§ 3.33 p.m.
§ Mr. Ronald Russell (Wembley, South)
I am sorry to have to take the House away from a very interesting discussion to one which is, however, equally important, and which deals with the problem of the stockpiling of certain metals, particularly bismuth metal. When most people think of bismuth they probably think of the meal given on certain occasions before an X-ray, but that is not what I want to talk about this afternoon. I want to speak about the supply of the metal itself.
This has arisen as a result of correspondence between a constituent of mine and the Atomic Energy Authority, and subsequently of correspondence I have had with various Government Departments. This started with the Ministry of Power, then it was diverted by the Minister of Power to the Ministry of Supply, and by that Ministry to the Lord President of the Council, and, finally, back to the Atomic Energy Authority, which was where we started.
It is because of that difficulty that I am raising the matter this afternoon, and I am grateful to my hon. Friend the Parliamentary Secretary to the Board of 2175 Trade for accepting responsibility for this subject and so providing me with a Government Department which is able to deal with this problem.
The origin of it was that my constituent, Mr. G. T. Hodge, the managing director of Mining and Chemical Products, Ltd., of Alperton, supplies bismuth metal to the Atomic Energy Authority. The Authority had inquired not only from him but, I gather, from other firms about the possibility of increasing the supply of bismuth metal. I understand that it is not easy suddenly to increase the supplies of this metal.
The metal is obtained as a by-product in the extraction of other metals from their ores, chiefly lead. Its raw material comes from countries like Bolivia, Mexico and Korea, all of which are, of course, completely outside our control. Any sudden increase in the demand would probably result in a great increase in the price. If the increased supply is needed in, say, 1958, 1959 or 1960, it is necessary to begin husbanding stocks immediately, otherwise any sudden demand by the Atomic Energy Authority for increased supplies would probably be met only by a reduction of supplies to other commercial users or even to other countries.
The plan put forward by my constituent is to lay in stocks gradually, starting from now, a proportion of the price to be paid for by the Government Department concerned. If, eventually, it were found that the stock was not needed this firm would take it back at the same price and at the same rate at which it was built up. Those are the broad outlines of a plan which would take all risk away from the Government and ensure supplies at a reasonable price whether they were needed or not.
The reply that my constituent got, and I got from the Atomic Energy Authority when I took it up with the Authority, was that it was too early to say whether the increased supplies might be needed. The actual wording of the letter I received was:…it would, naturally, be inappropriate to take any action to secure such materials until a much later stage of development and until the particular reactor systems concerned had shown some signs of success.I gather that if the "taking of any action" were delayed until these particular reactor systems showed some signs of 2176 success, it would then be too late to begin the stockpiling without the demand being too great for the existing supplies and the price having to be increased. I gather that this is the time to begin stockpiling if this increased supply is needed in two or three years' time.
This applies not only to bismuth metal for the Atomic Energy Authority, but to other metals, like copper and tin, for any other Government Department which may want them now that the price is very low. I am reminded that in 1950, when stockpiling took place rather suddenly on account of the Korean War, we bought cadmium, for example, at that time from the United States Government at a price of about 4 dollars 50 cents. per 1b. and sometime during the past financial year we began selling back that cadmium not to the United States Government, but to United States buyers, at a price of about 1 dollar, 50 cents. per 1b. I know that my hon. Friend will correct me if I am wildly out in the price.
That represents a loss of three dollars or over £1 per 1b. of metal. I do not know the quantities involved, but it seems to me a very great loss to have to take, even over a period of six years, on supplies of metal acquired from the United States at the time when we had to stockpile, and sold back to that country, if not to that Government, later on.
When I asked the President of the Board of Trade a Question about this a few weeks ago, the Answer that I received was:It is not the practice to disclose details of strategic reserve transactions.I quite understand that. My right hon. Friend went on:Moreover, the concept of profit and loss is inappropriate in this connection since these holdings were purchased, and their disposal decided upon, for strategic, not commercial, reasons."—[OFFICIAL REPORT, 29th March, 1957; Vol. 567, c. 159–60.]I suggest that, if it is possible to do so, the financial problem should be taken into consideration whether the holdings are for a strategic stockpile or not. If we can obtain the metal now, and, if necessary, sell it again without loss, surely it is much better to do that than buy it blindly at a high price when we are forced to do so and afterwards sell it at a loss.
