§ 9.58 p.m.
§ The Parliamentary Secretary to the Board of Trade (Mr. John Rodgers)
I beg to move,That the Cotton Finishing (Woven Cloth) Reorganisation Scheme (Confirmation) Order, 1960, a draft of which was laid before this House on 30th June, be approved.I suggest that it would be convenient also to discuss the following Order:That the Cotton Finishing (Yarn Processing) Reorganisation Scheme (Confirmation) Order, 1960, a draft of which was laid before this House on 30th June, be approved.The drafts of the Cotton Finishing (Woven Cloth) Reorganisation Scheme (Confirmation) Order, 1960, and the Cotton Finishing (Yarn Processing) Reorganisation Scheme (Confirmation) Order, 1960, were laid before Parliament on 30th June and I would like to thank the House for its indulgence in allowing us to debate them after so short an interval.
Almost exactly a year ago, the House approved the Orders bringing into force the Reorganisation Schemes for the spinning, doubling and weaving sections of the cotton industry shortly after the passage of the Cotton Industry Act, 1959. That Act and the White Paper which preceded it clearly envisaged the need for a reorganisation scheme or schemes to provide for the elimination of excess capacity in the finishing sections of the industry, but it was recognised last year, by the House as well as by the industry, that time did not permit the finishing sections to be dealt with at the same time as the manufacturing sections and that it would be appropriate to defer them until a later stage. The work has taken longer than was then anticipated.
The Cotton Board, which is responsible under the Act for preparing reorganisation schemes, were necessarily fully preoccupied for some time in implementing the earlier schemes. Moreover, owing to the complexity and variety of processes and equipment involved in finishing, the task of preparing satisfactory schemes in those sections presented much more complicated problems than in the manufacturing sections. The time, however, has 1312 been well spent in evolving, after careful consideration what appear to be satisfactory and workable schemes within the framework of the Act and appropriate to the special conditions of the finishing sections. For this, considerable credit is due to the Special Committee of the Cotton Board which is responsible for the work under Lord Rochdale, and to the Director of Reorganisation at the Cotton Board and his staff, as well as to those in the industry who have been concerned in the detailed discussions for the preparation of the present schemes.
It may be asked why the Government are prepared to continue to provide public money to assist the cotton industry which for some months has been able to benefit from a marked revival in trade. As I have already indicated, the Cotton Industry Act empowers the Cotton Board to prepare reorganisation schemes for any section of the industry to provide for the payment of compensation for the elimination of excess capacity. These provisions extend to the finishing sections no less than to the spinning, doubling and weaving sections, and it was fully recognised at the time that reorganisation schemes for the finishing sections might well be required and would follow the other schemes as soon as the necessary work could be done in order to complete the arrangements for establishing the cotton industry on a more compact and competitive basis.
I would not care to speculate on how long the present "boomlet" in demand for cotton textiles will persist. The cotton industry is notoriously subject to marked periodic fluctuations in activity, and it would be imprudent, and perhaps irresponsible, to refrain from taking full advantage of the Cotton Industry Act on the assumption that current trading conditions have come to stay. Nor would further delay be justified.
The Cotton Industry Act was designed to give the industry, with Government assistance, an opportunity to establish itself on an up-to-date and efficient basis as rapidly as possible. By going forward with the policy which Parliament has adopted, there is every prospect, as I shall indicate later, that excess capacity in the finishing sections will now be substantially eliminated. This will be achieved by orderly and organised measures over a relatively short period 1313 of time, with arrangements agreed with the trade unions, as required by the Act, for compensation in respect of loss of employment due to the elimination of excess capacity under the schemes. The alternative might well be a long drawn out haphazard, and piecemeal process of attrition without such arrangements.
On all grounds, the time to deal with excess capacity in the finishing sections is now. If we let the opportunity go by, the successful application of the Cotton Industry Act will be impaired, and not only the finishing sections but the cotton industry as a whole will suffer.
The Special Committee of the Cotton Board has advised us that it is fully satisfied that excess capacity in the finishing sections has led to serious damage from weak selling and too high costs of production. By eliminating it production will be organised on a more compact and efficient basis. The work-people will benefit from more stable conditions of employment and the considerably reduced risks of short-time working during periods of reduced demand, while there will remain ample scope for meeting peak or seasonally high demand by reasonable overtime working Moreover, removal of excess capacity in the finishing sections will in- crease their competitive efficiency and thereby strengthen the cotton industry as a whole. It is the finishers who put canton goods into the state in which they will be eventually sold to the customer.
Our exports of textiles are becoming increasingly dependent on high quality products where the best designs and the most up-to-date finishes are of crucial importance. The two Schemes now before the House are designed to complete the arrangements for the reorganisation of the cotton industry under the Cotton Industry Act, 1959, on a more compact, efficient and competitive basis. As the House is aware, the Board of Trade may only confirm a reorganisation scheme proposed by the Cotton Board if certain conditions have been fulfilled. These are laid down in Section 1 (2) of the Cotton Industry Act.
First the Board of Trade must be satisfied that the reorganisation scheme makes adequate provision, in point of time as well as in point of quantity, to the end of eliminating excess capacity 1314 in the section concerned. The Cotton Board's investigations have revealed that there is substantial excess capacity in the finishing sections. This naturally varies from subsection to subsection, but it is broadly of the order of between 30 and 35 per cent. I will discuss later proposals for its elimination.
As to timing, applications for compensation must be made during the period of three months ending 31st October, 1960, with the possibility of an extension to 31st January, 1961, at the latest. Units in respect of which compensation is payable must be closed down by the end of the sixth month following the acceptance of the application and the machinery must be scrapped by 31st December, 1961. This is a somewhat longer scrapping period than was permitted under the earlier schemes, but what is important is the closing down of the production unit rather than the actual scrapping of plant and machinery.
In the second place, the Board of Trade must be satisfied that arrangements have been made within the section and agreed with the trade unions concerned for the payment of compensation in respect of loss of employment due to the schemes. This has been done. The arrangements provide for the compensation of operatives, depending in some cases on the age of the recipient and in other cases on his length of service with the firm. The compensation will be paid partly in the form of a lump sum and partly in weekly instalments. They differ in detail according to the particular subsection concerned. For example, an operative in bleaching or dyeing with 40 years' service would get £180. Similar arrangements will be applied to the workers in supervisory, clerical and managerial grades in respect of salaries up to £2,000.
§ Mr. Leslie Hale (Oldham, West)
The hon. Gentleman has said that somebody with 40 years' service would get £180. If it is on the lines of the old agreement, that would mean £90 down and £90 by instalments. Under the old agreement, a person with 40 years' service but who was not fit to continue working would lose £90. Does that still apply? Has the person still to be fit for work after 40 years' service and able to sign on in order to qualify for the weekly payments?
§ Mr. Rodgers
There are various schemes depending on the various subsections. This is a complicated matter to deal with now. The lump sum down is much smaller than the hon. Member has mentioned. The weekly payments continue even if the man gets another job, provided that it is not with the same firm, but they differ between the various subsections. The hon. Member for Farnworth (Mr. Thornton) will, I think, agree that it is too complicated a matter to debate these actual terms on the Floor of the House.
I was about to refer to the managerial grades, because I know that a great many hon. Members are worried that the operatives are being covered and that the owners of businesses are getting compensation whereas, perhaps, the managerial class is being excluded. Arrangements have been made for people in the supervisory grades up to £2,000 a year to receive compensation. Anybody in receipt of more than £2,000 a year would receive compensation for the first £2,000 a year. I hope that individual firms will make a voluntary addition to the sums laid down in the agreed schemes. I know that this point has caused concern to hon. Members opposite.
As the House is aware, the responsibility for settling the terms of compensation rests with the employers and the trade unions and the Government believe that there could be no better way of safeguarding the position of operatives who lose employment due to the reorganisation schemes. The schemes, of course, provide that compensation will not be paid to firms eliminating excess capacity unless they have done everything necessary to ensure that their displaced employees are eligible to receive the compensation to which they are entitled under these arrangements. The schemes also provide for levies to obtain the money for this purpose from the section or subsection concerned.
Turning to the schemes themselves, the Cotton Board came to the conclusion, after careful study and full discussion with the industry, that it would be necessary to tackle the finishing sections on a broad, comprehensive basis, having regard to the many specialised processes involved. Accordingly, there are only two main schemes, one for the woven 1316 cloth sections and one for the yarn processing section. These two schemes are similar in all respects except that the woven cloth scheme operates by reference to three main sub-sections—(1) bleaching, (2) dyeing, raising and finishing (only) and (3) printing—for the purpose of ensuring that each subsection bears its appropriate share of the industry's contribution to the cost of eliminating excess capacity.
I should, perhaps, add that "finishing (only)" simply means the application of specialised finishing processes such as drip-dry as opposed to bleaching, dyeing and printing. Firms will be allocated to subsections according to their main activity in the industry. A great many firms are involved in a great many of the processes, but their main activity will decide into which subsection they go.
There are four main features in which the schemes differ from the schemes for the spinning, doubling and weaving sections of the industry. As in the previous schemes, each of the finishing schemes provides a minimum figure of elimination which must be reached before the Government contribution of two-thirds of the cost of compensation becomes payable. This minimum is about 20 per cent. of present capacity.
