is part of the democratic plan.I do not think that argument, as such, is very weighty if we can show that bulk buying as a system is a vicious one. It seems to be an argument for altering the democratic plan, whatever that means, rather than for saying that the democratic plan can only be carried out by using something which is unsound; or, to use a military analogy, if a tactical plan involves moving troops across the lines of communications of other troops who are engaged with the enemy, that is a reason not for violating military principles but for altering the plan and, possibly, even sacking the commander. Both those courses would, I think, be not inappropriate in the case of bulk buying. Since this defence was first made, I think the supporters of bulk purchase have slightly shifted their ground and lately, I believe, it has been supported by the President of the Board of Trade and others largely as an instrument of Imperial Preference and a means of Colonial development. With this defence, I think, the argument is more weighty. It is obvious that for the purpose of promoting the growth of some particular crop which His Majesty's Government think desirable, one of the methods used might be a fixed price over a long time, and there may be—and probably are—certain commodities for which that is an appropriate weapon. But such a policy has great dangers in it and I do not think it should be the only method by which this stimulation of certain production is achieved. I am sorry to have to say this, but one of the things which has to come into our consideration is whether, over a long time, this country, which is now living very largely on the benefit of foreign aid, will be able to carry out these contracts if the prices of these long-term contracts in three or four years time—when, perhaps, there is no more Marshall Aid—turn out to be wildly above world prices. I do not dissent from the proposition that as a means of Colonial development this is one of the possible instruments, but I think it should be used sparingly and that Ministers should realise that we may find it very difficult to carry out these terms later on. In many instances, I suggest, direct aid would be sounder. I should like to try to examine the proposition that bulk buying is unsound in theory and to show, later, how, when the theoretical basis has been violated, it works out in practice. First of all, bulk buying is unsound in theory because it substitutes for a free market price a single opinion covering very large quantities of commodities—a single decision, very often upon a single day; or, if that is unfair, then upon a number of single days in the year. The free market, on the other hand, where it can operate freely, represents an equilibrium day by day between buyer and seller, between supply and demand, and it is adjusted every day instead of at infrequent intervals. From the point of view of our own country, which has no natural resources except coal and which must depend on the importation of raw materials and the processing and manufacturing of those raw materials into the finished article, two things with regard to the purchase of raw materials are of vital importance. They are aspects of the same subject, but they are two different things. It is quite obvious that over the year it is essential that the British manufacturer should be able to buy his raw materials at prices which do not exceed the prices available to his international competitors. That is one of those blinding flashes of the obvious which I must inflict upon the Committee. The second vitally important consideration is often lost sight of, and that is that manufacturers and traders in this country must be able to adjust the prices at which they have to buy raw materials day by day, to the international price. It will not have escaped hon. Members that if the prices should happen to be too cheap on a particular day that is the moment when goods are taken up, and there are great disadvantages in that, if manufacturers have to buy above the world prices of raw materials, their competitive power, particularly in exports, is destroyed. These things are not achieved, whatever we may think, by bulk buying. I should not like the Committee to think that I am saying that the civil servants, or the experts who give their services to these Ministries, are either incompetent or ignorant of their job. In many cases they are amongst the most skilled in the business. However, what is quite impossible is for men to operate a system of bulk purchase upon statistical data such as they are given now. It is quite impossible for this system to work properly, and we cannot foretell the run of commodity prices by wiring from the course. It cannot be done. I notice that hon. Members opposite argue as though market prices of basic commodities were the result of a very careful series of speculations by the people concerned in the industry and that great judgment and finesse are necessary in fixing them. As a matter of fact, that is not so at all. As a rule the manufacturer, or even the merchant, buys upon his own order book, and when he takes an order for a certain cloth, for instance, he covers the cotton which is contained in that finished order; and so, as a rule, market prices are made by the state of people's order books, not by the exercise of some preternatural capitalist intelligence. That is what happens. To guess the cost of commodity prices correctly one would not only have to have an extremely good idea of what supplies are coming forward, but one would have to know the state of the order book of everyone in that particular industry, and by the time the central bureau of statistics had obtained the statistics they would already be out of date. That is one of the reasons why experts and very competent civil servants, when exercising their powers under the bulk system of purchase, are almost invariably wrong—because they have to make up their minds on insufficient data, and the right sort of man to engage in bulk purchase, if he were alive, would be Hitler's astrologer, or someone of that sort, because it is really only by a metaphysical idea that one could know the facts.
Surely, the argument would apply also the other way, because bulk purchasing means bulk selling, and the people on the other side must be equally incapable of forming the idea of the price?
Not so at all. There are occasions when bulk buying is countered by bulk selling, but that is not always so. Over the entire range of nonferrous metals, which I shall shortly be discussing, there is no bulk selling at all.The next idea which is advanced in favour of bulk buying is that it leads to cheaper prices—that we can get a reduction on quantity. That argument, of course, is put forward by those who have some hazy idea about some small venture in the retail trade. It is well known—and I believe it to be true—that if one buys 10 gross of buttons one will get the individual buttons cheaper than if one bought six at a time. I expect that that is quite true, but it has no application to the subject we are discussing—international commodities on a large scale. I think the proposition—and I really want to be as objective as I can about this, but I think the proposition is quite clear—is that when there is a glut, when supplies greatly exceed demand, the bulk purchaser is able to get concessions from the seller because it is of advantage to the seller to give those concessions since they enable him to find someone who will take part of the surplus off the book. I think I can carry the Committee as far as that. But if that is agreed, the converse must also be agreed. In times of shortages, and those are the times when the merits of bulk purchase are particularly underlined the converse must be true. In a time of shortage the man who wants to buy large quantities at a fixed price on the spot must be discriminated against by the seller, because it is not to the seller's advantage to increase the shortage by the sales of large quantities.
The right hon. Gentleman says it is not to the seller's advantage to increase the shortage. Surely, that is diametrically opposite to the truth? Surely it is to the seller's advantage to increase the shortage?
The hon. Gentleman entirely misunderstands the argument. If there is a shortage, it is to the seller's disadvantage to give concessions in price to somebody who wants to buy very large quantities. I may not have expressed it rightly, but surely what I am saying is quite obvious to anyone. So those who would advance the theory that bulk buying leads to low prices, to reduction on quantity, are really saying that those reductions in price during times of glut, that those concessions which happen in times of glut, must be counteracted by corresponding fines or difficulties for buyers in times of scarcity.The next claim, I think—and I hope to state this proposition fairly—is that bulk purchase leads to stability and tends to banish speculation from the markets in primary commodities. Of course, those who think we can have stability in the price of an agricultural crop are, in my opinion, entirely wrong. There is something inherently unstable in the price of an agricultural crop because it depends on the weather, upon rain and sun and wind, and sometimes pests, and, so far, we have not had any Orders in Council which have attempted to keep the sun and the rain and the pests under control.
Really, I cannot keep on giving way. When I have finished this particular part of my argument I will certainly give way, but there is nothing controversial in what I have said so far.In the economic field, as in anything in a dynamic situation, if we take one part of the dynamic factors and make it static, instability is bound to occur somewhere else, and it is exactly the same if we attempt to fix prices in one of these basic commodities. If we fix the price of cotton too low, land goes out of cultivation, and the cotton crop falls below what is required; and if we fix it too high, we grow too much cotton and a glut occurs. That is what we call, on this side of the Committee, waste. Now I will give way to the hon. Member for Uxbridge (Mr. Beswick). Oh, I have answered his question?
Will the right hon. Gentleman allow me to interrupt him? He is saying that because of the weather and pests and other factors beyond human control it is not possible to be sure we can get stable prices. How is it then that those countries that are prepared to supply us on bulk purchase, taking into account those considerations, enter into long-term contracts at fixed prices with us?
They perhaps think that the price is favourable. I am sorry it is so very simple. However, I am not on that particular point. I am on the point that it is impossible to imagine that we can ever get stability in the price of an agricultural crop.
I am sorry, but I really cannot wait until the hon. Member finds his place again and thinks of something new. That goes for agricultural crops.What about commodities which are not agricultural such as non-ferrous metals? Speaking broadly, nearly all the nonferrous metals which we use in this country are imported. It is only possible to have stable prices for non-ferrous metals when the supply and the demand are roughly in equilibrium. It is quite useless—even if the Minister of Town and Country Planning would allow it—for an Englishman to lock himself into his home or castle, draw up the drawbridge, and say, "I am going to have stable prices for non-ferrous metals in my castle," because these non-ferrous metals are mostly imported from abroad. If there is disequilibrium, there must be price changes. In a rising market—and on the whole markets have been rising since the war due to inflation and other causes—the bulk buyer can be made to look quite intelligent, or certainly he can be made to look non-certifiable. When markets are rising and when the bulk buyer comes to re-sell his purchases, he will not necessarily have to follow slavishly the upward rise of world prices. At that moment, the manufacturer will receive something of a subsidy from the bulk buyer, but that is the moment, I suggest, when the manufacturer has no need of subsidies of all. Subsidies, bad at all times, are much worse when they are not wanted during times of rising prices. Having agreed on that, surely the converse is equally true. The moment world prices start to fall, the bulk buyer will always be found to have bought above the market. I think that we have very clear evidence of that happening lately. However agile the bulk buyer may be—and I would not say that agility is an attribute particularly given to Government Departments—he will always be behind the market. It may be that the Treasury ought to go to the Ministry of Supply and say, "For non-ferrous metals, you ought to take a page out of your own Steel Bill. You ought to say to your officials of the Ministry of Supply that the outgoings in non-ferrous metals must be balanced by the intake in non-ferrous metals, taking one year with another, and, of course, this is one of the years you must take." The main thing is that when the market falls, the disadvantages are then transferred to the manufacturer. I should like the Committee to get some idea of what they are getting for their £16 million a year, by reading extracts from the "Bulletin for Industry," published by the Treasury, which does not go to the general public; as it is considered to be rather high-brow stuff, it goes to the business community. In the "Bulletin" for May, 1949, there is something which struck me like a clap of thunder. It says:
It goes on:"One of the main ingredients in prices is raw material costs."
The Treasury, I am glad to notice, agree with the general justice of my argument. Of course, the bulk buyer is like a doctor who gives steak and burgundy to a man suffering from a surfeit and takes away his grill when he is suffering from, what used to be called starvation, but is now called malnutrition. These are the broad theoretical reasons why bulk buying is unsound. I would add that, although the general level of prices is, of course, very much the concern of the manufacturers, what is of much greater concern is that, day by day and year by year, they should be able to buy their raw materials at prices not higher than the competitive prices. I think that the subject of bulk buying, when it comes to the particular, can rightly be divided into two. First, the raw materials used primarily in manufacture, and, secondly, those used in consumption. Of those used in manufacture, I would suggest commodities like cotton, rubber, lead, zinc, sulphur and hides, and of those commodities bought for consumption, wheat, cocoa or butter. How far does the violation of the common principles of trading and marketing work out in practice? Does it work out as we expected or has the Government to find some way of preventing the inevitable consequences of those who disregard the ordinary economic rules? I should say "No." I want to bring forward some instances. First, with regard to non-ferrous metals, let us take copper. Copper is the raw material of the electrical industry and is known generally in the form of alloy brass. If we assume the most favourable conditions from the point of view of bulk purchasing, that all the copper used in manufacture in this country had to be imported from the U.S.A., the parity of the prices would be £6 or £7 a ton delivered in the works above the U.S.A. prices. Between October, 1948, and May, 1949, the differentiation against the British manufacturer rose to £40 per ton. The Ministry of Supply, lately and tardily—inevitably tardily—have reduced their price. The fine against the British manufacturer is now £23 a ton compared with international competition. That is the extra price which he has to pay against foreign competition. If we look to zinc, the same thing applies. If I had been speaking last Monday, I could have said, after the adjustments on delivery, that the fine or handicap under which the British user of zinc suffers would be £10 or £12 a ton. The price of zinc has fallen internationally since then, and now the fine is £16 or £18 a ton against the British manufacturer. I think that what this means is not badly brought out by looking at brass, and taking high-grade brass composed of 70 per cent. copper and 30 per cent. zinc. The manufacturer of brass now suffers from a fine or handicap of £20 a ton in the fabrication, say, of brass strip. I suppose that the cost of making copper and zinc into brass would be something well under £10 a ton, and he starts off by buying his raw material at £20 a ton above the competitive price. It is, therefore, obvious that the exhortations by the Chancellor of the Exchequer and other Ministers to cut costs and increase efficiency are apt to sound a little hollow. When we turn to lead, very much the same differentiation exists against the British user of lead as in the case of zinc. Today, he has to pay about £16 or £18 more than the competitive price for lead. If this is translated into a simple thing like the sale of a battery, he will start out with a 12 or 14 per cent. disadvantage against the foreign battery, if he tried to sell batteries in the international market. I should like to turn from that to cotton. Cotton, as the Committee will remember, is handled by a different Department from that dealing with nonferrous metals. It comes under the aegis, shall we say, of the Board of Trade, or, if it does not, I think that we ought to be told about that very soon. I was about to pay the Board of Trade the left-handed compliment of saying that, by the nature of their name I think they know more about the ebb and flow of supply and demand than the Ministry of Supply. In cotton bulk buying is worked in a different way, because in the main the Cotton Commission has followed the international price up and down; true, at a respectful distance, but all along there has been an attempt to make cotton available to the spinner at more or less the world price, and I do not think that today the spinner would have very much complaint about the price he is being charged. Sometimes the price here has been over the price at Alexandria or in the United States and sometimes it has been below; but taking the rough with the smooth I do not think his chief complaint is upon the question of price. All that has happened is that the Cotton Commission has followed the international price up and down; but that international price is now fixed by other people instead of by ourselves. The Cotton Commission has been obliged to follow international prices fixed in Alexandria or in New York instead of following international prices fixed in Liverpool. I do not think that is a desirable outcome, but it is what has happened. Therefore, taking these commodities together with the non-ferrous metals there is neither parity nor stability; and taking cotton separately, although there may be something like parity of price the argument that the abolition of the Liverpool Cotton Exchange would lead to stability can be shown to be completely unfounded. I do not want to detain the Committee very long, but I must say a word or two about two other commodities which I count as commodities of consumption, which are subject to rather different considerations from those which apply to commodities of manufacture. I refer particularly to wheat and coarse grains. I would say that the Canadian Wheat Agreement has probably meant that His Majesty's Government have bought wheat at slightly below the price which other buyers would have had to pay. But it is very difficult to be even certain of this because, of course, the withdrawal of a large part of the surplus of Canadian wheat leads to a hardening of price for balancing quantities. However, I believe, and would certainly concede in an argument, that through the Canadian wheat agreement we have been able to buy our wheat cheaper than many other buyers. I believe that again there will be a sharp fall in grain prices and that the Nemesis which overtakes bulls who have not hedged their commitments will overtake His Majesty's Government. Perhaps we shall have an opportunity of debating that. When grain prices have fallen still further I think this Nemesis will overtake His Majesty's Government, who in this, as in so many other things, are the largest uncovered bull that has ever been seen in history. I am sorry that some of these rather inelegant phrases should have to be introduced into the Debate. Perhaps hon. Members would prefer the phrase: His Majesty's Government will be seen as stale bulls in a bear market. The story with coarse grains is very much the same as the story with nonferrous metals. The Russian and Andes Agreements covered one year's maize, and the prices which were given to the House were £29 a ton f.o.b. for Russian maize and £27 a ton for Argentine maize. Unfortunately, by the end of 1948 the rest of the world decided to ignore the President of the Board of Trade and the Minister of Food, and the price had fallen to £20 a ton; and now large quantities are being negotiated at £17 a ton. This, of course, is the ordinary result of bulk purchase in a dynamic market at fixed prices, and shows that these purchases end by being mere gambles. To sum up, my submission is that bulk buying is insupportable in logic. Wherever we check up that statement, wherever we look at where the principles have been violated, we see that the results are exactly what we should expect. I do not know—and, to say the truth, I do not care—whether bulk buying is necessary to democratic planning or not. All I do know is that bulk buying is bad, and I believe that it should be done away with and the terminal markets reopened as quickly as possible. In saying that, I do not for one moment skate over the difficulties which there are over exchange considerations in reopening the terminal markets. Yet it is possible to make a beginning. The rubber market has not so far been much of a success; but it has at least begun to make a free market, and other countries which were unwilling to use it, are now beginning to come into it. I believe that these terminal markets should be reopened, and I do not really think that some of the treasured tenets of Socialism would be very much disarranged if bulk buying were dropped. Indeed, I think that embarrassment to the Labour Party over the remainder of their life in Government, which no doubt will be short, would be done away with, because if there are large falls in commodity prices, everybody who loses an order will, instead of blaming it on world conditions, blame it on His Majesty's Government—and they will be right. I do not think it would disarrange any of their tenets; but I do think that it would remove a source of embarrassment. Would it be asking too much to ask that His Majesty's Government should look at this matter outside the political arena altogether and try to abolish a system which I am absolutely convinced will be a great handicap to British traders and manufacturers in the much more difficult times which will shortly attend us?"The fixing of prices over a period by long-term contracts is an advantage when prices are rising and a disadvantage when prices are falling."
We welcome very much this discussion because there has been a great deal of argument, in public, in the Press, and at Question Time in this House, on this problem of bulk purchase. It has been alleged by those who disagree with the Government that our policy of purchasing food and raw materials of various sorts by the machinery which we have adopted has been harmful, has handicapped our industries, and should immediately come to an end. We are therefore delighted when that view is expressed publicly and fully by the right hon. Member for Aldershot (Mr. Lyttelton), who has put his arguments very forcibly and when we are given an opportunity of controverting those arguments, not in theory but by facts.The right hon. Gentleman talked throughout of "bulk purchase," a method of buying which he dislikes, but he did not specify exactly what he meant by "bulk purchase." There are various forms of purchasing of which I gather the right hon. Gentleman disapproves, and I propose to follow him by arguing that what he calls "bulk purchasing" has been exceedingly beneficial and should not be ended. By "bulk purchasing" I mean the various methods by which we buy very large quantities of goods—whole crops, from certain countries—by which we undertake, by central buying, to purchase on either long-term contracts at a fixed price for a year, or maybe more or less, or the purchase of commodities by Government agencies in various parts of the world, maybe on short-term bases, or by means of spot purchases where those are necessary. All that type of buying was, I think, covered by the right hon. Gentleman in his condemnation of bulk purchasing. He said that he considered bulk purchasing was unsound in theory, particularly because it disregarded the ordinary economic rules. Well, I wonder what the ordinary economic rules are nowadays? I am afraid that new rules are being forced upon us and on the world every month, and we cannot possibly conduct our international trade or our industrial affairs according to conditions which existed 20 or 30 years ago, which is really what the right hon. Gentleman's argument advocates. There is a great deal to be said—although I am not saying that I accept it—for the case that where there is a really free market, when currencies between all countries are easily convertible, certain advantages will be obtained by not buying commodities in bulk. That seems to me to be a tenable argument, although even so I would not agree that it could be applied to all commodities. But it seems to me to be looking at the problem in a really fantastic way to suggest that we can apply what might have been applicable and desirable to conditions existing a long time ago to completely new conditions, such as those existing today where all the old economic rules are broken, where there is restriction on currency conversion between one country and another, and when we in this country are in particular difficulty over our dollar payments. We must, therefore, adjust our international trading and the purchasing and selling of our commodities in the light of these conditions. I suggest, therefore, leaving aside all theory—and I want to argue the practical side of the problem, showing the actual consequences of our bulk buying policy and the consequences that would fall upon us if we abandoned it at the moment—that I can prove to the Committee fully that the country, our industry and our people have received immense benefits through the policy of bulk buying, which the right hon. Gentleman so dislikes in theory, and that we should be in a very serious situation indeed if we were to abandon in any wholesale way that policy which has served us so well up to now. Let us look at the exact consequences of our policy of bulk buying during the past few years—I will come to the present situation shortly. There were some very interesting figures published in the Economic Survey of Europe in 1948. This is a document prepared by the Research and Planning Division of the Economic Commission for Europe. This document showed, in table 66 on page 56, these very interesting figures for the years 1947 and 1948, and I hope I may be allowed to inflict them on the Committee as they are quite short. They deal with the prices of imports into this country compared with the United States price levels for the years 1947 and 1948, based on the year 1938 which is given an index of 100. On that basis, in the year 1947 the price index of imports into this country for food, drink and tobacco was 212, whereas in the case of the United States it was 260. When we come to raw materials and articles mainly unmanufactured, the figure for this country was 235 and for the United States 276. Last year, the price on that same basis for food, drink and tobacco was 233 for this country and 282.5 for the United States, and for raw materials and articles mainly unmanufactured 272 for this country and 297.5 for the United States.
Is that c.i.f.?
Perhaps the right hon. Gentleman would also give the Committee the benefit of the proportion of total consumption represented by imports into the United States and imports into this country, which is of great significance for commodities like tobacco?
I know that any comparison of this sort is not exact—of course it is not. We in this country import many more goods than the United States. These figures, prepared by an impartial body, are not only interesting but extremely significant. I want now to read a comment contained in this report.
Further, the report says:"The explanation of the relatively low prices paid by the United Kingdom for its imports of food and raw materials appears to lie largely in the extensive use which it has made of long-term contracts and bulk purchase agreements covering a large proportion of its purchases."
These figures and comments from an impartial source give some indications of the immense benefits brought to this country by the policy of bulk purchases pursued by the Government, a policy which the right hon. Gentleman dislikes so much because it is against the natural order of things. I propose to deal in particular with the raw materials which are the responsibility of my Department. The right hon. Gentleman referred to many others, and they will be dealt with later on by my colleagues. The right hon. Gentleman made a particular attack in regard to non-ferrous metals. I know he is knowledgeable about non-ferrous metals, although I too have had some previous experience of these commodities. If we had not during the last few years adopted this policy of bulk purchasing, which the Opposition dislike so much, it is quite certain that many of the industries using these raw materials would have had to close down from time to time."In the field of raw materials, the United Kingdom likewise appears to have purchased at prices considerably lower in relation to prewar than those prevailing in the American market. This was particularly true in 1947 when, for instance, the average price, in dollar equivalent, paid for timber, cotton, and hides and skins imported into the United Kingdom was about two-and-a-half times pre-war compared with three to four-fold increases above the 1938 level in United States prices."
It would have caused not only an upset in our export programme, but unemployment to the people concerned. The right hon. Gentleman says "rubbish." I am glad at any rate that many of those I speak to—the leaders of the industries who consume these com modities—appreciate my point to the full.Let me give two examples. Take copper: before the war a great deal of the copper from Rhodesia, which forms a very large part of our supply today, went to various parts of the world. Following an arrangement the right hon. Gentleman made during the war years——
—but which terminated at the end of the war, we very wisely continued an arrangement with the Rhodesian producers by which, on a sliding-scale of prices, they undertook, with few exceptions, to provide us with all their output. If they had not done that as part of an agreement of mutual interest, a great deal of that copper would, without question, have gone to the former markets to which the Rhodesian producers used to sell, and we should not have been able to buy the copper to fulfil our requirements even from the United States, because owing to a serious world shortage, it was just not there. We should have gone without some part of the copper we needed during these last few years in order to build up our industry and achieve substantial exports.The same applies to lead. If it were not for the agreements—gentlemen's agreements, or call them what you like—which we have with producers in Australia and Canada, their output, or a good part of it, would inevitably have gone elsewhere and we should have been very much shorter of lead than we have in fact been. As it is, we have had to ration lead to something like 60 per cent. of requirements, and it has been quite serious. If we had not had these bulk purchase agreements we should have been without even the amount of lead which we did get and it would have had a serious effect on our economy and on our recovery during these past few years. It is very clear—and I believe anyone who has followed the position agrees—that at any rate during the last few years, when there has been a shortage, we have not only immensely benefited as a result of our policy of bulk purchase, but many of our industries would have been in a very disastrous situation if we had not pursued that policy. I want to deal fairly with the argument put forward by the right hon. Gentleman. He said that it was all right in practice when prices were going up, even though theoretically it is all wrong, as there might be benefits to someone somewhere. But, when prices were falling these bulk purchase agreements must be ended as quickly as possible, and free enterprise allowed to act as it did in pre-war years in order to bring us the supplies we need. I want to deal with the problem again solely from the angle of the non-ferrous metals which we must buy if our economy is to prosper. Quite obviously it has been easier and more convenient for everybody concerned, particularly for the bulk buyer and the consumer, when prices were going up and when there was a shortage. The producer loses under those conditions where prices are fixed for some time ahead. I want to repeat what I said in the House a few days ago in regard to these metals and our long-term agreements. We fix the price three or four months ahead on an average. When prices have been rising, we have had the benefit of that rise in price, and we have, in fact, been able to buy our metals on the whole slightly cheaper than if we had bought them without those contracts or if they had been priced on the day of delivery of those goods. There has been a substantial price advantage to everybody concerned, apart from the fact that we have also been able to obtain goods which might otherwise have by-passed this country. The first point I want to make is to assume—an assumption which I do not accept for a moment—the correctness of the argument which the right hon. Gentleman put forward namely that it might have been all right or advantageous when prices were going up, but now, when prices are coming down, it is going to be damaging to us and that we should therefore terminate these arrangements straight away. I suggest to the right hon. Gentleman and to the Committee that to do so would be wholly wrong and might be looked upon as something like sharp practice by many of these producers, who have played the game with us so very well, and have entered into agreements with us from which we have had the benefit. Moreover, these producers are mostly Empire producers, and they wanted to help us, if possible, out of a feeling of kinship. Now, when it looks as if these contracts might disadvantage us and bring benefit to them, it is suggested we should cut them, and leave those producers in a falling market without the security they had before. That would be a wholly reprehensible thing and something which no sound business concern with any reputation would do. If we want to change our buying system for these commodities, we should do it as a result of consultation and discussion with our partners, and see that no disadvantage is suffered by those people who have helped us during the last few years.