2177 I suggest that my constituent's plan, the broad outlines of which I have given, is a very sound and sensible one for taking all the risk away from the Government. If private industry is willing to handle the risk, surely that is a great advantage. In that case, the taxpayers will stand no risk of a loss at all. The plan is that my constituent's firm will take back the stock, whether it is needed or not, at the price at which it was supplied. Therefore, if the Atomic Energy Authority finds, in the end, that it does not need this metal, there will be no loss on selling it. The firm will take the risk of any loss in handling the material.
This is a gift horse which the Government should accept, in the case not only of bismuth, but of any other metals of this kind. I ask my hon. Friend not to look in its mouth, but to accept it. If he cannot say today that he will accept it. I hope he will consider what I have said and see whether it can be accepted in the end.
§ 3.43 p.m.
§ The Parliamentary Secretary to the Board of Trade (Mr. F. J. Erroll)
In his opening remarks, my hon. Friend the Member for Wembley, South (Mr. Russell) related how he had approached several Ministers about the matter and said that, as I should be answering at the Dispatch Box, it seemed as though his problem had finally come to roost in the Board of Trade. I should make it plain that the reason why I am answering his remarks today is that the Board of Trade has the responsibility for strategic and trading stocks which were built up some time ago, and it was thought, therefore, that it would be best if I were to explain some aspects of the general matter first and then deal with the case of bismuth, which is more properly a matter for the Atomic Energy Authority itself.
A number of materials were stockpiled by the Government during the war and in the years immediately after the war. The original stockpiles were solely for strategic purposes, but after the war, particularly at the time of the Korea War, there was a certain amount of stockpiling for trading purposes in order to supply manufacturers in this country with, in particular, metals which it was thought might become in short supply owing to the large demands of the Korean boom. Since that 2178 time, the Government have decided to give up all forms of trading in trading stocks and to run down their strategic stockpiles.
The decision to run down stocks was announced in the Statement on Defence, 1956, Cmd. 9691. In paragraph 125 of the statement it was announced that we had decided to make a start on that in 1956–57, that we would take care to avoid disrupting markets, and that, where substantial quantities of any commodities were involved, the arrangements would be discussed with appropriate interests.
My hon. Friend referred particularly to the loss which he alleged was sustained over cadmium stocks, and quoted a reply of my right hon. Friend to a Question which he asked a short while ago. It is certainly not the practice to indicate the profit or loss on the disposal of strategic stockpiles, or, indeed, stockpiles for trading purposes. The example which my hon. Friend quoted serves to illustrate the extra difficulty of Government trading in this sphere, because one cannot be certain how a market will move. We quite rightly decided not to continue to hold trading stockpiles because we regarded it as much better for individual manufacturers and traders to hold the stocks themselves with their own money and to take their own view of whether the market was likely to go up or down.
Therefore, as the general policy of the Government is to run down our stocks of scarce materials, or what were at one time thought to be scarce materials, there would obviously be no case for reversing that policy in the particular instance of bismuth metal. The company to which my hon. Friend referred, namely, Messrs. Mining and Chemical Products Ltd. has put forward an ingenious scheme, which shows a proper sense of commercial opportunity in that if it were adopted it might seem to possess some advantage for the Government Department concerned, and it would certainly be one of considerable advantage to the company itself.
All that the company is really offering is a scheme whereby a material can be stockpiled, but with the aid of the working capital being supplied by the Government agency concerned. There is, after all, nothing at present to prevent Messrs. Mining and Chemical Products Ltd. from taking a view of the market 2179 possibilities of bismuth and deciding on its own account to lay in stocks in advance of an expected rise in price and of demand.
The only point at issue is that the company would like to have a certain amount of Government money tied up in the transaction. We take the view that this is a matter for the commercial judgment of the individual companies concerned and that the Government, having experienced something of the difficulties of this type of trading in the past, are well advised to keep out of such transactions and to leave them properly to private enterprise.