In the woven cloth scheme there are also minima for the three subsections; if any of these is not reached public money will not be payable in respect of that subsection. However, unlike the spinning, doubling and weaving schemes, the finishing schemes will be operative from the outset. Compensation will be payable and elimination must be effected even if the minimum figures are not reached.
The reason for this—and I know it is a matter for concern why the schemes should differ from previous schemes—is that since only complete units can be submitted for elimination—there is no provision for partial scrapping—firms could not take the risk of their intentions to close down becoming known without an assurance that a re-organisation scheme would become fully operative from the outset, and thus that a measure of elimination of excess capacity would be guaranteed. This is why the scheme would proceed whether a minimum target had been reached or not. The important difference is that, in that case, 1317 there will be no Government contribution and the whole of the cost of compensation instead of only one-third, will be borne by the industry. The fact that the industry was prepared to accept this shows the importance which the industry itself attaches to having such a reorganisation scheme.
As to closing down, there is in the finishing section no single machine which, like the spindle or the loom in the manufacturing sections, can be used as the yardstick for measuring the capacity eliminated and to which the compensation can be related. In addition, the processes involved in finishing are complex and inter-connected.
In these circumstances, eliminated capacity can be effectively measured only by reference to the closing down of production units, as a whole, that is complete works. There is accordingly no provision for the elimination of part of a unit's activities, scrapping some part only of the machinery and plant. The Cotton Board must be satisfied that all the activities of the unit in the section concerned have been permanently discontinued.
§ Mr. Douglas Jay (Battersea, North)
The hon. Gentleman is putting this forward as justifying the expenditure of public money. Can the hon. Gentleman tell us how much public money he intends to spend on these schemes and how much has been spent under the Act so far?
§ Mr. Rodgers
I intended to deal with that later. I will certainly answer the right hon. Gentleman later in the debate.
I should like to say a few words about the realisation companies. There is every reason to hope that the minimum figure of 20 per cent. elimination referred to above will be reached, and in this event a very worthwhile contribution to the efficiency of the industry will have been secured. It is, in fact, highly desirable that it should be exceeded.
Provision is therefore made for the industry itself to offer additional inducement to close down and scrap. The whole of the cost of this additional payment—and not merely one-third—will be borne by the industry itself. For this purpose, the Cotton Board may approve the incorporation and constitution of a separate non-profit-making realization 1318 company for each of the three sub-sections of the woven cloth section, and for the yarn processing section. that is four in all. The realisation companies cannot operate unless their incorporation and constitution have been approved by the Cotton Board. The principal object of the realisation companies will be to acquire productive units, or the companies to which they belong, from their existing owners, in order to close down the works and scrap the machinery and equipment. The realisation companies will receive the compensation payable for the units which they close down, and they will dispose of the units' other assets and discharge their liabilities. Any deficit of the realisation companies will be met entirely by levy from the sections or subsections concerned. Thus, the additional inducement to close down will be afforded without any extra cost to the taxpayer.
The realisation companies will be able to operate whether or not the 20 per cent. minimum is achieved, but if it is not achieved, the industry will, of course, bear the full costs of compensation unaided. If it is achieved the industry will still bear unaided any extra costs arising out of the deficits on the operations of the realisation companies.
There is no question of compulsion on firms to offer units to the realisation companies any more than to submit units direct to the Cotton Board for compensation for closing down. Both decisions will be entirely voluntary and it will be for the firms themselves to decide how to proceed, or whether to proceed at all. Equally, there is no obligation on the realisation companies to acquire units which may be offered to them.
I now wish to say a word about acceptance of applications. As has been explained, the participation period will begin on 1st August, assuming that these Orders are approved, and applications may be submitted at any time up to 31st October, either by the firm concerned or by a realisation company. At the end of this period the Cotton Board will review all the applications received.
It is not desirable in the finishing sections to do as was done in the manufacturing sections and accept without question every eligible application for compensation made within the stated period. The variety and the complexity of the finishing processes are such that 1319 to accept all applications might result in leaving the section short of essential capacity, whether in the woven cloth or yarn processing section as a whole, in individual subsections or in particular specialised subsections and processes.
It is, therefore, essential to maintain control of the process of elimination so as to ensure that adequate capacity is retained, both overall and in detail, while still encouraging the fullest possible elimination of the excess. Accordingly, at the end of the participation period. the Special Committee of the Cotton Board, with its access to experienced advice from all the sections of the cotton industry—manufacturing and merchanting as well as finishing—will consider all applications.
The intention is to accept all eligible applications save where this would be likely to lead to a shortage of capacity either generally or of some particular kind. It is hoped that in practice there will be comparatively few cases where it will be necessary to exercise this power of refusal, but we are satisfied that the power must be available and that the Special Committee is the right body to exercise it.
I want to say a word at this point on the method of operation. If at the end of the participation period—31st October—it appears to the Special Committee that there is room, in the interests of the industry, for further elimination than is involved in the applications already accepted, it may announce a supplementary participation period lasting not longer than 31st January, 1961, during which further applications may be submitted. It will be during this period that the realisation companies, to which reference has been made, are likely to be most active.
During the participation period, all applications will be considered on their merits irrespective of the date of submission and this will give every firm in the industry, whether large or small, equal opportunity to consider the full implications of the offer of compensation for closing down and the possible arrangements which are open to it to make.
Further applications during any supplementary participation period will be dealt with on a "first come, first served" basis since the Cotton Board will wish to bring 1320 the period to an end, before the terminal date of 31st January, 1961, if necessary, if it considers that there is any risk of too much capacity being eliminated.
As in the participation period, it will also be concerned to avoid imbalance in the industry as a result of a shortage of capacity for particular processes. The Order does not lay down any precise maximum limit for elimination, but in practice the Cotton Board would regard as an overall effective maximum the extent of the excess capacity which its figures show to exist in the industry—some 32 per cent. in the woven cloth scheme and 34 per cent. in the yarn processing scheme.
In fact, this limit would only be reached if applications came forward in an exactly balanced proportion in relation to the different processes involved, and this appears unlikely. Once an application has been accepted by the Cotton Board the applicant must close his works down completely by the end of the sixth month following the acceptance—subject to extension in exceptional circumstances—and, as I have said, must scrap his plant and machinery not later than 31st December, 1961.
The detailed arrangements for compensation which are laid down in Part II of the schemes provide, as I have explained, that only if the minimum figures for elimination are reached, two-thirds of the compensation will be provided by public funds and one-third by levy on the industry; otherwise the whole cost will be provided by the levy. In fixing the level of compensation the object is to provide a proper inducement to the firms concerned to scrap the excess capacity.
Making allowance for differences in the circumstances of the different sections, the compensation provided under the present schemes bears a similar relation to such relevant factors as capital employed, average profitability, and book value of fixed assets, as was the case with the compensation for the manufacturing sections. Since, however, there is, in finishing, no standard machine, such as the loom or spindle, on which the compensation payable to an individual applicant can be calculated, it will instead be related partly to the applicant's turnover and partly to the written-down value of his plant and machinery.
1321 For both schemes the detailed figures are 10s. per pound sterling of the written-down value of plant and machinery and 3s. per pound sterling of turnover in the last complete financial year prior to 31st October, 1959.
The House will observe that there is no provision for varied rates of compensation comparable to the standard, premium and discount rates of the earlier schemes. This is because the present schemes do not, and cannot, provide for the scrapping of only a pant of a unit's plant and machinery; they require that in all cases the whole unit must be completely closed down; nor in the circumstances of the finishing section could regard be had to previously idle capacity.
The Cotton Board is satisfied that the rates of compensation are fair and reasonable, and have a good prospect of eliminating a substantial part of the excess capacity. As regards the cost of the proposals, it is estitmated that, assuming some thirty per cent. of capacity is eliminated, the total cost of compensation under both schemes would be of the order of £3.6 million.
The Exchequer contribution would be two-thirds of this, namely £2.4 million of which just over £2 million would be for woven cloth and about £300,000 for yarn processing. If 30 per cent. were exceeded, the Exchequer contribution would then be likely to rise above £2.4 million but, as I have indicated, the Cotton Board will be concerned to prevent the elimination of capacity exceeding safe limits.
As I have pointed out, the figures it has in mind for this purpose are the extent of excess capacity shown to exist in the industry—some 32 per cent. in the woven cloth and 34 per cent. in the yarn processing section—and it is unlikely that applications will come forward in an exactly balanced proportion, so that these figures may nit be reached to the fullest extent.
§ Mr. Rodgers
I would like to finish my explanation of these schemes and then come back to that point.
1322 On the other hand, if less than 30 per cent. of capacity were applied for and accepted, the cost would be proportionately less, down to a figure of the order of an Exchequer contribution of f1.6 million. This is what it would cost, on the estimates I have been using, to eliminate the minimum 20 per cent. and, as I have already explained, if eligible applications do not reach the minimum figures, there will be no Government contribution at all.
Part III of the Schemes provides for the collection of the levies which will produce the funds for the industry's share of the compensation for closing down, and also the compensation for displaced operatives. In order to secure that, in the woven cloth scheme, each sub-section finances its own elimination, the levies may be collected at different rates in the different subsections.
