Import Duties (Finance Act, 1936, and Import Duties Act, 1932).

– in the House of Commons on 22 March 1937.

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8.13 p.m.

Photo of Mr Walter Runciman Mr Walter Runciman , St Ives

I beg to move, That the Additional Import Duties (No. 3) Order, 1937, dated the second day of March, nineteen hundred and thirty-seven, made by the Treasury under the Finance Act, 1936, and the Import Duties Act, 1932, a copy of which was presented to this House on the said second day of March, nineteen hundred and thirty-seven, be approved. The subject of the duties imposed on iron and steel is by no means a new subject of discussion in this House. There are few industries except agriculture which have received more attention in this House than iron and steel, and for the good reason that the prosperity of that trade is a matter of vital importance, not only to the industries which are large users, but to the country as a whole. The Order which I am moving now is made under Section 6 of the Finance Act of last year, which makes provision for the licensing of iron and steel imports. Before we were prepared to give Government support to this proposal, we had to be fully satisfied that it was in the interests of industry as a whole and not merely of the iron and steel industry itself. That satisfaction was given to us in June, and the proposal was fully discussed in June of last year. The White Paper which covers the important points of this arrangement is Command Paper No. 5201, and that paper still remains the document on which our iron and steel legislation is based.

In November last the licensing system was brought into operation. The agreement which had been entered into between the steel producers of this country and the Continental cartel, and which was of great advantage to us abroad as well as at home, could not be preserved unless a licensing system was an integral part of the machinery which we wished to operate. The duty on licensed imports was fixed at 20 per cent. ad valorem, in accordance with the recommendation of the Import Duties Advisory Committee. I think it right to say at this stage that there has been no step taken by us from the first without full examination of the conditions of the industry. The present Order provides for the reduction of the duty from 20 per cent. to 10 per cent. ad valorem, that is to say, these various iron and steel goods are to be charged only with the general ad valorem duty. The reduction, which is to facilitate the import of steel from the Continental cartel, is essential if we are to keep up our necessary supplies, and I am glad to say that it meets with the complete support and cooperation of those who are responsible on the Continent for the operating of the cartel.

During the last six months world demand for steel has been prodigious. No one could have anticipated a year ago that there would have been such a rapid and complete recovery in this industry, and still less could they have prophesied that there would have been such a hot demand for iron and steel goods, as well as for iron and steel raw material within such a very short period of time. The heavy industries are, of course, dependent upon supplies which are produced here and on a large quantity of imported iron and steel. We have never been able to do without those supplies, and in so far as we are able to foresee the requirements of the next few years, we cannot expect to make our iron and steel industry self-supporting independently of the arrangements which are made with the cartel. I know that there are a good many Members who are uncomfortable about any engagements which involve an agreement with the cartel, but I would point out that not only is an agreement an essential part of the iron and steel organisation in order that in normal times there should not be an undue flow of iron and steel over the frontiers of this country and of those who are in the group, but also that there should be some assurance given to those of our own people who are engaged in foreign trade that a large, steady and stable section of that trade should be constantly at their disposal.

We have, therefore, been only too ready to do what was in our power to provide for complete co-operation, and having observed the progress of events in the iron and steel trade with a critical eye during the last three or four years, I have come firmly to the conclusion that working in co-operation with the cartel was essential for our prosperity, and that without it it would have been impossible for us to have looked forward to the future with any sense of security. The fact is that the time will come when the supply will once more overtake the demand. When that time comes, our foreign trade will certainly be endangered. I have been doing my best in my personal capacity and officially to commend to those who are in control of this great industry the necessity for looking ahead. It is all very well to be taking orders now with great rapidity and finding them profitable, but unless we are able to look forward to a large extension of our foreign trade in the coming years, it means that we shall slip back into the condition of depression which we have experienced in the past. It is with the desire of helping that foreign trade that I have been so glad to commend the agreement entered into with the Continental cartel. We are assured under that agreement of a steady percentage of foreign trade which, when the present boom is over and the present emergency has been swept away, will be the essential backbone of that important industry.

I would like to amplify these general remarks by giving some particulars of the arrears of the importations into this country which are accentuating the shortage. At the end of the year the deliveries of cartel products outstanding under the agreement amounted to no less than 81,000 tons. This is a very remarkable amount, because one can well recognise that ironmasters of the Continent were just as anxious to sell in this country as we were ready to buy. Eighty-one thousand tons arrears is the very serious drawback under which British industry, the users of iron and steel, are at present labouring. There were also outstanding balances of 48,000 tons under the arrangement made with the Federation for the supply of additional semi-manufactured goods. The total arrears amounted to approximately two months' deliveries. During the current quarter no deliveries have yet been made in respect of the quarter's quota or excess purchases, that is to say, no less than 131,000 tons and 70,000 tons respectively. During January and February the total cartel deliveries were approximately 78,000 tons against the arrears I quoted a moment ago.

