§ 11.0 a.m.
§ The Minister of State, Board of Trade (Mr. Edmund Dell)
I beg to move,That the Hosiery and Knitwear Industry (Scientific Research Levy) Order, 1969, a draft of which was laid before this House on 24th April, be approved.This Order, if it is approved by Parliament, will be made under the authority of Section 9 of the Industrial Organisation and Development Act, 1947. The Act provides that charges may be imposed by Order on persons engaged in an industry, if it is expedient for funds to be made available for certain purposes, one of the more important of which is scientific research. At the present time Orders under the authority of this Section are in existence for the wool textile and cutlery industries. I now seek the approval of the House for a similar Order to be applied to the hosiery and knitwear industry, which, in this context, means broadly the knitting, dyeing and finishing and making-up of weft-knitted articles. The end products of the industry include stockings and socks, tights, underwear, outer garments such as jumpers and cardigans, weft-knitted fabric, and other weft-knitted articles such as dusters and headwear.
Although this is the first time a scientific research levy has been sought for the industry, the Hosiery and Allied Trades Research Association, usually known as H.A.T.R.A., has been carrying out collective research for the industry since 1949. This has been financed partly by voluntary subscription and partly by a grant from the Ministry of Technology. The association is currently supported by some 300 firms out of a total potential membership of over 1,000. However, in terms of production member firms represent 1892 about 70 per cent. of the industry's turnover.
The purpose of the proposed levy is to spread the cost of research, which benefits the industry as a whole through a gradual improvement in knitting techniques, on as equitable a basis as possible to all firms within the industry; and in doing so to augment H.A.T.R.A.'s income to the extent necessary to carry out research on a scale suited to the needs of a highly competitive expanding industry with considerable export potential.
The Board of Trade is satisfied that H.A.T.R.A. is, in the words of the Industrial Organisation and Development Act, 1947, a body capable of carrying out scientific research satisfactorily.
The levy will be related to the turnover of the industry subject to deductions as defined in paragraph 6 of the Order. The levy will be payable in respect of six-monthly periods, and the charge will be 6s. 8d. per £1,000 of turnover, less deductions, during a base period of the previous six months.
Based on the estimated turnover of the industry in 1967 and on the assumption that sales will continue to increase, the annual levy yield should reach at least £100,000, compared with the current subscription yield of £61,000. This should give H.A.T.R.A. a total income of £195,000 during the year beginning 1st July, 1969, compared with £131,000 for the preceding year.
This income will enable H.A.T.R.A. to increase its qualified staff to the extent necessary to carry out research into, among other things, automation of the making up process, and the development of non-woven, non-knitted material, both subjects of vital importance if the industry is to maintain its strong position, both in overseas markets and at home, against increasing competition from imports. The Association will also be able to step up its current work on a wide range of subjects including the study of fabric and yarn structures, shade variations in knitted goods, quality control and efficiency in water usage and conservation. Greater provision would be made for the dissemination of information, both by literature and through the use of the "Hatravan" information and training van, and for improving its liaison services. These latter services are particularly 1893 important in an industry which has a large proportion of small firms, many of whom, especially in Scotland, are situated at some distance from H.A.T.R.A. headquarters.
It is against this background that in 1967 H.A.T.R.A. asked the Board to consider making an Order introducing a levy for scientific research in the hosiery and knitwear industry. Its application was backed by a Joint Standing Committee consisting of senior officials from the two main trade associations—the National Hosiery Manufacturers' Federation and the Knitted Textile Dyers Federation—the National Union of Hosiery Workers and members of H.A.T.R.A. Council. At a general meeting on 4th June this year H.A.T.R.A. members reaffirmed their support for a levy by a majority of two to one.
I should perhaps say that the attendance at that meeting on 4th June was very poor. Less than 40 people attended, and they voted in favour of a levy by a two to one majority. A poll vote taken in connection with the meeting, based on a weighted voting system and including proxy votes, also showed a two to one majority in favour of the levy, although less than 9 per cent. of the potential total votes were cast, so that less than 3 per cent. were against the levy.
I take this to imply that the opponents of the levy, for whose benefit the meeting was called, were able to muster in their support only a small minority of the membership. It is also relevant that the members of H.A.T.R.A. had previously supported the levy at three annual general meetings. However, I claim that the industry supports the principle on the basis of the long and detailed discussions which we have had with representative bodies.
Besides the main trade associations and the principal union, the Board sought views on the levy proposal from 20 other organisations believed to be representative of substantial numbers of employers and employees in the industry, including the nine regional associations affiliated to the National Hosiery Manufacturers' Federation. As the result of the views expressed during these consultations, the Board reached the conclusion that the proposal to introduce a levy had substantial majority support within the industry 1894 as a whole, and my hon. Friend the Minister of State, Ministry of Technology—then Minister of State, Board of Trade—announced to the House on 3rd April, 1968, the Board's intention to seek approval for the introduction of a levy.
The Order has been drafted following detailed consultation with organisations representative of manufacturers in the industry. The opinions of the small but important minority of organisations who criticised the levy have been carefully considered and, wherever practicable, modifications have been made to allow for their comments on the levy proposals. The most significant of these have been a reduction in the rate of levy proposed from 0.065 per cent. to 0.033 per cent.—that is 6s. 8d. per £1,000—of net turnover, and the provision for deduction from turnover of certain selling and distribution expenses, including those incurred in maintaining offices overseas for export promotion purposes.