In conclusion, Mr. Speaker, may I say that I believe the schemes have been drawn up, after careful consideration, to provide a reasonable and practicable method of eliminating sufficient excess capacity to improve greatly the efficiency of the finishing sections, while avoiding the risk of creating shortages of essential capacity. They have the support of the industry and the Cotton Board, and will benefit not only the finishing sections but the cotton industry as a whole. I hope, therefore, that they will have the support of the entire House.
I now want to deal with the point raised by the right hon. Member for Battersea, North (Mr. Jay)—
§ Mr. Speaker
Before the Minister does that, I should like to assist myself, with the aid of the House. The Minister appears to have been talking about the two Orders. My ignorance is such that I do not understand this, but from my point of view there are two Questions. Is it accepted as being for the general convenience of the House that one Question shall be put and that the Orders shall be simultaneously discussed?
§ Mr. Rodgers
I understand that that is also convenient to hon. Members opposite.
I have been asked what we expect the cost of the whole policy of reorganising the cotton industry to amount to. In the debate on the earlier Schemes, the then President of the Board of Trade estimated that the cost of compensation—if the minimum figures of capacity elimination were achieved—would be £7½ million, of which the Government's share would be £5 million. In fact, the minima were considerably exceeded, and the cost to the Exchequer of these three Schemes is now estimated at £10½ million, of which £4.1 million has so far been paid.
The amount of re-equipment for which applications have so far been submitted for the spinning, doubling and weaving sections is £9.2 million. Assuming that all these applications proved fully eligible the Government's share of this would be £2.3 million, but it is much too early to say what the total cost of re-equipment may be. As I explained, the cost to the Government of the Finishers' Schemes is estimated at about £2,400,000, assuming that 30 per cent. of capacity goes out; it has not yet been decided whether there shall be re-equipment grant in this section.
The figure which has been previously given to the House as the best estimate which can be made of the total possible cost to the Exchequer of reorganisation and re-equipment under the Cotton Industry Act is £30 million, over 5 years or so. At the present early stage of the policy I do not think I can usefully try to offer any more accurate estimate.
§ Mr. Rodgers
I am afraid that I should require notice of that question—but that comes under the agreement between the two sides of the industry.
§ 10.27 p.m.
§ Mr. Ernest Thornton (Farnworth)
These are extremely complicated Orders, and I am grateful to the Minister for the details which he has given the House tonight. But there are still a number of points which I do not regard as being sufficiently clear, and I shall have certain questions to pose after I have made a few general observations.
1324 It would appear that under these Orders the expenditure of public funds is fairly well limited to about £2½ million. To that we must add the £10½ million that has already been spent or to which we are committed according to the hon. Member's latest estimate. I believe that his previous estimate was £11¼ million, and I take it that that estimate has been reduced by £750,000. The £2½ million, together with the £10½ million to which we are committed on the spinning, doubling and weaving orders, means an expenditure of about £13 million for scrapping machinery only. We must add to this between £20 million and £40 million for re-equipment. In all probably not less than £35 million—and it may be as much as £55 million—of public funds will be spent on the industry.
What will the public purse get for this? I am afraid that it will get nothing. If similar schemes are presented to Parliament, we must surely think in terms of loans and repayments, or the taking of equity shares in return for moneys advanced. This is perhaps not practicable where scrapping is involved, but certainly it is where advances are made for re-equipment. I am led to the belief that in future the emphasis should be more on re-equipment and less on scrapping. I frankly admit that the Schemes of which we have had experience have worked out better than I expected. There has been less dislocation and far less chaos than I expected. We have been fortunate in that the implementation of these Schemes has coincided with an upturn in our internal economy and—perhaps even more important—with the great boom in textile industries throughout the world.
Our industry should now face the future somewhat more confidently, but let us remember, as the Parliamentary Secretary said, that activity in this industry is cyclical, and it is unlikely that there will be no slump following this great upsurge of the last twelve months. There are disturbing indications. The trend of our exports still remains downwards and the trend of our imports remain upwards, and these two factors together are rather disturbing.
In the first five months of 1960 imports of cotton cloth were valued at £24 million. Exports of cotton cloth were valued at £20 million—£4 million less. In respect 1325 of yarn, in the first five months of 1960 imports were valued at £3 million and exports at £4 million. In terms of volume, imports of yarn and cloth were approximately double the exports. That is because, generally speaking, the qualities and values of the yarns and cloths that we export are higher than those that we import. Without doubt, the trend is in the direction of the growth of imports of finished cloth rather than of grey cloth.
The Parliamentary Secretary referred to the important difference between these and previous schemes and said that even if the minimum is not reached the present schemes before the House will still be operated. I am not convinced by the reasons that he advanced, although I agree that there is something in what he said.
I now come to the lessons that we have learned from the operation of the three schemes governing spinning, doubling and weaving. We should have learned some lessons by now, and I think the hon. Gentleman and the Board of Trade in general have learned some of the lessons which are indicated in some of the changes which are made in these Orders as compared with previous Orders. The first lesson that I have learned is that the terms offered for scrapping machinery under the spinning, doubling and weaving schemes which the House approved last year were too generous. In saying that, I am admitting that I am being wise after the event. Most of the machinery scrapped was already out of operation on 23rd April, 1959, and was unlikely to start up again. Therefore, the actual cost of machinery put out of action as compared with 23rd April last year is something like four times the standard rate of compensation offered.
I would point out that the effective cost is about £3 per spindle and about £250 per loom. Two-thirds of this has been paid from Government funds, so the burden of the costs of the remaining firms is not likely to be unduly heavy, but I see the danger in these finishing schemes that, through the realisation companies, the actual cost of scrapping machinery can prove as heavy, comparatively, as it has been in the spinning. doubling and weaving schemes. While it is true that the extra cost will not fall on public funds, it can mean a very 1326 stiff levy on the remaining funds, in fact, so heavy as to damage their competitive efficiency.
Once realisation companies are formed, will there not be a tendency for smaller firms to stand out for better terms, particularly if the applications fall short of the 20 per cent. in the first participation period to which the hon. Gentleman referred? The terms here under these conditions can, I feel, in fact prove too generous. Then we have the danger—and this is a distinct danger having regard to the large combines in each of the four sections—of these schemes leading to eventual monopoly in the four different sectors.
The second lesson that I think we have learned is that discrimination in accepting or rejecting applications is desirable and possible. The Government rejected our pleas from this side of the House when the cotton spinning, doubling and weaving schemes were going through that there should be discrimination to prevent social dislocation in certain one-industry or one-mill areas. The Government said that discrimination was wholly undesirable, if not impracticable. The Government now accept discrimination, but on other issues, that is, to prevent unbalance in production sections. I ask the question, and I think I pose it quite fairly, why not, then, discrimination also to prevent social unbalance?
The third lesson—and this is the last I shall reach—is in relation to operatives' compensation. I am grateful for the details which the hon. Gentleman gave the House. I am conscious from very long experience—thirty years—of negotiating trade union agreements, that it is far easier to criticise an agreement than to negotiate one. I am fully conscious of that. Weekly payments in the spinning, doubling and weaving sections have proved a shocking farce. It is a really scandalous situation.
There have been months of delay in these weekly payments. The case is not isolated where operatives have waited twenty-five weeks for weekly payments and then have been paid in a very much delayed lump sum. It is not fair to pin the blame for this scandalous situation on to the administrators. They have been given an administratively impossible task. Thirty thousand claims, or thereabouts, with all the incidences 1327 of sickness, varying wages and unemployment and one-hundred-and-one variations, have made complications that are administratively impossible where so many claims are involved.
The net effect has been in many cases that the second part of the total entitlement which the operative was justified in receiving—if he took another job, for example, at a lower wage—has not been paid in weekly payments, but as a much delayed lump sum settlement. It has been really scandalous. I hope the hon. Gentleman will look into that.
The purpose of these weekly payments has been completely frustrated and defeated. I opposed the idea of the weekly payments all along, and I warned the House of the complications that would arise. It is surely right and fair that, if the employers and managerial staffs are being compensated by a lump sum payment, the employees also ought to receive a lump sum payment instead of having this ridiculous situation of weekly payments which are impossible to administer.
These weekly payments were intended to tide over and help the worker during the transition period of losing one job and getting another, or, perhaps, adjusting himself to a substantially lower paid employment. The delay in payments have without doubt caused frustration, annoyance and anger among the operatives. Doubtless the unions in the finishing section have made the best possible bargain, but their bargaining position is not as strong as we have been led to believe because there is a realisation that whether there be a scheme or not—as was the case in spinning, doubling and weaving—a number of producing units are going to close down.
It appears to me that the employers have been tight-fisted and even less generous than was the case in the spinning, doubling and weaving sections. It is estimated, I believe, that under the spinning, doubling and weaving schemes about £3 million will be paid for compensating workers and approximately £5½ million for the scrapping of machinery. Both these amounts will be raised by levies on the industry.