The right hon. Gentleman appears to suggest that I had advocated a system by which contracts and arrangements entered into should be repudiated. I did not say anything of the kind. I was only speaking about the system which ought to be stopped.
I think there is some confusion about what I was saying. No one suggested that any current price contracts should be broken, but the suggestion is that these general arrangements for taking goods at certain terms, even for three months, should suddenly be brought to an end when we think it will help us, although it will be doing the producers considerable damage at the same time.
Is the right hon. Gentleman suggesting that because we have employed bulk purchasing on rising markets we must continue it on a falling market?
I do not think the hon. Gentleman heard what I said. The point that I was making was that I was repudiating the plea of the right hon. Gentleman that now that there appears to be a change in the way prices are going, we should immediately tell the Empire producers that our arrangements are finished, that we are now going to revert to private trading, and that they can sell their goods as best they can on a free market.
This is important, and we should be clear as to what the right hon. Gentleman means. He has come to the end of his metal contracts. He is now faced with the necessity of renewing the contracts on a certain basis with the people with whom he has dealt. Will he make new contracts in view of the falling market, and is he going to make them on a long-term, bulk buying contract basis conditioned on the falling market, which at certain periods give no great advantage to the producer, who will only be able to sell at ruling prices, or is he going to continue his benevolence and buy at higher prices than world prices?
The only point I was making is that if we are going to terminate the present system of buying from the Empire producers, we should be wholly wrong to do it quickly and suddenly, as appears to be suggested by the right hon. Gentleman, and if we do want to make some alterations, as we probably do, it must be done as a result of discussion and agreement.Let me now deal with another argument put forward by the right hon. Gentleman, which has been advanced outside the Committee as well. It is said that at the moment the result of our bulk purchase agreements is that they have had the effect of bringing about a difference in price in these non-ferrous metals for the consumer here compared with the consumer in the United States, and are, therefore, doing serious damage to our industry and to our export trade. It is argued that this is very terrible and one of the inevitable results of the Government's policy. I should like to deal with that problem, because as everybody knows there is at the moment a significant difference in price, and the figures given by the right hon. Gentleman are broadly correct. I should like to put one or two points before the Committee in regard to this matter and to ask a question. First of all, to what extent is this price differential seriously damaging our vital interests, particularly our export trade? It has been suggested in some quarters that this price differential is having a most serious and damaging effect on practically the whole of our export trade. First, I want to give some general figures, with all reservation, because I know that if one generalises too much one may be falsifying the real situation when one comes down to detail. However, these figures are important. It should first be realised that our exports consist only to the extent of 15 per cent. of imported raw materials Therefore, if there is a price differentiation of even up to 10 per cent.—and it is nothing of the sort—in the price charged to the consumer of metal in this country and the price charged to the consumer in the United States, the net effect on the price of the United Kingdom finished article would be about 1½ per cent. I admit that this an average figure. I said that I made this observation with all reservation, but I want to put it forward because to some extent it makes nonsense of the argument that our export trade generally is being ruined because of the difference between the prices of non-ferrous metals in this country and in the United States.
The argument seems to be that charging the consumer of copper £23 a ton does not matter. Is that right?
I am sorry, but I cannot repeat the argument. The right hon. Gentleman obviously did not grasp it.
I am quite unable to understand the right hon. Gentleman. Does he mean that the cost of raw materials does not matter to our production costs in this country?
My right hon. Friend stated exactly how much it mattered.
I admit that there may be a difference of 1½ per cent., but that must be considered together with production costs, wages costs, tariff barriers, dollar shortages and all the other things which go to make the success or failure of our export trade. I repeat that I use these figures to counter the wild arguments put forward that our export trade is being ruined by these price differences.
Will the right hon. Gentleman explain a little more clearly exactly what is meant by the 15 per cent. which he quoted? It is not clear. Was the 15 per cent. the total value of all imported raw materials used for the exports of this country? Did it include food, or was it only raw materials?
The raw material content of our exports includes 15 per cent. imported raw material. I hope I have now made that clear. I admit straight away that to talk about it in general terms of that sort is all very well but, though it answers the wild accusations which have been put forward, what we have to consider—it is our duty as a Government and my duty as Minister of Supply—is the effect on specific trades where the effect may be very much more substantial—and in fact is—and to be quite sure that our exports in those trades are not seriously affected by the differences in price. It is quite clear—I admit it straight away—that any difference in price of the raw materials must of course have some effect. The question is whether we should follow the violent fluctuations of prices in the United States and adjust our prices immediately to the same extent as the prices in the United States, and whether that would benefit the nation as a whole, taking everything into account. The interests of the exporters are not the only considerations to be taken into account; there are also budget considerations which are not without importance.I want to make two points about our exports. The right hon. Gentleman pointed out that the difference in the price for copper and zinc would have a material effect on the exports of brass strip where, he says, the raw material content in the final price make-up is very substantial. He asked what about all our exhortations to exporters when the makers of brass strip, for example, are put to this very significant handicap compared with their American competitors. I want to assure the right hon. Gentleman that copper "semi's"—brass strip is one of many—is one commodity the export of which we have never tried to increase. It is an export which is of doubtful advantage to this country. What happens is that copper comes in, from the United States, among other places, because we have to buy it, and it is turned into "semi's" at very small additional cost—for some the conversion cost is very small—and exported maybe to a soft currency country, so that the net advantage to this country is doubtful. In all probability it is a disadvantage to this country.
I am sure that the right hon. Gentleman does not wish to mislead the Committee. The significance of having a very high cost on things like high-grade brass strip is in relation to the export of sporting cartridges, and so on.
There is a substantial export of copper "semi's," of brass and so on, and that is the industry which is most severely hit by this price differentiation. The point I am making is that this is not an industry whose exports are really advantageous to this country except to a very small degree and in certain limited spheres. When we come to highly manufactured articles where the conversion value is high, of course the raw material content factor becomes correspondingly low. The effect on a finished product worth £200 or £300 of a difference in price of the raw material, of 10, 15 or even 20 per cent. is not a large one. The difference is, in fact, small.
Will the right hon. Gentleman agree that, whatever the difference is, if it is a difference which operates against our getting an order, it is a very large difference?
Certainly, if it really does make a difference between getting or losing an order. I want to put this important point to the Committee. I have discussed this problem of price differences with the various industries most likely to be affected. Two of the industries whose export trade is valuable and who are considerable consumers of copper and lead—I would rather not mention which industries they are, but I will tell the right hon. Gentleman later if he wishes—put this to me quite definitely. They said, "We should be embarrassed, and we do not want you to put the price down immediately to the American price. Violent fluctuations of that sort bring about certain real disadvantages, and it would be very much better from the point of view of our industry if violent fluctuations in price in America were followed slowly rather than rapidly by changes in price in this country." That was their view, and I think their arguments were sound. Therefore, we have to take all these things into account—and this is particularly important coming from those two industries—when fixing our prices for non-ferrous metals.I want to put another point to the Committee. Because there is a higher price here for copper, zinc or lead than in the United States, it does not necessarily mean that the products made from those non-ferrous metals in the two countries will be so very different. In the United States, as there is no Government bulk purchasing which guarantees supplies, there has presumably been much more stocking up by consumers than there has been in this country, and therefore they have stocks in their works which they have to work off. They are, therefore, not likely to take an immediate loss on the stocks which they have and sell their final products on the basis of a raw material which is today £20 or £30 less than their purchase price. That is a factor which should be borne in mind, because it is important.
They have a futures market on which they can cover if they are not certain about the immediate outlook.
There is practically no futures market at the moment.I want now to come to another aspect of this problem, one which has been raised many times in the House, and that is whether the time is now ripe for some abandonment of bulk purchasing of nonferrous metals and possibly the opening of the London Metal Exchange. I know that the hon. and gallant Gentleman the Member for Macclesfield (Air-Commodore Harvey) was going to raise this matter on the Adjournment last night, but he was good enough to give up his opportunity because this subject would be discussed today. I do not want to say very much about it, because I have indicated that it is under consideration by the Government at the moment, but in view of the fact that the advantages have been so freely and fully stated and the difficulties have not, I want to put forward—without in any way prejudicing the decision which may finally be arrived at—one or two of the difficulties which would arise through the introduction of a free market for some or all metals and the opening of the London Metal Exchange. I suppose I have had more experience of the Metal Exchange than almost anybody in the Committee, including the right hon. Gentleman, because I worked there for a long time. The Metal Exchange operated effectively in conditions of free international trade and free conversion of currency, and rendered a service to industry which was also of some value economically and financially to this country. If it were opened under present conditions, with the restrictions that exist—the inability to buy freely in dollar countries, the inability to export metal freely from this country to soft currency countries—it is exceedingly doubtful, I do not put it higher, whether there would be a free market in anything like the sense there was in the old days, and whether it would provide those facilities asked for by industry and which I admit are desirable if they can be provided, namely, facilities for free hedging. It is doubful whether a market opened under present conditions would not be so inevitably restrained and restricted that it would not serve the purpose which those who advocate its opening would require of it. Secondly, there would be a serious risk that, if there were any form of free market in this country, there would be a drain on our dollar resources because, amongst other reasons, we could not assure to this country the import of those sterling non-ferrous metals which now come to this country under our bulk-purchase agreements. We could not guarantee that they would come to this country and, if they did not, we would have to make up our requirements with purchases from the United States or Canada in dollars. Therefore, before any decision is reached on this matter, most careful consideration will have to be given to those two problems. In particular, the Committee will be aware that one of the metals which used to be dealt with on the Metal Exchange, tin, is now subject to a world allocation scheme, and another one is strictly rationed in this country because of its great scarcity. All those factors would make it exceedingly difficult to establish anything like a free and useful market for metals in this country at the moment. It has been argued, inside and outside the House, that we should bring down the prices of metal close to the American prices because it does not matter if the Exchequer loses the money as, on balance, it would be of benefit to our exporting industries. Apart from the arguments which I have just put before the Committee about the desire of some of the exporting industries to avoid violent price fluctuations and to have a gradual adjustment, I would put forward a further observation. The Committee are entitled to know that during the years when prices were rising and we were bulk buying, we gave the advantages of that bulk buying to industry and to our exporters. It is all very well saying now that they did not need them at that time and could have well gone without those advantages. At that time our exporters were trying not only to get back into their old markets but to develop new ones, and it was essential during the last two or three years, to give them every possible opportunity. Therefore, from the Treasury angle, we took the line that we would not, as a Government, take such advantage as we might have done of the rise in prices. We passed to the consumers all the advantages of the cheap prices obtained, with some small addition to cover us against possible losses in future. At the end of the last financial year, that is the end of March, 1949, we had accumulated as a result of our bulk purchasing a small cushion of roughly £6 million. Of course, if we adjusted quickly our selling prices in this country down to the American prices, that sum would be swallowed up immediately, and there would be a substantial loss on top of it. It is a question of debate, and I do not want to lay down any principles at the moment, as to what extent this difference in prices—which is necessitated by our need to buy sterling goods and to avoid the purchase of dollar goods—should be carried solely by the taxpayer or to what extent it can be borne without damage by the consumer of these goods. I want to put this consideration into the minds of hon. Members, that as Marshall Aid comes to an end there will be all the greater scramble by buyers in most parts of the world to purchase sterling raw commodities. Therefore, it will be all the more important for us to be certain in the future that we can rely on those sterling non-ferrous metals which we have been buying in the past so that we have not to buy these commodities in dollars, which would seriously upset our dollar position. As the demand for sterling commodities will inevitably increase substantially, we have to be particularly careful to see that we make certain of acquiring those sterling commodities. This may mean that we have to pay rather more for them than if we were free to buy them with dollars. There may be for some time a difference in price of the same commodity bought in sterling as compared with the price at which it might be bought if it were paid for in dollars. That is a situation we must all face, and it arises from the dollar disequilibrium which, unfortunately, still exists and is likely to exist for some time. I have tried to argue on facts and not on theory the case for bulk purchasing, the benefits which it gives this country and without which we would have been in a sorry state, and the need for continuing that policy. One can say what one likes about the theory of it—the right hon. Gentleman said a great deal—but on facts I maintain that any impartial 'survey of the problem shows that it is inevitable, if our industry is to survive and prosper, that we should continue our bulk purchases, to some extent at any rate, and that the benefits derived from them in the past have been essential for our recovery. We shall continue to try to balance the various considerations, though I agree that that is not easy under present conditions. We are obviously anxious that there should not be a greater burden than is necessary—if any burden at all—on the Exchequer as the result of these transactions into which we enter. It is even more important to be sure that we do not have to purchase goods with dollars when we could buy them with sterling, even at a slightly increased price. It is desirable to see that our industry, and particularly our export trade, is not damaged by that differentiation in price, and that we do not lose markets by it. Those are all factors which we have to bear in mind. I believe that our policy of bulk purchase of nonferrous metals in the past has been successful, and I am confident that, even under the more difficult conditions which exist today, it will continue to be successful.
I should like to apologise to the right hon. Gentleman for not being here at the opening of his speech. I felt last night that it would be better to delay what I was going to say, which concerned principally the opening of the London Metal Exchange, so that it could fit into the order of today's Debate. The right hon. Gentleman, as he said a few minutes ago, has got more experience than any of us in dealing with non-ferrous metals. That may be so, but he has had a good Socialist training since he gave up that vocation, and it surprised me to hear the argument which he put forward, in view of the experience he has had in that industry which, I agree, is a complicated and a difficult industry. Nevertheless, I think he made a very good showing out of a poor case, if I may say so, because it is a technical matter.I am surprised that four years after the war the London Metal Exchange is still closed. I can quite see that at the end of the war it was necessary to carry on bulk buying until trading conditions became a little more settled. In the early stages it may have paid the Government, and the country to some extent, to have the Ministry engage in bulk buying, but it is certainly not paying the country today, nor is it likely to do so in the future. We must take into account, with the sellers' market drying up, that if there arises the question of missing a deal, whether it is by only a few pounds, it is all-important. It may be only a matter of 5 lb. weight of copper, in a manufactured article but when we are competing with other countries on the Continent who are now getting into their production stride, we may lose business as a result of the Government's policy. With limited restrictions, I should have thought that this was the appropriate time to take off these controls and allow the Metal Exchange to operate, with certain safeguards to protect our dollar currency. I am told by people in the trade that before the war the London Metal Market over a period of years earned many millions of pounds in the form of commissions, warehousing and so on, and much of that was in dollar currency. We are getting none of that at all today. There are companies which operate in Brussels, and, of course, in New York, which are making big profits for their countries, but we are getting none of that here. It seems unfortunate that this business is excluded. After all, it is an invisible export upon which this country was built, the same as banking and insurance. This country, if it is to survive, has got to make its way when we are competing with countries which are gradually improving their methods of production. We have got to trade by using our brains and ingenuity, in selling our "know-how" in this type of business. The Ministry of Supply has, of course, recently made adjustments in the prices of these metals, but, as the "Financial Times" said in what I thought was an extraordinarily good leader last week, it is too little and too late. The prices of copper, zinc and lead today are still away above the New York prices. In the case of copper it is £23, lead £15 15s, and zinc £16 15s. That is after allowing for freight and warehousing costs of approximately £6 to £7 a ton. That is a lot of money when the industrialists have got to buy the raw materials, and although the right hon. Gentleman said that he had had assurances, or an opinion given to him by two industries, that they were fairly content to go along as they are at the moment, there must be many others who are dissatisfied. It is a question of degree. Some industries may not be very much affected, but I am sure that others, such as those making cables and where these non-ferrous metals form a large part of the finished article, will suffer a disastrous effect on their overseas sales. I believe the Minister said this question of opening the London Metal Exchange is under review, and of course he has got to consider every aspect of the case, but I hope he will not delay too long in making up his mind, because I am told that the Bank of England has agreed to the proposals worked out by the Metal Exchange itself. If the Bank of England today agrees to a proposition it must be a fairly good one. After all, it is now nationalised and that ought to speak for itself. Are the Government going to continue charging consumers prices which bear no relation to the prices in New York? I can only think that that is being done to offset the losses which would otherwise be made by the Ministry of Supply if they came into line right away. After all, the Minister himself, when he was speaking at the British Industries Fair at Birmingham on 11th May, appealed to all sections of industry to reduce the prices of British goods for export. How can they comply with that specific request of his unless they can get the raw materials at the market price?
Would it not be better for the difference between the New York price and the British price to be embodied in the export price of commodities manufactured by those industries which are experiencing no export problem, such as the electrical equipment industry'? Would that not be better than to pass on this loss to the taxpayer?
I am not quite clear what the hon. Gentleman means. If he means that the difference should be included in the price, that will not be very helpful to manufacturers in this country who have got to compete with manufacturers in other countries. I cannot see how that can possibly be done with the diminishing sellers' market. Under the bulk-buying system it is incumbent upon the Ministry to secure adequate supplies of metals for this country, and I should imagine that the country must have enough metal for a period of from three to six or nine months ahead. That is the period for which it is necessary to buy ahead in order to have adequate stocks. In fact, I should imagine that we have probably got stocks of metals to last until the end of this year at least.The producers naturally try to get the highest price they can for their metals. In a rising market the producers are unwilling to sell at the fixed price for delivery ahead. That stands to reason. Then in times of scarcity the Ministry are unable to dictate buying terms. Thus, in a rising market the producer sells for forward delivery on the basis of the United States prices ruling at the time of delivery. In fact, the producer and not the Ministry of Supply gets the benefit of the rise in price. Conversely, in a falling market the producer is not so willing to sell for forward delivery at the prices ruling at the time of delivery; he prefers to quote a fixed price. It seems to me that the Ministry of Supply get the worst of both worlds under this method of trading, and they are also in the unenviable position of having to supply metals whether the price goes up or down. Much has been said about the civil servants who carry out bulk buying. For my part, I think they do their best and I think in the circumstances they do well. I should like to offer them a word of praise for their difficult task. It is a difficult task, whoever is doing it, but it is not their fault if the prices are high. I think the fault lies—indeed, it is inherent—in the bulk-buying system. One often hears civil servants being slanged. I believe they have done their task fairly well. On 9th May last, I put a Question to the right hon. Gentleman about the re-opening of the London Metal Exchange, and this is what he replied:
I think that statement is very far-fetched indeed, because if the London Metal Market had been functioning in 1946 onwards we should have had more and not less metals from which to choose."If it were not for the fact that we have been bulk purchasing metals many of our manufacturers would have been without their raw materials."—[OFFICIAL REPORT, 9th May. 1949; Vol. 464, c. 1498.]
The right hon. Gentleman shakes his head; he does not agree. I have spoken to people who have been in the metal industry longer than he has, and they are firmly of the opinion that the stocks would be better. We have seen countries like France, Switzerland and Sweden, in anticipation of bulk purchases by the United Kingdom, operate before we entered the market. Matters cannot go on like this; if they do the country will be landed into serious trouble in trying to sell its manufactured goods. Experts do not think that the Ministry's purchases have any real influence on the price at which metal is bought. Prices are governed by New York quotations. I do not believe that the Government have been very clever in the last few months. It is easy for them to look back and say, "We did very well in the early days"—they probably did—but the country was better off then than it is now and could afford to stand a loss if one was made.Before the war this country was the centre of world trading in non-ferrous metals. We want to get back to that position if we can do so without endangering our dollar currency position. I suggest that if dollar purchases are made they could be conditional on a dollar sale. A clause could be inserted in the contract that the metals are not for resale. Some companies on the Continent might perhaps make a resale regardless of the guarantee given, but they would soon be found out and British brokers could refuse to deal with them in future. It is not as though supplies are scarce. The tendency now is for metal prices to come down, and they will probably continue to decrease, although there may be some fluctuations. I am told that the Americans would welcome the reopening of the London Metal Exchange; it would assist them, and it would certainly assist this country. We recognise that certain restrictions would be necessary. The charge is often levelled against the Conservative Party that we want to sweep away all controls, because we think they are unnecessary. That is not so at all. Where controls are necessary, I agree that they should be retained. I ask the right hon. Gentleman to look further into this question, and reverse the present position. If, over a period, things did not work out well, and we were losing dollar currency, there might then be a case for doing what is being done now. If the country continues to be governed by Ministers who are dogmatic about controls, the crash will come sooner than it is expected. The Government have every chance to pull us out of the mire by letting us get back to proper trading methods so that we can earn money by the brains of our traders.
The hon. and gallant Member for Macclesfield (Air-Commodore Harvey) quoted the "Financial Times." I want to quote "The Times," because it seems to me that the Tory Party, in the Debate so far, have failed to relate the question of bulk buying to other analogous questions, such as the balance of payments problem and the problems of transferability and convertibility. By inference, "The Times" this morning, in what I think is a very well-reasoned and objective leader, said that this subject could not be discussed in a theoretical vacuum and that
The question of bulk buying must be related to present currency difficulties. It seems to me that Tory arguments are based on a nostalgic and understandable desire to get back to the halcyon days of pre-1914, when we were on top of the world. I can understand that, but the fact is that the laissez faire which then existed has gone, and that the great example of the virtues of laissez faire—the United States—never really practised laissez faire, certainly not international laissez faire. We must recognise, as my right hon. Friend said, that we are passing into a world the pattern of which has not yet emerged. It is quite clear that very large sections of the world's population will not identify themselves with the laissez faire system. Departure from bulk purchase would entail a return to that system. It is also clear that the primary producer will not again tolerate what has happened in the past. The Tory argument today was that we should buy cheap and sell dear——"bulk-purchasing arrangements of some kind are probably indispensable so long as the country's resources of foreign currency are so deficient."
That is what the Government are doing in cocoa.
Millions of people, who will have a profound influence on the future course of international affairs, have woken up, and are now beginning to demand greatly improved living standards. The business of buying cheap from primary producers and selling dear has gone for ever.
If it has gone for ever, perhaps the hon. Gentleman would speak to the Minister of Food. Profiteering is now being done by the Ministry of Food in buying cocoa cheap and selling it at a high price to America and other countries.
I think my right hon. Friend the Minister of Food is to intervene in the Debate and, if so, I have no doubt that he will deal adequately with that point. I also hope that my hon. Friend the Member for Devonport (Mr. Foot) will be able to catch your eye, Mr. Deputy-Speaker, because I am sure he has something to say about the Empire. I would merely say that the West African is getting more for his cocoa today that he has ever done in history and that the United States, an immensely rich nation, is quite capable of paying a fair price for cocoa which she buys in the sterling area.
What about the starving people in Europe and the rest of the world who, by the Ministry of Food's ruling, have to pay exactly the same price for cocoa as is being paid in America?
Did not the hon. Member for Wednesbury (Mr. Evans) suggest, a few moments ago, that we should charge high prices abroad?