The fact that it has not been possible to meet all requests for modification of the levy provisions does not reflect any lack of appreciation of the differing needs of each sector of the industry. It does reflect the need to produce provisions which are as fair as possible to the widest possible section of the trade without becoming so complicated and so capable of misinterpretation as to become unworkable.
I am satisfied that a considerable majority of the industry wishes to have this levy. The industry regards this levy as a proper and valuable way of promoting useful research. They support the levy as necessary to share the financial burden, which now falls only on the firms which are members of H.A.T.R.A., more equitably among all firms in the industry, all of whom stand to benefit from H.A.T.R.A.'s work. They regard it as essential to provide H.A.T.R.A. with the income needed to finance the level of research appropriate to their expanding and changing industry, an income which cannot be provided equitably by a system of voluntary membership and subscriptions.
A minority in the industry takes the view that the levy is an inappropriate way of promoting research, or that they are unlikely to benefit from the research that will be done, and that it is, therefore, unreasonable for them to be forced 1895 to pay what is virtually a tax for work that will not benefit them. This minority points out that some of them do their own research which H.A.T.R.A. may duplicate; and that much technical information, which again H.A.T.R.A. may duplicate, is provided free by the suppliers of the industry. They also fear that a levy system may reduce the industry's control over H.A.T.R.A.'s activities.
No one will dispute that it is vital that the hosiery and knitting industry, a section of the textile industry in which Britain is particularly strong, must remain technically in the lead. The only question is whether a levy for H.A.T.R.A. is a proper way of helping it to maintain its lead.
There are certainly dangers in a levy. There is the danger, for example, that an organisation that does not have to earn its keep may fail to justify its existence. There are always difficulties in managing co-operative research. There are difficulties in knowing what projects shall be carried through; whom they will benefit; what is their competitive value when they are likely to be as available to foreign competitors as to the British industry; whether the co-operative research organisation will be directed away from particular sensitive areas of research precisely because some of its members are interested in those areas and do not want their competitors to be brought into the field. There are major problems of transfer of information from the co-operative research organisation into the industry, particularly to companies that lack technical personnel of their own, capable of understanding what is being offered to them.
It is certainly true that while there are in this country examples of co-operative research done supremely well, there are other less encouraging examples.
I do not say that these criticisms are without substance. There are dangers. It will be for H.A.T.R.A. to satisfy the industry, including the opponents of the levy, that in this case the benefits that flow outweigh any detriments. The industry have asked for this levy, as they are entitled to do under the Act. The majority of the industry that supports the levy is entitled to a trial of its view that this will be a successful method of 1896 raising the standards of innovation and technical competence in the industry.
Those who support the levy certainly have a duty to ensure that it is properly used and for the benefit of the industry as a whole. If, over a period of time, they fail in this task, the levy can be cancelled or modified. In short, the opposition to the levy has not, in my view, been sufficient to justify the Government in refusing to implement the wishes of the majority. But a clear responsibility lies on H.A.T.R.A. and its Council to make this levy a success, and, of course, they have behind them twenty years' experience to assist them in this endeavour.
§ 11.16 a.m.
§ Mr. Tom Boardman (Leicester, South-West)
First I must declare a constituency interest. Leicester, part of which I represent, is one of the leaders in the hosiery and knitwear trade, and hosiery and knitwear is one of its staple industries. I must also declare a possible personal interest, in that I am chairman of a group which has textile interests, none of which appears to be directly affected by the Order, but which might have been affected by the Order in its original form.
I have visited the research establishment, and anything that I say in the debate will not, I hope, be taken as a criticism of that establishment, the work that is done there or of the skill and the efforts of the staff, which are of a high order; nor I hope will it be taken as a criticism of the need for research. Indeed, Leicester was in the forefront of research and development particularly in textiles. It was the first city in Europe and in the world to make many major developments, and it retains that position.
The Minister has conceded that the case for the Order is not all one way; that there are dangers and problems. I am not satisfied with the case for the effectiveness of collective compulsory research. I believe that research can more often best be done by individual firms, although the small firm may be in some difficulty. Those firms which are not of a size to justify their own research get best value from voluntary collective effort. A compulsory collective effort inhibits firms from putting into the pool many things which they would prefer to keep out and not to share with those bodies with whom the compulsory Order requires them to participate.
1897 The case is perhaps adequately and admirably summed up in the report of the chairman of the Leicester and District Hosiery Manufacturers' Association Ltd., a body of considerable importance in the context of this Order. The chairman said this in his annual report:It is the section's firm believe that any research association will only obtain the support from the industry that it warrants. Our problem now is that we do not now have a choice. We pay for and support research which may be done well or may be done badly; research which may be relevant or irrelevant and we have no option.That, of course, is on the basis that the Order is made. I ask the Minister to weigh those words carefully, and to contrast the approach to this Order with the approach of the nearest comparable research association, S.A.T.R.A., the Shoe and Allied Trades Research Association. That Association is voluntarily supported and holds a unique position in the world. It would be a disaster if that voluntary principle in S.A.T.R.A. were destroyed. I believe it may be a mistake to destroy the voluntary principle in H.A.T.R.A. as it will be by this Order. If the association's work is good, it will be supported by all those who benefit from it. If the work is worth while, those who do not agree to benefit from it or take advantage of it will suffer or cease to be competitive. They will not have the advantages of those research efforts and will fall by the wayside. I again urge the Government to reconsider the principle as to whether compulsory levies of this kind are right.