In the finishing section, my estimate —and it is difficult to make an estimate 1328 —is that there will be somewhat less than £½ million paid in operatives' compensation. That is on the assumption that a 30 per cent. closing of units will be achieved, and, of course, we all realise that some of those units have already closed. It is probable that in the finishing section about £1¼ million will be raised by levy for wrapping machinery. This figure can be substantially exceeded if the realisation companies have to offer bigger inducements to achieve either the 20, 25 or 30 per cent. level of closing down.
As I see it, the operatives in the spinning, doubling and weaving sections are getting about half of what is being raised for the scrapping of machinery, but in the finishing section it is likely to be less than one-third of what will be paid for the scrapping of the machinery, and raised from the industry by levy. These, at least, are some of the lessons that I have learned from the operation of the spinning, doubling and weaving schemes.
I ask the employers and the unions—and I do so in no critical sense—to look again at the weekly payments aspect of their compensation agreement in the light of the very bad experience that we have had in the spinning and weaving sections.
A further point that must surely arise in considering the paying out of a further £2½ million is whether it is justifiable that public funds should be paid to such large, wealthy firms as are in the finishing section of the industry. I refer to the Bleachers' Association, which I understand has net liquid assets of £2 million, the Bradford Dyers' Association and the Calico Printers' Association, which each has approximately £2½ million of net liquid assets. It raises public misgivings. I say this in no carpingly critical way. In many ways these are fine firms, well managed and efficient, and my praise would certainly outweigh my criticisms of them, but we should be burking the issue if we were to think that there was no public disquiet at public funds being given to wealthy firms such as these.
As I indicated earlier, I have some questions to pose to the Parliamentary Secretary. First, I take it that the aggregate capacities of 25.2 million 1329 imperial pounds and 534.5 million linear yards relates to the actual performance of the production units rather than to the total capacity of the machines running 24 hours per day seven days per week. Is it that the returns made to the Cotton Board, as referred to in paragraph 2 (3) on page 4 of both Orders, will have been subject to levies under the Cotton Industry Development Council Order, 1948, and will therefore be a reasonable guarantee that the capacity has not been over-stated in the claims?
Secondly, I suppose the minimum figures of 25.2 million imperial pounds and 534.5 million linear yards relate to the aggregate through-put or capacity per year. I emphasise "per year" and ask whether this point is adequately covered by reference to paragraph 2 (3) or elsewhere in the Order. Does the capacity of the production unit refer to annual capacity?
Thirdly, what percentage of the yarn processing section's total estimated capacity does the minimum of 25.2 million pounds represent? Is it a round 20 per cent., as I have seen referred to in one or two articles? Likewise, with respect to the minimum aggregate yardage, what percentage in the three subsections do these yardages represent?
There is reference in the Orders to "less direct materials consumed". Is the yarn or cloth processed a direct material consumed? This is a point which I should like clarified. If the minimum figures of capacity are not reached and, in consequence, no Treasury funds are payable for scrapping machinery and what scrapping is effected is financed wholly from the levy on the units remaining, will the second levy for operatives' compensation still have statutory effect? In other words, is the levy for the operatives' compensation dependent upon the Government making a financial contribution towards the scrapping of machinery?
Is it intended that the Cotton Industry Act, 1959 will be operated to permit of the 25 per cent. re-equipment grant provided for in that Act, or is that something which we have to wait for, which will be dealt with by subsequent Order presented to the House?
1330 My last question—this is an important point—relates to the realisation companies. I am a little unhappy about this set-up. Can a realisation company be set up by one firm in a particular section? For example, the Bleachers'Association has over one-half of the trade in that section. The Calico Printers Association does, I understand, two-fifths of the trade in its section. What control will there be? In what way will the Cotton Board or the Board of Trade have control over the setting up of a realisation company? It is very important that this should be watched very closely indeed.
We shall not oppose these Orders. They follow naturally on the previous ones we disposed of last July. But if an Act or order comes forward for other industries, as well they might in this rapidly changing world where some industries are expanding and, in consequence, others must inevitably contract, we shall certainly press that there should be some financial return to the Exchequer for public funds found for private industry and some return to the public purse out of profits subsequently made.
§ 10.51 p.m.
§ Mr. F. Blackburn (Stalybridge and Hyde)
At this late hour, it is not my intention to make a speech. I wish to ask three questions.
One of the reasons given in the past for the large imports of grey cloth has always been that we had excess capacity in the finishing side of the trade. If we are to scrap part of the finishing section and imports remain at the same level, will not this have a bad effect upon the other part of our industry?
My second question relates to discrimination. If there are more applications than the percentage which the Board of Trade has in mind for scrapping, what criteria will be used to decide which firms will be allowed to go out of existence and which must carry on? My hon. Friend for Farnworth (Mr. Thornton) referred to discrimination on social grounds. Will that be taken into account? Will the efficiency of the firm be taken into account? What will be the criteria used in deciding which firms have to go out of existence and which must carry on?
My third question is this. When the machinery in one of the mills has been 1331 scrapped, what is to prevent some other firm coming in and starting up again in the same part of the finishing trade in the same mill? There is nothing in the other Orders to prevent that in weaving and spinning, and there are one or two very unfortunate examples which have occurred of people starting up under different names. I want to know whether there is to be anything to prevent that. When a decision has been made about the size of the industry, is there any way in which we can control new sections starting up in firms where compensation has been paid?
§ 10.53 p.m.
§ Mr. Leslie Hale (Oldham, West)
At this late hour, it is my intention to make a speech. I was not responsible for the decision to discuss a matter of this importance at this late hour and in this way. One of the reasons that the House of Commons is so obviously dying on its feet and democracy is quoted on the Stock Exchange at about the same rate as Government consolidated stock is the complete failure of Her Majesty's Government and Her Majesty's advisers to give the House any information on any topic. I can understand the Members of the Government on the Front Bench having a very sound reason for a lack of self-confidence. I can understand their reticence. But day after day we are confronted with what is described in the Parliamentary Press as able stonewalling, as a refusal to give an answer.
Tonight, we are discussing two Orders which refer to an important section of what was once a very great industry, and still is an industry very dear to Lancashire hearts and to hearts in some of the constituencies of my hon. Friends from Scotland, too. These are two Orders of great complexity, two Orders which, so far as I can see, have not even been considered by the Statutory Instruments Committee—I can find no report on them, and its last Report is dated 28th June—two Orders which have been before the House for only a few days, which have an Explanatory Note which really is an insult to the House, which contain definitions which refer to five separate Statutory Instruments, which are about 6,000 words in length, and in respect of which, on very many subjects, the Minister has not thought fit to give a reply at all.
1332 In the singularly able speech of my hon. Friend the Member for Farnworth (Mr. Thornton), there were only two sentences with which I disagreed. One with which I violently disagreed was when he thanked the Minister for giving information about the terms of compensation. I began to feel that I had dozed off in the course of the hon. Gentleman's speech and had missed the paragraph to which my hon. Friend referred.
My hon. Friend speaks with more authority on this subject than any Member of the House, and he always speaks with great moderation. He has asked a number of questions, which shows—he will not mind my saying this, because it is certainly not his fault—that he does not yet know what the scheme is. He has asked a number of extremely important questions. My hon. Friend the Member for Stalybridge and Hyde (Mr. Blackburn) followed with two or three questions of first importance and which. for the most part, were related to criticisms that we made of the previous scheme on similar grounds, when we were told that everything was all right.
Another of the difficulties of our situation today is that it is very difficult to criticise the spending of £2 million on an industry in relation to a Government that throw away £100 million on a bomb or missile that will not work and was never expected to work and which has never gone into production. It inhibits criticism. It is all rather sad. We have reached the stage when Ministers come along and say "It was only an extra £50 million on defence—and what is £50 million?". I would rather see it go to the cotton industry than on defence. It inhibits criticism.
The other sentence, if I may break the news softly to my hon. Friend the Member for Farnworth, with which I disagreed was when he said that we were rather surprised that this restriction had worked so well. Restriction always works well. The Tory theory is, and always has been, that we want unlimited competition. The Tory theory was that the great laws of supply and demand and competition produce efficiency, that the more cut-throat the competition is, the nearer we get to a really competitive price, and so on.
Restriction, so far as it consists of planning an organisation, is a Socialist 1333 theory, but it conflicts with another Socialist theory with which it must be adapted that we should produce goods for use and not for profit and that so long as people never have shirts—[Interruption.] The hon. Member for Louth (Mr. C. Osborne) never understands this. I know that he tries to understand; I give him that credit. But there are still old-age pensioners in Oldham who come to see me every week and say that they get £2 10s. on which to live, that they live by themselves and that they cannot afford to buy clothes. That is one of the arguments against restriction.
The other argument against restriction is the historic parallel all over the world that we spend one period giving compensation for reducing output and then we spend another period giving subsidies to induce people to produce the same thing again, because once we force them to reduce they are a little reluctant to expand. Indeed, the trouble of the cotton industry has always been that people were afraid of the future.
Generally speaking, relations between employers and workers in the cotton industry have been remarkably good. I agree with every word my hon. Friend the Member for Farnworth said about that. Generally speaking, in working out this difficult and complex agreement, both sides have tried to honour their obligations. I have no doubt about that. I agree with my hon. Friend, too, that this difficult agreement, arrived at quickly, is a remarkable agreement. One can, of course, criticise it—one always can afterwards. It compares favourably with other unintelligible documents. People can understand it.