What I said was that it may be better to include this price difference in the charges made for exports that are still in heavy demand, rather than pass it on to the taxpayer. That seemed to me to be the intelligent thing to do.There is an inference in the Tory Party's argument that our present austerities and problems are due, very largely, to this Government. That is what is said. I want to say at once that that is a dishonest and mischievous argument because the problems confronting us at the moment are very largely due to circumstances outside the control of any British Government. They arise very largely from the fact, as the right hon. Member for Aldershot (Mr. Lyttelton) said, that the only essential raw material which we have in this country in quantities adequate to our needs is coal, and that all the other primary products such as cotton, copper, oil, wheat and tin have to come from abroad. That is the great problem which has always confronted the British people, but it confronts us more today than ever before. Before the war, we imported into these islands 50,000 tons of foodstuffs every day, and even now 40 per cent. of the timber that goes into every British home has to come from abroad, mainly from dollar sources. Our most grievous problem today is shared by many nations, and it arises from the fact that, due to the devastation and dislocation of war and the interruption of pre-war sources of supply, we are being compelled to queue up at the only shop in the world with a surplus for disposal. The shopkeeper will not take francs, marks, lire or pound notes; he will take only dollars. Let it be said that had it not been for Marshall Aid, we should have been in a real tangle by this time. It does no good to deny the fact that we are living on borrowed time paid for by the United States of America. The present position is that if we have no dollars we can have no coffee; no dollars, no tobacco; no dollars, no Betty Grable. This is the reason why Canadian salmon are now living to a ripe old age and Canadian apple trees are being cut down. It seems to me that in these circumstances bulk purchase and reciprocal trading agreements are the only way out. Last year, according to my reckoning, our dollar imports came to about £450 million of which Marshall Aid found £325 million, and the balance was found by dollar earnings. As a nation we are profoundly grateful to the Americans for Marshall Aid, but it is now 2,000 years since the Roman Legions landed on the shores of Kent, and 2,000 years of history is a very long time. In my view, it ill becomes a proud and ancient race such as the British to be the tail to anybody's kite, including that of our good friends the citizens of the United States. Therefore, we have to see how we are going to escape from this dollar thraldom, because that is what it is. One of the things that worries me is the great and growing divergence of costs and prices as between United States products and those of Great Britain. This is a very serious problem and one which is very material to today's discussion. In part, of course, this widening discrepancy between British and American prices is due to a Luddite approach to the problems of mechanisation, modernisation and productivity, notably in our cotton and coal industries. But it is also due to the advantages conferred on the United States of America by their virtual self-sufficiency and a tremendous home market which results in very much longer runs than British manufacturers are able to enjoy. This question of bulk purchase and the continuation of reciprocal trading agreements is bound up with the question, Can we ever hope to close this gap between American productive costs and prices and our own productive costs and prices? This question of long runs is very relevant. I remember standing in Broadway one day, long before the war, looking at one of those electric ticker tapes. It read:
It was the Chevrolet advertisement. That was in the month of August, which meant that one car company, with only seven months of the year gone, had built and sold its millionth car. It seems to me that our British car industry which, so far as I am aware, has never yet produced one million cars—that is to say, automobiles, including trucks—in one year, can never be competitive with this huge American industry, even though we reduce our automobile workers to a coolie standard. Therefore, the necessity for entering into reciprocal trading arrangements with other nations is corroborated by that fact."We have today built and sold our millionth car."
How does the hon. Gentleman expect the British motorcar industry to step up its production when the Government are discouraging our citizens from buying cars by levying a Purchase Tax?
I do not know of any British motor manufacturer who is yet in any difficulty in disposing of his wares.
Well, I do not know of them. I was going to bring to the witness stand a very important witness, Mr. Lord, the Austin Motor Company's chairman, who, earlier this month, said:
I accept that this problem exists in hard currency markets, but I would not accept that any British manufacturer has yet experienced any difficulty in disposing of such cars as he has had at his disposal for the home market."Although my company has reduced our U.S.A. prices to rock bottom, the market has dried up."
I think the hon. Member will find that the tendency now is that, whereas he would have to wait one, two or three years to get a car, many are now cancelling orders for cars around the £1,000 mark and it will not be long before they can buy them direct from the showroom.
If the hon. Member will look up the records of sales in the sterling area, he will find that many British car manufacturers cannot dispose of their cars in that area.
That was not the argument advanced. The argument advanced was that sales of British cars were being handicapped by Purchase Tax. Purchase Tax, of course, does not apply to exported cars. Relative to this question of bulk, purchase and trading agreements, it seems to me that, pending the time when the U.S.A. will accept an import surplus—and I am the last to want them to accept an import surplus at the moment, I welcome their export surplus—we have two alternatives before us. Either we have to accept what I find, and I think most people find, the ignominious role of pensioners to the United States with all the political and economic consequences which inevitably flow from that—I think we should in effect become the 49th State of the United States—or we have to enter into trading agreements with nations within the British Commonwealth and Empire and such other nations as find themselves in the same position.The real fight at the moment is not so much Communism versus Social Democracy, or Russia versus the rest; the biggest fight in the world at the moment is the fight of the £ to re-establish itself as a world currency. I believe more and more nations will come to accept that it is necessary that there shall be an alternative world currency to the dollar if nations are to thrive and to live in happiness and prosperity. Therefore, for myself, I have to welcome these bulk purchase and reciprocal trading agreements for which the Government have been responsible. I am reinforced in my belief that this is going to be necessary on an ever-increasing scale by the present attitude of the United States Government to certain British industries and activities. No one in this Committee or outside is more conscious of the great debt of gratitude that we and the free peoples of Europe owe to the United States of America——
Would my hon. Friend alternatively say whether the free peoples of the world do to some extent owe this country some tribute for the state in which we are?
I think the hon. Member for Wednesbury (Mr. S. N. Evans) is going a little wide. This Debate is dealing with bulk purchase and disparity in prices.
I was going to examine rather critically the present attitude of the United States Government to certain British industries and activities and I do so because I think there should be frankness between friends.
I cannot understand how that can be relevant to the subject of this Debate.
There are circumstances which are compelling us to enter into bulk purchase and reciprocal trading agreements on an ever-increasing scale. That was the argument I proposed to bring to bear and, because it involves some examination of present United States policies towards certain of our industries, I thought it proper to preface my remarks by the observation I made. Take shipping, for instance. If there is one thing we British can do it is to make ships and sail them. We are at present spending something like £250 million on the rehabilitation of our Merchant Fleet——
I think the hon. Member is going wide of the subject of the Debate. He must restrict himself to the Debate, namely, bulk purchase and disparity of prices.
The question of bulk purchase and reciprocal trading agreements is under attack from the Opposition and I thought it was part of our duty on these benches to refute the arguments advanced. That seemed to me the task I should set myself. I therefore thought it proper, and I hope you will agree, Mr. Bowles, to examine some of the causes of this dollar stringency which, of course, is the main reason why we are compelled to enter into these bulk purchase and reciprocal trading arrangements.
Yes, but the hon. Member must do so shortly; not at great length. He can do it shortly and it must be relevant.
I will not take up the time of the Committee for very long. From the shipping industry we hope to get a large invisible export, but I fear that the United States who are always complaining about discrimination, are discriminating very substantially against us in this field, because they are now subsidising the building of a "super-duper" liner to compete with the Cunard flagships "Queen Elizabeth" and "Queen Mary." The extent of the subsidy is £10,500,000 in addition to which they are proposing to subsidise operation. If that is going on—and one finds it also in regard to synthetic rubber—how are we to get the dollars which alone will enable us to escape from these reciprocal trading agreements of which the Tory Party complain? That was the argument which I was trying to develop.It is very necessary that we should continue these bulk-purchase arrangements because that is the only way in which we shall be enabled to recover our economic independence and financial self respect. We are at present spending about 60 million dollars a year on chemicals. By 1952 we hope to be able not only to meet our own requirements but also to be in a position to export caustic soda, soda ash and fertilisers to the Far East and to South America. It is clear that the only basis upon which those nations will be able to absorb those exports of chemicals is that of reciprocal trading arrangements. The same applies to sterling area oil. We shall find that when we have doubled our export production, as we are engaged in doing, from 54 million tons to 108 million tons, we shall only be able to dispose of it on the basis of reciprocal trading arrangements, which mean guaranteed markets and bulk purchase. Therefore, without hesitation, I support a continuation of this comparatively new method of trading.
The Committee are fortunate that this interesting Debate was opened by two right hon. Gentlemen who knew so well what they were talking about. I think we all appreciated very much the careful and effective way in which both Front Bench speakers approached this difficult subject. I would not claim to have the same experience as they have but I shall try to imitate their approach to what is one of our most difficult commercial problems.The fact is that the boom is ending. Anyone can see from the figures that Government Departments must either be piling up losses for the taxpayer or they must be imposing handicaps on the British exporter. Millions of pounds have already gone down that drain, and we on this side of the Committee say that unless some changes in policy are made a good many more millions are bound to go the same way. Results of that kind would be damaging at any time and for any country; for Britain, at this moment in the trade cycle, they may very well be disastrous. I do not, however, jump to the conclusion that all State trading is bad. I wish first to ask whether it is the system which is at fault or whether it is the men in charge of the system. Suppose—my hon. Friends will forgive me for a wild assumption but I wish to clear the ground for my main argument—that we had competent and efficient Socialist Ministers in charge of this system, would it give good or at any rate better results? The Government have their answer ready. They say, like the proverbial woman next door, "We are not incompetent and our buyers are business men of great experience." The Committee should not accept that reply without examination. It is not fair to Socialism as a theory, because if all the blame for these losses is to be put upon the system of State trading the possibility that Ministers with more experience and of a different calibre could make some of this State trading work to the advantage of the nation is quite overlooked. It is my view that in nearly all cases—I propose before I sit down to define the exceptions—State trading is bad in itself, but that does not alter the fact that the system has not had a fair chance under the direction of those who have been in office in the last three years. In trying to take a balanced view about this matter I propose to start by asking whether the losses which are now being made, as the right hon. Gentleman admitted they were, owing to prices falling outside this country and our prices not coming down, may not be inevitable. I do so because when world prices begin to fall any large business which consumes substantial quantities of raw materials is bound to make some losses; it could not do otherwise. It must carry large stocks which must lose part of their value. But there is a very big difference between the way in which business men handle a situation of that kind and the way in which it is handled by politicians. Business men are brought up to cut their losses quickly and to work on hand to mouth stocks as soon as they believe that world prices are going to decline. But not so His Majesty's Ministers of any party because for a Minister to make a loss of this kind means that he has afterwards to confess a mistake in this House, and that he does not like to do. Ministers therefore wrap up losses. They will play a trick with home produced hides, which is a subject on which my hon. Friend the Member for Howdenshire (Mr. Odey) is an expert. They will come here and argue, as did the right hon. Gentleman, that it is a good thing to pass on to the British consumer the loss which would otherwise be borne by the Treasury. No business man would do that. Moreover, they are constitutionally slow in changing their policy and cutting their forward commitments. All that is happening today. I wish to give the Committee one or two examples from the metal market to show how badly the buying is being done. I do not wish to give examples in my own words. I propose to quote from an American document prepared by one of the agencies of the American Government, and submitted to the man in Washington who is most responsible for the supply of these things to the O.E.E.C. countries. This is what the document says, and I apologise for the length of the quotation:
Here are details of three of these contracts:"We have made inquiry concerning a number of the participating countries' non-ferrous metals contracts for the second quarter of 1949, and found that most of the participating countries have followed general trade practice and have made forward contract commitments at prices based on month of delivery or the previous month's average. However, the British are an exception to this and we find that practically all of the British nonferrous metal contracts—some placed as late as February, 1949—call for delivery in second quarter at a firm price. Some of these particular British contracts are apt to prove very embarrassing to us—not to mention the fact that the U.K. consumer of non-ferrous metals will not benefit by reduced prices and hence will find it difficult when competing for export business."
"On zinc; The British have contracted for a total of about 18,000 metric tons of United States and Mexican zinc for delivery April through July at a firm price of around 18 cents, whereas the present U.S. market price is about 13 cents … or a difference of 100 dollars per ton. If these contracts had been written on a month of shipment, or even previous month's average basis as is customary in the trade, savings could have amounted to 1,000,000 dollars or better.
On lead: The British have a contract for a total of 4,500 metric tons of Mexican lead for delivery through June at a firm price of 21¼ cents; whereas the present U.S. price is 15 cents or a difference of 125 dollars per ton. If this contract had been written on a month of shipment or previous month's average basis savings could have amounted to about half a million dollars
Add those three losses together and that is three million Marshall dollars lost by not following the ordinary trade practice.On copper: The British have contracted for about 18,000 metric tons of Canadian copper for delivery through June at a price based on a price three months in arrears of purchase.' In other words the January 23½ cents price of copper will apply for April shipment.… Here again, with the current U.S. price of copper at 18½ cents, and the May and June once likely to be even lower, the British could have saved about a million and one half dollars on these contracts, if they had not chosen to make a firm contract."
I do not question that contracts of that sort may have been entered into, but I am not accepting for a moment that metal could have been obtained in other ways or that the deduction which the hon. Member has drawn from the contracts is correct at all.
E.C.A. say that the other participating countries place their contracts on a commercial basis.
I am not accepting that.
I was saying that the losses add up to three million dollars. We are shortly going to vote a reduction of £10 in the Minister's salary. It ought to be three million dollars. I put it to the right hon. Gentleman does not he think it humiliating that we, a nation of shopkeepers, should have to be taught an elementary lesson of how to buy nonferrous metals by the Americans?
Would the hon. Member authenticate that document in order that the Committee may be able to assess its worth?
It is a document from the Marshall Secretariat in Washington——
That is not sufficient.
That is all I intend to tell the hon. and gallant Member. He will very soon find out whether it is wrong. I could give the Committee similar details of bad bargains made by the President of the Board of Trade with the coarse grain contracts with Russia already mentioned by my right hon. Friend——
We on this side of the Committee appreciate the remarks of the hon. Member for Chippenham (Mr. Eccles) but if he knows of a number of instances of this kind, surely it is his duty as a Member of Parliament to inform the Minister concerned.
I would tell the hon. Member that one of my hon. Friends has all the details and if he can catch the eye of the Chairman he will give them.
Why does he not give them to the Minister?
With regard to the coarse grain contracts details have been published in "The Economist"; if the hon. Gentleman reads that newspaper he can see them. These are the sort of mistakes which lead one to say that the system has not had a fair chance. I suppose convinced Socialists would say that these are only the teething troubles of the new economy. I would not expect them to abandon their faith in State trading, but I do expect even the most bigoted of them to condemn the particular Ministers for the way in which they have operated the system.It is worth considering how the Government came to make mistakes of this kind; after all, they must have taken advice from expert business men. I think it goes back to the habit formed in the war of importing as much of everything as shipping space would allow. The Committee will remember that when the whole of the war effort depended on the flow of munitions and on feeding the people, it was then the duty of the Departments concerned to do everything they could to maintain a safe level of stocks and as large forward commitment as they could. The price was a very minor consideration. Shipping space and the source of supply were everything. I well remember that Departments had to fight for their own stocks and for their share of the import programme, and that is a habit which has persisted much longer than it should have done. I shall digress for a moment, because I wish to take up something which the right hon. Gentleman said about the cleverness of the Ministry of Supply in buying metals. It is worth remembering that at the end of the war the stocks of many vital materials in this country, together with the forward contracts, were at a very satisfactory level. The fact is that the caretaker Government left the Socialists with a good margin. I wonder whether there will be the same amount in the warehouses and stock yards when next year they hand over to us. In the Autumn of 1945 the Ministry of Supply made a very silly judgment about the demand and supply for one of the base metals over the ensuing year. They thought that the post-war scarcity would be soon over, and that it would pay them to stay out of the market and live upon the stocks left them by my right hon. Friend the Member for the City of London (Sir A. Duncan) and his colleagues. That was a crazy decision, and many sensible people said so at the time, including the Australian producers of lead and zinc. It cost the British manufacturers millions of pounds, because when the Minister saw the error of his ways and had to come back into the market, the price had gone up and supplies were very scarce. In fact, the shortage of lead which threatened unemployment at one time in vital industries like battery making was entirely due to ministerial miscalculation. It is completely wrong for the right hon. Gentleman to have said that our industries at all times have been supplied through bulk purchases by the State with the maximum amount of material which it would have been possible to get by more efficient trading. That bit of history shows how very vulnerable a system of procurement of raw materials is when it rests upon the judgment of one Minister and his advisers. Supposing the markets had been opened at the end of the war, it is absolutely certain that thousands of traders and merchants would not have taken the view that supplies were going to became more plentiful. Some would, others would not; but the higgling and haggling of the whole lot of them would have ensured that Britain got a least part of her supplies at the right price. The result of that blunder—and it was a very had blunder over lead—was to revive in the Ministry of Supply the war-time habit of buying as much as they could as far ahead as they could. Safety first was again the rule. I quite admit that in times of great scarcity safety first is a good rule, but when the supply position becomes easier it is then disastrous, because it prevents the Minister from taking the elementary precautions which any business man takes when he sees a slump approaching. I think that the Committee will agree, whether the system of State trading is good or bad in theory, in practice it has not had a fair chance, owing to the way in which it has been operated. I wish to speak about the other objection to State trading, namely, its effect on the export drive. We shall have many examples given this afternoon of Government contracts made at prices which turn out badly for the British manufacturer. I want to add one more. For a long time the Minister of Food charged a price for sperm oil so far above the world price that the manufacturers of fatty alcohols made from that oil were driven out of the market and the Norwegians captured the business. It was only after long and unnecessary delays that these manufacturers were told that they could have their sperm oil at world prices when it was for manufacture for export. Apparently the right hon. Gentleman the Minister of Supply does not believe that it matters whether the manufacturer for export gets his raw material at the world price or a little over. That, of course, does not square with his other argument that when, through his bulk purchasing, he was able to sell it to the British manufacturer a little below the world price it gave a great advantage to the export trade. He really cannot have it both ways. If it was an advantage previously to sell too cheap, it must be a disadvantage now to sell too dear. The example of the sperm oil is typical of a great many of the minor raw materials. It leads me to invite the Committee to consider this general proposition: that all is well so long as the Government Departments supply at world prices the raw materials required for manufacturing goods for export. I certainly expect some Ministers to say—apparently not the Minister of Supply, but some of the others—that there is nothing to worry about provided that the exporter is not penalised by the bad bargains made by the Government purchasing of his raw material. I should like the Committee to examine that doctrine by reference to another example. Let us take the material tallow which enters into the manufacture of soap. Tallow is selling at the equivalent of £30 a ton on the New York market—say, £50 a ton delivered to the works in this country—but it is selling at £120 a ton in the sterling area. Obviously, any British manufacturer who is offering soap in a foreign market cannot compete if he has to pay £120 a ton for his tallow. That has actually been happening. The South African subsidiary of Unilevers have been getting dollars for a good long time with which to buy tallow in the New York market. They have, therefore, been able to produce soap much more cheaply than Unilevers in this country. Now I understand that Unilevers here are to be given dollars to buy the quantity of tallow which goes into their exports of soap to hard currency makets. Of course, in that way something is done to mitigate the evils of the bulk purchase system. It is better than nothing. But two results follow. One, referred to by my right hon. Friend the Member for Aldershot, is that all stabilisation of prices, which is one of the benefits claimed for the bulk buying system, is given up and we return to world prices. The other is that it involves the most prodigious amount of form filling. However small the export is, the manufacturer has to write it down three or four times in order to claim back his tallow, even for one bar of soap, and in order to get the raw material replaced at the New York price. What about the production of soap for the soft currency markets and, if one may talk about such a person, the home consumer? They have to buy soap based upon the Ministry's price of £120 from the sterling area. Here we see that the scarcity of dollars mentioned by the hon. Member for Wednesbury (Mr. S. N. Evans) together with the relative abundance of sterling and very clumsy bulk buying, put up the price of an essential article of life—soap—to the British housewife. Really, when we are considering the causes of the high cost of living in this country it would be appropriate to mention these facts as well as profits put to reserve. The Chancellor of the Exchequer might look to the bulky beam in his own eye before he goes chasing after these motes, because be it noted that the Minister of Supply said that it did not matter very much passing on to the British consumer these higher prices—it was probably better to do that than to leave a loss for the Treasury to cover. There is a plain example of the Government putting up the cost of living. I draw the attention of the Committee to that. I agree with the hon. Member for Wednesbury that State trading is a very powerful instrument for creating barriers between the two worlds of prices—the dollar world and the controlled world outside it. Because sterling is not convertible, we have advanced a very long way towards the system of Doctor Schacht. Nazi Germany used to buy very dear from the Balkans and sell very dear to the Balkans, and make use of a number of different rates of exchange of the mark. His Majesty's Government are doing exactly the same thing today. The rate of exchange of the £ with a soft currency is in reality quite different from the rate of exchange with the dollar. That is what comes out of the remarks of the Minister of Supply about the two different prices for the same commodity. Even inside the sterling area the Government are building a many-storeyed house of different prices for the same commodity. I should very much like the Minister of Food to tell us when he replies to the Debate all the different prices for the same joint of beef which he pays to the different countries from which he buys meat. I think that we should see that Doctor Schacht is being most closely followed by His Majesty's present Ministers. I now want to ask whether there is any general answer to be given about the merits of State trading. In my view it is not true that all examples of State trading, bulk contracts or long purchases with a fixed price, are bad. There is a great deal of confusion on the subject and there is such a dense political fog surrounding the argument—though that was not evident in the two speeches with which this Debate was opened today—that we should look at it with some care. There is first the very obvious fact that when prices are rising it pays to buy big and when prices are falling it pays to buy small. The Canadian wheat contract looked very good because the price of wheat rose after the contract was signed, but it might have fallen, and it may now very well fall far below the prices written into the new international wheat agreement. If I was the Minister of Food I should keep pretty quiet about my wheat buying until I saw how the price turns out under the new agreement. The point of quoting this contract is that no judgment about the merits of State trading is worth anything unless it covers a period of experience of both rising and falling prices. The evening-out argument which was used the other day by the Chancellor of the Exchequer will not stand up to any examination. It is not true any longer in respect of raw materials going into exports because the Government are now following the world market. In any case, this country cannot afford the evening-out, because when we are up against a sellers' market a difference in price does not matter very much but when we come to a buyers' market it matters tremendously—even tiny handicaps of a few per cent. We, of all countries cannot afford this evening-out. If we were a single, ring-fence economy, we might manage it, but in our position we must follow the rest of the world or sink. Apart from the question when exactly it is right to buy, it is arguable, that, when the Government guarantee a ration of so much a week to the consumer, it cannot disinterest itself in the procurement of supplies sufficient to honour that ration. I accept that argument, but it does not tell us anything about the method of procurement which it would be right to follow in the case of a particular commodity. I go on and say that there is all the difference in the world between State buying of a rationed commodity and State buying of a commodity which is not rationed. In the second instance, the State has no overriding obligation to the consumer, and can and should leave the whole of the procurement of non-rationed commodities in private hands.
Will the hon. Gentleman allow me? He will agree that there is a mean of need for any commodity which must be approached in every possible condition or circumstance. There is a figure of the need that our industries must procure, which is a need of raw materials, below which figure we should not go without jeopardising our industry.
If I understand the hon. Gentleman, he says exactly what I have been saying—that, when a commodity is rationed, the State has a certain obligation towards securing a supply, but that that consideration does not apply with a commodity that is not rationed.I want to carry the argument one step further. It will be said that, when dollars are desperately scarce, we cannot abandon the buying of non-rationed commodities to private channels if some part of the supply is to come from the hard currency areas. It will be said that they would buy too much in the United States, and so, even when the world supply is sufficient and there is no need for any rationing to the British consumer, none the less, the State has to step in and fix the upper limit of dollars which can be spent in buying in North America. Again, I would accept that argument in principle, but it does not follow that the Government itself should do the buying. It can ration the dollars. It might be said that rationing the dollars would lead to unfair advantages for those who get the dollars and for those who would get the cheap raw materials bought with those dollars. The man who can buy his tallow at £30 per ton in New York would have a big advantage over the man who has got to pay £120 per ton for tallow in the sterling area. It will be said that only the State can marry these two prices and give all manufacturers a fair deal. There is a genuine difficulty here which we should face, but we have to weigh the disadvantages of the trade solving this difficulty over a small portion of the supply against the disadvantages of the State making itself the sole buyer over the whole of the supply. I am certain, at any rate, in times when world prices are declining, that it will be very much in the national interest to make arrangements to leave the procurement of all non-rationed commodities to private channels. The hon. Member for Wednesbury mentioned bilateral agreements, and I agree with him that bilateral agreements are a powerful stimulus to State trading. I recall that, when debating meat a few weeks ago, the hon. Gentleman in his accustomed and endearing manner said something to the effect that there was a big difference between trading agreements made with a member of the British family and those made with some other nations. I agree that the distinction applies to State trading and bulk buying. We can surely make long-term contracts with the Dominions and Colonies, because we can trust them to carry out their bargains, although what the Canadians might think about the present Government here is another story. We should face the fact that long-term contracts with fixed prices made with nations not of our way of doing business simply mean that we get the goods if the price falls and that we do not get them if the price rises. That places the Government in a very awkward position, because for the time being they must make these bilateral agreements. When they make these agreements, they are under pressure to enter into firm contracts which turn out to be firm only if they suit the seller, and, if they do not suit the seller, we do not get the goods. What is to be done? With the Dominion and Empire countries, we should have long-term contracts with annual price reviews. Where that is possible we ought to do it, but, with other countries it is high time we worked out a new technique to deal with a new situation. I hope the Government will withdraw entirely from the business of procurement at fixed prices with countries outside the British family. On the other hand, they require to give some guarantee about quantity to the other party to the trade agreement, and I suggest that, while we are getting back to free exchanges, the Government should underwrite the quantity of whatever the commodity is—maize, metal or anything else included in the trade agreement—and should say to the other Government that they intend to buy through private channels, but if, at the end of the period, the trade has not bought the quantity specified in the agreement, the Government will buy it at the world price ruling at the time of the determination of the agreement. Some technique of that sort must be worked out, or we shall find in a period of falling prices every one of these bilateral agreements turning against this country. There is one other objection to Government buying, and that is that it breaks the connection between the consumer in this country and the producer overseas. If we are to get the right quality of imports—and quality is often as important as price—the best way to do it is for the consumer to be as near to the man who is producing his raw materials as he can be. When we have Government buying, we introduce two, or at any rate one, sets of officials between the consumer and the producer who were not there before. For example, I am sure that it will be found that the bad quality of the meat from the Argentine that we have had recently was due very largely to the fact that there has been a break in the chain between the consumer here and the producer in the Argentine. I apologise for keeping the Committee so long. My conclusions are three. Whatever may be the merits of State trading as a system, I say that the Ministers of this Government have shown themselves incapable of giving it a fair trial. Secondly, there is a very strong presumption that the system should be abandoned wherever possible when world prices are falling, but, in the case of rationed goods, the Government must remain in control of the imported proportion of our total supplies. Thirdly, when making these bilateral agreements, a new technique must be worked out to suit the new phase of the trade cycle. This technique should embrace underwriting a guaranteed quantity without a firm price. The long and the short of it is that Ministers should apply to this very difficult matter the commonsense principles and commercial skill of our people.