A voluntary system avoids the nonsense of the legal definition of those who have to pay. In a voluntary system the trade subscribes on the basis of getting value for money. With a levy the trade subscribes because it comes within a rather arbitrary legal definition. I know that the Minister has had considerable difficulty in getting this definition agreed within the industry; indeed it is not now agreed. He said that the majority of people supported it, but I will develop that argument in a moment. The contrast is between payment made because a firm falls within the peculiar legal definition and payment because they are getting value for money.
1898 The definition makes a nonsense. It excludes, for example, the makers-up. The Minister said that it included makers-up of knitted materials, but he will agree that makers-up of knitted material are caught by the levy only if they also happen to engage in knitting activities caught by the levy. The firms outside the industry, the makers-up for what is colloquially known as the "rag" trade, which get considerable benefit from the research that is carried out, are not caught by the levy, nor are the yarn producers, although a great deal of research work has been undertaken in connection with large yarn companies by the research association. As proof of that, the Minister will be aware that a great many of the voluntary contributions to the association are now made by the yarn producers. This surely is evidence that they are people who are getting benefit from the research. It is quite anomalous that they should be excluded from the levy. I recognise that they are also caught by a statutory levy of another kind, but although they benefit also from the work of the Hosiery and Knitwear Research Association they are excluded from this statutory levy.
The machinery makers also are excluded. I know from my visits to the research association and from my knowledge of the industry that much of the development work that takes place in the establishments is related to the development of machinery. It is worth noting that H.A.T.R.A. has established a happy working relationship with some of the leading knitting machinery manufacturers in the country. Machinery makers get the benefit, the pay-off, from this research, yet since they are outside the net, they are not to be required to make any contribution. It will be their customers, the people who buy the machines, who through the levy will pay for the research.
The Minister has pointed out that the Act requires what one might call consultation with the industry. But consultation can take many forms. It was Sir Winston Churchill who said that one could consult a man and ask him if he wishes to have his head cut off, and, when he says "No", one could cut it off and say that he has been consulted. I wonder whether that is not appropriate to the consultation which has taken place here.
1899 The H.A.T.R.A. vote, as the Minister fairly said, was at a poorly attended meeting. Those in favour were 18, with 8 against, a majority of slightly more than two to one. But on the poll that was taken, with one vote for every £50 of levy, those in favour were 270, those against 178—something less than the two to one stated by the Minister.
They comprise the very people who are the beneficiaries of the Order, the people who, on the Minister's argument, are paying voluntarily for research which is being shared by those who are not paying. They are the people who say, "Why should we keep putting our hands in our pockets for research and know-how when all the people outside are getting the benefit and paying nothing?". On that argument one would expect to see 100 per cent. support from members of H.A.T.R.A. rather than the ratio of 270 to 178, or 18 to 8.
The Minister also said that there had been support for the levy at a number of previous meetings. But that is not entirely fair, though I am sure it was not intended to be unfair. Previous meetings of H.A.T.R.A. considered the draft Order in various forms and amendments have since been made. I believe that the figures are relevant only on the occasion when the Order was finally drafted.
There was very strong opposition from members of the National Hosiery Manufacturers' Federation, but that opposition was to some extent diluted by the fact that a number of important members resigned when the Federation decided to support the principle of the levy. So the poll or vote taken there was not representative of all those who were opposed to it. Those people were then outside the federation; they comprised powerful interests, firms not necessarily large in size, but certainly strong in influence and in various other ways, and they opted out. They were consulted, but they are not brought into the figures.
A private poll has been conducted, and I believe the figures have been given to the Minister. I am a little surprised that in constant references in his speech to the majority and the complaints of the insignificant minority he made no reference to this private poll that was carried out and reported in the Hosiery Times in January, 1969. The result of the poll was as follows.
§ Mr. Boardman
I am sorry if I got carried away and distorted the Minister's proper qualification. The figures of the results of the poll were as follows. It was a poll made on a wide section of the industry in which 330 firms were consulted and a number did not reply. There were 180 against the levy and 41 in favour. The approximate number of employees in these groups of firms was, 43,000 employees in firms against and 15,000 employees in firms that declared themselves to be in favour.
On any yardstick it would be wrong to say that a majority of the industry are in favour. I believe that the majority of the industry are opposed to the levy. The Minister will correct me if I am wrong, but I understand that these figures of the poll were given to the Minister and he was invited to examine them and to see the form of the poll and to make any challenge he wished. It is remarkable that in quoting the figures of two to one and in referring to the minority and majority—it was an important minority—no reference was made to the dramatic figures whch are far more representative of the weight of opinion than those taken from the members of H.A.T.R.A., who automatically have a vested interest; and even there it is not a very large majority.
I turn now to the amount of the levy. The effect of it is to increase the charge on the majority of firms in the Leicester and district area, who at present voluntarily contribute to H.A.T.R.A., by something between four and six times. That is the rate of increase which will fall under this levy on firms who at present support the association. That shows how illogical it is. I know that the Minister has tried very hard to find a formula which will produce a fair sharing of the levy, and I recognse the difficulties that there must have been. But the Act requires it to be in accordance with fair principles, and I ask whether it can be a fair principle on those who voluntarily support the association when, under a compulsory levy, which is meant to bring in outsiders who have not been supporting it, they will find their costs increased four to six times. I am not sure whether the Minister is aware of this. If he 1901 is not, I hope that he will take the opportunity to reflect upon it before proceeding with the Order.
I have referred already to the lengthy correspondence with his Department. He said in April that he believed that the change to the turnover basis now being proposed would not of itself materially alter the contribution which might at present be paid per head on a voluntary basis in these cases. But it increases it by four to six times.