No Parliamentary draftsman or counsel, no brilliant lawyer, could ever foresee all the problems that would arise in relation to compensation for workers in an industry of this kind. We in this House have become humble, because we serve on Committees and points keep cropping up which nobody had thought of. We know that this is a process and that in Committee we must be strictly empirical. The Parliamentary Secretary owes a duty to the House of Commons in this connection.
The major criticism that we made of the agreement was that too much was being given for destruction. That was one criticism. Now the Parliamentary 1334 Secretary, in a brief aside which was not even in the speech which he had had prepared—there were some notes on a separate sheet which he had had added in case he was pushed—said "By the way, on that item: it was not £5 million; it was £9 million. But, after all, what is another £4 million to a Government like this? "It is rather staggering.
The second criticism that we made—it really was a criticism—was that the framework of the compensation did more for the badly equipped firms and did nothing for those who really had to re-equip.
§ Mr. Hale
Yes, it was just a liability on the firms. I am obliged to my hon. Friend. We said that. This is exactly what the Government are doing again. I can understand that two factors in relation to the basis of compensation are required, but the main basis is depreciated value. Although certain taxation loopholes have, we have been told, stopped or there have been diversions to other channels, in relation to this everybody knows that when someone buys an old firm he upgrades the value of the machinery in order to nobble as much depreciation as he can as an Income Tax concession. That is always done. The result is that people with very old machinery usually show on their balance sheet as much depreciation for their machinery as those who bought new.
My hon. Friend said—I should have thought that the Parliamentary Secretary might have answered the question because it is so fundamental to our consideration; I should have thought it a reason for moving the Adjournment of the House if we did not get a reply—that it is not clear whether the 500 million yards of cloth and the 26 million lbs. of cotton, which is the basis of the estimate of productivity on which assessment is made, is based on actual output or upon statistically computated output. Surely that is vital. Surely we can be told about that. Surely we ought to know what the Government are compensating and why.
Turning to the agreement, as I have said, it really was a pretty good and workmanlike job. The trade unions and the employers have set up arbitrative committees to solve difficulties. The fault of the agreement is not in the 1335 agreement itself. The first fault is in the terms which were forced upon the industry by the Government. I think that the fault applies to this scheme. I hope the Parliamentary Secretary will tell us—if he understands the Orders. If he does, he might give us more information.
The great fault was that all the workers and firms which had just closed down and all the workers and firms which closed down after 31st March did not qualify at all. I am now referring to the old scheme. So far as I know, that will continue. But the firms which had closed down before the scheme qualified for compensation and have only to declare a formal intention to reopen and they are qualified; but the workers cannot do that.
I thought we were to have figures. The last figures I have—I am quoting from memory and I apologise if I am inaccurate—were given to me a couple of months ago. My impression is that about 33,000 or 34,000 claims had been submitted a couple of months ago on behalf of workers in the industry as against a loss of employment of about 100,000 since 1955. It must, of course, be remembered that the trade unions submit the claims in general. It is not 100 per cent. membership but it is a very high percentage membership. Those who are not in trade unions have to submit their individual claims or go to the manager of the mill. The trade unions submit only those claims which they are reasonably sure ought to qualify, and more than 2 million had been either turned down or adjourned for further consideration.
The Parliamentary Secretary said that a person in the finishing industry who had been employed for forty years would qualify for £180 compensation, paid partly by lump sum and partly by weekly payments. I thought that that would mean 50 per cent. payable in each way, but he said that it did not mean that but that a person could get less in relation to the lump sum payment.
One gets case after case, and the House should consider whether this sort of thing is good enough. It may be a good agreement—I think that it is. It may be that it satisfies the unions and the employers, but that hon. Members 1336 still have to deal with individuals who did not understand, who had high hopes, who perhaps heard the Prime Minister, at the election, say that £50 million spent in Lancashire was bound to do someone a bit of good.
These individuals come to me and ask: "How mush good does it do for me? I have worked in the industry for fanty years but my firm closed before the appointed day." I have to say to them that I am sorry but they get nothing. A few weeks ago a lady came to me and said that she had been forced to go to work because her husband had been sick. She was now getting on in years. I told her that she would surely qualify for full compensation, and that she would get half of it down as a lump sum. She said that as she had thought that she had 26 weeks payments to come, she decided she would stay at home and look after her husband, who had been in bed for so long with virtually no one to look after him. She had learnt only too late that she could not share in the 26 weeks' compensation because she was not genuinely seeking work.
Another man told me that they had said he had bronchitis, but it was actually byssinosis. He was advised to go slick, and he did so, but then the compensation was suspended, at any rate until he was able to go back to work. It was suspended because he was not available for work.
§ Mr. Hale
Yes, in my view. Of course, they come under different headings. I speak from memory, and I apologise for not having checked the figures, which I got in Oldham two months ago, but my recollection is that 2,000 cases were under criticism and investigation. Many workpeople have written to me and I have had to reply and say that a decision on this has been given and there is nothing I can do Everyone of them is a hard case.
The point is that, if a man has been forty years in the industry, then he has just about reached the age when he is not fit to go on working any longer, and the person who has worked longest in the industry is getting the smaller 1337 chance of receiving weekly compensation. These are serious matters. We have not tried to criticise this in a controversial spirit, but they are important matters. I suggest to the Parliamentary Secretary that he should consider some of them.
The question of the depreciation process is important. We should have a second look at that, and at least take the right to have a valuation of the machinery where it is obvious that, for taxation purposes, or because of stamp duties, a wholly fictitious figure has been put on old machines—not fraudulently, for it is a common, recognised practice, done quite frequently. But one should at least not qualify for compensation on the basis of a fictitious figure.
I hope I have made it clear that I appreciate what my hon. Friend the Member for Farnworth said. The more I look at this agreement, the more I think that both the unions and the employers did very well in all the circumstances. The more I see the problems that are arising, the more I realise how impossible it would have been to provide for them all. But I still think that the Minister failed a little in his duty to the House in this connection by not saying that he had an agreement over which he was unable to exercise limited Parliamentary control. I am always a helpful sort of bloke. I introduced a Bill to enable him to do so. It could have passed on the nod. But the Minister did not move an inch. There was always someone to say "Object!" and to apologise afterwards and say, "You know what the Whips are."
Lastly I would say, quite seriously, that when democracy is ceasing to exist all over the world, one of the hopeful signs in this House has been the coming of some very able younger Members on the benches opposite, and also on this side of the House. It would be a good thing if Ministers took a second thought about their attitude, and said, "Our first duty is to make clear the facts." The House exists as a great inquest of the nation upon the facts, and must have the evidence in front of it before it can give a decision on any subject. The Prime Minister sets a good example in this respect, but many Ministers seem to think it is their duty to say nothing unless they are forced 1338 to do so; to produce no information unless it is demanded, and to fall back on, "I must have notice of that," or "I cannot go into that now," or some explanation of that kind.
It is to be regretted that we are debating a matter of this importance in circumstances in which the debate has the aspect of becoming rather more of a formality than it should. I hope that the Minister will ask the leave of the House to speak again—unless he has another Minister to speak—and make a statement in answer to some of the important questions that have been put to him.
§ 11.12 p.m.
§ Sir John Barlow (Middleton and Prestwich)
I do not propose to speak for very long at this hour, but these are very important Orders for many people in Lancashire. I welcome the explanation which my hon. Friend the Parliamentary Secretary has given of these very complicated documents. It was a thorough explanation, given very lucidly and in a very short time. Likewise, I welcome the questions put by the hon. Member for Farnworth IMr. Thornton), who speaks with great sincerity and authority on this great industry.
Those of us who have been in the cotton industry for thirty or thirty-live years know a little of its difficulties and great complexities. I wonder whether anyone in the House tonight does not welcome these schemes in a general way. Both the last scheme for spinning and weaving and the Orders before us have been criticised. Many points have been criticised by hon. Members opposite, and there may be criticisms from this side of the House, but is there anyone knowing anything about the industry who does not welcome the schemes as a whole?
Having been in different parts of the industry for so long, and having seen the diminution of the whole industry, with its ups and downs, over a period, many years ago I came to the conclusion that it would be fatal for the industry and for the welfare of Lancashire to let the laissez faire policy of attrition continue to the end, because it would have meant untold misery to all concerned. For that reason, I pressed this Government for many years before they agreed to some redundancy scheme. At long last they introduced the scheme for spinning and weaving, last year.
1339 There were things which could be improved, but it was the first scheme of its kind, and I know that it worked extremely well on the whole. We know there was great delay in payment to some workers. That was deplorable, but quite impossible to avoid, in the circumstances. I, with many other hon. Members, investigated cases to ascertain why some workers were paid so slowly, but I was convinced that in the circumstances it was quite impossible to gather together a competent staff to deal with such a big business in such a short time. Let us be fair to the people. They had an almost impossible burden put on them, and I regret the way in which some of the workers suffered in a scheme which had not been tried before. I think that this scheme is an improvement on the other. Although I have been critical of the fact that the Cotton Board has been so long in bringing forward the finishing Scheme, this delay has given ample time for us to see some of the difficulties and pitfalls of the scheme.