Like the hon. Members who have already spoken I think that this Debate should be welcomed, because obviously this is a subject of vital importance for the whole of Britain's economy, and also it has been a subject of predominant interest in public controversy outside the House. The attack on the bulk purchasing system of the Government has been one of the most prominent features in the campaign run by the party opposite, although this is the first occasion on which they have asked for a full Debate upon it, I congratulate them upon their audacity today.There is a second reason why it is right to have this Debate. This system of bulk purchasing and State trading has, to some extent at any rate, grown haphazardly and partly accidentally; it grew up chiefly during the war and has been continued since the war. It is quite right that we should examine the principles and the theories which underline the system, because certainly there is nothing wrong in discussing the theory of such trading. But when we have done that, the Government have the right to say that this is a very different kind of Debate from the one which might have been expected from the propaganda that has been put about by the party opposite. It is all very well for the right hon. Member for Aldershot (Mr. Lyttelton) to come here and say he wants a nice calm Debate, that he wants to study the matter objectively, and all the rest. The fact is that for the past three years his party have been responsible for blaming almost every food shortage which we have had to endure in this country upon the system of bulk buying, and since that is what they say in the country they ought to have the courage to come and say it to the Committee. In particular, they ought to have the courage to come and make the charges about food which they have been making throughout the country. It is only in the last few weeks that there has been the big attack from the opposite side on the question of the bulk purchase of metals; but the bulk purchase of food has been attacked by them persistently for three years. Therefore, it is rather strange that when a Debate upon this subject takes place in the Committee—the first we have ever had which was devoted entirely to bulk purchase during the whole of this Parliament—practically no charges are made against the Minister of Food at all. He got nothing but compliments from the right hon. Member for Aldershot. The right hon. Member for Aldershot got up and said he was quite sure, or was pretty sure, that it was the best men in the business who were now engaged in this job. Think of all the smears that have been plastered about the country in the past few years; of Lord Woolton's article in the "Sunday Graphic" in which he said there had been meddlers and incompetents, although Lord Woolton knew better than anybody else about the people who were running the business. He wrote an article in the "Sunday Graphic" in 1947, which I have quoted before in the House, in which he suggested the whole job was done by a lot of amateurs and incompetents. Now, three years later, the right hon. Member for Aldershot comes along and says he is quite sure, or is fairly sure, or is as sure about it as he is likely to be sure about anything, that the people now engaged in this job are very skilled people and represent the best brains in the business world. Why does he not tell Lord Woolton? It is really disreputable that this kind of stuff should be put about. The right hon. Gentleman's next item of criticism, apparently, of the Minister of Food was his praise of the Canadian Wheat Agreement. I hope that he will argue that out with the hon. Member for Flint (Mr. Birch) who the other day, in one of his moments of higher explodability or irritation, was telling us that the Canadian Wheat Agreement was no good; he was trying to tell us from the Tory Benches that he was opposed to that agreement, and I challenged him to say whether, in fact, he was against it. Apparently he was, but the right hon. Member for Aldershot thinks it was good business and includes it in his damaging criticism of the Minister of Food in the Debate today. Those were really the only references we have had to food, and it ought to be made known that practically no criticisms whatever have been made on this subject from the opposite side. Now, let us take the case of the hon. Member for Chippenham (Mr. Eccles). We on this side have a great respect for him and we regard him as probably the most intelligent Member of the stupid party. Usually we welcome any contributions which he makes, but I do not think he was quite up to form today, because he said that no judgment on State trading is worth while until we have had the two periods on which the judgment must be passed—those were his words. But he was passing judgment on the system today, and the party opposite have been passing judgment on it for the past three years. In one sentence he completely destroyed not only his own suggestion that we should have waited another three years for this Debate but a large part of the argument he was putting forward. The hon. Member for Chippenham had prepared his speech very carefully but it did not happen to have any relation to the arguments in defence of this system which had been advanced by my right hon. Friend the Minister of Supply at the beginning of the Debate. The hon. Gentleman assumed that there had been great losses in the bulk purchase of metals during the past three years. As proof he cited only one document, of which he will not give the full authority, a document which covers only a short period. He dismissed altogether, or at any rate does not attempt to discuss, the figures given by the Minister of Supply from a document which is available to everyone in the Committee and which, I imagine, most hon. Members who were thinking of taking part in this Debate had considered. That document not only compares the prices that have been paid for these materials by the United States as compared with ourselves; it also compares the prices paid during the past two or three years for materials, metals and food in Europe with the prices that have been paid by this country; so that the interruption of the right hon. Member for Aldershot on those figures was not in any way relevant. The hon. Member for Chippenham has not even considered these figures at all. He brushes them aside, assumes that there have been these huge losses and even says his party are putting down a vote demanding a reduction of a few pounds in my right hon. Friend's salary, whereas the vote should have been concerned with millions. He never even attempted to answer the argument presented at the beginning of the Debate that, in fact, during the past three years millions of pounds have been saved by the policy of bulk purchase operated by the Ministers of Supply and Food. It really is somewhat contemptible, at any rate for the hon. Member for Chippenham, who has a so much higher reputation than the other Members on that side, that he should not attempt to answer these figures at all. If he cannot answer them, then there is obviously no other Member on the opposite side who can. The fact is that the Opposition have completely changed the whole basis of their argument. Their argument in the past three years, and particularly against the Minister of Food, all along as been that the Minister, or Ministers, were making bad bargains on behalf of consumers in this country. In this Debate their argument has completely changed and they are saying, "Of course, we know there may be advantages in the period when prices are rising." The right hon. Member for Aldershot even quoted a document that had been sent round by the Government to business men. He seemed to complain because its language was very simple, but it has to be very simple for business men. Even the right hon. Gentleman seemed to agree, since the prices quoted referred to a period when prices were rising, that there was an advantage in the system. But we cannot let the Opposition get away with it quite as easily as that. If they now admit that in a period of rising prices, the bargains we make are good bargains for the British consumer, they destroy the whole of the case they have been making in the country. It was not necessary to wait three and a half years after the beginning of the present Parliament in order to have a Debate to discover these facts. They could have been discovered perfectly well by hon. Gentlemen opposite much earlier had they wanted to discover them. These facts were revealed, for instance, in the National Provincial Bank Review for February, 1948—over a year ago—in an article by Sir Hubert Henderson, the economist, in which he said:
These facts have been known for two years, but all through the period during which they have been known there has been a conspiracy by the Opposition not so much in this House—they have not dared to make these statements in this House—but conducted by Lord Woolton and his friends and hangers-on throughout the country to try to deceive the British people about the real facts of the situation. I want to direct my attention, in particular, to one special aspect of the problem. The right hon. Member for Aldershot said he was quite prepared, in the case of agreements for Colonial products, to allow this kind of arrangement to go on but, he said, that was something quite outside the main issue. The hon. Member for Chippenham also agreed that in many cases he would, perhaps, be in favour of these agreements being maintained in the case of Empire countries. Why do they not say that to the country? After all, a great part of this bulk purchase system is concerned with Empire countries. Let us take the Ministry of Food. Of the 26 long-term contracts which the Ministry of Food have with Government or quasi-Government organisations, 20 are with Empire countries. Let us take the long-term contracts which the Ministry of Food have with exporting associations in different parts of the world; six out of the eight are with Empire countries. It is not quite the same proportion in the case of short-term contracts, but let us take the case of the long-term contracts, and that has been the main principle, at any rate as far as I am concerned, and the main principle which the Minister has always defended; and in that case, the bulk of the arrangements are with Empire countries. It is no use saying, therefore, "Of course, we will leave out the question of whether this should go on with Empire countries; that is subsidiary and beside the point." In fact, it is one of the essential points. Long-term contracts and bulk purchase have now become an essential part of the economic structure of the British Empire, whether people like it or not. One of the questions we have to settle is whether the Conservative Party has yet made up its mind as to what view it takes about this most essential part of our economic livelihood and of our associations with these Empire countries. They ought to tell us what they think. Have they yet plucked up their courage to change their minds on the subject, or are they still persisting in an attitude which is totally opposed to that of multitudes of primary producers throughout the British Commonwealth? The truth is—and, of course, we know what the truth is—that the whole of this campaign against bulk purchase and long-term contracts was launched by Lord Woolton, the hon. Member for Hornsey (Mr. Gammans) and a few other hangers-on of the Conservative Central Office before they knew what it was about. They did not wake up and discover until two or three years later, following an education campaign conducted from this side of the House, that it had anything to do with the Empire at all. There cannot be any dispute about it; no one can argue about the facts. I am sure no one could question this, because it is already in the records. Let us take the speech of the right hon. and gallant Member for Gainsborough (Captain Crookshank), speaking officially on behalf of the Conservative Opposition in December, 1948, when he said:"A large part of our supplies from the British Dominions and other Empire countries is obtained under bulk purchase contracts, at agreed prices fixed to cover a considerable period. These prices have usually been well below the inflated world market level."
That was a bald, flat, simple statement; there were no qualifications about Empire countries or anything else. Let us take another year. In November, 1947, the hon. Member for Mid-Bedford (Mr. Lennox-Boyd), who is one of the experts in the Tory Party on the British Empire and who always speaks in these Debates on the British Empire, said:"We still consider that the habit of bulk purchase … is wrong."—[OFFICIAL REPORT, 13th December, 1948; Vol. 459, c. 940.]
he was referring to the Overseas Food Corporation—"I believe there is danger ahead if the Government continue with these corporations"—
In other words, the hon. Member for Mid-Bedford, officially on behalf of the Conservative Party, was calling for a halt and a retreat on this whole project of bulk purchase with the Empire countries. We have been trying to educate hon. Members opposite on these matters and we have the right to know what view they now take about them. We had a Debate on Jamaica in this House a few months ago when my hon. Friend the Member for Maldon (Mr. Driberg), some other of my hon. Friends and myself raised this question, and we tried to continue with the education of the Conservative Party in how interested the people of the Empire were in these matters. We have heard what the Tories said about these matters and now, perhaps, we should hear what interested people in the Empire are saying. In that Debate several Tories interrupted and said that we on this side of the House had no right to talk about the British Commonwealth; they said we were not speaking for those people at all, and how shocking a thing it was that we should raise the question of bulk purchase in the way we did. A week after that Debate, after those protests had been made by those hon. Members opposite, who so hated the bulk purchase policy, people in Jamaica and the West Indies passed resolutions of thanks to hon. Members in this House which had raised this issue and who had presented to this House a subject which those people themselves had wished to present, but which no hon. Member of the Conservative Party in the House of Commons had dared to raise, despite the fact that many of them have travelled in the West Indies in the past three years. I should like to give the Committee a few more of the opinions, if the Opposition can bear them, of the accredited representatives of the primary producers of the West Indies. I think they have a right to be heard in this House of Commons. The Opposition have never raised this subject; they have never presented this matter to the House, but I think these people have a right to be heard. In a report from "The Gleaner," a Jamaican newspaper, of 18th February, 1949, Mr. Richard Williams, who may be known to some hon. Members in this House as a very eminent Jamaican citizen and head of the Banana Producers Organisation, referred to Imperial preference as being"—in their policy of bulk purchase … and possibly a head-on collision between the Colonies and Whitehall."—[OFFICIAL REPORT, 6th November, 1947; Vol. 443, c. 2,108–9.]
This is a quotation from "The Gleaner" of Jamaica:"out-dated and out-moded and antiquated."
The report continues:"Mr. Williams declared that they believed that if they satisfied themselves with the preference alone they would be failing to realise that the world was turning. But they could not stop it from turning."
and that will give an indication of Mr. Williams' political views—"'This is an age of planned production and planned marketing,' Mr. Williams emphasised, and though we may be opposed to nationalisation'"—
Later in the same discussion—and this was a meeting of the representatives of all the primary producers on the island of Jamaica, and they were speaking on behalf of many others throughout the West Indies as well—Mr. Kirkwood head of the organisation representing the citrus producers and also connected with the sugar manufacturers, made some comments on the situation. This is what the newspaper said:"'the sooner we realise that planned production and planned marketing is something we are going to live by or die without, the better it will be for all of us.'"
So one of the resolutions was passed in the strongest possible terms saying that the people of the West Indies and the primary producers regarded the maintenance of this system as being absolutely vital to the economic life of the country. I think it is really time the Conservative Party made up its mind. [An HON. MEMBER: "Speak up."] You have to shout in order to be heard, sometimes, and in order to get these things across. After three years the Conservative Party has steadily refused to declare what is its policy on this subject of major interest to people throughout the Empire. [Laughter.] It is all very well for the right hon. Member for Aldershot to laugh; it will not sound very well in Jamaica tomorrow morning when they read that when we raised this issue, all the Opposition could do was to laugh. These are facts and I think, therefore, that the Conservatives should set up some committee upon the subject—some study circle perhaps. They should get together and get the facts. The people in the West Indies and the people in Nigeria and Africa will soon send the facts; or the Conservatives can collect them from those countries with which we have the 20 contracts. I am sure they would see whether they could really make up their minds on a major issue of policy for the British Empire. There is certainly one right hon. Gentleman on that side of the Committee who ought to be able to give them some guidance—the right hon. Member for West Bristol (Mr. Stanley). There was a very amusing scene in the House at Question Time a few weeks ago when these contracts were under discussion and the Opposition were being provoked on the matter. The right hon. Gentleman jumped up and said, "Oh, I made some of those contracts when I was at the Colonial Office during the war." And it is quite true. I give him full credit for it. In one sense he is the parent of this awful child, and he ought to have educated his fellow Members of the party. After all, think of all the trouble he would have saved. Think of the leaflets that would have been stopped from flowing from the Conservative Central Office if only he had informed his colleagues that he had been the part author, at any rate, of this policy of bulk purchase agreements with Colonial countries. I think it would have been a great advantage if he had not wrestled with his guilty secret for three years, not knowing what to do about it, but had got up, whatever damage he might have caused to his party, whatever concern and consternation he might have caused, and said that in fact he was in favour of this system of bulk purchase long-term contracts with Colonial countries."Mr. Kirkwood, in commenting on the situation, said that it appeared that some of their friends of the Conservative Party in Britain seemed still to be labouring under the misapprehension that our problems could be solved by Imperial Preference, and it was up to them to disabuse that idea entirely."
I am slightly deafened by the hon. Gentleman's eloquence, but I should like to ask him this question. When he refers rather loosely to bulk purchase long-term contracts, does he mean contracts with fixed prices, or contracts with clauses to allow of variations?
I mean various kinds of arrangements. I shall discuss some ways in which negotiated prices can be settled. As the hon. Gentlman knows, most of the agreements with, at any rate, the primary producers in the West Indies are agreements with annually negotiated prices. I think that is a fairly good system. We have to have various rules as to how to negotiate these prices.It has been said on the opposite side of the Committee that there is an argument about the theory of this issue. Of course, the difference between the two sides of the Committee on the subject is that hon. Gentlemen opposite genuinely believe that the old system of prices having free play on the world's markets, worked, and, therefore, they advocate its return. There are, however, millions of people in this world who are quite certain that it does not work—the people of Durham, the people of South Wales, the people of Cumberland and of Lancashire; and there are people in many other parts of the world—distressed areas of the world—who suffered because of it. The West Indies is a notable example. Therefore I wonder if hon. Gentlemen opposite really understand what is the effect in Colonial territories of that system; I wonder if, despite all their claims to know about the British Empire, they understand what is the effect on those territories when they say that if they got back to power, or, if they had their way, they would restore the full play of free prices in world markets. The people in the West Indies remember it. They remember the 'twenties and the 'thirties. They remember the crash. They remember the poverty they endured. They remember the Commissions sent there They remember the Commission of Lord Olivier in the 'thirties, who reported in 1930 in favour of the system of bulk purchase as the only way to save the industries of the West Indies and, in particular, the sugar industry. After that there was nothing done about Lord Olivier's recommendation. Sugar was being sold in all the countries of the world, as Lord Olivier stated, below the cost of production, and labourers in Cuba were paid 30 cents a day and in Java half of that, and the policy of the world price was that the West Indies should be forced down to compete with the cost that was involved in the payment of 30 cents to the labourers in Cuba and half that much in Java. Still it went on. It went on during the 'thirties, and went on to such a point that riots and rebellions took place, and we had to fight to keep our rule in the West Indies. The cost of all that was never shown in any ledgers. The Opposition believe it. But that is what happened, and a Royal Commission was sent there, and the Royal Commission produced such shocking revelations that the Chamberlain Government in 1940 was not prepared to issue them for fear they would give dangerous assistance to Dr. Goebbels. That is the sort of practice that our fellow citizens of the British Commonwealth suffered, and they remember it. But a new hope was born during the war when these bulk purchase arrangements were made. Bulk purchase meant that they could shake off the grip of some of the great commercial organisations which had been squeezing them. I do not think any hon. Gentleman opposite would deny that who knows anything about the subject. Bulk purchase enabled them to set up some kind of reserves against the hazards of nature—hurricanes and other natural disorders. It gave them some guarantee. It gave them, in fact, the kind of guarantee which we now give to the British farmers. That was the hope that was born in the war. I am passionately interested in this subject, because I say that if we kill that hope, if we discouraged that hope, it will strike despair into the hearts of millions of people throughout the British Commonwealth. It is of no use lecturing people in the West Indies about world prices. The academic essays of the hon. Member for Chippenham or the cruder essays of the right hon. Member for Aldershot will not go down very well there. The world price of sugar, for instance, is a fantasy. There is no such thing as a world price for sugar. Most of the sugar we eat in this country is heavily subsidised sugar, and, personally, I think it is a mistaken policy to go on increasing beet sugar production in this country when we can buy sugar much more cheaply by expanding production in the West Indies. But equally there was never a world price for sugar before the war. The West Indian Royal Commission report which dealt with this subject, quoting the United Kingdom Sugar Industry Inquiry Committee, stated:
that was in 1935—"Today, therefore,"—
We cannot talk about a world price. The so-called world price today of sugar that people talk about is the dumped Cuban price, because the Cubans sell their sugar in a preferred, protected market in the United States of America—an agreement which we certainly ought to take up with the United States when we argue about tariffs and discrimination or anything of the sort. The Cubans sell sugar in a preferred market, and what they choose to dump on the world is supposed to be the world's price. There is no sense in it. There is no such thing as a world price for sugar. There has not been for 20 years. The price has been arbitrarily fixed by nationalism, by Governments, by discriminatory arrangements. And what applies to sugar applies to all manner of these products, and, in particular, to great numbers of these primary products which we get from the British Commonwealth. I urge the Minister of Food to examine these matters and to study them carefully, as I am sure he has done. He has entered into a contract with the West Indies to end in 1952 and he has talked of increasing sugar production in the West Indies by some 40 per cent. I think that if that is to be achieved—and it is necessary to achieve it to save the economy of those countries—we must be prepared to go further than that and give a 10-year contract to those producers. I think that is a legitimate expectation on their part, because that is the basis of the policy announced by the Chancellor of the Exchequer on the question of the bulk purchase of primary products. I know that there are great difficulties. There are difficulties, for instance, in negotiating with Canada, and Canada, apparently, says she wants to buy sugar at the world price. But as there is no such thing as a world price, and we ought to be able to persuade the Canadians to come in with us in an effort to save our fellow citizens in the West Indies. There are other difficulties about negotiating prices. Of course there are. No one says there are not. No one says there is an easy system. But it is much saner to try to make mutually satisfactory arrangements between the consumers in this country and the producers in the Commonwealth rather than to go round with a madcap idea in our heads that there is such a thing as a world price to settle these things. It does not exist. We in this country know that it is an essential part of our economy to recognise that the price mechanism does not work in many spheres. We have proved that view by giving guarantees to the farmers of this country. Hon. Gentlemen opposite who protest against this system do not so often protest against the system, which is based on the same principle, of bulk buying from farmers in this country. We abandon the price mechanism in order to encourage much greater production of food in this country. If we do that for the farmer at home, by what moral right should we deny it to the native worker in the British Commonwealth? I think that we have a special obligation to workers throughout the British Commonwealth; and to treat this matter as one of flippancy and to think that it does not matter to the workers in many of these Commonwealth territories is to insult them. Therefore, I seriously suggest that not only should the party opposite try to catch up on this subject, but we should have a much fuller investigation of the effects of the whole of this system on the economy of the British Commonwealth, and the great part which it has played in bringing new hope to territories which have suffered so much in the past, and to whom we owe a special obligation. The problem of holding together the British Commonwealth is not, I believe, primarily a military problem or a political problem or a constitutional problem; I think that it is primarily an economic problem, and a question of whether we at home in these islands are prepared to recognise that in fact our whole status in the world has been transformed and that we can no longer hope to live on cheap food produced by sweated labour abroad. These are not exaggerated phrases, and they will all be found in the Commission's Report on the West Indies. We cannot do that. These people for 10 years have been climbing out of the rut of poverty and no one is going to force them back into that rut and still keep them under the British Crown; not even world prices can force them back. It would have to be done by guns and bayonets and measures which, I am sure, no one in this House wishes to see. Here, thanks to the war, and thanks to the saner arrangements for our economic sustenance which we had to take in the war, this instrument has been fashioned, and I assure the House that great store is set on this instrument throughout many parts of the British Commonwealth, not only in the West Indies but in Africa and elsewhere. Therefore, we should use the instrument and decide to go forward and improve it. Not only can it bring benefits to them, which is very important, but it can also bring us assured supplies which cannot be guaranteed in any other way. It will enable the producers in these countries to tend their herds and their trees properly and to give proper attention to the expansion of their prospects in a way which does not involve waste of land and the rape of the soil which went on so much and which was one of the worst accompaniments of those kinds of slump conditions that prevailed before the war. Not only do I ask the Government not to retreat from this policy, I ask them to go boldly forward with it, and I am sure that they will have the backing of those who are the true friends of the British Commonwealth of Nations."practically the only countries which are producing sugar without State assistance in one form or another are Java, Peru, and Santo Domingo, and these together provide not more than 5 per cent. of the world's current output."
I will not attempt to follow the hon. Member for Devonport (Mr. Foot) in his somewhat heated political arguments. One of the things that I think we deplore, as the right hon. Member for Aldershot (Mr. Lyttelton) said, is that this question of Government bulk purchase has been thrown into the political arena. The Minister of Supply said that this was a question that had to be settled as a matter of fact and not as a matter of theory. So far as we on these benches are concerned, there is much that the hon. Member for Devonport said with which we could be in agreement. We support Government bulk purchase when it comes to a question of the supply of milk, for instance, in this country, which is dealt with by the Milk Marketing Board. It may well be that many of the same arguments could be usefully applied to our Colonial development.I submit to the Committee that there are cases where we are buying commodities abroad, in countries such as the Argentine, where these considerations do not apply. We drive this argument home at the present time because we on these benches know full well that this country is about to enter upon a most difficult period when its very economic existence will be at stake. We have heard a great deal from the Government, very belatedly, about the importance of exports. In fact, during the time when hon. Members on the benches opposite decried exports, I can remember that they also decried the British Empire. The fact remains that both our exports and the British Empire represent two of the main things by which we may hope to survive.