The excess being contributed will be devoted largely to projects in which the contributing firms have no special interest. Some of it will be devoted to projects which benefit other industries that are not required to contribute. One very important development which has been going on for some time concerns a positive feed control. That is essentially of interest to knitting machinery manufacturers and is for their benefit. The results of that development will be paid for by the knitting industry when it buys machines, and it will also benefit machinery makers in selling their machines. But it seems wrong that one section of users should be required to subsidise this sort of development. Some of the research money will continue to go on research into automation in making up. The makers-up are outside this Order unless they make up their own knitted materials. I suggest that that is wrong.
The wrong formula has been adopted. The requirement on the turnover basis means that people pay for the value of the material used. Two comparable firms, one of which is knitting expensive yarn and the other using cheaper yarn, will pay different contributions. The firm using the more expensive yarn will pay a greater contribution, although the effect of research may be far more beneficial to the firm using the cheaper yarn since one of the objects of research is to bring down the value of the raw material used without reducing the quality of the finished article. That is, after all, one of the basic concepts of efficiency. That shows how illogical it is.
When dealing with the deductions allowed from turnover, the Order pays a good deal of lip-service to export expenditure. The Order provides that, for example, overseas offices are a deductible expense. It also allows deductions 1902 in respect of sales. However, there is then a rather cheap jibe. In the Order as originally drafted, there was a proviso included in the paragraph dealing with the deduction of expenses. It allowed from the turnover the deduction of various expenses… provided that a body corporate shall not be entitled to any deduction in respect of the remuneration and expenses of its directors.The Government have a fetish about directors. They seem to think that, because someone is a director, he is a useless appendage—
§ Mr. Boardman
I take you point, of course, Mr. Speaker. I brought it up merely to indicate that, in spite of dropping the proviso, nevertheless in their negotiations with the industry, the Government have arranged to retain it. They say in a letter to the Nottingham District Hosiery Manufacturers Association dated 1st April, 1969:As you know the proviso was added to make it quite clear that deductions could not be made in respect of the remuneration and expenses of a director of a company. By virtue of his position a director would in most companies have responsibility under the statutes of the company for the general management of the company and could not therefore be considered as 'wholly engaged' in the procuring of contracts of sales. If, however, a sales manager is merely a director of a department with no position on the board of directors and he deals full time with sales, the deductions may legitimately be made. After further consideration and to cover the case of a director without responsibility for the general management of the company it has been decided to admit the proviso, on the understanding that this in no way alters the position regarding the deductions which may be made.
§ Mr. Speaker
Order. With respect, the hon. Gentleman is debating a proviso which has gone from this Order and which he apparently does not want to see in the Order.
§ Mr. Boardman
I am referring to the interpretation which the Minister has said is intended to be placed on the Order which is now before us. The Order is intended to be interpreted in such a way as to make it clear that no director concerned with general management shall be included in the class of persons whose expenses and salaries can be deducted 1903 from the turnover in calculating the levy. I will not develop the argument, but it is difficult to think of a director who is not responsible for general management. I should have thought that the Board of Trade would be aware of the duties of a director under the Companies Act.
This is cheap, and I ask the Government to think again. They must be aware of the effort which is put in by the directors of companies who spend their lives selling. I am sure that the Minister is aware of one leading figure in the hosiery trade who has done great work on the British National Exports Council and who has spent most of his life with a suitcase selling British hosiery overseas. According to the Order, apparently he is to be regarded as a useless appendage whose expenses and salary cannot be taken into account because he also has a responsibility for the general management of his firm. The firm in question won the Queen's Award, and now it is to be told that its director must be regarded in that way. I must ask the Minister to think again about the way in which he interprets that part of the Order.
I suggest, too, that when the Government pay lip service to exports, they should consider making a deduction in respect of export turnover as a whole. It would be a little fillip to exporting firms. It would not infringe G.A.T.T. or E.F.T.A. It would show that the Government have some intention of backing all the words and exhortations they have given to exporters. Surely that should be done.
I believe that the Order will add a bit more to the Socialist bureaucratic nonsense. There will be a terrible amount of administrative work. I remind the House of the wording of Article 8, dealing with the furnishing of information. Returns have to be compiled giving a person's name and address, the business name under which he carries on a business, the principal place of such business and a description of such business. He may also be required to furnish such returns and other information, to keep such records, and to produce for examination such books and so on as shall be required by the Board of Trade.
Really, what a tremendous amount of rigmarole. It is a pathetic exercise. At the end, it will force a lot of people to 1904 pay something that they do not want to pay to produce an additional income of £40,000 per annum instead of the voluntary figure of £60,000 which is now being obtained. All this is for something that the majority in the industry do not want.
I cannot let pass the final part of the Order dealing with penalties. "Penal clauses" would perhaps be a more appropriate and apt description. If a person fails to fulfil any of the requirements under the provisions of Article 8, which requires everyone to fill in all these forms and go through all that rigmarole,or recklessly makes a statement which is false in a material particular he shall be liable on summary conviction to a fine not exceeding £50, or on conviction on indictment to imprisonment for a term not exceeding two years or to a fine not exceeding £100 or to both such imprisonment and fine.What have we come to? Throughout the country we have had all this "to do" about fines on certain other matters and on penal clauses. Yet, one of the leading industries in this country is to be subjected to a form-filling bureaucratic routine with a threat of two years imprisonment if someone makes a mistake. I ask the Government, for heaven's sake, to stop meddling in things that they do not understand and to let this great industry get on, as it has got on so well in the past.