I do not propose to go into the details, but I think I should mention the suggestion that this will lead to a monopoly among the three main finishing sections. I do not think that is likely. We know how monopolies occur these days, and in the printing trade, of which I know something, I believe there are more than twenty printing places, mostly in Lancashire and Cheshire. I think there is little chance of the industry as a whole suffering from monopoly.
One hon. Member has pointed out that he considered it unnecessary to make large payments to the three main companies. He named three companies, and, as hon. Members are well aware, I know something about one of them, and perhaps, something about the others. It is so easy to quote figures about liquid assets, but if one looks more carefully into them it is very often found that the assets are taken up in the working of the business. Furthermore, very often there are bank overdrafts, which in present circumstances tend to put up costs. Because there are so-called liquid assets—a liquid surplus—it does not follow that there are ample working assets and the companies are very flush of money. It simply is not the case.
1340 I do not think that this sort of scheme should be applied to the other industries, but it is established that the Lancashire cotton industry has made out a very special case. I welcome this scheme and wish it the best of success.
§ 11.18 p.m.
§ Mr. Thomas Steele (Dunbartonshire, West)
So far the debate has been confined to hon. Members from Lancashire.
§ Mr. Steele
Yes, but during the Second Reading debate and the Committee Stage of the Act it was probably only Lancashire and Cheshire which were mentioned, and until my hon. Friend the Member for Oldham, West (Mr. Hale) observed me sitting here with a few notes, I think that perhaps you, Mr. Deputy-Speaker, have also tended to think of this as a Lancashire and Cheshire debate in the way your eye has rolled past me.
The Orders which we discussed last year for the spinning, weaving and doubling sections did, in the main, concern those counties; but those we are discussing tonight, dealing with the finishing trades, are very important to my own constituency. We have two firms there; British Silk Dyeing, and United Turkey Red, and I should like to say a word about the U.T.R.
This is a firm established as far back as 1897—
§ Mr. Steele
Established in my area, then. That is the information I have. At the height of its production it was actually employing more than 4,000 workers in the Vale of Leven and the surrounding district. It was no accident that this firm was located in this area because, as other Members who are better informed on these matters know, large volumes of fresh water are necessary, and this site was chosen because of the large quantity of pure water which comes from Loch Lomond.
Difficulties occurred around the 1930s, and because this firm was the basic industry in the area and because of those difficulties, in the 1930s 75 per cent. of the insured population were unemployed. There are many scars to be seen to this day. One can see the effects of those 1341 days reflected in the attitude of some of my constituents. We have many memorials in the shape of old, large, gaunt buildings on both sides of the river, to remind us of that time. The United Turkey Red Company employs 1,350 workers, and that is a large number of people. Their memories go back to those days and what happened then, and I think the House will appreciate their fears and apprehensions.
In passing, I would remind hon. Members that in the Committee stage of the Cotton Industry Bill an Amendment was moved requesting that account be taken of the social consequences of any proposed closures. That Amendment was rejected in very strong terms by the Minister. He saidIf we introduce the third condition, that in considering which mills should close we should have regard to their situation, to the employment in the area … we should get right away from the prospect of making an efficient industry.The Amendment was rejected by the Minister, and, while I do not want to go into this in great detail, he said one significant thing to which I will refer later. He saidWhat would happen? The owner of a mill in a town where there was not much alternative employment would say, 'I wish to qualify for a compensation grant'. The Board of Trade would have to say, 'You cannot have that grant because of the employment situation in your area'. That is what would have to happen. If that occurred, I think the mill owner would say, 'We are making a loss. We will not continue on this basis. Will you subsidise us?" Before we knew where we were, we should be in the realm of subsidising firms which wanted to close and take the compensation but were told by the Government that they must not close."—[OFFICIAL REPORT, 17th June, 1959; Vol. 607. c. 551.]On those grounds the Amendment was rejected. But I should like to draw attention to the fact that when the President of the Board of Trade was rejecting that Amendment and was advancing this argument, entirely the opposite was happening. At that point of time, the Development Areas Treasury Advisory Committee was arranging a loan to this firm of U.T.R. of £400,000, and that loan was granted with an agreement on an overdraft up to £300,000 from the bank. So, in effect, this firm, at the period when the Bill was going through the House about elimination of excess capacity, was getting help from the Government up to £750,000. I was not com- 1342 plaining at the time, and I am not complaining now—
I must ask the hon. Member to assist me a little. Is this strictly relevant to the two Orders we are now considering?
§ Mr. Steele
Yes, Sir, because I am making a special plea on a special case. There is no provision so far as I can see in the Orders at present dealing with a firm which has a grant of this kind. I want to know whether a firm which had already had a loan under D.A.T.A.C. of £400,000, plus the agreement for £300,000 overdraft—one of the basic conditions before the grant being that the Committee had to be satisfied that the project assisted would provide continuing employment—will be able to satisfy the conditions if it wants to close.
It was not without significance that the condition was that before the grant was given to the firm it had to satisfy the Committee that the project assisted would provide continuing employment. I think the whole House will agree that this was an area which wanted assistance. The high level of unemployment in the area is well known. It is true that the loan was not given to provide new jobs; it was to safeguard the employment of the workers in the United Turkey Red factory. In fact, if this grant had not been given it would have been a real tragedy and probably this firm would have been closed by this time.
This money which was given has been used by the firm. Reading the balance sheet, which has just been published, we see that the chairman said:During the first four months of 1960 the Works have been busy and, if the improvement in trade is maintained, it is probable that trading losses will be eliminated and a small profit emerge for the current year.That is rather different from the years before when nothing but trading losses had accrued and, so far as it went, under the circumstances of the firm this was not unsatisfactory.
Now I come to something which, Mr. Deputy-Speaker, I assure you is very pertinent to these Regulations. It is something which has caused considerable concern in my constituency. On 7th June, not very long before these Regulations were published, the Calico Printers Association made a bid for the take-over 1343 of the United Turkey Red Company. In a letter which the Board of Directors of U.T.R. sent to its shareholders it advised them to accept this offer. One of the reasons indicated in the letter was that the redundancy scheme which we are discussing tonight would not provide as good terms as were, in fact, being offered by the Calico Printers' Association.
I cannot speak on the financial situation. I do not know whether the terms were as good or not, but in any case that was the view of the directors of U.T.R.
§ Sir J. Barlow
I think I am right in saying that the offer was made some time before the redundancy terms were issued. I suggest that to the hon. Gentleman just to keep the matter clear.
§ Mr. Steele
I am sorry if I created any misconception in the mind of the hon. Baronet. What I intended to say was that in the letter which was sent out the chairman of the company indicated that the board was of the opinion that this offer would be better for the shareholders than what they would get under any redundancy scheme that was likely to be put forward. It was a long letter, but that was the purport of it.
To me the important thing about the letter is that the advice given by the directors to their shareholders made it absolutely clear that they had lost faith in themselves and in the future of their company as an independent firm. They also said:In the same event, the future conduct of the business of your Company will pass out of the control of your Directors and they cannot forecast its course.The letter then went on to deal with the fact that a redundancy scheme would be coming out and finished by saying:In these circumstances C.P.A. has advised us that it cannot state its intentions regarding the future operation of the Company's print works until the provisions of any Government Scheme are known.The immediate reaction to all this was that it was thought that the factory was going to close. It is easy to understand, in the difficult employment situation in the area, the deep apprehension that has been caused.
1344 I am not, I think, guilty of over-statement, but when one reads in the local newspaper headings such asGrave fears of shut down at U.T.R. Jobs of 1,300 employees threatenedand then goes on to read:It now appears that there is no cause for complacency in the take-over bid that the Calico Printers' Association are making for the United Turkey Red Company in Alexandria. Many of the 1,300 workers at this factory fear that the move may threaten their employment, and it seems that these fears are in no way unjustified. If the take-over bid succeeds, the factory may be closed by the end of the year. That is not just the view of union officials but of senior executives of the firm as well.Therefore, the fears and apprehensions that have been caused are quite understandable. I hope and pray that these fears are groundless, but they are there and will remain until some authoritative statement is made.
May I also make it clear, because it is terribly important, that I, the workers, and the trade union officers in my constituency have no quarrel with the Calico Printers' Association. Indeed, if the Association decides to continue work at this factory and, with the assistance of a reorganisation grant, modernise and improve the works, it will not only have my blessing, but the active co-operation of the whole community.
It is obvious that the directors of the United Turkey Red Company have lost faith in themselves. Had this bid not been successful, it is very likely that they would have accepted the redundancy scheme and made an application, and the firm would have been closed. Therefore, our hope—I am expressing now the hope of the people in my constituency—is placed in the hands of the Calico Printers' Association, which will provide a better management. By modernising the works, it could continue to provide work for our people. Mr. Lee, the chairman of the C.P.A., has most willingly agreed to meet a deputation from Alexandria on Friday of this week in Manchester.
Hon. Members who took part in the debates on the three previous schemes which came before the House, namely, the doubling, spinning and weaving Orders, expressed fears about what would happen, particularly regarding employment. Tonight they said that they felt reassured in their fears and that what 1345 they thought might happen has not happened. We are all very happy and pleased that that should be so.