I am sure that the hon. Gentleman's memory is so good that he will be able to give the Committee the evidence which he has in mind, particularly of what he has just said about the British Empire.
So far as the British Empire is concerned, I remember the words of the Chancellor, who said that whenever he thought of it, he hung his head in shame. I would prefer not to pursue that particular matter at the moment because we are considering the subject of bulk purchase. I should like to examine that subject from the point of view of facts and to give some instances of which I have personal knowledge.I am connected with the leather trade and I have a vital interest, which I now declare, in the purchase of hides. It fell to my lot in 1941 to go to the United States to open negotiations between the Government of the United Kingdom and the Government of the United States for the combined bulk purchase of hides. An organisation was set up in Washington which carried out that task during the war most successfully. As the result of that combined bulk purchase, we were successful throughout the war in maintaining the price of the Argentine standard frigorifico hide at a price of 10d. per pound. With the conclusion of hostilities, the United States, in 1946, withdrew from that arrangement and substituted for it in the United States the private purchase of hides by United States tanners. Our Government, most unfortunately in my view, proceeded with the system of Government bulk purchase in the Argentine. Let us look at the consequences which followed, and I ask the Committee to mark them well. In the first place, there was a steep increase in the price as a result of which we are today paying 2½ pence per 1b. for standard frigorifico steer hide which we were buying during the war years at 10d. a 1b. Not unnaturally, as we proceeded with our system of Government bulk purchase, the Argentine Government set up a Government selling organisation which proceeded, on behalf of the Argentine Government, to enter into a sort of tug-of-war with the British Government and the Board of Trade, who were responsible for making the purchases. What has happened has been that in the first place we held off from the Argentine market while the Argentine hides accumulated; eventually, when the Argentine Government could afford to hold their hides no longer, they accepted the price we were offering; then, after another period of time, we in turn became drastically short of hides, and once again a large spasmodic purchase was negotiated. Hon. Members opposite, who are constantly pointing to the pre-war fluctuations of trade, can take an object lesson from spasmodic purchasing by examining the trade in hides between the Argentine and this country. Not only was there a disruption of continuous employment in the tanning industry due to the irregularity of the arrival of the hides, but when the hides have at long last been purchased, they have come in such vast quantities that it has been impossible to inspect and examine them to see that the quality was maintained. My contention is that, if the Government had abandoned the system of Government bulk purchase in this instance and reverted to private purchase, this spasmodic purchasing would not have taken place, but instead there would have been a continuous stream of hides coming to this country. But much more serious results have followed from the continuation of this policy, because in the meantime the price of hides in the United States had fallen considerably, and we, owing to the Government's policy and the admitted shortage of dollars, were unable to make any purchases there, as a result of which at the present time footwear manufacturers in the United States are buying their leather at 30 per cent. less in cost than our footwear manufacturers here. That means that exporting our footwear to the States and to North America generally is rendered almost impossible, because with articles such as boots and shoes, or manufactured leather goods, it is quite impossible to compete in the dollar market when suffering a handicap of that magnitude on the raw materials side. This handicap, which applies so clearly in the case of footwear and manufactured leather goods, applies to an increasing number of industries the prices of whose raw materials are getting out of line with the prices paid for similar commodities in the United States. There are other evils which arise from the system of Government bulk purchase. One of the most important is that the responsibility for making the purchase is blurred. Before the war, before Government bulk purchasing was instituted, the purchase of hides was undertaken only after the most careful inquiry into whether the purchase could be turned into leather at a profit. But today there is no such system in operation. What happens is that the Government make their purchase of hides and then allocate the purchase to a tanner, who has little or no option but to take what is sent to him. The Committee will realise some of the evil results which follow from this system—a system which applies inevitably to any industry whose raw materials are purchased by the Government—because the Government, having made the purchase, must get rid of it, and they can only do so by having a system of allocation. When raw materials of that kind are allocated it follows that there must be a list of those eligible to receive an allocation, so that with a system of Government bulk purchase there is created a series of virtual monopolies, because the Government become responsible for creating conditions in which the industry can make a profit. From that moment onwards the Government become involved in profit control, the effect of which is invariably based upon the high and not the low cost producer, which is a direct encouragement to inefficiency. That is a most unfortunate development which is taking place, in my view, on a quite wide scale. It follows that if the Government do all the purchasing the whole system of brokerage and merchanting is kept standing idly by. Many of these brokers and merchants are kept in a state of enforced idleness; they are not able to make the contribution to our invisible exports which they would make on a free market. Many brokers and merchants who have been unable to occupy themselves on the home market have been forced to restrict their trade to the Continent and other foreign countries. We have surely reached a dreadful state in this country, which built up a great measure of its prosperity on its merchanting ability, when our merchants in the City of London, in Liverpool and elsewhere are unable to perform their ordinary work, simply because the entire purchasing for the country is being carried by the Government. Another abuse occurs because, as has already been pointed out, the Government must at all costs avoid making a loss. How do they deal with the situation? In the case of hides it is dealt with in the following way, a way which seems to me to be politically dishonest. The Minister of Food proceeds to sell hides and skins to the Board of Trade at something approximating to pre-war prices, and the Board of Trade then proceed to sell them to the tanners at something like 100 per cent. profit. There is thus immediately in the hands of the Board of Trade a nest egg which properly belongs to the Minister of Food, and that nest egg is used to soften up the purchases of hides from abroad. Take the Argentine hide, which today is being purchased at 21½d. That is not the price at which it is being sold to the tanner. It is being sold at 18d. It is not altogether surprising that as a result the whole of the tanning industry is wedded to this system of Government bulk purchasing.
The hon. Member has just told us that the Minister of Food sells the hides to the Board of Trade at pre-war prices and the Board of Trade then proceed to sell them at 100 per cent. profit. Will he tell us what happens to the accounts of the Ministry of Food? How do they show a profit if they sell at pre-war prices?
The Ministry do not show a profit or a loss. It means that the Ministry of Food buy the carcass of the animal from the farmer and the hide becomes a by-product. All I am saying is that if these hides were sold at the full price they would bring in approximately £2 million to the Ministry of Food. That is my guess, and it is always open to the Minister to correct my figure if I am wrong. It will be readily seen, therefore, that the food subsidies should be decreased by that £2 million.The net result of all this is that under this system of Government bulk purchasing we shall never see any reduction in leather prices, because the whole system is designed to maintain prices at their present high level. There is no resistance on the part of the tanner to the hides that are being sent in, because he has been the recipient of this submerged subsidy from the Ministry of Food. The Minister will realise that I am putting this view forward from the point of view of the consumers in this country. They are the people who ultimately have to pay, and that is one of the illustrations of the way in which this whole system of bulk purchasing is creating dear goods for the people. It is not only creating dear goods for the people, but it is also preventing as from maintaining our proper position in the export trade. The sellers' market is coming to an end, and we shall soon find ourselves once again relying upon our traditional exports in consumer goods. It is vital that footwear and manufactured leather goods should continue to make a substantial contribution; but they will never make that contribution while this system continues. I hope that this matter will be looked at quite dispassionately. Let us get away from all this political prejudice that has been brought to bear on this problem, Let us look at it sanely from the point of view of advantage for the people of this country. If that comes about, then there will be some hope.
The Committee were entitled to a full-blooded attack from the Opposition on the broad, general principle of bulk purchasing and its application, but all we have had is a series of statements. First of all the right hon. Member for Aldershot (Mr. Lyttelton) said: "After all, the bulk purchasing system has yet to be subjected to its severest test and has so far only been used in an era of rising prices." That did not stop him from saying in the end, that it should be done away with. The hon. Member for Chippenham (Mr. Eccles) did not seem to dissent from the theory of bulk purchasing at all. All he did was to adduce a series of cases of small sections of the bulk purchase field, not supported by any kind of documentation to which he cared to give the title or author, which in their total effect—and assuming they were true—have absolutely no relation whatsoever to the volume of imports into this country.It is not the case of the Opposition, as presented to the country, that there may be instances of bulk purchasing where the country gets a bad deal. It is not the case that perhaps in rubber, or in tallow and one or two other instances, the country gets a raw deal and the consumer pays. That is not the case at all. The case put forward by the Opposition to the country is a frontal attack on the whole business of bulk purchasing. I am bound to say that the Committee is entitled to think it very dishonest that, after the campaign against the Minister of Food in particular for the last two years on the subject of bulk purchasing, there has not been one Member of the Opposition who has got up and dared to say the things that are being said in the Tory Press and in the publications shoved through the letter-box by Lord Woolton's organisation. No Member opposite has dared to say in the House, the things the Conservatives are prepared to say in the country, and perhaps, therefore, I may be permitted to remind them of some of those things. There was, for example, a little pamphlet put out by the Conservative Central Office entitled, "Fifty more things Labour has done." It was an endeavour to show how the Labour Party had been wrong in a whole series of instances. It put in this pamphlet one or two things which have been incorrectly done, such as:
That was reproduced in a rather larger pamphlet sent out by the Conservative Central Office. [Interruption.] The right hon. Gentleman must endure his own propaganda. Then there is Lord Derwent, a Conservative peer in another place."Persisted in bulk purchase of food and other commodities although involving taxpayer in heavy losses. In one transaction the Argentine Government made over £8 million profit. (You pay.)"
He is a Liberal.
He said, in a syndicated article dated 18th May, in discussing why our athletes were not producing champions these days——
If the right hon. Gentleman does not understand I will explain it further. People who run. People who jump.
He says at the conclusion of his article:
This is exactly what the Conservative Party are saying by pushing pamphlets through the letter boxes of the people and by writing in the Press. They think they can get away with it by sheer propaganda on the part of their newspapers without having to adduce any rational argument in support of their claim. For example, the right hon. and learned Gentleman the Member for West Derby (Sir D. Maxwell Fyfe) was regaling the people of Portsmouth on 7th April last with what the Conservative Party will do if they are returned to power. It is remarkable that he was able to tell my constituents, because his Leader, the right bon. Gentleman the Member for Woodford (Mr. Churchill) does not know yet. What does the right hon. and learned Gentleman say? Here it is:"These islands can breed champions as easily as in the old days, but we cannot feed them. Mr. Strachey and his bulk-buyers are the people to blame."
"By giving back the buying of food to those who understood the business they would reduce the cost to the country."
I am very pleased that Lord Woolton carries the hon. Member with him, because he has not been carrying the Front Bench with him for the whole of the afternoon. The hon. Gentleman will be getting considerable preferment by the Conservative Central Office if he keeps on the way he is going, but he should pay more attention to what his right hon. Friends in front of him have been saying this afternoon. Then there is the verbatim report of the 69th Annual Conference of the Conservative Party, together with the text of the speech of the right hon. Member for Woodford. Here we have some real gems about bulk purchase which have not been quoted today.
Lord Derwent, who has died since he made that speech, would be absolutely horrified if he knew he was accused of being a Conservative. He was a life-long opponent of Conservatism, for he was a Liberal.
I must say that in other respects his article was quite rational, which bears out the hon. Gentleman's contention.The hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) at the Conservative Party Conference spoke on bulk buying, the resolution in regard to which was passed unanimously, as happens at all Conservative conferences. It is amazing the degree of unanimity that the Conservative conferences reach. The hon. and learned Gentleman said—[Interruption.] The right hon. Gentleman's laugh is just a little hollow this afternoon. On this subject the views of the party are absolutely clear, which is in sharp contrast with their general policy. The hon. and learned Gentleman said:
We learn from the report that this was followed by applause. Then there is a gentleman called Mr. McCluskey, also from the hon. and learned Gentleman's constituency of Wirral, who got up and said:"We want a return to the old system of commodity markets and the use of the skilled services of the private trader. I believe that this is one specific way in which the next Conservative Government will be able to undertake its task, which can be defined as 'Stop this muddle and clean up the mess!'"
That is what the Conservative Party have been saying all over the country, and, of course, they are backed up by their Press, in particular by the Beaver-brook Press, which comes out with the slogan "Bulk purchasing does not pay." The gamble of the Opposition on this whole business is that the term "bulk purchase" may be used by their Press and drummed home in almost Goebbelslike fashion so that, ultimately, people will come, in fact, to believe it, but the one thing that they will not do, and they have not done this afternoon, is to provide any kind of general case against the whole policy of bulk purchase carried out by this Government."Now it is wisdom to experiment, but folly to persist in something which has proved a failure; bulk buying is a proven failure and it is folly to go on with it."
The hon. and gallant Gentleman has not been listening.
I have and I was amazed by the incredible moderation which the right hon. Gentleman used. From the propaganda of the Conservative Party one might almost infer that the Conservative Party were in favour of the policy of cheap food. After all, their propaganda is that it is the Government's policy of bulk purchase, which is forcing up the prices of food for the people. The inference is that the Conservative Party themselves believe in cheap food policy, but they do nothing of the kind; at least it is not shown in a document which is not normally sent to the general public. The general public are not supposed to know these things, but in the party's weekly news-letter of 21st December, 1946, which is sent out to the different constituency associations and to its literature subscribers, but not pushed through the letter-boxes in the ordinary way there appears this statement:
The problem of Britain for the next ten or 15 years will be to get as much food as possible, so that that statement must rank as one of the most supreme pieces of nonsense made by the Conservative Party since there was a Conservative Party. So far as bulk purchase is concerned, the case can rest on a much broader basis than that on which it has been discussed today, and I want to deal with it first of all on its general principles. At times when the demand for a vital food or raw material is vastly in excess of the supply, then the more demand is split up, the more it is fragmented, the more likely is it to force prices up. Hon. Gentlemen opposite may argue against that, but if they go outside and listen to the small business men, whom they profess to represent, they will find that argument supported. The right hon. Member for Aldershot gave sanction to that earlier this afternoon when he said that the subject of bulk purchase had so far been mainly used in a period of rising prices, and, therefore, had not been subject to any undue strain. It is equally true that at times, when supply is vastly in excess of the demand, there is a case then for deliberately fragmenting demand, in order that the consumer here can get the maximum beneficial effect to the country of private competition."A Conservative Government would have to make it quite clear that there would have been no policy of cheap food imports, such as we are trying to get from the Danes, to undermine home agriculture."
What happens to the hon. Gentleman's theory when there is a surplus if there is fragmentation as at present?
I shall explain to the hon. Gentleman if he will wait a little while. Would the hon. Gentleman allow me to make my own speech in my own way?
I am sorry about that.
Since so many speeches have been made this afternoon in which it is suggested that the Government bulk purchase policy is at fault, because it is now quite clear that supplies are on the increase, and, therefore, that prices are going to come down, I would suggest to hon. Gentlemen that they should read through their own Party's publications, which it is extremely important for them to do. There was a document published entitled, "What do you think of the Agricultural Charter?" which was, in fact, written by the hon. and gallant Member for Richmond (Sir T. Dugdale). What does it say about the relative position of demand and supply over the next few years? Here is what the pamphlet says:
It is a little unfortunate when we get one section of the Conservative Party saying one thing and presumably an equally responsible section of the Conservative Party saying the other, not to mention the observations of the hon. Member for East Aberdeen (Mr. Boothby)——"Although technical advances in developing the agriculture of backward lands will serve to counter-balance this tendency to some extent and though for some time to come many of those who desire more food may not be able to pay for it, the long-term trend is for demand to exceed supply."
Who would be a Parliamentary Private Secretary?
—who was in opposition to his own party's policy of bulk purchase and who denounced his party's policy as being entirely ridiculous.
This comes curiously from a Parliamentary Private Secretary.
Is the hon. Gentleman's argument that members of the Socialist Party always agree in all they say?
By no means. We are not as doctrinaire as that. The main difference between my party and the party opposite is that my party thinks and therefore there must occasionally be some differences.The most important part of the whole argument is whether the policy of bulk purchase of the Government has succeeded over the last three years or not. My right hon. Friend the Minister of Supply has quoted the Report of the Economic Commission for Europe which was published on 6th May last. That is a rather important document to which the Committee should pay attention. What does the Economic Commission for Europe say about this country's policy in regard to bulk purchase over the last three years? It is extremely important that we should know. In discussing the reasons why the deterioration in the terms of trade affecting Europe as a whole in its dealings with the United States has not been felt with comparable severity in Britain, the Report says this:
It went on to give the reason why, and the Committee might reasonably note this:"In the case of the United Kingdom, the deterioration of the terms of trade was allayed largely because it was able to purchase food and raw materials from the Dominions and other areas at prices considerably below those ruling in the United States markets."
Table 67 gives the relative prices paid in respect of wheat, beef, mutton and lamb, bacon, pork, butter, cheese and eggs. The Report goes on to say—"The explanation of the relatively low prices paid by the United Kingdom for its imports of food and raw materials appears to lie largely in the extensive use which it has made of long term contracts and bulk purchase agreements covering a large proportion of its purchases. The influence of these arrangements on British food supplies is shown at Table 67"—
The report also says:"which covers eight commodities imported from the Argentine, Australia, Canada, Denmark, New Zealand and the United States."
This makes complete nonsense of all the Tory Party propaganda which has been issued in its various forms to the country over the last three years. The report continues:"The table shows that in the greater part of the food purchases from those countries, the United Kingdom has been able to hold the post-war price increases to relatively modest dimensions compared with the general rise in world prices. For each of the commodities listed, the larger part of British imports was invariably obtained at very much lower prices than those paid for the marginal quantities obtained from other suppliers."
Once again, this makes nonsense of the propaganda put round by the Conservative Party. There is an interesting footnote in the report. It says:"The United Kingdom obtained its wheat largely from Canada at a price only about double the 1938 level (in terms of dollar equivalent), whereas the smaller quantities obtained from the United States, Australia and the Argentine cost from two and a half to three times the pre-war price. On the other hand, meat and dairy products came principally from Australia, New Zealand and the Argentine at prices which were, for the most part, not more than one fourth to three fourths higher than the 1938 levels. The prices paid for smaller quantities of similar products from Denmark, Canada and the United States tended to be very much higher, in relation to the prices paid to the principal suppliers and to the pre-war levels."
I invite the Conservative Party to go and tell that to the housewives of Britain instead of telling them some of the trash they have been telling them for the last two or three years. The point is carried further into the field of raw materials. The report goes on to say:"Though imports from Denmark show relatively high prices, imports of bacon and dairy products have also been covered by bulk-purchase agreements, under which the prices charged to the United Kingdom have been considerably lower than those applying to Danish exports of the same products to other countries."
That section of the report—it is Chapter V on pages 13 to 25—concludes with a general observation which is applicable to the United Kingdom as a whole as to the general effects of the Government's whole policy of bulk purchase. I invite the attention of the Opposition to this opinion. It says:"In the field of raw materials, the United Kingdom likewise appears to have purchased at prices considerably lower in relation to prewar than those prevailing in the American market. This was particularly true in 1947 when, for instance, the average price (in dollar equivalent) paid for timber, cotton, and hides and skins imported into the United Kingdom was about two and a half times pre-war compared with three to four-fold increases above the 1938 level in United States prices."
I submit that the evidence put forward by the Economic Commission for Europe is quite conclusive. I further submit that no evidence has been adduced by the Opposition this afternoon in support of its arguments in the country or against the arguments which are put forward by the Economic Commission for Europe and by my right hon. Friend. The fact of the matter is that the Opposition have not the slightest case. All they are seeking to do is to pursue a general vendetta against the Minister of Food because they realise that food matters to the housewife probably more than anything else, and any stick with which to endeavour to beat the Minister of Food, even though it may only be a slogan, is better than nothing so far as the Tory Party is concerned. I hope that on this occasion they will have the elementary honesty, although I very much doubt it, to withdraw some of the extravagant statements they have made in the country. I want to refer to one other matter before I close. It has been the practice recently when my right hon. Friend the Minister of Food has been winding up Debates and putting forward rather incisive arguments on behalf of his case, for the Opposition to endeavour to prevent him from being heard. In view of the lack of case which the Opposition have put up today—and what a number there are present here now for an Opposition which is bent on attacking the Government's bulk purchase policy, and what enthusiasm, for they have no support——"In the case of the United Kingdom, the effect of bilateral arrangements and bulk purchases is generally to lower the price of its imports compared with the prices which the supplying countries charge other customers."
The hon. and gallant Gentleman is not worth listening to. That is why.
It would not surprise me if, when the Debate is being wound up, they endeavour to do the same. If they endeavour to do it on this occasion, I do not think the country will misunderstand. The country will realise when the facts get around; and the facts do tend to get around, despite the machinations of the Conservative Party; that far from the policy of bulk purchase having cost the nation millions of pounds—the case which the Tory Party make out but are not in a position to prove in this House—it has not only contributed powerfully to helping the Empire, as my hon. Friend the Member for Devonport (Mr. Foot) pointed out, but has also actually saved the British taxpayer and the British housewife millions of pounds. If hon. Gentlemen opposite deny that proposition, I invite them to refute in detail wherever they like—in their newspapers, in their speeches, in the House or outside—the conclusions reached by the Economic Commission for Europe to which the Committee has been good enough to listen this afternoon and which I submit are utterly conclusive.
The great advantage of listening to the hon. and gallant Member for North Portsmouth (Major Bruce) is that he always speaks up, and the same can be said of his colleague the hon. Member for Devonport (Mr. Foot). In fact, I think they have much in common, for both of them plunge with joy and fervour into political controversy and, indeed, they seem to have some kind of combined policy, because they both follow the same argument. They tell us that we on these benches make certain statements in the country but have not the courage to make them in the House of Commons. I will give three examples of certain things over which we have attacked the Minister of Food and which we have debated and spoken about in the House. First, the negotiations with the Argentine regarding meat; secondly, the change of policy towards Canada, which has caused a considerable amount of misunderstanding; thirdly, the lack of imported foodstuffs into this country which has been constantly pressed.The hon. and gallant Member for North Portsmouth said that he would welcome the statement from these benches of a general case against bulk purchase. He accuses my hon. Friends of being as dogmatically against bulk purchase as he and his friends on the benches opposite are for it. I would remind him that, after all, bulk purchase in its present form was started during the war and was started by the Conservatives in exceptional circumstances when the private trader was excluded from transport and foreign exchange. As a highly-populated country, closely barricaded, we had to rely on it for essential imports. Our national need was so desperate that the price did not matter much; the only thing that mattered was that we should win the war. We now find that the system has survived to supplant to a great extent the mechanism of private trading as we know it, so that by 1948 we found that the Minister of Food was the sole importer of nearly 80 different kinds of foodstuffs. As regards a general case against bulk buying, it is important that we should try to differentiate between bulk buying in its many forms and State trading; that is to say, bulk buying where the Government buy from the growers, and State trading which is essentially government-to-government negotiation. I will give several reasons why we are against State trading. First, we believe that the private trader with many years of experience who bears the risk of enterprise is, on the whole, a better negotiator than the Government. He establishes goodwill in commercial circles, he is well known, and probably has been for many years, and he goes about his business quiely. A Government buyer, on the other hand, is heralded with all the publicity that accompanies necessity. We are very much against a single seller negotiating with a single buyer to the detriment of the primary producer. I give as an example the Argentine, where their Government kept back a large part of the purchase price to the detriment of their own producers, which not only discouraged production but also encouraged inefficiency. Then, again, we are against government-to-government negotiations as a whole because we feel that they are inclined to foster such as, for instance, happened in Canada and Eire. While that may happen with private traders, it is not of international importance.
Will the noble Lady allow me to ask her a question which arises because of what other hon. Members on her side have been saying? Do I understand her to disagree absolutely with State trading in the case of the Dominions and Colonies?