§ 11.42 a.m.
§ Mr. A. G. F. Hall-Davis (Morecambe and Lonsdale)
It is right that the House should spend some time debating this Order. The Minister gave his usual balanced review of the matter, but the fact that he found so much to say on both sides of the account, as it were, is full justification for our considering the implications of the Order in some detail.
The Minister's account of the voting procedures that were followed suggests that the polls that were taken could not be considered conclusive evidence. We have had various discussions about the deductions to be drawn from occasions when the poll is low, but I think we can agree that this is one occasion when it would be unwise to base an assessment of the correctness of the introduction of the Order on the polls that were taken, particularly as they were apparently taken largely within an association composed of 1905 people who were already, of their own free will, contributors to H.A.T.R.A.
There are some particular points about the Order which we should discuss, but should like to make one general comment about this type of compulsory Government-imposed levy. Where a decision is taken to compel firms to make payments for purposes of an industrial nature, which they have not been willing to pay for of their own free choice, we must be very careful lest the result is a misapplication of economic resources and, therefore, a weakening and not a strengthening of the country's economic base.
The whole point of the Order is that it brings about a change for a voluntary to a compulsory basis of financing. The Hosiery and Allied Trade Research Association has been carrying on research for the benefit of the hosiery and knitwear industry since 1949. This is not to bring some new body or new sphere of activity into existence.
I should like at this stage to echo what was said by my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) in a number of trenchant comments. I hope that any comments about the Order will not be taken as a criticism of the need for research. We on this side of the House fully support what the Minister of State said about the need for research in this very successful and progressive industry. But I think that we are entitled to probe the reasons for the change to a compulsory basis at this point when the association has been in existence for some 20 years.
In considering the Order I thought that there could be three underlying reasons why this change was now proposed. The first, which I should welcome the most, would be a statement from the Minister and a revelation that there had been developments in the industry's technology which justify or call for an expansion of research effort.
The second possibility was that the Association is not viable as an independent unit on its present voluntary income. I have not had the opportunity to visit the association's headquarters, so this is a general comment, but it is relevant to the situation. We should always examine, when this kind of situation arises, whether it is right that a body should stay independent or whether 1906 it may be better that it should be merged into some larger research organisation. This pattern is taking place generally in industry.
The third possibility for the introduction of the Order was the one to which the Minister gave the most emphasis—I found this the most disappointing thing about his speech—namely, that there is just a feeling that some firms are benefiting from activities to which they have not made a financial contribution. That is perhaps the least praiseworthy reason for taking action of this nature.
I have a feeling that the changes in the technology of the industry possibly did not get the emphasis from the Minister that they deserve. He made reference to the need to pursue research into non-knitted, non-woven clothes. I am sure that this is a considerable field for change that lies ahead of the industry. It may be that there is, therefore, a technological basis for this proposal. However, I am sorry that the Minister felt that he could not give it the pride of place in the argument which he put before the House.
Another thing which makes me look with some care at the Order is the fact that since 1961 there have been only three industries subject to Orders under the Industrial Organisation and Development Act, 1947. So obviously this is not a usual practice: these are exceptions. The Minister quoted two in his speech, but a few days ago, in a reply which perhaps I misunderstood, he gave me three. We will not quarrel about it. There have obviously been very few Orders made to introduce a compulsory levy.
It seems to me that a conclusive case has not been made why the industry and the association are required to be the subject of an Order which is of an unusual nature. The industry is not predominantly composed of small firms. The Minister has referred to approximately 1,000 firms in the industry. Accepting that there are 1,000 firms in the industry, this would, on the basis of the levy that the Minister has indicated, point to an average value of product of about £300,000 per firm per year. That is an average value over them all. The levy figure suggests a total net aggregate value of products supplied of £300 million. I found this a surprisingly high figure. I hope that I have applied the arithmetic 1907 correctly. A net aggregate value of products of £300 million suggests a very substantial industry indeed. Therefore, it makes it all the more surprising that it is necessary to resort to an Order for a compulsory levy of the nature that we are now considering.
Can the Minister tell us the number of firms that he estimates will come within the exemption provisions? There are presumably in the industry a number of large firms, as well as smaller ones, that are not contributing, judging from the figures he has given us. If so, that is presumably because they do not consider that it would be worth their while. It is a little disturbing that the figures indicate that it is not only the small firms but the larger firms that feel it is not worth their while contributing. Some of the reasons for this obviously lie in the background to the type of work done.
The Minister referred to the objectors to the introduction of the Order. He was very fair about this and made no attempt to glide over the fact that there have been objections, as there certainly have been. I would like to deal with the nature of the objections and the reasons for them a little more fully than the Minister could, in the hope that in due course solutions about their objections may emerge.
Many of the objectors are firms in Scotland which do not consider that they will obtain value for money. My hon. Friend the Member for Renfrew, East (Miss Harvie Anderson), who has some of these firms in her constituency, and has contact with many others, has brought to my notice correspondence addressed to her by firms in Scotland, which I have read with considerable disquiet. It would be wrong not to say that they have a considerable ring of conviction. My hon. Friend the Member for Renfrew, East would very much have liked to take part in the debate, but she was prevented from doing so when the business was arranged for Friday by commitments she had already undertaken in Scotland.