I should, however, like to deal in rather more detail with the case of bismuth, because it was the example most quoted by my hon. Friend. I feel that it is necessary to outline something of the background which led to the proposal being put forward by Messrs. Mining and Chemical Products Ltd. For some time the United Kingdom Atomic Energy Authority has been investigating the possibility of what are called liquid metal fuel reactor systems. In this connection, it was decided by the Authority that a small quantity of bismuth metal, about 20 tons, should be bought for use in the basic experiments. While the basic experiments were going on, the Authority naturally considered what might happen if the initial work on the liquid metal fuel reactor system were successful and an experimental reactor were built, and if the experimental reactor were successful and it was decided to go into large-scale production for a similar system.
Arising out of consideration of those matters, it was obviously necessary to consider whether there would be sufficient bismuth metal to supply the reactors, and, if that sequence of events were to occur, how much bismuth would be required. The firm which has been mentioned is, I understand, the main importer of bismuth into the United Kingdom. It was quite appropriate for the company to suggest, therefore, that a stock of bismuth should be built up on behalf of the Authority. As my hon. Friend has informed the House, it offered to buy it back again if it was not required. The Atomic Energy Authority reviewed the possible future for this 2180 type of reactor and, as a result of that review, it informed the company that it had at present no requirement for bismuth other than for the small order which had already been placed.
Notwithstanding that, the company persisted in pressing its suggestion on the Authority, which has, quite rightly, adhered to its original decision not to go ahead. I ought to make it plain to my hon. Friend that the Authority does keep under review the world supply and demand of all metals in regard to which there is a possibility that there might be a future application in the sphere of atomic energy. That review of course includes bismuth itself.
The liquid metal fuel reactor systems are, however, still in an early stage of study—not even of development. There are many competing forms of reactor awaiting development, and it must remain unknown for some time whether that type will be chosen for large-scale production. From what I have said, I am sure the House will agree that there has to be a great deal more work done before any large-scale requirements for bismuth could possibly begin to emerge. Development of new ideas in atomic energy often raise at an early stage possible demands on a large scale for substances which are at present required in world markets only in very limited quantities. It is obvious that the Authority could not possibly undertake to stockpile all those materials against the possibility that one or more of them might eventually be required.
I will now deal in a little more detail with the proposal itself. It would not have involved the Authority in any ultimate expenditure if the bismuth had not been wanted. That was one of the interesting and ingenious features of the proposition. But, as I have said, it would nevertheless have involved the provision of working capital to a private firm in circumstances which would have enabled that firm to use public money for the building up of a stock of material which, under the very terms of the suggested arrangement, the firm would have been free to dispose of as it thought fit.
§ Mr. Russell
Only by agreement with the Atomic Energy Authority. What I gave was a broad outline of the plan. 2181 The firm would obviously enter into arrangements to freeze the stock for the time being until it was sure whether the Atomic Energy Authority wanted it.
§ Mr. Erroll
I should have made that a little more clear. I meant that once the Authority had decided that it did not require the stock, the firm would have been free to dispose of the material in any way it thought fit. It might have made a large profit if prices had gone up, or indeed it might have sustained a substantial loss if the market was weak at the time of its determination to dispose of the stock.
Of course, once the Authority was no longer interested, it would want its money back, and the firm would have to sell the stock, possibly on a weak market, at a time when its commercial prudence would have dictated that it should have held on to it. I mention these points to show how difficult such a scheme would be in practice if the metal was not ultimately required. Obviously, in the absence of any firm requirement for the material, it was a proposal which was quite unacceptable.
I should mention one other matter, namely, that the Atomic Energy Authority, under the terms of the Atomic Energy Authority Act, 1954, is responsible for its own day-to-day affairs. It would obviously be wrong for Her Majesty's Government to interfere in the Authority's commercial arrangements except on a matter of considerable national importance. A decision by the Authority—and the Authority has made the decision—that it was not in its interests to buy a particular material was essentially a matter for the Authority itself. It would not be proper for any Government Department to seek to interfere with the Authority's own commercial judgment.
From what I have said I hope that the House will agree that the Government have acted rightly in this matter The proposition has been carefully examined by the Authority, which decided to turn it down. The Government see no reason why they should interfere with the Authority in what we regard as a proper exercise of its judgment.