If the hon. Gentleman will allow me, I will develop that part of my argument later in my speech, and will now finish the arguments against State trading which I was asked to give by the hon. and gallant Member for North Portsmouth. We consider that in a government-to-government negotiation there is no international control to ensure against default of agreement. For instance, a government having agreed to a certain negotiated price with another government, may find later that it is possible to sell its products elsewhere for a higher price, and there is a great temptation to do so. If that happened in private commercial circles, it would not be tolerated; the person in question would be blackballed. Then there is the question, an intangible one, of the moral issue in government-to-government negotiations. It is important that governments negotiating directly with each other should each accept the same moral standard of ethics.Lastly, it is said in favour of State trading that although when prices are rising government-to-government contracts may be favourable, and when they are falling those same contracts may be unfavourable, nevertheless the two probably cancel each other out. I would suggest that it is in any case a gamble with the taxpayers' money, as there are no futures or terminal markets to allow hedging as insurance against price swings, as in private trading. Therefore, when we Conservatives attack State trading, we refer to wasteful government-to-government negotiations which we have attacked and will always attack. Conservatives as a whole favour all forms of negotiation whether by Imperial preferences, quotas, or long-term agreements. One or all may be necessary. We have to judge each commodity on its merits. This evening I shall deal with one commodity, sugar. I only wish that I had been called, just after the hon. Member for Devonport had spoken, because he spoke on the same subject. We have both recently visited the West Indies and both of us, I gather, have had talks with the primary producers on this subject. While I was in Jamaica in the early part of this year, a Debate took place on Jamaica in the House of Commons, to which the hon. Member for Devonport referred. The local paper, "The Daily Gleaner"—which may be known to some hon. Members who have visited that part—had headlines splashed across it, regarding the Debate, with a photograph of the hon. Member for Devonport which I must say, I did not find the most attractive. Much interest was caused amongst the primary producers by the statement that the British Government favoured long-term contracts. That is understandable because the British West Indian growers expect a reasonable degree of security in their markets, not only because they are primarily an agricultural producing country, but also because they depend for their livelihood on this agricultural product in a tropical climate where disease or hurricane may in the space of a few hours sweep away their livelihood and all the hard work they have put in. As hon. Members know, it takes a newly-planted crop of citrus several years in which to bear fruit. Therefore the Colonial primary producers will take steps to increase their production and improve working conditions only if they have a reasonable degree of security. That is where I come to the point put to me just now from the Front Bench opposite. We on this side of the Committee have never said that we are against all forms of long-term contracts. In fact, we started them in many cases, and this is particularly so as regards contracts within the Empire.
Will the noble Lady say whether her objection to long-term contracts applies to the breeding of pigs, etc.?
I have no great knowledge of the breeding of pigs, and I prefer to leave that to some other Member from an agricultural constituency. At the moment I am devoting myself to the question of long-term contracts within the Empire as regards sugar production. It is unwise for Members like the hon. Member for Devonport to make such very dogmatic assertions about long-term contracts. He dealt first with the past, then with the present system and finally with the future system. All of it, as far as I could make out, was directed to one particular form of guaranteed contract. I think we ought to consider these things.Before the war, production outstripped consumption, and now exactly the reverse is the case. How long that will last is, I think, anyone's guess. It is said by some experts that this country and the Empire generally will be able to consume all the sugar which it can produce up till 1952, and that if Canada takes a large amount of sugar from the British West Indies there will not be overproduction until about 1959. But we have to remember that at this moment we are buying food in a world that is short of it, and our absorptive capacity is not the only limiting factor. Ten years ahead things may be very different indeed and it is unwise to adhere rigidly to one particular form of negotiation, because that is a negation of all progress. Who knows what we shall have devised in 10 years' time? Our task in this country is to procure food at the lowest price that is fair to the producer both at home and overseas. We have to be fair not only to our own farmers but also to those in the countries within the Commonwealth and the 53 Colonial Dependencies for which we are directly responsible. None of them have identical problems, and we cannot say that we will rigidly adhere to one particular system. They each have their value. As regards the form of bulk buying which we are discussing today, I think the best description of it was given by the Minister of Food himself on 20th January in a Debate on the Ministry of Food (Financial Powers) Bill. He said:
I suggest that only when that quotation remains true is the bargain in fact justified. Bulk buying in this form which I have described can have definite advantages where we want to give priorities or advantages to certain producers. That applies to those countries which are within the Commonwealth. I agree with one thing that was said by the hon. Member for Devonport, and that is that the world price is not a true price. It has virtually dumped Cuba sugar. There are two major factors which make the old system of the world price plus preference more precarious today. First, the world dollar shortage may force Cuba to sell her sugar at a lower price than she does at the moment, and secondly, because of the Geneva and Havana Agreements, preference can only be revised downwards or else eliminated altogether. It is not as flexible as it used to be. What can we hope for today as a future policy in this very difficult period of altering commodity markets? I suggest that the Government should differentiate between Colonial and Empire production, because the British West Indies are almost entirely dependent upon sugar, while Australia, which is seeking to expand her production up to 500,000 tons or one million tons in a few years, has a much more diversified economy. If we take the West Indies, Barbados has a sugar production of 91 per cent. of her total economy; British Guiana has 62 per cent., Jamaica 53 per cent. and the Leeward Islands 89 per cent. Therefore, owing to the dollar shortage, which it seems will last for a long while, it is important to encourage sugar production in sterling areas within the Commonwealth. As regards the West Indies, there have been many changes since the war. First, wage rates have risen and, of course, there is a strong endeavour by primary producers to improve labour conditions. Then there is the increased cost of production which I am informed has risen by about 60 per cent. because the West Indies are buying loyally from us, and it must be confessed that the prices of our products are sometimes higher than those which could be procured in dollar areas. Thirdly, there is the very difficult local problem of the increase in population—a yearly increase of 2 per cent., which means that the population will be doubled in 35 years, and employment has to be found for all these people. Therefore, at this moment one would support the policy which is being pursued within the Commonwealth as regards the West Indies, which is a guaranteed outlet for their production on annually negotiated prices. But there is one point which I should like to put to the Minister, and which I trust will be answered later on. If we are agreed that we are going to continue with the present annual guaranteed outlet, I suggest it is most important that these negotiations should be done in the right way and at the right time, which sounds a very obvious remark. I should like, however, to refer to the way in which the sugar crop price was negotiated in 1948. As the Committee know, the primary producers in the West Indies put forward every year in the Autumn a proposal for the price of the sugar crop for the ensuing year, and it is important that all negotiations with our Government should be finished, at the latest, by early December, because the reaping season in the West Indies starts in January and, therefore, negotiations with labour have to be based on the current crop price. In 1948 the primary producers had consistently depressed their position, and it was not until 22nd December that finally they were suddenly informed of a decision by the United Kingdom Government as to the price, a decision that had already been communicated to the Colonial Governments concerned, and a decision which was made ready for publication. As I was out in the West Indies at that time, I can assure the Minister, who has just returned to the Chamber, that it caused a great deal of ill-feeling and misunderstanding in the West Indies. It was felt that the United Kingdom had defaulted on their agreement, that they had come to a decision when, in fact, the principle was to negotiate these annual prices. Therefore, I should like to ask the Minister what was the cause of the delay in these negotiations, why they were carried out in the manner which I have described, and lastly, to give an assurance that when he negotiates the price next year he will do it in plenty of time to allow the primary producers to get on with their job. I will not now discuss the merits or demerits of our Government not having raised the price of sugar by £3 per ton, as requested. We must recognise that when we press for economy in this House we must also keep a fair balance and allow a fair price to the primary producers. I suggest that one of the most important tasks of the Minister of Food is to educate public opinion in this matter. I think it was the hon. and gallant Member for North Portsmouth who talked about the question of cheap food, and while we have a long history in this country of encouraging cheap food, nevertheless I do not think we should do so at the cost of a severe disadvantage to the primary producers."It is the nature of the bargain entered into between producer and consumer and buyer and seller, with the seller getting a degree of security he would not get from a day-to-day transaction on the market, and the purchaser paying a lower price than he would by buying day-to-day on the market."—[OFFICIAL REPORT, 20th January, 1949; Vol. 460, c. 355.]
Is the noble Lady advocating that we should pay more for our sugar from the West Indies than we are paying now?
I said that I did not think it was suitable, in this Debate, to argue the merits or demerits of the increase by £3 a ton, but when we press for economies, we should realise that the Minister must give a fair price to the primary producer.In supporting the system of a guaranteed outlet at an annually negotiated price, that does not mean to say that I and my hon. Friends on this side are not against State trading and Government negotiations as a whole. When my hon. Friend the Member for Bury (Mr. W. Fletcher) winds up the Debate for the Opposition tonight, we shall hear from someone who has had a lifetime's experience of the commodity market what an extremely difficult and variable subject it is. When the Government enter successfully into bulk purchase with public money, that does not excuse a single failure. The onus is upon the Government to prove that in every negotiation they enter into, they are using the best possible instrument and are thereby getting the best possible bargain.
I was disappointed with the speech of the noble Lady the Member for South Aberdeen (Lady Tweedsmuir), who began by telling us that her party were against the Government on three grounds—their Argentine trading, their change of policy towards Canada and their policy in relation towards feedingstuffs. I noticed, however, that the noble Lady did not go into any of these matters in detail, and I think I know the reason: the Conservative Party can only go into these three matters in detail when there is no one who can reply——
I do not like interrupting the hon. Lady so early in her speech, but I believe it is a custom in the House to try to answer in Debate the Member who has just spoken. To discuss the subject of the Government's policy in relation to Canada would have taken me at least two hours, and I wished to speak particularly about sugar.
I will do it for the noble Lady. I will tell her what her party and she herself, and the Tory Press, are telling the people day by day. They are telling them about our policy towards Canada without explaining the dollar barrier which has been erected between the United States and Canada, and which has prevented us trading with Canada in the particular commodities of which the Tory Party speak.When circumstances change, the party opposite, says, "There you arc. The Government have at last agreed to our suggestions." The Conservative Party are saying it now about feedingstuffs. They are pretending that it is through their propaganda that the Minister of Agriculture has been able to make the announcements which he has made lately. They conceal from the public that there were fewer animals to feed in 1945, that many livestock were killed at that time, that it was human beings that had to be fed. They fail to reveal that other nations have been competing for these feeding-stuffs; they fail to reveal our lack of dollars and conceal the fact that the Minister of Agriculture—who is well aware of the need—has increased his distribution throughout the country from 500,000 tons to 2,500,000 tons, not counting the increase which was announced about a fortnight ago. I want to put the noble Lady to a much sterner test. Will she go to the housewives in the country and argue, from the price of bread, butter, tea, sugar, margarine, eggs, bananas, apples and oranges, that bulk purchase has failed? That is the test, not a hypothetical speech which leaves us bewildered, and wondering whether it is an attack or a commendation.
The price of the foods which the hon. Lady has mentioned may be satisfactory to housewives while bulk purchase is taking place, but will she have the common honesty to say that the price to the consumer depends entirely on the size of the subsidy?
How wrong members of the Conservative Party are; I am astonished at such abysmal ignorance. I shall try to educate the hon. Member. Take the ordinary 2 1b. loaf. With subsidy, it is 4½d.; without it it would be 7½d. Is there any other country in Europe where there is a 2 1b. loaf at 7½d.? To what do we owe that price? To the policy of bulk purchase. Will the noble Lady tell any of her audiences that there is any other country in Europe which can produce a 2 1b. loaf at 7½d.
As the hon. Lady has directly challenged me, what I would do if I was talking to housewives would be to give them the figures of the subsidies, and tell them that we are subject to the highest taxation in Europe.
I was trying to reply to the hon. Member for Bury (Mr. W. Fletcher) when the noble Lady interrupted. I am astonished at what she has said. The noble Lady is well reported in the newspapers, no doubt because of her large audiences, her charm and intelligence. I am sorry that the accent is on charm rather than intelligence, because charm passes, as I know to my cost, and I can assure the noble Lady that it will not seem like two months before some day she wakes up and finds that, like the last rose of summer, it has all gone. We must, therefore, rely on intelligence. I have never yet heard the noble Lady putting pep and courage into her audiences by telling them that they are partaking of foods which, even without a subsidy, are the lowest priced in all Europe. I have never yet heard her say that the United Nations' Bulletin puts this country's cost of living increases as being the lowest in the world.Let me come back to bread and butter, and the things we eat every day. I like to talk to housewives myself, though I can assure the Committee that when I do, I never get reported in the newspapers. If I call somebody a "twerp," however, I manage to get loads of publicity. I want further to enlighten the hon. Member for Bury, who asked me about subsidies. Butter, with subsidy, is 1s. 6d.; without the subsidy it would be 2s. 11½d. Does any hon. Member opposite know of a country in Europe where butter is as low even as 2s. 11½d.? But let us forget about the subsidies. The hon. Member for East Aberdeen (Mr. Boothby) a few days ago asked the Parliamentary Secretary to the Ministry of Food if butter could be freed entirely from subsidy and allowed to find its own head—at 3s. a pound. I wonder if this is a clue to Conservative policy? One has to search for clues, because there is nothing open and above board about Conservative policy. When the Conservatives go to the country, they will tell the people that if ever they return to power they will abolish subsidies, but if they did that, would they still be able to say that our prices were the cheapest in all Europe? Take the price of butcher meat. Is it not astonishing that the price, without subsidy, is 1s. 7½d.? To what can we attribute all this? There is no evidence here of any failure of bulk purchase; it is all exactly the opposite. So that she may obtain an idea of prices abroad, I recommend the noble Lady to buy one of the pieces of pork now coming in from France. A quarter of a pound will cost her about half-a-crown and she will find that half of it is bone. This will illustrate what the women abroad are paying for their food. When the Swiss Delegation were in this country recently we asked them the price of butter in Switzerland, a country which never had the war. They told us the price was 5s. a pound. When I was in Switzerland it was 6s. a pound; in Sweden it was 6s.; and when I was in Norway the price was 5s. a pound, but it was not butter; it was a special kind of margarine that tastes very much like butter. The price of butcher's meat, without subsidy, affords an astonishing comparison with the prices obtaining all over Europe. And eggs—their price would be 4s. 5½d. a dozen without subsidy. I hope that hon. Members opposite, particularly the hon. Member for Bury, who was so ill-informed as to suggest that our low cost of living was due entirely to the subsidy and that I was concealing that fact, will digest what I am now telling him. When hon. Members opposite talk about freeing these commodities to private enterprise so that private enterprise may get its head, do they ever tell housewives that free enterprise black market eggs are usually from 6s. to 10s. a dozen?
Is the hon. Lady suggesting that there is a direct connection between free enterprise and the black market? Is she making a general slur on private enterprise?
I am afraid that I should require a microscope with a super lens to discover the distinction.Cheese, without subsidy, at 2s. 3d. a pound, is the cheapest in Europe. The same is true of margarine. As for bananas, even the black market bananas sold by the barrow boys in Glasgow at 6s. a dozen are far cheaper than any bananas that can be bought in any country in Europe, even at the black market price. The explanation cannot be attributed to any other reason than that they come into this country at a bulk purchase price. Need I go further into all those things? I have had an intricate and prolonged commercial training. I was taught how to give advice when I went into a counting house to audit books, how to advise business men when I examined their balance sheets and how to explain to them that certain principles had to be adhered to. The hon. and gallant Gentleman the Member for Pollok (Commander Galbraith), who conies from a firm of chartered accountants and knows much more of this subject than I do, will agree that certain principles are laid down for the conduct of commerce and business and cannot be deviated from without disaster. There are other principles which are applied by way of advice. We have heard of the law of supply and demand and of mergers, yet hon. Members opposite come here to decry and to denounce bulk purchases while the whole of their principles in commerce and business have been based on eliminating the crowd, combining to eliminate all competition, and on merging to engage in buying and selling. Let me give just two examples of the representation of the Conservative Party in the country. The noble Lady the Member for South Aberdeen adorns bazaars and sales of work with her presence—and a very nice presence it is. I believe that at the last one which she opened in Glasgow, crowds were waiting for admission to make purchases. That must have been very heartening to the women who spent laborious months in stitching and making-up garments, wondering what prices they would fetch. The hon. Lady understands the sentiment perfectly. The price which those garments would command would depend entirely on the number of buyers to purchase them. But does not the hon. Lady know that if, when the doors of the MacLellan Galleries were opened and all the stall holders were in their places, there had been only one buyer those articles would have been sold very cheaply? The other 50 per cent. of the Conservative lady Members of this House appeared in another constituency, that of my hon. Friend the Member for Dumbartonshire (Mr. McKinlay). The hon. Lady likened bulk purchase to a buyer from the Government, arriving at the Argentine very pronounced and prominent, and looking like a big elephant. She said that everybody, of course, knew he was coming, but failed entirely to get down to the guts of the situation: that only one buyer was arriving. But all the sellers knew that only one buyer was arriving from Britain, that the same ship would take him back again and that he was buying for the whole of Britain; and surely, as business men, they would know that it was up to them to make a deal with him. Suppose it had not been an elephant, but just a midge and there were a whole lot of other midges coming in the same ship. The buyer would know that if one midge did not buy he could hold it up, because there would be a whole lot of other midges who would nibble and up would go the price.
I am flattered that the hon. Lady should follow my activities in detail, but I am a little confused by her speech. What does she mean by her reference to one buyer in the McLellan Galleries when in fact they made a great deal of money?
I am sorry that my example did not get home. They did make a great deal of money because, as I said, when the doors were opened the rush of women to buy was phenomenal and they were bidding against each other. If, when the doors were opened there had been only one buyer, the price would have dropped and they would not have made any money at all. The buyer would have come off best.May I illustrate the point further by pursuing our mutual work in the constituencies? The noble Lady knows that when the stalls have been denuded at high prices, it is a common thing to get one buyer to buy up everything that is left. That is done, time and again, at a sale of work. But it is never done until the last minute, because the buyer then gets the advantage and when there are many buyers, they do not have the advantage. This little study in economics has all been summed up in a story of two Irishmen. One said to the other, "What do they mean by this law of supply and demand?" Pat replied, "Well, it is like this. If I have one pig and take it to market and there are two buyers, pigs is dear. But, if I have two pigs and take them to market and there is only one buyer, begorrah, pigs is cheap." The principle runs through the whole gamut of our life in this country and bulk purchase is bound to be successful. I know I can be corroborated by any hon. Member on this side of the Committee who has ever taken part in municipal life. In Glasgow Town Council, when I was convenor of housing, we sent out tenders time and again. We got very curious replies. We found there were mergers, or, if they were not mergers, they were very ill concealed. We found that in contracts for commodities for the building of houses, where the tender was £100,000 the difference between four different firms might only be 11½d.
I called the committee together on one occasion and suggested that, instead of sending out tenders month after month, we should buy in advance. We had a programme of 10,000 houses and if we could place orders in advance for 10,000 baths and 10,000 sets, which would be bulk purchase, we would have the whip hand over the mergers. The director of housing who made out the report took out tenders corroborating that. I do not know how hon. Members opposite can bolster up their false ideas any longer. The facts are all against them. They may go to their audiences and give nice little speeches about everything and anything except what housewives are wanting to know. They can never tell their audiences that the Strachey policy of bulk purchase has succeeded in bringing to us the cheapest food in all Europe. That is true. I am afraid, however, that the audiences will not be told that. I hope that the noble Lady will give that to her audiences. Or will it be said of her:
"Her honour rooted in dishonour stood And faith unfaithful kept her falsely true"?
In the few minutes available to me I hope I shall be forgiven if I do not follow the hon. Lady the Member for Coatbridge (Mrs. Mann) through the bazaars of Scotland, or on that curious zoological ship which went to the Argentine. I am sure that most of us following the Debate, however much we have studied the subject of bulk purchase, must have been astonished at the wide ramifications of Government trading and purchase. Government activity has apparently invaded all commercial and economic spheres in England today and, indeed, something of a revolution has taken place.Of the two main arguments which appear, the one put forward by hon. Members opposite is that the past is over and that we are passing into a new type of economic world. We on the other hand, say that the good methods of the past were better and that we should attempt to return to what was good and best in those methods. I ask hon. Gentlemen opposite whether they want to return to the best methods of the past, or whether they are in fact using present difficulties, such as currency difficulties and foreign exchange problems, as an excuse to implement still further the system which is a main article of their political faith. I think hon. Members opposite prefer the system of bulk purchase and central allocation and prefer a system of rationing which makes it much to go in for bulk purchase. That is the great gulf which divides us. I wish to refer to the various types of commodity which are now controlled and allocated by the Government. As the Minister of Supply has now returned, I would like to have his attention in regard to copper prices. He said that the price of the raw material, if 10 per cent. above the world price, made very little difference to the price of the finished article, if one averaged it out over the whole range. That was a clever and ingenious argument, but it is very small consolation to those firms in which the raw copper content is a very considerable proportion of the articles they export. It is no consolation to those firms who at present are suffering very seriously and may well have to dismiss a large number of men in the very near future. In the case of electric cable, for example, we are definitely beginning to lose orders because the buying countries are not prepared to pay prices so much above world market prices for cables which contain so much lead and copper in their make-up. Over the whole field the Minister's average may be correct but that is no consolation to the marginal firms which are very much affected. Little reference has been made today to the centralised purchase of raw cotton. I think that the reason this matter has not been more forcibly ventilated by the industries concerned is because the cotton industry still enjoys very much a sellers' market and spinners know that they can sell all the yarn they produce and get pretty well what price they like for it, so while they may grumble a little that cotton qualities supplied by the Raw Cotton Commission are not really what they want, they put up with them, knowing that they can spin them into yarns of some sort and more or less compel the weavers to take them from them. The situation will be very different indeed when the sellers' market disappears and the shortcomings of the Raw Cotton Commission are exposed.
Is the hon. Member not aware of the fact that it is impossible to buy all the qualities that are required in Lancashire at the present time?
It may be impossible under the present system of centralised purchase, but I very much doubt whether it would be impossible if the Liverpool Cotton Exchange were restored. In introducing the Bill to establish the Raw Cotton Commission, the Government said that the Commission would provide cheaper cotton, a better service than the old system, and stable prices. In fact, cotton has been more expensive, the service has been worse and there have been far greater fluctuations in price. The spinners who have to put up with it are the first to say so.I now wish to turn to one or two of the points about foodstuffs mentioned by the hon. Lady the Member for Coat-bridge. We have to distinguish between the two systems of food supply which have been evolved in different parts of Europe. There is the system of Switzerland, France or Spain if you will of "All you want if you have the money to buy it," which tends to mean food for the rich and not so much for the poor. Then there is the policy which has evolved in this country over a decade of fair shares for all at low prices. If we are to accept the second policy indefinitely, we have to recognise that it will also mean smaller shares. We get cheap butter but we get very little of it.
The reverse means big shares for some.
I take as an example oranges, which the hon. Lady mentioned. We could have had many more oranges in this country this Winter had we been prepared to pay a little more. While there may be a little virtue in getting one orange a fortnight on the cheap, many people would have been prepared to pay a little more for more frequent purchases. We could have had many more oranges from Spain this Winter if the Minister's so-called experts had had freedom to negotiate a fairer price with the suppliers. There are plenty of people in England who would gladly have paid a little more for Spanish oranges, leaving the cheaper Palestinian oranges to go to areas accustomed to cheaper prices. In other words, more oranges could have been had if private buyers had been allowed to make private purchases again at varying prices.There is a little to be said for offering long-term contracts to primary producers, particularly within the Empire and Commonwealth, with price reviews of an annual nature, but let us be sure that we get something in return in addition to the mere right to buy their food. Surely we are entitled to get from those countries long-term orders for our manufactured goods. It takes as long to design and produce a new motor or new aeroplane as to grow a new citrus tree or develop a new sugar plantation, and there is just as much financial risk involved. I have not heard any mention today by anyone on the other side of the Committee of the fact that we are entitled to get some guarantee from Commonwealth countries that they will take all the manufactured goods that we can make, and that they will not set up in ruthless competition with us as soon as they can while still holding us to our own long-term contracts. There should be a quid pro quo. We as a great manufacturing country are just as much entitled to guaranteed markets for our goods as primary producers are entitled to some reasonable guarantee from us in respect of their corn-modifies. This Debate has shown us the extent and ramifications of Government trading. We must be careful not to wind up the mechanism so tightly that it can never be unwound and loosened in the interests of a freer world economy.
The last remarks of the hon. Member rather made me feel that this Debate has suffered greatly from the fact that the only Member who really loathes bulk purchase, the hon. Member for Orpington (Sir W. Smithers), has not been here and has not been called. It has been most significant that from the beginning of the Debate until now there has been no clear-cut denunciation of bulk purchase over the whole sphere of Government purchases from any hon. Member on the benches opposite.I wish to refer to only one consideration which has not yet been mentioned. The main subject into which I wished to go was that raised by my hon. Friend the Member for Devonport (Mr. Foot), but I feel that he has dealt with it adequately—namely, the fact that the only way to keep the Commonwealth and Empire together today and in future is to go in for long-term contracts which provide primary producers throughout the Commonwealth and Empire with a proper living. The aspect of the matter with which I should like to deal is that a policy of bulk purchase is absolutely essential and complementary to a policy of full employment in this country. That is a fundamental point. I wish to quote from the speech made by the Foreign Secretary at Blackpool, which was the basis of my party's foreign policy at the time of the General Election. He said:
I was glad to see in "The Times" today a letter from a farmer. No hon. Member opposite has referred to it. It is most remarkable because he says:"At the end of the last war the price of wheat dropped in 1920 by 60 per cent. The international price level had broken and we had one of the greatest depressions the world has ever known. The farmer therefore must have a guaranteed price, not only nationally but internationally."