On the question of objections, one would hope that when an Order of this kind is being made to introduce a statutory levy, support would be found for it spread broadly and evenly across the 1908 whole industry. That is surely the object of the consultations which the Board of Trade is under an obligation to hold before laying the Order.
One can reasonably expect to find some dissident firms, because there are some companies which, on grounds of principle, are opposed to compulsory levies of this kind. However, one would hope not to find a whole section of the industry united in opposition to the levy. Dissidents spread thinly across the spectrum of the industry one could accept without many qualms, but it must give rise to more serious misgivings when one finds a whole section apparently united both in objecting to the Order and in its grounds of objection.
I have therefore studied carefully the objections brought to my notice. The main grounds are readily identifiable. They reinforce the arguments put forward by my hon. Friend the Member for Leicester, South-West. The first is that the smaller firms situated in Scotland benefit from the activities of the research association to a much smaller degree than larger firms in England. That is one of their repeated contentions. I should like to quote from one letter, which is typical of a number of others, from a firm situated in Scotland. It says:Directly conferred benefits to knitwear manufacturers have, in the main, been enjoyed by large firms in the Midlands using mass-production techniques …. The basis of the proposed assessment, being a fixed percentage of total sales, less certain deductions, would operate unfairly on the smaller manufacturers of high quality knitwear in Scotland, who are much less likely to derive anything like the same benefits as the large manufacturers of cheap, mass produced knitwear.There is a further comment of the same kind on this point, again from a firm in Scotland. The writer says:In my considered opinion … the work done by H.A.T.R.A. can only be of benefit to a large group based on Leicester. Having been in business for almost 50 years, this company has not found a need to call upon H.A.T.R.A. for any information, and does not expect to require the kind of research H.A.T.R.A. undertake.I should add one comment on this quotation in case anyone should think that the firm stands on the faltering fringe of the industry. The writer states at the beginning of the letter:… we export a certified 85 per cent. of our production".1909 I am sure that that will bring the same pleasure to the Minister as it did to me when I read the letter.
It is all the more reason for taking note of these objections that most of the firms in Scotland that are unhappy about the compulsory levy are large-scale exporters or suppliers to firms of multiple retailers noted for the high standard of product they demand and the quality control they exercise. A number of these firms are both.
I come now to the next ground of objection of these firms; namely, that a substantial part of the benefit of H.A.T.R.A.'s work flows to firms which will not be called upon to pay the statutory levy. I should like to quote from another letter, also from a firm in Scotland, supporting what my hon. Friend has just said. The firm's letter states:The services provided by H.A.T.R.A. have all along been, and continue to be, of most direct benefit to yarn spinners and dyers on the one hand, and manufacturers of textile machinery on the other hand.I understand that yarn manufacturers, dyers and textile machinery manufacturers are excluded from the levy. I should like to read one further quotation before I leave this point about the objectors. It is from the first firm that I quoted on this point, and it says:As a small knitwear manufacturing company we can testify that we are quite unaware of any benefit we may have obtained as a result of the activities of H.A.T.R.A. either directly or indirectly. We suspect that they may possibly have had some hand in the design of the machinery we have acquired over the past 10 years, but we would presume to have paid for that at the time of purchase.That has an entirely fair and logical ring to me. One does not expect to pay twice for this type of research into machinery manufacture. If the machinery manufacturer has been receiving the benefits of research in some form or other, it is right that he should pay for it and recover the payment from the cost of his product when he sells it.
Surely it would have been possible—and I ask the Minister to reflect on this, because of his final remarks—when the change to a compulsory levy was proposed to arrange at the same time that those firms receiving a service from H.A.T.R.A. that were not to be within the scope of the compulsory levy should be charged or should undertake to pay the full costs of 1910 the services they receive. If H.A.T.R.A. could have made firm proposals on those lines it would have removed any feeling of injustice and one of the objections made by the group of firms to which I have referred.
I turn to the narrow aspect of the calculation of the levy and the level of the exemption limit. Here I must be strongly critical on general grounds. I shall make a great attempt to carry the Minister with me. It is a fine sunny morning and there is no harm in being optimistic in one's approach to these matters.
The exemption figure for aggregate value is so low that I must confess that it raised doubts in my mind whether I had understood correctly the basis of calculation. It was only when I looked at the exemption limits on other orders, expressed in a slightly different form, that I was fully confident that I had made a correct assessment. I have come to one conclusion about which I am certain; namely, that those just above the exemption limit will be paying £3 6s. 8d. plus 1d. per annum, or, more precisely, £1 13s. 4d. in each levy period of six months. This must be nonsense. It will cost more for the firm to calculate and pay than the cost of the levy itself.
My hon. Friend touched on the really grotesque nature of the language used in connection with a levy of this size—the ponderous language of paragraphs 8, 9 and 10 of the Order. My hon. Friend quoted from the penalties. I merely quote paragraph 8(2), which provides:The Board of Trade may by notice in writing require any person to whom this Order applies:Reading the Order, we realise that this direction may relate to the collection of as little as 1s. 6d. per week. When we think about this we realise why Britain is the laughing stock of the world. It is because of the way we subject ourselves to bureaucracy gone mad. The minimum figure that we are talking about is less than the average citizen who enjoys a flutter on the football pools puts in the envelope that he sends away each week 1911 Apparently it is necessary for us to bring the full majesty of surveillance, inspection, direction and record-keeping into play in this case.
- (a) to furnish such returns and other information,
- (b) to keep such records; and
- (c) to produce for examination such books and other documents and records as may to the Board of Trade be reasonable requisite for the purpose of the recovery of any charge imposed by this Order."