Those hon. Members should not overlook the fact that they have been rather differently placed from what would happen in my constituency. In Lancashire and Cheshire they have been fortunate. They have had a period of high employment. Whilst there has been inconvenience, difficulties and problems with cornpensation, at least those who have been displaced have been able to find employment, but that is not the position in Dunbartonshire.
The whole of today and tomorrow in this House is taken up with a debate on industry and employment in Scotland. Hon. Members on both sides, not only on this side, are expressing their grave fears about the situation. The fact is that work is not available. The Parliamentary Secretary is very well aware of the situation. Not so long ago I took a deputation to meet him and discuss the problems of Dumbarton. He was very pleased to meet us, but I recall that when he answered me he said that one of the hopeful signs was the £400,000 being given to United Turkey Red, which would provide and maintain employment in that area.
The Parliamentary Secretary said tonight that one of the results of this re-organisation and the elimination of excess capacity would be the provision of stable employment. I am sure that he meant in Lancashire and Cheshire, but certainly not in Dunbartonshire. There would be no doubt about the effect of closing down the United Turkey Red Company. There would be 1,350 workers unemployed, and they would have no opportunity of finding work anywhere else in the locality. It would be not merely a blow to them; it would be a blow to their families and to the whole community.
I am comforted by the answers so far received from the President of the Board of Trade. In answer to a Question by me on 2nd June, he said, with reference to the fears which I expressed,The Government would be very sorry to see anything that aggravated the unemployment situation in this part of Scotland".[OFFICIAL REPORT, 21st June. 1960; Vol. 625, c. 213.]1346 On 23rd June, in answer to another Question, he said:I am aware of the need for employment in the Dumbarton area, and I hope that … employment will continue to be provided at these works".That was a step forward. When I questions him further, he showed the concern which he himself feels, because he went on to say:We have been in touch with the Calico Printers' Association and pointed out that the Government very much hope that nothing which is done will create greater difficulty in the employment situation in Dunbartonshire."—[OFFICIAL REPORT, 23rd June, 1960: Vol. 625, c. 664.]I very much appreciate what the Minister has said and what he has done. I am sure the Parliamentary Secretary will understand that I am sincere when I say that. I feel that, coming from the President of the Board of Trade, these are not words which can be lightly cast aside. Any board of management is bound to give them serious consideration.
The Act under which the Orders are made, unfortunately, does not give the President of the Board of Trade anything other than power to make a plea of that kind. That is not our fault on this side of the House. We moved an Amendment in Committee to ensure that such a situation would be provided for. However, I am sure that the plea will be heeded. I should be glad to hear the Parliamentary Secretary announce tonight a favourable reply to his right hon. Friend's representations. That, of course, may be too much to ask for, but, in any event, I am sure that he will be very glad to underline the assurances which the President of the Board of Trade has already given. That would strength and encourage our deputation to Mr. Lee in Manchester on Friday.
The Minister cannot escape his responsibilities in this matter. He cannot, on the one hand, say that he is doing what he can to provide employment where it is needed and, on the other hand, stand aside when regulations are being passed through the House which might have the very opposite effect to what he is trying to do. At this time, he must bear in mind that, when consideration is being given to what closures should take place, it is only sensible to ensure that the closures take place in areas where alternative employment will 1347 be easy to secure, not in an area where unemployment is high already and where a closure of the kind I have described would be a tragic calamity.
I am sure that the Minister fully realises that the matter is one of extreme importance to the welfare of the 1,350 workers in the factory, their families and the traders in my constituency, who would warmly welcome a statement which allayed their fears and apprehensions.
§ 11.45 p.m.
§ Mr. Cyril Osborne (Louth)
It is too late to make a speech, but I should like to ask my hon. Friend the Parliamentary Secretary three questions. First, can he give an assurance that the small minority of workers on whose behalf the hon. Member for Oldham, West (Mr. Hale) made such a strong plea will have their position reconsidered and that in those cases where help can be given, it will be given, especially when it affects the older workers, who will find it more difficult to get another job when they are turned out under an amalgamation?
Secondly, will my hon. Friend do his best to meet the United Turkey Red position? He will remember that I put down a Question some weeks ago on this problem from two angles. The first was the fear of monopoly and the second was the fear of unemployment in Scotland, where, unfortunately, unemployment is much heavier than in England. If my hon. Friend is able to satisfy the hon. Member for Dunbartonshire, West (Mr. Steele) that his fears will be allayed as regards the United Turkey Red, will he give an undertaking that if similar cases arise under the scheme he will do his utmost to ensure that firms are not ruthlessly closed irrespective of social consequences?
I am terribly keen on having industrial efficiency, but it can be bought at too high a price. We can pay too much even for efficiency. I say that as one who has been chasing it all my life.
I represent those who buy the services of the Lancashire cotton trade. As taxpayers, those of us who buy the services of either the finishing trade or the yarn section are entitled to say that if public money is being poured into this industry, efficiency should show itself in lower prices or better-quality goods.This 1348 public money ought not to be poured into the Lancashire trade to give those who already have a stranglehold on the industry greater powers of monopoly.
Will my hon. Friend do his best to see that those of us who buy what Lancashire produces and then use it still further in the hope of meeting the demands either of our home market or of the export market will, as a result of the scheme, get either lower prices or better quality or, if possible, both? If my hon. Friend does these three things, he will be doing a service to the whole trade.
§ 11.48 p.m.
§ Mr. J. Rodgers
I should like to try to answer some of the questions which have been raised during this rather late debate. The hon. Member for Farnworth (Mr. Thornton), with his usual courtesy, gave me notice of some of the questions he raised and I should like to answer them. They are a little technical and detailed, but I appreciate why the hon. Member wants the answer to them.
First, the hon. Member asked whether capacity has not been overstated and whether it has been calculated on a basis of seven days a week, working 24 hours a day. As regards the capacity of the finishing sections, the estimates, which relate to capacity, not past performance, were produced by the Cotton Board on the basis of the returns made on Forms F.C.2 and Y.P.1, which are described in paragraph 2 (2) (b) of each Scheme, which is printed as a Schedule to the Order. These forms asked forthe annual capacity of the works if all the appropriate plant were run full time with a full labour force for the customary working week or 45 hours whichever is the greaterThe forms also stipulated that this should bea figure which is capable of achievement, not a purely theoretical maximum".The Special Committee has assured me that in the light of the checks which it has been able to make and as a result of inquiries which have been made from a number of persons concerned, it is the opinion of the Committee that the figures of capacity shown by the returns give, in the aggregate, a reliable estimate of the current capacity.
In estimating the capacity of particular units for the purpose of determining whether the minima have been achieved the same Forms F.C.2 and Y.P.1 will 1349 normally be used. They are related to annual capacity. Having regard to the wording of the forms themselves—they were statutory returns called for under the Cotton Industry Development Council Order, 1948—we are satisfied that paragraph 2 (3) is adequate.
In addition to Forms F.C.2 and Y.P.1, the Cotton Board may specify such information and records as it thinks necessary to satisfy itself about the capacity of individual units. The returns made for the purposes of the Cotton Board's ordinary levy under the 1948 Order will not provide a crosscheck since they are on a different basis. However, I think that the Cotton Board will have all necessary power to satisfy itself of the accuracy of the returns.
I might add that a number of firms which considered themselves to be working at full capacity in 1959 gave their 1959 output as their capacity figure, which helps to demonstrate, I think, that the returns have been carefully and accurately made.
The hon. Member also asked what percentage of current estimated capacity is represented by the minimum figures. Both in yarn processing and in woven cloth the figure is 20 per cent. In the woven cloth scheme these are also the subsectional minima—which do not, of course, add up to the sectional minimum. They are: bleaching 15 per cent.; dyeing 17 per cent.; and printing 15 per cent. They are calculated on the basil of 50 per cent. of excess capacity or 15 per cent. of current capacity, whichever is the larger.
I am glad to assure the hon. Member that the levy for compensating displaced operatives will still have statutory effect even if these minima are not reached. That is an important point for all to appreciate.
As regards the hon. Member's question whether the yarn or cloth processed is "a direct material consumed" for the purpose of estimating turnover under paragraph 10 (4) of the Woven Cloth Scheme and paragraph 9 (3) of the Yarn Processing Scheme, the answer is no; where the work is on commission the finisher does not own the raw material.
The hon. Member raised a query with regard to the realisation companies, 1350 whether this would lead to a heavy levy on firms which remained in the industry by the granting of too generous terms to the people going out. If small firms want to stand back in an attempt to get better terms from the realisation companies during the supplementary participation period, they take the risk of being too late and missing their chance. The Cotton Board will bring the period to an end if it feels that it has eliminated enough excess capacity. That is a sufficient guarantee that excessive rates will not be paid.
A number of questions have been asked about compensation for the workers who lose their jobs as a result of the schemes, not only by the hon. Member for Farnworth, but also the hon. Members for Stalybridge and Hyde (Mr. Blackburn) and Oldham, West (Mr. Hale). As I have explained, the 1959 Act requires the Board of Trade to be satisfied that arrangements have been made for the payment of compensation and have been agreed by bodies representing the interests of a majority of the employees. The Government, therefore, have no responsibility for the terms of the arrangements for compensation for employees. These terms are for the employers to settle with the employees' organisations. I am assured that the agreements which have been made will provide compensation for the employees of all units which receive compensation for closing down.