He gives more instances and approves of them, for this reason:"In the first half of 1947 … the price of wheat in Winnipeg and Chicago was in the neighbourhood of £30 a ton, while the English farmer was not receiving much more than half of that."
It is the fact that, in general, wheat prices govern world prices. It follows that if there is a great depression in the agricultural communities of the world, sooner or later that hits us in Birmingham and Liverpool and is responsible for mass unemployment in this country. It happened after the last war and in 1930. I have not the time to quote at any length, but I should like to refer to the remarkable work of Lord Beveridge on full employment, which was part of the Liberal Party policy at the last Election, and in which he quite specifically came out in favour of bulk purchase. I wish to quote only a few words. He first of all says, quoting Lord Keynes:"We have no desire to profiteer today by charging our neighbours exorbitant prices based on scarcity, and we feel that the immediate loss in potential profit is far more than offset by the security which results from the assurance that, in future, the prices we receive will be based to a large extent upon our legitimate costs of production, rather than upon world shortages or surpluses."
this is, in one year—"that there is an astonishing degree of variety in prices for wheat, rubber, cotton and lead and that indeed over a period of a year the variety in price averages as much as 67 per cent. It is this astonishing variety in the price of food that is the main cause of depression in the world which leads to unemployment, totalitarianism and finally to war. In the 12 months 1937–38—"
Here are the vital words:"wheat fell from 7s. 5d. to 3s. 4d. per bushel, copper from £75 to £35 per ton, cotton from 8d. to 4½d. per pound, wool from 110d. to 48d. per pound."
It is therefore absolutely vital for us, by bulk purchase, by long-term contracts, to guarantee throughout the whole British Commonwealth and Empire those conditions which will enable the depressed people—the peasants, who after all are the most important people in the Commonwealth and Empire—to know that they can go ahead and produce up to the hilt. I wish that the party opposite had been prepared to go in for a full programme of developing the British Commonwealth and Empire 25 years ago. If instead of making fatuous remarks on the subject of the groundnuts scheme they had pressed the Minister of Food, as they should have done, to have 10 groundnuts schemes instead of one, I might begin to think that they had changed their minds about it. The whole Commonwealth and Empire say the same thing. It just happens by chance that I met a New Zealander today whom I had not seen for a long time. They all tell the same story. New Zealand, Australia, the whole Commonwealth and Empire, want guaranteed prices for primary producers. The main cause of depression is always the fact that the primary producer gets out of touch with industrial communities. The need to keep a proper relationship between the agricultural producers and the great industrial communities of the world is the main desideratum, to preserve a world policy of full employment. It is important for us to appreciate that the two main reasons for the policy of Government trading are first that it is essential for a policy of full employment, and secondly, it is the only method by which we can ensure the development of the Commonwealth and Empire as a whole. I would ask one question of the hon. Member for Bury (Mr. Walter Fletcher) who is to wind up for the Opposition. I think every hon. Member knows perfectly well that there is a great danger of a world-wide trade depression coming now. It will start as it did before in the United States——"It is idle to expect that the demand for British exports can become stable if the prices of British imports and by consequence the purchasing power of Britain's supplier customers continue to vary as violently as in the past."
It has started already.
The hon. Member says it has started already. There are already at least 3,200,000 unemployed in the U.S.A., which is equivalent to a million unemployed in this country. I ask this question which specifically arises out of the speech of the hon. Member for Wednesbury (Mr. S. N. Evans), with whom I was generally in agreement. How can we possibly insulate ourselves in this country against the consequences of a world-wide depression starting in America unless we can have reciprocal bulk purchase contracts throughout the Commonwealth and Empire? Are we to abandon the great advantage open to us in a time of world depression by reason of the fact that we are the greatest importing country in the world? This becomes a tremendous asset because primary producing countries want to sell their goods and we are able to go to those who are our good friends in the Commonwealth and Empire and closely knit to us by ties of sentiment, which matter just as much as economics, and say, "We will buy the whole of your exportable surplus" and we ask them in return to buy our manufactured goods in order to ensure employment for the people of Birmingham and other cities in this country.
This Debate is quite clearly a somewhat difficult one with which to deal in a relatively short time. Remembering what Lamb once said, I think we can say that it is "Fine, rich, confused debating." I wish to deal with one or two points made by hon. and right hon. Gentlemen opposite, starting with the Minister of Supply. The right hon. Gentleman first of all paid a great tribute, and one which was justified, to the working of the London metal market before the war. I would point out to him that in that metal market there was the same degree of speculation as on the Liverpool Cotton Exchange, yet that was used by the Government as the reason for shutting down the Liverpool Cotton Exchange. It seems to me to be a very curious anomaly that we have the Minister of Supply paying a tribute to this well-organised Exchange which attracted a great deal of admirable business and gave much employment in this country, and which was exactly the same in every way as the Liverpool Cotton Exchange, and yet his colleagues condemn and shut the Cotton Exchange on exactly the same grounds as these on which he praises the Metal Exchange.There was another point which he made and of which I do not think he realised the true implication. I do not think I am misquoting him if I say he said that he thought on the whole it was all right to pay a rather higher price for goods in the sterling area than it was for dollar goods. That is a direct attack on what the Chancellor of the Exchequer is trying to do. The Chancellor is trying to defend sterling and keep sterling stabilised at the point where it is now. There are very good arguments in favour of that and there are arguments against it. But what the Minister of Supply is really doing is saying, "I am not going to back that horse at all. I am going deliberately to pay something much nearer to the outside world assessment of the value of sterling in buying goods within the sterling area at a higher price." That is one of the great problems which makes the whole question of bulk purchase so dangerous. It is based at the present moment, or supposed to be based, on the fixed sterling rate. Whereas in fact when he comes to buy the seller is selling and wishes to sell at the opening market sterling rate. That is true in nearly every country outside the sterling bloc. It is that contradiction which he inadvertently brought into the open by saying that it was right to pay a higher price in the sterling bloc than outside. I pass to the speeches, very much alike, of the hon. Member for Devonport (Mr. Foot) and the hon. and gallant Member for North Portsmouth (Major Bruce). They are a sort of twins. They might well be called "Gog and Demagog" but I am not quite certain which one I should choose as "Demagog." I have heard the speech of the hon. Member for Devonport before on the Committee stage of the Colonial Development Bill. I have heard it fairly often. The hon. Member is getting very good at making it, if I may say so. He is word perfect; the gestures are right and it really is impressive. I think that after a while I shall be able to make it almost as well as he did. The way in which he assumes a monopoly of understanding and feeling for the peoples in the West Indies and other native countries is also a thing we have noticed before. But let us get down to the nub of what he and his twin—and the tertium quid who has now joined them—have to say on this question of having huge bulk purchasing long-term contracts. I realise that we on this side of the Committee have angered hon. and right hon. Gentlemen opposite today because we have been factual and careful and that does not seem to have pleased them at all. I should like to issue this very real and serious warning. It is perfectly true—and this is the reason why the Opposition have chosen this Supply Day for this Debate—that we are now entering on a new and very difficult phase in world trade. It is a phase of declining prices, a phase of the end of the sellers' market as the Chancellor of the Exchequer has not failed to point out. At the moment we have to be supremely careful that we who are on one side of a bargain do not underwrite and give our name to contracts which cannot be fulfilled. We are a poor nation. We have lost, through honourable reasons during the war, a great deal of our overseas assets and, as is being driven home to us the whole time by the Chancellor of the Exchequer, we are today in a very precarious position. The export gap widens. The support that we receive from Marshall Aid, which has been generally acknowledged today, yet may one day be withdrawn. When the hon. Member for King's Norton (Mr. Blackburn) talked about contracts at fixed prices in 10 years' time, did he really think quite seriously that we are of necessity going to be able to fulfil the whole of these contracts, and a great many more?
The hon. Gentleman knows perfectly well that there are escape clauses. There are plenty of devices by which one can prevent a fixed price under an agreement from becoming too burdensome when the situation changes.
I should like to know who is going to escape from the escape clause. Is it the buyer or is it the seller?
Both. Either side is able to escape. I am sure that the Minister of Food will be only too delighted to give the hon. Member details because he does not seems to know about it. Both sides are able to escape.
If that is so, then to the sugar producers in the West Indies a contract does not mean anything at all.The Government are up against a problem. They must face up to it and decide. I do not pretend that it is an easy one. As far as I am concerned, this is no party matter. When a country is in a set of circumstances of extreme financial stringency and difficulty, the Government must face the question which the hon. Gentleman put to me of unemployment here through the difficulty of selling our goods in the world in which huge areas are cut off from us. They include at intervals the Dutch East Indies, the whole of China and, by unilateral action, South Africa, India and Pakistan. Whole areas are often no longer open to our exports. When the effect of that really begins to come home do hon. Gentlemen opposite think that it would have been a fair deal to have gone to the Colonies and the development areas throughout the world and signed seven and 10-year contracts? If they do that, what will the contracts be? Will the contracts contain—and this is the essence of the matter—a clause which will assure them that they will receive, at a moment when prices have declined very much, prices which will allow them a good and decent standard of living? If that is the basis of the Government's fixed prices then they must realise that if prices in other parts of the world are then lower, this country, faced as it may be with grave difficulties and unemployment, will be paying a subsidy, which on many grounds is perfectly right, outside the country. It is often a most fatal thing to do in a contract, and His Majesty's Government have learned this. They have departed to some extent from fixed contracts towards variable ones. It is a fatal thing to write a long-term contract if there is any doubt about one's ability to carry it out. It is even more fatal to do it with people who are primary producers in an early stage of their political development. If they are let down by our inability to carry out the contract, they most certainly will not look upon it in the same way as we have heard this afternoon, where this terrific effort to build up may be seriously jeopardised by not having taken a factual view and tried to understand whether or not this or that is possible. We can only work within the means at our disposal. I should now like to turn——
Before the hon. Gentleman leaves that point——
I cannot give way. The hon. Gentleman had longer to speak than I am allowed.When we talk about bulk buying, obviously we mean three or four different things. We mean an ordinary large single purchase; we mean centralised buying; and, of course, we mean State trading. It is an extremely difficult matter to make a statement condemning bulk buying covering all these points. None the less, I believe that, taking it by and large and looking at this in one light only, and that is in the light of all the difficulties coming to us, the reason why the Opposition started this Debate is quite clear; they had before them in their minds two questions only, the main question being: Will the system of bulk buying promote the manufacture of goods in this country by allowing the import of raw materials over a whole period of years on a better basis than previous systems, and, will the same also apply to food? I take first some of the considerations regarding raw materials, and particularly cotton. The Government took action to shut down the Liverpool Cotton Exchange, and I am talking about it not from the point of view of the people employed in the Exchange but from the point of view of the manufacturers in Lancashire. There have now been several years of experience from which we can talk with some knowledge. As regards the question of price, it is extremely difficult to judge at present, after a rising market practically the whole way through, how it has worked out, and it is always difficult with Government and State trading to know how it is worked out, because Departmental balance-sheets are not made out on the same basis as commercial ones. Government balance-sheets are not compiled in the way that we are compelled to compile them by the Cohen Act. They do not put "stock at market or cost, whichever is the lower," because that would reveal the loss made over the year. That is not what is done at all. What is done is something very different. The Government Department says: "The price is lower now than it was during the year, so, first of all, we must push the stuff off at the cost price to the manufacturer." There is no other source of supply in many areas and he has to take it though it adds to his cost price. They do that, or they conceal it in various other ways, because there is often no cost of storage, no cost of insurance, etc. All this is a very bad thing for the country and is not even helpful to the Ministers themselves, but when we get nearer to the causes of such things in the case of cotton, we find that on the question of price, I have no doubt there is not going to be very much in it, remembering that the Government has actually inherited a rather nice bonus stock at the end of the war. The question of the price in a sellers' market has been concealed by the ability of the manufacturer to take up any difference there might have been by being able to sell his goods almost anywhere in the world. But, in the bulk purchase system of the Cotton Commission, there are much worse vices. The question of quality is paramount. Lancashire faces the competition of other manufacturing countries; competition now comes from Japan. What has happened? First of all, there has been an improvement, and I am the first to admit that there is a slightly better choice, though not enough samples and still not what the manufacturer wants in grades. I spent the whole of last week in Lancashire going into these matters. The manufacturer does not want to complain, because if he does he gets a bad name with the Ministries. He pushes the stuff away in a corner of his factory and hopes to be able to use it later on. He has not got the freedom that he should have, because the buying has not been done in such a way as to allow him to buy exactly what he wants. The Government's "cover" scheme, which was brought in with such a flourish and is an interesting and good scheme, does not extend far enough, but only to the spinner; it does not protect the converter and exporter. Manchester is full not only of frustrated export, but of frustrated exporters, for we find there markets being shut off from us day after day. I remember a story which illustrates what happens and what will happen under bulk buying as it operates at present. It is the story of the traveller in the Middle West in the old days who went into a small restaurant, the only one in the place, in which there was a huge menu of about 50 different dishes which he began to read to decide what he would have for lunch. At that moment the proprietor came in with a big revolver and said, "Stranger, you'll have hash." That is exactly what happens if anyone goes to the Cotton Commission and is too difficult about things, asking for too many grades and differences in qualities, and complains—he has to have hash. The Minister of Supply talks with knowledge on the freeing of commodity exchanges. I have been working, as he knows, in certain other commodities, in rubber particularly where the exchange has been open since the war. I say quite openly that so long as we have not got convertibility of sterling and free exchange what we can expect from any open market is somewhat limited. There will not be free hedging which allows stocks to be brought to this country and relieves the Government from the high costs of holding stocks in this country. The costs did not fall on the taxpayer when exchanges were open but were borne by the trades themselves. With an open exchange people could hedge from other countries; something like 70 per cent. of the business came from overseas. It is one of our greatest invisible exports. We are living under the orders of the Chancellor of the Exchequer that that is not possible at the present moment. Nevertheless, there are certain things that come from open exchanges which we do not get in Government bulk buying that are of the utmost value. There is arbitration, which is a point that has not been touched. One of the greatest things with all these exchanges was the fact that anyone who had a complaint on a contract, say, in regard to quality, could get arbitration, which meant that by and large the goods that the manufacturers wanted were invariably the goods that they got. Penalties and awards were given by the eminently fair arbitration which was recognised throughout the world, and the penalties were such that the bad deliverer had a bad time. This was particularly true of the Liverpool Cotton Exchange, which is one of the reasons why so much business was transacted there. That has gone, but it will come back. One of the reasons why I urge the Minister to open the metal exchange is that other countries also have their exchange regulations and are suffering from inability to use the open market. If we open the exchange here, with the great reputation that it has we should transact business for the whole of Europe and for America. Gradually we should break down this resistance there is in other countries and attract business to this country, which would give invisible exports that are so useful because they do not involve manufacturing capacity. I add to the plea for the opening of the exchange and eventually for the opening of other exchanges. We shall never be able to meet the shock that is coming to the manufacturing element of this country so long as we are trammelled by the system of bulk purchasing. Reference has been made to a great many papers and documents, and I should like to read a small extract from a paper that carries weight in every quarter, and that is "The Economist." Members will forgive me if I change my glasses. I have to have three sets, one for distance and one for reading, and since the Minister of Food has been in charge, one for feeding as well. "The Economist" of 30th April, speaking of Government purchases, says:
That is really the greatest condemnation from a thoroughly impartial source, quoted with glee on many occasions by the Chancellor of the Duchy of Lancaster, of the system of bulk purchase. [Laughter.] Right hon. and hon. Gentlemen opposite may cheer and laugh, but if they will think seriously and if they will examine the position in the exports world at the present time they will see perfectly clearly that to run a risk of sticking to a system or to say, as they are saying at the present time, "My theory right or wrong," will handicap industry, and industry is very apprehensive about it. I must change my glasses again; these are the distance glasses. I want to come to a matter in connection with the Argentine Meat Agreement, because that also has a great many interesting points. The hon. Member for Coatbridge (Mrs. Mann) brought forward the thesis that buying through one person, through a known buyer for a Government, was much the most economical way of bargaining and that the impact of one buyer on the market was very much less. What is the truth about the matter? If one buys regularly over the whole year, through the normal channels through which purchase is made, the impact must be very much less. The contracts must be much better carried out partly because the goods are not all being inspected by one inspector. There is safety in numbers. If the Minister of Food doubts that, I suggest he reads the evidence of the Estimates Committee by the Food Secretary and his officials when asked questions as to whether he thought the bargaining in the Argentine was better carried out by the old system or by the new system. There is no doubt—and there is evidence of every sort for this—that the right way to do this is by the normal channels. One of the great vices of bulk purchase, which has been emphasised in other places, is that the relative honesty of the two parties enters into the matter. That is one reason why there is sounder ground for some of these contracts in the Empire than there is outside, although even in the Empire, as the right hon. Gentleman knows, in the case of copra, we had at least one very unfortunate experience. He was not always so fortunate with tea; either. What happens in the Argentine? It is without doubt the finest example that we have seen of the dangers of bulk purchase. We have paid the highest price for the worst delivery. Even at this moment the Ambassador, a most distinguished civil servant—in a somewhat new role—is walking around with his string bag arguing with the local butcher about buying our chops—an edifying spectacle. This business should be carried out in a totally different way, through the proper normal channels. By all means let the Minister direct policy. While it is a question of the lack of dollars, let him guide policy; but let him use existing machinery to a much greater extent than he has done even with the 15 experts he told us he had, on one occasion; let him to a much greater extent take an example from some of his colleagues and use existing organisations. Even with the financial ability which he and his colleagues possess he will not find it possible to sell the Argentine Railways to them a second time. If that does not happen, then he will find it extremely difficult to pay for other deliveries coming along. We hear a great deal, and we have heard a great deal, about the dollar shortage, and there is no doubt at all that it is the overriding question and that it does condition a great deal of what we can do. But I would suggest this to the Government: that they must tighten things up, that any factor which loses dollars to the sterling bloc and any factor which tends towards that loss must be handled very firmly. He and his colleagues know as well as a great many hon. Members on this side of the House how, under bulk trading, under Government trading and a bulk purchase system, there are very many loopholes and how very many commodities that can be turned into dollars are being diverted by other countries who are outside the sterling bloc and then re-shipped to America and turned into dollars. Before we hear much more about the dollar shortage they should block up the leaks that there are at the present time. This may not appear to be a very big question, but it undoubtedly runs into many tens of millions. There have been a certain number of speeches on questions of principle, but I most sincerely believe that what we have to consider at the present moment is much more the practice than the principle. We are in a period of declining prices. How can this be mitigated? There is trouble because of Government trading, and with distribution through Government agencies and bulk purchases, instead of our using the open market exchange system. Today when a manufacturer or shipper or a merchant in Lancashire gets an order from any part of the world he knows that he is in reality in competition with a great many other countries. If he does not have flexibility in his raw material price he cannot buy at the day's ruling prices in the world. We have heard before in previous Debates, and my right hon. Friend the Member for Aldershot has most certainly emphasised this, quite rightly, today, that the important thing was stability. We have heard during the Debates on the Iron and Steel Bill from the Minister of Supply that flexibility was to be the order of the day. We have stability and rigidity on the one side and flexibility on the other. They seem to me to be slightly incompatible. What is wanted—what the cotton manufacturer undoubtedly is wanting—is the certainty that the price of his goods will be competitive in the world, or the export drive will fade away, particularly in the textile trade. Any protection that there is goes only to the spinner, and the merchant, who has to take the brunt of the thing, is not protected. I do believe that there is a better course in the gradual swing over away from bulk purchase, away from State trading, and that the need for that course is greater than ever it was. I would put forward a plea to the Government. One does so very often, and it is very seldom one gets any satisfactory response. The Government have shown a small sign during this Debate that they are receptive to new ideas. They will have on their shoulders very soon very great responsibility. They should listen carefully to what the Chancellor tells them, to what the President of the Board of Trade tells them, to what their own knowledge and commonsense tell them—that there are declining markets in front of them and that they have two duties in front of them, not to add to the burden of the manufacturer, who is already in great difficulties, for in many ways his raw materials are made more expensive than they need be, and—possibly more important than that—not to add to the difficulties of the householder by making food dearer than it need be. Anything that tends to put up wage costs at a moment when raw materials are declining is probably the biggest handicap and the greatest weight around the neck of manufacturing industry in this country. I believe that the Opposition were right and were bold—right because they were bold—in bringing forward this difficult technical subject at exactly this moment, because anybody who studies the trends of trade can well understand—and instances have been given about metal today—how acute that situation is, and how violent fluctuations can be. He should know quite well that we have passed through a period of general rising prices and are entering upon difficulties and deficiencies. It will not be good for hon. and right hon. Gentlemen opposite, when they examine their consciences in a year or two, if they have not taken the opportunity given them by the Opposition to show that they know that this period we have gone through, this phase, is over, and that we are entering another phase. It will not be good for them if they do not say, "We propose to learn the lessons which have been learnt by other countries and to change to a considerable extent our system of bulk purchase and State trading; we propose gradually to examine the question of the convertibility of sterling." Hon. Members opposite talk of enormous long-term contracts. That is a megalomania which attacks the Minister of Food more than anyone else. He loves to fly away to Africa and look at his £50 million bad debt investment there. Let me give him a hint so that when he gets there he will know what his local name is. He is known there as King Kongwa. Let him avoid this other form of megalomania. Nothing is more pleasant for Ministers than to go round the world as bulk purchasers and government traders and to talk of the enormous contracts in size and time which they are going to offer. The objective is often very good, but before they sign these contracts and evoke great hopes in the people concerned, they must make up their minds whether the conditioning of our trade is going to permit them to fulfil the contracts, and whether they are really doing the best for the export industries of this country. This is not a moment when we can afford to stick to theories that may be very dear to us. During the war and the time of the Coalition Government, both sides gave up some of their most cherished ideals, and unless they do that again today we are in for an economic slump, almost as severe as any the world has known. This is the moment when people should put aside the things that they love very dearly in the way of theories and look absolutely factually at the question of whether this is not the time to grow away from this power-loving megalomania idea of bulk purchase and come into the field where the great fund of knowledge and the whole of the genius of the trading community can be better harnessed to the end that we have in view."The most serious criticism is that under rising prices British costs tend to be artificially low, whereas under falling prices they are too high, that is, too high at a time when competition is all the more keen."
I think that the Committee will agree that we have had a very nice and reasonable Debate, but I think that some of us on this side must be feeling a certain sense of anti-climax when we remember the bold and forthcoming terms in which bulk purchase has been denounced by the Conservative Press, the Conservative Central Office and in other forms of Conservative utterances outside this House, and we are a little disappointed with the very mild remarks which have been made this afternoon. However, better late than never in appreciation of the real facts of this position.What has really been said from the other side of the Committee comes down to this, that there has been no attempt to deny seriously that bulk buying in the four years since the end of the war has been immensely successful in saving this country many hundreds of millions of pounds and in securing enormous supplies of raw material and food for this country which could not have been supplied in any other way. [HON. MEMBERS: "Oh."] There has been no attempt to deny that. What there has been an attempt to do is to say: "That may be so; there may be something in all that, but now you have come to a different phase of the trade cycle. That was all true when prices were rising all the time and it was easy enough to make bulk buying a success and forward buying and long-term contracts a success. Now you have come to a falling market, and it is going to be very much more difficult." Let me say at once that the position, stated like that, points to a real problem. Of course, a falling market will call for different methods of procurement and supply to this country. No one on this side of the Committee doubts that for one moment. I should like to recall a few remarks I made before the fact—if it is a fact, and I think it probably is—of falling markets had become nearly so apparent as it is today, because I should not like it to be thought that the Government had given no attention to this point before it was raised by the Opposition this afternoon. As long ago as 20th January, I ended a short speech on this subject with these words—and I do not think I could have put the thing more strongly—when talking of bulk purchase, State trading and long-term contracts, that most complex of methods:
I think it is, therefore, perfectly clear that the Government have had the very real problem which procurement will present to us on a falling market very clearly in mind, and that the perfectly true remarks just made by the hon. Member for Bury (Mr. W. Fletcher) on that subject—that we must approach this problem in the most objective and most factual way we can—are thoroughly appreciated by the Government, and have been appreciated by the Government ever since the signs of the change of economic climate became apparent to us some months ago. Having said that, I ask the Committee to look in a little detail at what it is that is being objected to by the Opposition today. It is, as I understand it, the whole complex of arrangements, which consists partly in the Government being the sole buyer of some commodities—foodstuffs or raw materials—with Government buying being exercised in what is called the method of bulk buying, which simply means buying a lot of the particular commodity in one transaction or, alternatively, a long-term contract under which the price of the commodity in question is fixed, or fixed within certain limits, for a relatively long period of time. These are, no doubt, associated arrangements of trading, but they are not indissolubly associated. It is not by any means the case that the Government, while retaining in their own hands the procurement, the import, of a commodity, need either make long-term contracts in advance for that commodity, or need buy it in large quantities at individual transactions. Certainly, if we are entering a period of falling markets the Government, in buying the commodities they do buy, reserve the right—they have always done so—to buy, when they think it advantageous to do so, in very small quantities, cargo by cargo, to buy without any fixing of the price in advance, and to buy not necessarily directly but through various agents and traders. For instance, the cereals which are bought, and have always been bought, by my Department have always been bought by a multiplicity of traders in the grain trade acting as agents of the Ministry of Food. Therefore, the method of Government buying is a far more flexible one than anything we have heard suggested today."There are various methods by which we can safeguard, and must safeguard, against the effect of these arrangements being to stabilise the prices which we should pay for our primary products at what might prove in future years to be an unnecessarily high level. The House may rest assured that so long as I, at any rate, hold my present responsibilities, I shall always bear in mind that perhaps the greatest economic danger to which this country could expose itself would be to pin the price of its imports at a high and fixed level, while the prices to be realised by its manufactured exports were left free to find their own level. That, of course, would be a most hazardous thing to do, and one which we shall avoid at all costs."—[OFFICIAL REPORT, 20th January, 1949; Vol. 460, c. 361.]