Surely it would be sensible to start by fixing a realistic figure below which it is plainly uneconomic to calculate, pay and administer the levy. There must be such a figure. The Minister has seen, in various calculations, how much it costs today to write and post a letter—never mind making a calculation involving the net aggregate turnover before making out the cheque, sending it off and having it cleared so as to make sure that the Board of Trade is satisfied that somebody is not escaping the levy. It is not 1s. 6d. per week. The Minister will soon fix on a figure that will be below the level of any coin in our currency—and then the nonsense will become apparent. I seriously suggest that the minimum figure for the levy should be £50, or £25 per annum at the very lowest.
§ Mr. Speaker
Order. I have been listening carefully to what the hon. Member has said. He cannot seek to amend the Order; he can denounce it.
§ Mr. Hall-Davis
I was endeavouring to be constructive, as well as critical, Mr. Speaker, but as the rules of order restrict me to being destructive I will turn to another field of destructive criticism.
It is important that in fixing this type of exemption the Minister and the Government should recognise that the basis of running a small business is not the same as that of running a large one. With a levy fixed at this sort of figure, if an obligation is imposed on small firms to keep records that they would not otherwise keep and to change the whole basis of administration and accounting in their business, what the Order is really saying is, "You are a small business. We know that you therefore do not derive some of the benefits which accrue to large-scale business enterprise. You know that and we know that. You run your business in a different way, so that the advantages that you derive from being a small business offset the disadvantages arising from your not having the economies of scale. But we are going to see not only that you lack the benefits of large-scale operations; by imposing obligations on you we shall see that you have to forego the 1912 advantages which normally accrue to small-scale operations from flexibility and a lack of bureaucracy."
The industrial training boards are increasingly realising that equity can be the adversary of common sense, and are tending to widen their exemptions from the training levy for small undertakings. Has the Board of Trade considered the experience of the training boards in this direction? Does the Minister feel that even though the industry that we are discussing may feel it inequitable that only two-thirds of the industry should be paying this levy, it would want to see the levy fixed at a minimum level of 1s. 6d. per week? If we think in such small terms, no wonder our achievements are so short of what we want to see.
We are discussing the appropriateness of this Order to the situation in the industry. We are not discussing—and I am not seeking to criticise—the merits of the Hosiery and Allied Trades Research Association. The long existence of that research association, supported by voluntary payments and charges for services rendered, is evidence of its usefulness to the industry. An Order of this kind, carrying with it statutory obligations, must be fair and sensible in its provisions, and there would appear to be a substantial section of the industry that considers that its terms are not fair. The Minister almost accepted that that was so in his opening remarks. I hold the view that these exemption provisions are set at such a derisory figure that they are not sensible.
No doubt the Minister wishes to see the Order in operation. He gave some of the background, telling us how long these discussions had been taking place. These terms are th best that he has been able to produce so far; I hope he will not be deterred from further attempts to improve them. He said that it would be up to H.A.T.R.A. to justify a levy being imposed on this basis. I hope that he also believes that it is up to him to justify fixing a levy in these terms, and that he will not be deterred, whilst the Order is in operation, from considering whether it can be improved.
I ask the Minister to give us an assurance that he will review the levy provisions—apart from the consideration to which he has referred—after one or two years' operation, and then introduce an 1913 amending Order if he is persuaded that one is desirable. I particularly ask him to consider the minimum exemption levels, which it is apparent that the Board of Trade fix with a fine historical sense and an almost complete disregard for the realities of current financial terms.
§ 12.9 p.m.
§ Mr. Dell
With permission, Mr. Speaker, I should like to reply to the very interesting speeches which have been made by the hon. Members opposite. One speech, at any rate—and probably both—invited me to speculate at some length and with a breadth that you, Mr. Speaker, would undoubtedly rule out of order, on the relative merits of compulsory and voluntary contributions to research. This is an interesting argument, and I indicated that I quite understood that there were arguments on both sides of this question. There are strong possible disadvantages in a compulsory system of financing research. I am aware of them. I am sure that if the levy is to be a success H.A.T.R.A. must find a way of overcoming them. They are dangers to be avoided.
However, the problem as presented to me is not the theoretical question whether we should have a compulsory or voluntary levy for research in this industry. The problem is that this is something which the industry wants. Both hon. Members produced evidence that this was not true, which I will consider in a moment. But for the moment let them accept that the industry wants this and that this is the view of the majority of the industry. The Board of Trade must therefore consider whether to use this Act to support their judgment. It seemed right that the industry should be able to try out this system without foreclosing or deciding the relative arguments of principle or merit between compulsory and voluntary financing.
I am surprised that the hon. Member for Leicester, South-West (Mr. Tom Boardman) thinks that so many members of this industry are Socialists or supporters of bureaucracy. I am delighted to hear it: I look forward to excellent results in the hosiery areas at the next election. I must also disabuse him of the idea that we have any prejudice against directors: there are too many of them on this side for that. But we have undertaken extensive consultations 1914 and believe that the industry supports the levy by a substantial majority.
Mention was made of the H.A.T.R.A. meeting on 4th June, at which there was a small vote. The significance of that meeting was that it had been represented to the H.A.T.R.A. Council that there had been insufficient opportunity for the opponents to represent their views. All that happened was that something under 3 per cent. of the members of H.A.T.R.A. voted against the levy, which was no sign of strong opposition. Indeed, one gentleman who has been legitimately active in his opposition to this levy did not even turn up at the meeting which had been called to allow him to express his point of view. Admittedly, these are the members of H.A.T.R.A., and the hon. Member fairly said that they might be expected to support the levy more than those who were not members.