I understand that three agreements have been signed for the finishing section of the cotton industry between the employers and the various unions concerned. The details of the different agreements vary, and I do not think I should try to give illustrations of the amounts which will be payable in different circumstances. I can assure the hon. Member that they are very complicated.
The House may like to know, however, that all the agreements provide for setting up a joint board consisting of nominees of the employers and the unions to administer the compensation fund. This fund will be raised by statutory levy by the Cotton Board. It is also provided that firms which apply to close down must inform their employees as soon as practicable after their applications have been accepted. The employers and the trade unions have undertaken to co-operate in attempting 1351 to find alternative employment in the section for such redundant employees.
There has been some criticism of difficulties and delays experienced by employees in obtaining payment of compensation under earlier schemes, and it has been suggested that the Board of Trade should intervene. In November. 1959, the hon. Member for Oldham, West obtained leave to introduce a Bill under the Ten-Minute Rule to make the President responsible for compensation arrangements. I must, however, emphasise that under the 1959 Act the responsibility for reaching agreement rests on the employers and the trade unions in the industry. We think that is the better arrangement. This is the type of question which is customarily negotiated by them, and I am sure the House will agree that this is the most satisfactory way of dealing with such matters.
Reference has been made to suggestions that compensation payments are less generous than those negotiated in other sections of the industry. I do not think that the facts will support this. There are differences in the agreements which, no doubt, arise from differences in the circumstances of the different sections. In any case, these are the arrangements which are acceptable to the unions. I understand that these criticisms—and perhaps this is where the hon. Member for Oldham, West gets his information—stem largely from a statement by the General Secretary of the Guild of Calico Printers, Bleachers, Dyers and Finishers Foremen, who is reported to have said that his Guild was not consulted in any way. I am informed, however, that the Guild has never taken part in any negotiations relating to the wages and conditions of its members, and has no standing in this matter whatever.
§ Mr. Rodgers
If I may I will write to the hon. Member about that point, which is rather complicated. Another point made in the debate was about delays in paying the workpeople com- 1352 pensation under the spinning, doubling and weaving schemes. I can assure the hon. Member for Farnworth that I will look into this. I understand that nearly £2½ million has already been paid out over all, and I can well imagine the difficult administrative problems that are involved, but I am sure that the board, as well as both sides of the industry, are anxious to deal with outstanding payments as quickly as possible.
I have not previously had these matters brought to my attention by the unions, or by anyone else, and perhaps the hon. Member for Farnworth, who is usually so moderate in presenting his case, slightly exaggerated for once when he referred to these delays as a scandal. I will look into it and will write to him.
I will now say something about the possible effects if the United Turkey Red works in Dumbarton are closed down. I realise that there is special anxiety about the situation which may arise in Dumbarton if the works were to be closed. On the general question, I understand from the Cotton Board and from representatives of the industry that there is no reason to fear that the schemes in general will cause any considerable amount of unemployment, or that such difficulties as arise will be persistent. In general it is expected that most of the displaced workers will be able to find employment elsewhere in the finishing section.
There are standing arrangements between the employers and the unions to help secure this, and it is also provided for specially in the agreements about the compensation of operatives. Since the finishing workers are largely men, they tend to be rather more mobile than the operatives in other sections of the industry. If there should be pockets of unemployment in particular localities, the Board of Trade will do all it can to help in providing other employment, and, of course, in development districts the powers provided by the Local Employment Act will be available.
It has been suggested that the Calico Printers' Association will apply to close down the United Turkey Red works, and that this application ought not to be granted. I am aware that C.P.A.'s bid has now been declared unconditional, but I understand that it has stated that no decision has yet been taken about the 1353 future of the Dumbarton works. If an application to close it down is received, it will have to be considered on its merits by the Cotton Board, and I do not think I can properly attempt to pre-judge the decision.
§ Mr. Osborne
Would my hon. Friend give an assurance that the social as well as the economic consequences will be taken into account in such a proposal?
§ Mr. Rodgers
I will come to that point in a moment. Clearly there can be no question of ruling particular undertakings out of the schemes in advance. It is true that this particular firm received a D.A.T.A.C. loan, but it would not have been possible to make it a condition of this loan that the works should continue in operation or that the shareholders should not dispose of their shares. Even if the Calico Printers' Association had not made a bid for this firm it would have been perfectly possible for the existing management to apply to close down under the scheme, as the hon. Member pointed out. If the Dumbarton works should close we should do all we could to help in providing other employment for the operatives. Some hon. Members have suggested that the schemes ought to include provisions requiring that special regard ought to be had to the effects on employment when considering applications to close down works in development districts, such as Dumbarton.
I would remind hon. Members that when the 1959 Act was before the House Amendments to this effect were rejected on the ground that the object of the schemes is to produce a more compact and efficient industry. If we take steps to discourage firms which are anxious to leave the industry from going so we shall cramp the operation of the policy, and the schemes will be that much less efficient in creating a healthy industry.
§ Mr. Steele
I accept that we need a more compact industry, but that does not mean that we must have a concentration in one area of the country.
§ Mr. Rodgers
I accept that, but I must emphasise that though the Cotton Board might be able to refuse particular firms or particular sections of the industry permission to participate in the schemes it could not prevent them from going out 1354 now or later if they wished to do so. All it would then have achieved would be to prevent the workpeople from being eligible for compensation. The people in Dumbarton would be worse off than they are now.
But in certain circumstances it may be necessary for the Board, in reviewing applications to close down, to make a choice between applications which relate to units of otherwise comparable capacity, and to decide that one or more of these must be rejected. This would arise if the pressure of applications were so heavy that it would be impossible to accept them all without impairing the industry's ability to meet reasonably foreseeable demands.
The choice in these circumstances will be in the hands of the Special Committee, which consists of three independent business men and a trade union representative under the Chairmanship of Lord Rochdale. I am satisfied that they are well qualified to make such a choice. If I were asked what considerations I would expect to guide them in such circumstances I would suggest that they would be likely to have regard to such factors as the effect on the efficiency of the industry, on export trade, and, of course, on unemployment. These are obviously the sort of factors that they will have to bear in mind. That is also a partial answer to the hon. Member for Stalybridge and Hyde who raised this matter in general terms.
Two points were raised by the hon. Member for Oldham, West. He asked whether the workers would get compensation if their firms closed down before the operative date. Operatives in firms which receive compensation for closing down, if this took place between 24th April, 1959, and the end of the closing down period, will, I understand, be eligible for compensation for loss of employment. Firms which closed down prior to 24th April, 1959, will not qualify for compensation under the present scheme. "Closed down" means permanently closed down. If firms have closed down prior to April, 1959, they will not be eligible to claim compensation for scrapping machinery, as their capacity has already been eliminated before the date on which the Government's proposals were announced. If such firms had been inactive, although 1355 not closed down, the odds are that they would not have been employing any workpeople during the period in question.
§ Mr. Hale
I cannot let that pass. It is true that the odds are that if a firm is temporarily closed down it has not employed workpeople, but it is equally true that the odds are that the work-people would not go back, and so the firm would cease to deal with them. So it appears that the firms will receive compensation but the workpeople will not.
§ Mr. Rodgers
I am not sure whether the hon. Member is correct, but I will write to him on that point.
We have had a very useful debate. This is a complicated subject.
§ Mr. Rodgers
I am sorry. I have only one point in my notes. Perhaps he would remind me of his other one.
§ Mr. Blackburn
The hon. Member partly answered my question in regard to excess capacity. I also asked what was to prevent another firm coming in and starting up again when one firm had received compensation for the machinery in a factory. The third point was about the imports of grey cloth and the excess capacity in the finishing end of the trade. My question was whether, if this is to continue, will it not have deleterious effects on the other sections?
§ Mr. Rodgers
I think I have answered that point. What I was dealing with was the new firm starting up in the same mill. The Cotton Board must be satisfied that the plant has been scrapped, and it would be theoretically possible for the company to start up anew; but it would be a pretty expensive process to start from scratch, and it is doubtful if re-equipment grant would be payable; no decision has been taken on whether this will be paid to the finishing sections. But there is nothing to prevent a new man from coming in and buying an existing building; if he does, then I say "Good luck".
I should like to thank all hon. Members, and especially the hon. Member for Farnworth for the manner in which they have received these two Orders, and also for their constructive comments. They are complicated Orders, as has been shown in our debate, but I think that it is generally acknowledged that the previous Orders, in the weaving and other sections, have worked better than any of us dared to hope or anticipate. I have every confidence that these schemes we have discussed tonight will work equally well, and I hope that the House will now approve them.
§ Question put and agreed to.
That the Cotton Finishing (Woven Cloth) Reorganisation Scheme (Confirmation) Order, 1960, a draft of which was laid before this House on 30th June, be approved.
§ Cotton Finishing (Yarn Processing) Reorganisation Scheme (Confirmation) Order, 1960, [draft laid before the House, 30th June], approved.—[Mr. J. Rodgers.]