Will the right hon. Gentleman make clear the point about the Government acting through a multiplicity of agents in the grain trade? He is not referring to the grain trade of this country?
Yes, I am referring to the grain trade of this country. Trading firms in the grain business buy particular cargoes. The hon. and learned Gentleman shakes his head. I am telling him the facts.
The hon. Gentleman is quite wrong.
The hon. and learned Gentleman simply does not know what he is talking about.
Would the right hon. Gentleman say who bought the maize from the Argentine? Was that bought through private traders or was it fixed up by agreement under the Andes Agreement?
I did not say that the Ministry of Food do not buy direct if they wish to, but I say they reserve the right to buy through firms in the grain trade acting as their agents, as they have done through these years, when they consider it right to do so. They reserve the right to continue to do it. That is a perfectly good answer to the hon. and learned Gentleman's question.
I am not disputing that the right hon. Gentleman uses firms in the grain trade for distribution, but I challenge his statement that he buys through them.
I can assure the hon. and learned Member that that is right. It does not apply to every transaction. I never said that. We reserve the right to use the firms in the grain trade for buying particular consignments of cereals, acting as agents for the Ministry of Food. I put that phrase into my original statement. That is a useful method by which the trade can be conducted.
I think I must go on now, for I want to come to the statement made in this connection by the hon. Member for Chippenham (Mr. Eccles). In what I said about purchasing small quantities, I must not be understood as saying that I regard bulk buying or longterm contracts as being necessarily undesirable practices on a falling market. The hon. Member for Chippenham made a very sweeping statement about alleged losses which the Ministry of Supply were supposed to have made in recent transactions on non-ferrous metals, and he repeated time after time the statement that vast and fantastic losses had been made by the Government. He went on to repeat this accusation, and then tried to invent an explanation of how it happened. We listened to him with great care for the evidence of these alleged large losses, and when it came it was of the most remarkable character, because it was a document or letter—he would not tell us which—which he said he had had from a source which was unnamed. He would not tell us how it came into his hands, but from this unnamed American official he read out allegations about three purchases of non-ferrous metals on behalf of the Ministry of Supply which had been exceedingly disadvantageous. The only shred of evidence put before us as to these alleged vast losses in State trading were from that document, and that was the basis of his whole argument. It does not seem to me that that is good enough for the Committee.
Let us be clear about this. Does the right hon. Gentleman challenge the facts of that paper whatever its origin might be, and does he now say he has not experienced those losses?
We were read a small extract from an unnamed paper from an unknown source, and I could not possibly say whether that was a just or fair appreciation of how the contracts were made. It did not, of course, give all the circumstances, such as whether the price was correct or not, whether the quantities were correct or not, and whether the metals could have been obtained from other sources more advantageously. I imagine there is a great deal to be said on the other side.
Could the right hon. Gentleman say whether the tonnage and the prices mentioned by my hon. Friend in his remarks were correct or not? That is a piece of information which he could obtain from anyone in the Ministry of Supply at any time.
I did take the trouble to find out whether they were correct or not, and in some cases they were not correct.
In which cases?
I am not going into a fragment of a document read out to this Committee. [Interruption.] Then we were told that it was humiliating to the Committee to be corrected by an American source on our methods of buying. What is humiliating is that the hon. Member for Chippenham, apparently, takes these casual comments made in a private letter from an American source as an authoritative statement as to whether our transactions were right or not.
Were they right?
Where were they wrong?
Some of the figures were wrong but I am certainly not going into the figures mentioned in this fragment of a document, because there would have been all sorts of considerations as to whether alternative methods of buying those metals at that time would have been more or less advantageous.I come now to the second instrument, long-term contracts, and whether those are or are not advantageous as an instrument on a falling market; and what we on this side consider is the chief argument for long-term contracts for primary products and, above all, agricultural products and foodstuffs. We regard long-term contracts as essentially an instrument of procurement which can give the primary producer in the Commonwealth, and in many cases also outside it—the primary' producer outside the Commonwealth is someone who is worth keeping in business to continue producing foodstuffs for the world—the security without which today he simply will not extend his production, which is of such enormous importance to this country. We are told that that is a matter of great unimportance; it is completely glossed over, and we are told that because the long-term contract gives that security to the primary producer on a falling market it must be disadvantageous to this country, because it means—and I readily admit it—that on a market which would otherwise be falling steeply into slump this country may pay more than it would pay under a free market price. But what happened when we paid a free market price for these imports in the 1930's? There were no long-term contracts which might prove disadvantageous on a falling market at that time; we imported wheat at 50 cents a bushel, and we imported about two million unemployed with that wheat. That is the real answer on these matters. I noticed an interesting letter in the correspondence which has been going on in "The Times" on this subject, which said that as long as the Government do not take part in the buying, the primary producer does not resent his ruin by a falling price. This was the actual statement made by Mr. Paul de Hevesy in "The Times" of 24th May, when he wrote:
I can assure the Committee that ill-feeling did accrue amongst the primary producers of Canada and Australia in the 1930's, when they were ruined precisely by the free market prices, which fell to absolutely catastrophic levels for them. It was at that period, I think, that the old rhyme of the Canadian prairies was coined, which is very often heard when one goes out there today:"Whether a price is low or high, no ill-feeling accrues if the purchaser is a private firm or individual."
"Here lies the body of Farmer Pete,
Anyone who deals today with the Australian Government, representing the Australian primary producers' interests as they rightly do, and with Australian primary producers themselves, knows that their reluctance to undertake boldly great capital works and expenditure on meat production stems from the terrible experiences they suffered at the hands of the importers who drove their advantage to the uttermost limit.Who starved from growing too much wheat."
I know Mr. de Hevesy well and I think the right hon. Gentleman has only quoted part of his letter and slightly caricatured his views. His point of view is—and I do not think the right hon. Gentleman can contradict it—that considerable ill-feeling has been caused in Canada now by the Government and that no ill-feeling was caused against the Government, or the people of this country, in those days.
That is precisely the point I was on and that is precisely the fallacy I was pointing out, that intense ill-feeling was caused——
Is caused now.
No, was caused then. That is the extraordinary fallacy into which hon. Members opposite continually fall. They think the primary producer does not mind being ruined when his products go to catastrophic levels, so long as it is not the Government who are buying.
I really cannot give way again on that issue. We regard these long-term contracts as at least as valuable, although, perhaps, for different reasons, in conditions of a falling market as in conditions of a rising market. When I say that, of course, I agree with many of the things said by the hon. Member for Bury about the importance of not making these contracts too long and not making them with fixed prices, but of having review clauses and annual price reviews, or such clauses, as in the recent contracts with Australian and New Zealand producers, by which the price cannot vary by more than a certain percentage each year. Certainly it is of great importance to this country that we should safeguard our interests by reasonable measures of that sort. I thought that on both sides of the Committee there was a revulsion against the catastrophic swing of prices under the trade cycle which we have seen produce such devastating results for the primary producers of the world—for the primary producers of the British Commonwealth and for the primary producers of the United Kingdom, for they suffer just as much.In some moods we find hon. Members opposite saying, as several have said today, in relation to Commonwealth producers, that they are now in favour of long-term contracts of one kind and another. It was remarkable a few weeks ago that on the subject of sugar, after the violent campaign which had been launched and was still running in Conservative newspapers and other organs of publicity against long-term contracts, that I was very strongly pressed by the hon. Member for Hornsey (Mr. Gammans) to extend the present four-year contract to sugar producers of the West Indies and the rest of the Commonwealth to a 10-year contract. We thought that was going rather far, for the reasons which the hon. Member for Bury, for one, put forward today. Hon. Members opposite really cannot have it both ways. We must draw a reasonable commonsense line between the two extremes. We agree with the very strong pleas and views expressed on this side of the Committee about the necessity for supporting the sugar and other primary producers of the West Indies and elsewhere, but I think hon. Members will find that we shall come to reasonable arrangements with them and will give them all the measures of security for which they can reasonably ask and which we can afford to give them and which will not be too financially dangerous to us. In passing, I might refer to the fact that the noble Lady the Member for South Aberdeen (Lady Tweedsmuir) asked me why the arrangements for this year's price took so long to negotiate. The answer is because we were taking great care to consider all the representations from the sugar producers of the West Indies. We fixed the price, in consultation with them, at what I think they will in the end find to be a fair figure. But we cannot, for the reasons which have been given again and again in this Committee, give just any price for which we are asked in these transactions. I come next to a subject which was raised I think by only one speaker, the hon. Member for Bury—our buying of meat from the Argentine and elsewhere under the present system of bulk buying or State buying and in some cases long-term contracts. I am glad he raised that subject because it is most important. The hon. Member said categorically that we had paid, and were paying, more for our meat by this method of buying than if we allowed private traders to go out and compete with each other to buy the meat. But he gave not a single figure to substantiate that contention. Let us look at the figures. In 1948–49 we paid for our meat which we bought from Australia under long-term contract 70 per cent. above the pre-war price. For the meat we bought from New Zealand we also paid 70 per cent. above the pre-war price and for the meat we bought from the Argentine we paid 86 per cent. above the pre-war price. Hon. Members on both sides of the Committee will agree that if we could get all our imports on the basis of such a moderate price rise as that, we should be very happy indeed. [HON. MEMBERS: "What about quantity?"] Secondly, I should like to compare that, not with the pre-war price level, but with the prices which other buyers of meat—and there were other active buyers in the market last year—actually paid. They were buying their meat mainly from the Argentine at prices 50 to 75 per cent. higher than we were. There were the two systems working side by side, and competitive private buying of meat resulted in prices 50 or 75 per cent. higher than the prices we paid. As to quantities, I gather it is being alleged at this moment by hon. Members opposite that at all events whatever it achieved on price our bulk buying of meat by Government buying has failed to secure the quantities. It is an interesting fact that up to and including 1947 we imported by this system of Government buying of meat a higher tonnage of meat in each of those years than we imported before the war. In 1947 we imported 1,106,000 tons as against 1,019,000 tons of meat before the war. It is perfectly true that in 1948 we imported only 875,000 tons of meat as against the 1,019,000 tons of meat before the war.
What are we to get this year?
Do hon. Members think that I can tell them what the total meat imports for this year will be?
As I say, we imported 875,000 tons of meat in 1948 against a pre-war import of 1,019,000 tons. The whole of that drop resulted from the fact that the import of Argentine meat dropped by 135,000 tons for reasons which we have gone into a good deal in the House, and for reasons which we naturally deplore. It was a matter of serious concern to us that the Argentine Government failed to fulfil its contract by that amount of meat. The Committee will see that the shortage of meat has not been the result of our policy for purchasing imported meat. The meat shortage in this country is entirely accounted for by the fact that we cannot as yet produce anything like the quantity of meat at home that we were producing before the war. There is roughly about 300,000 tons less meat being produced at home than was being produced before the war. Why is that? It is for two reasons. One is the perfectly necessary concentration in home agriculture on wheat and milk production; and secondly the fact that we cannot as yet provide the same tonnage of feedingstuffs as before the war. Those are the two perfectly obvious reasons why home production of meat cannot be as high as it was before the war.That brings me to the next great commodity which is bulk bought, namely, cereals. We have heard a good deal from the right hon. Member for Aldershot on the subject of the Canadian wheat agreement. Let us look at what has happened under that long-term contract, which is a good example of a long-term contract and the biggest in tonnage that we have ever entered into. It is a four-year contract. In the first year we bought four-fifths of our entire wheat supply at a price of one dollar 55 cents. That was in the year 1946–47. In the year 1947–48 we also bought the same quantity at one dollar 55 cents. During the whole of those two years the Chicago price of wheat ranged between two dollars and three dollars, and on one occasion it went up to three dollars 18 cents. It is alleged that we bought Canadian wheat during these two years at the whole of that differential below the world price. I would not accept that contention for the reasons which the right hon. Gentleman mentioned, that had that Canadian wheat been on the world market the Chicago price would have been somewhat lower, at any rate, than it was; but when I mentioned those prices which we have paid for the Canadian wheat and what the Chicago price was, I should not have been overstating the case if I had said it was not an extravagant transaction for this country. I go on to the third year, 1948–49. There we are paying two dollars, which is a higher price—and I think rightly—for the Canadian wheat. The Chicago price during the whole of this crop year, which is now almost finished, has been over two dollars. The margin is narrow there, and I am very glad it is. We are paying rather more for our Canadian wheat and the Chicago price is coming down. I think it is very likely that if the whole of the Canadian crop were on the open market, we should not be buying our wheat from Canada this year at below the world price. Now I come to the last year of this four-year contract, 1949–50. We have already settled that for that year also we shall pay the Canadians two dollars for their wheat. It is quite true that we have just entered into—if it is ratified and I hope it will be—an international wheat agreement which will fix the maximum price of wheat in the world at one dollar 80 cents. Therefore, we shall, in the last year of the contract, give an advantage of 20 cents a bushel to the Canadians, by buying their wheat at two dollars. We think this is just the way a long-term contract ought to work out. It worked out at a financial advantage to us in the earlier years and it will work out with a distinct financial advantage to the Canadians in the last year; and we shall be doing exactly what we said we would do in the terms of the contract; we shall have regard to the financial advantage which we had in the earlier years. But over and above that, of course, it will give, and has given, to the Canadian producers four years of security for their wheat. That is the great quid pro quo that we have given. I go on from that to the purchases of cereals mentioned by the right hon. Gentleman the Member for Aldershot. They are not long-term contracts but they are large purchases. We bought Argentine and Russian coarse grains at prices of between £27 and £30 a ton. It is perfectly true that those are high prices. We made no commitment to go on buying at those prices and when we buy our next supplies, which will be fairly soon, we certainly shall not pay anything like those prices. I am perfectly prepared to defend those large purchases of coarse grains as absolutely sound at the time they were made and indeed absolutely essential for agriculture and for the economy of this country. In no other way could we have got the quantity of coarse grains that we have got, which alone has allowed us even to begin the process of rebuilding our livestock industry. Hon. Members opposite really cannot have it both ways. They are always attacking us for failing to buy coarse grains on an adequate scale. Because, even though the price was then high, we did go out over a year ago into the world market and buy at the earliest possible opportunity large quantities of coarse grains, that is precisely why we are now beginning the process of rebuilding our meat and livestock industry. It is worth while repeating the figures which have been given once before which show the value of these purchases and also demonstrate that the allegation that we are failing to provide the British agricultural industry with coarse grains is simply not the case. Since 1945–46, when we could only import 414,000 tons, we have built up year by year, until this year, 1948–49, when we will have imported 2,282,000 tons of coarse grains. That could not have been done without those big Argentine and Russian purchases which had to be made at that time at what were undoubtedly high prices. That is the justification for them. A number of smaller points have been made. I will take one of them as an example of the reiterated accusation that our bulk buying of raw materials on a falling market handicaps the British exporter because he pays a higher price for his materials. I entirely agree that that is something which we must watch most closely, and something which we must do something about. [HON. MEMBERS: "Hear, hear."] Yes—and I will give the Committee a good example of what we have done about it. The material which principally concerns me in my Ministry in this matter is linseed. We were strongly accused of failing to provide the British paint and linoleum industries, for example, with linseed at an economic price. Mr. Beddington Behrens, in his correspondence to "The Times" on that subject, in a letter which appeared on 9th May, said that whereas the United States price for linseed oil was £153 10s. a ton, our price in the United Kingdom was £170 a ton, but he had omitted to notice that the day before we had reduced our price to £150 a ton, so it is now below and not above the American price. This is the third consecutive reduction which has been made in the price of linseed oil, and we are now buying our linseed oil at a cheaper price. We hope to buy the next lot more cheaply still, and we shall pass on the benefit to the manufacturers in this country. It is highly probable that they will be able to get further benefits as supplies of linseed oil become cheaper. I think I ought to say a word or two about the very remarkable report which has been quoted already in this Committee both by my right hon. Friend the Minister of Supply and my hon. and gallant Friend the Member for North Portsmouth (Major Bruce)—the "Economic Survey of Europe in 1948"—because there the most authoritative and most impartial body we could have, the United Nations organisation, examines most closely and carefully our bulk buying arrangements and passes its considered opinion upon them as to their actual practical effect on the economy of this country. The Commission simply contrasts the way in which other European countries have bought and the prices at which they have bought with the prices at which we have bought, and has come to the conclusion that there has been quite a sharp differential and that we have been able to get our stuff markedly cheaper than other countries have been able to get it, the simple explanation being that which has already been quoted:
That is the verdict, not of a body engaged in some special pleading for this Government, but of the world authority, and we stand by it. We do believe that these arrangements have been of enormous benefit to the people of this country and to the manufacturers of this country. We see perfectly well the dangers and difficulties of operating in the new conditions. We are well aware of and awake to them, and I have already outlined the methods which we may have to take to avoid these difficulties and dangers. We are very glad indeed that this subject has been raised in the Committee this afternoon, because it has given us an excellent opportunity to destroy—I will"The explanation of the relatively low prices paid by the United Kingdom for its imports of food and raw materials appears to lie largely in the extensive use which it has made of long-term contracts and bulk purchase agreements covering a large proportion of its purchases."
Division No. 152.]
|Agnew, Cmdr. P. G.||Gridley, Sir A.||Odey, G. W.|
|Amory, D. Heathcoat||Grimston, R. V.||Orr-Ewing, I. L.|
|Baldwin, A. E.||Hannon, Sir P. (Moseley)||Osborne, C.|
|Baxter, A. B.||Harden, J. R. E.||Peaks, Rt. Hon. O.|
|Beamish, Maj. T. V. H.||Harris, F. W. (Croydon, N.)||Pickthorn, K.|
|Bennett, Sir P.||Harvey, Air-Comdre. A. V.||Ponsonby, Col. C. E.|
|Birch, Nigel||Headfam, Lieut.-Col. Rt. Hon. Sir C.||Prior-Palmer, Brig, O.|
|Boles, Lt.-Col. D. C. (Wells)||Hollis, M. C.||Raikes, H. V.|
|Bossom, A. C.||Hope, Lord J.||Rayner, Brig, R.|
|Bower, N.||Howard, Hon. A.||Reed, Sir S. (Aylesbury)|
|Boyd-Carpenter, J. A.||Hulbert, Wing-Cdr. N. J.||Renton, D.|
|Braithwaite, Lt.-Comdr. J. G.||Hutohison, Col. J. R. (Glasgow, C.)||Roberts, Emrys (Merioneth)|
|Bromley-Davenport, Lt.-Col. W.||Joynson-Hicks, Hon. L. W.||Robertson, Sir D. (Streatham)|
|Buchan-Hepburn, P. G. T.||Keeling, E. H.||Robinson, Roland (Blackpool, S.)|
|Bullock, Capt. M.||Langford-Holt, J.||Ross, Sir R. D. (Londonderry)|
|Clarke, Col. R. S.||Lloyd, Maj. Guy (Renfrew, E.)||Shepherd, W. S. (Bucklow)|
|Clifton-Brown, Lt.-Col. G.||Lloyd, Selwyn (Wirral)||Smith, E. P. (Ashford)|
|Conant, Maj. R. J. E.||Low, A. R. W.||Spearman, A. C. M.|
|Crosthwaite-Eyre, Col. O. E.||Lucas, Major Sir J.||Strauss, Henry (English Universities)|
|Crowder, Capt. John E.||Lyttelton, Rt. Hon. O.||Studholme, H. G.|
|Cuthbert, W. N.||MacAndrew, Col. Sir C.||Sutcliffe, H.|
|Davidson, Viscountess||McCallum, Maj. D.||Thomas, Ivor (Keighley)|
|De la Bere, R.||McCorquodale, Rt. Hon. M. S.||Thomas, J. P. L. (Hereford)|
|Digby, Simon Wingfield||Macdonald, Sir P. (I. of Wight)||Thornton-Kemsley, C. N.|
|Dodds-Parker, A. D.||McFarlane, C. S.||Turton, R. H.|
|Donner, P. W.||Maclean, F. H. R. (Lancaster)||Tweedsmuir, Lady|
|Dower, Col. A. V. G. (Penrith)||Manningham-Buller, R. E.||Vane, W. M. F.|
|Drayson, G. B.||Marsden, Capt. A.||Wakefield, Sir W. W.|
|Dugdale, Maj. Sir T. (Richmond)||Marshall, D. (Bodmin)||Walker-Smith, D.|
|Eccles, D. M.||Marshall, S. H. (Sutton)||Ward, Hon. G. R.|
|Eden, Rt. Hon. A.||Molson, A. H. E.||Webbe, Sir H. (Abbey)|
|Elliot, Lieut.-Col. Rt. Hon. Walter||Moore, Lt.-Col. Sir T.||White, Sir D. (Fareham)|
|Erroll, F. J.||Morrison, Rt. Hn. W. S. (Cirencester)||Williams, C. (Torquay)|
|Fleming, Sqn.-Ldr. E. L.||Mott-Radclyffe, C. E.||Williams, Gerald (Tonbridge)|
|Fletcher, W. (Bury)||Neven-Spence, Sir B.||Willoughby de Eresby, Lord|
|Fraser, H. C. P. (Stone)||Nicholson, G.||Young, Sir A. S. L. (Partick)|
|Gage, C.||Nield, B. (Chester)|
|George, Maj. Rt. Hn. G. Lloyd (P'ke)||Noble, Comdr. A. H. P.||TELLERS FOR THE AYES:|
|Gomme-Duncan Col. A.||Nutting, Anthony||Brigadier Mackeson and|
|Adams, Richard (Balham)||Benson, G.||Carmichael, James|
|Albu, A. H.||Beswick, F.||Champion. A. J.|
|Alexander, Rt. Hon. A. V.||Bevan, Rt. Hon. A. (Ebbw Vale)||Cobb, F. A.|
|Allen, Scholefield (Crewe)||Binns, J.||Cocks, F. S.|
|Alpass, J. H.||Blackburn, A. R.||Collick, P.|
|Anderson, A. (Motherwell)||Blenkinsop, A.||Collindridge, F.|
|Austin, H. Lewis||Blyton, W. R.||Coilins, V. J.|
|Ayles, W. H.||Bowden, Fig. Offr. H. W.||Colman, Miss G. M.|
|Ayrton Gould, Mrs. B.||Braddock, T. (Mitcham)||Cooper, G.|
|Bacon, Miss A.||Bramall, E. A.||Corbet, Mrs. F. K. (Camb'well, N. W.)|
|Baird, J.||Brook, D. (Halifax)||Corlett, Dr. J.|
|Balfour, A.||Brooks, T. J. (Rothwell)||Cove, W. G.|
|Barnes, Rt. Hon. A. J.||Broughton, Dr. A. D. D.||Crawley, A.|
|Barstow, P. G.||Brown, George (Belper)||Daines, P.|
|Barton, C.||Brown, T. J. (Ince)||Davies, Harold (Leek)|
|Battley, J. R.||Bruce, Maj. D. W. T.||Deer, G.|
|Bechervaise, A. E.||Butler, H. W. (Hackney, S.)||Delargy, H. J.|
|Bellenger, Rt. Hon. F. J.||Callaghan, James||Diamond, J.|
not say the case put up this afternoon—but the case which is put in the Press and elsewhere, where it cannot be so readily answered, and we are thankful that it has at last been made in a place where we can answer all these allegations.
I beg to move, "That Item Class IX, Vote 2, Ministry of Food, be reduced by £5."