But we have consulted a large number of trade associations which, by a large majority, have said that they support this. Surely we have to assume that a trade association speaks for its members. If it does not, its members should change its leadership. A large majority of other organisations, like trade unions, also supported the levy.
The hon. Member for Leicester, South-West referred to a sample referendum conducted by one distinguished member of the industry of 330 manufacturers, mainly in the fabric sectors, of whom 180 stated their opposition to the levy. We were told about this referendum. Of course the hon. Member does not need me to tell him that there are dangers in conducting polls and interpreting their results. The coverage of this sample was, perhaps, not all that it should have been. If one presents people with the question, "Do you want to pay additional money?", without any clear explanation of what benefits are likely, it is hardly surprising if the answer is, "No". Even then, in these somewhat biased circumstances, a little under half those consulted seem to have been in favour—again, a large number of Socialists.
§ Mr. Tom Boardman
The hon. Gentleman is a little unfair when he suggests that the question put was a loaded one. He should look at the questionnaire, which was fair and balanced. There 1915 were 180 against, out of 330, and a number did not reply. I said that only 41 were in favour.
§ Mr. Dell
I am grateful for the correction. I did not have the number who said that they were in favour. But it is a matter of assessing the value of this sample, and the questionnaire, as to whether it represented to those questioned the merits of the proposal. Against that, we must put the views of the trade associations which we have consulted, so we are justified in saying that this is something which the industry wants. It is open to any trade association to change its mind and say that it does not want this any more.
The next series of points related to the formula on which the levy is based. It is very difficult—I accept that this is probably one of the arguments against compulsory levies—to get absolute fairness. We have consulted so as to do the best we can. Our object in putting in various deductions was to help firms which produce high quality stuff and therefore have a high turnover relative to employment, and which will therefore suffer because of the change from an employment basis.
The hon. Member for Leicester, South-West complained that we did not put in other sorts of deduction, but, at the end of the day, one must decide what is a fair distribution of the burden among different firms. If this is going to be a success, one must aim to accumulate a certain income. If all the deductions which he suggested were made, the object would have been defeated, because there would have been virtually no income. The additional deductions must produce the income: either that or the rate must be increased. We were concerned to have a fair distribution between different sections of the industry.
§ Mr. Tom Boardman
The deductions which I asked for were, first, the exclusion of directors—as he did, but which I thought was illogical—and the only positive one which I put forward was export turnover. I believe that that would be substantial because this is a high exporting industry.
§ Mr. Hall-Davis
Is it the Board of Trade's intention to go through the rigmarole about expenses of directors overseas if they have general management responsibilities?
§ Mr. Dell
No, the position was correctly stated by the hon. Member for Leicester, South-West. In this Order, we have to define, in a way which is legally valid and capable of interpretation, those expenses which will be deductible. In terms of export sales, if we took a director also with general management responsibility, we should have to make a deduction in respect of a certain part of his activities. We have ruled that out—
§ Mr. Tom Boardman rose—
§ Mr. Dell
Perhaps I had better continue. We can discuss the matter further by correspondence, if necessary.
The hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) says that the £5,000 exemption is too low. First, I think that he is wrong in saying that the cost of collecting this will necessarily be greater than the income. Obviously when one gets a small income, the relative cost of collection is high. However, the total cost of collecting the levy is estimated to be about £3,300, compared with a total income of £104,000.
We shall have to make the turnover inquiry of the firms concerned in any case, whatever their current turnover. This is a rapidly expanding industry, and firms which are currently excluded may soon come within the ambit of the levy. Some inquiry will have to be made of those firms, therefore, and once that has been done, since it represents a considerable proportion of the cost of operating the scheme, the limit which we have fixed will be seen to be perfectly reasonable.
As for Scotland, I am aware of and regret the opposition of the representative organisation of the industry there. The H.A.T.R.A. Council has authorised the staff for an office in Scotland which will be concerned with servicing the industry. There are certain problems of location which have yet to be resolved, but I 1917 hope that this will enable the industry in Scotland to see that certain benefits will flow to it from the operation of the levy.
Mention was made of firms which are not covered by the compulsory levy but which nevertheless have contact with H.A.T.R.A. Certainly H.A.T.R.A. is in a position to make contracts with specific firms for specific projects, and the making of such contracts is a not insubstantial part of H.A.T.R.A.'s current income. That is something which it can continue to do, whether or not there is a levy.
I base my support for the Order on the views of the industry. Obviously it is a matter for which we must take responsibility, and we must also take the responsibility of watching the situation. I made it clear in my opening speech that, as a result of the levy, H.A.T.R.A. has a clear responsibility to help the whole industry.
It is possible to modify the Order. If experience shows that modification is necessary in respect of the points made by the hon. Member for Morecambe and Lonsdale and others, we shall do it. That is a matter which will have to be judged in the light of experience. Also in the light of experience we shall have to see whether H.A.T.R.A. is able to satisfy those who currently oppose the levy that the results of the research made possible by the levy assist them in their work and in developing this rapidly growing industry. I hope that that will turn out to be the case. I hope, too, that the House will be prepared to give the levy a trial and will approve the Order.
§ Question put and agreed to.
That the Hosiery and Knitwear Industry (Scientific Research Levy) Order, 1969, a draft of which was laid before this House on 24th April, be approved.