Arrears of these dimensions place us under great disabilities, and I have no doubt that we shall be hearing on every hand during the next few months of the shortage of iron and steel which enters into almost every manufacturing process. The output of the establishments that are at present smelting, rolling and forging, is being strained to the uttermost. I hear of the risk of shipbuilding orders being delayed owing to absence of raw material. Again and again there are brought to my notice instances of ships which have come t this country to be repaired and are unable to proceed on their voyages. The lengthened delays are a dead loss to the shipping industry. With these great disadvantages overhanging the heavy industries and with the iron and steel trade suffering as it has been from violent fluctuations, and, at one time in this country, running the risk of being wiped out to a large extent, we had to turn our attention to the means by which we could, by imposing duties, give artificial encouragement to the iron-masters and the iron companies.

Let me point out how rapidly and, if I may venture to say so, how effectively we dealt with the question of import duties on iron and steel goods. The first Order we passed in this House was in 1932; it came into force about April, I think. Under it we imposed a duty of 33⅓ per cent. for three months on the principal semi-manufactured iron and steel products. In addition to this, duties, mostly of 20 per cent. and not specifically temporary, were imposed on iron and steel products of a more highly manufactured kind, like pipes and wire. Two months later we varied the duties imposed under the first Order, and the principal change was the imposition of a duty of 33⅓ per cent. on pig iron. We did that with the deliberate object of encouraging the production of pig iron in this country. Every encouragement had failed, and we were not prepared to stand still and do nothing, and, therefore, we gave this very considerable assistance. We extended that first Order twice, and then we came to the Order of 1933, which provided for certain concessions which had to be made under the trade agreements with Norway and Sweden. These concessions in no way interfered with the activity and the prosperity of the iron and steel industry.

In order to give time for reorganising the industry it was necessary that the duties should be imposed over a longer period. Reorganisation of the industry we believed to be absolutely essential, and we claimed the right to impose on the industry schemes for reorganisation as long as we gave them the artificial assistance I have just recounted. There was correspondence on this subject between the Board of Trade, the Treasury and the Iron and Steel Trades Federation which led up to the point that we were to remove the time limit upon the duration of the duties which was imposed under the Order of 1932. Early in 1935 we had raised the duty on certain semi-manufactured iron and steel products to an average of about 50 per cent. This was, of course, a stunning blow to some of those who had been enjoying the lower rates of duty and whose memory went back to the days when the iron and steel trade was entirely free from this imposition of reorganisation or artificial assistance. In order to encourage the Continental steel cartel to come to an agreement it was necessary that our iron masters conducting the negotiations should be armed with this very formidable weapon, and I am very glad to say that after prolonged negotiations on the Continent, and, I have no doubt, with the assistance of this weapon, they were able to arrive at an agreement which has been working satisfactorily ever since.

There have been one or two changes of an immaterial character made at various stages, but it was not until August, 1935, that the permanent agreement with the cartel was incorporated in the Orders under which we were working. Thus having gained our object we reduced the duty to 20 per cent. until 7th January, 1936. We continued the reduction of the duty for a further period, and, finally, in November of last year, we set up the two-tier tariff for iron and steel products covered by the agreement. Where such products were accompanied by a valid quota certificate and the certificate of origin a duty of 20 per cent. was imposed; much higher rates of duty were imposed on those who were not in possession of these franking documents.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

What were the higher rates of duty beyond the quota?

Photo of Mr Walter Runciman Mr Walter Runciman , St Ives

On the whole they were on the 50 per cent. scale, and they remain unaffected by the present Order now before the House. If the House will turn to the White Paper which we are now asking the House to endorse, Command Paper 5389, they will see that as regards pig iron the present duty on pig iron is 33⅓ per cent., and that rate has been in force since June, 1932. The present level of world prices makes it unprofitable to import pig iron from foreign sources, and the committee say: We are satisfied that the steps being taken by the Federation to ensure that so far as possible supplies are adequate and that prices are not unreasonably increased will be facilitated by the removal of the present duty on pig iron. That duty has been wiped out and this move will give that for which my hon. Friend below the Gangway has, I know, been yearning for a long time past—it will give him and his friends access to raw materials; otherwise they would be heavily handicapped by the import duties. I hope that my hon. Friend will be as' ready to commend this step as he has been to criticise others in the opposite direction. So much for pig iron. With regard to steel, the committee's earlier recommendation was that consignments of certain iron and steel products, when accompanied by certificates and so on in accordance with the provisions of the Finance Act of 1936, should be charged at a reduced rate of 20 per cent. It is proposed under this Order to wipe out the additional duties altogether, and to leave nothing but the 10 per cent. duty to be imposed upon these imported articles. That, shortly, is the proposal before the House. We have gone from step to step, stage by stage, through these various encouragements given to the industry. The result has been most remarkable, and when my right hon. Friend the Member for Hillsborough (Mr. Alexander) speaks in the course of this Debate—

Photo of Mr Walter Runciman Mr Walter Runciman , St Ives

I should have liked him to do so, because I know of no city which has benefited more from our iron and steel policy than Sheffield. Wherever you inquire about the activity which now prevails everywhere in the country, north, south, east and west, you are bound to come back to the fiscal system under which the manufacturers have been encouraged to conduct their operations during the past two years as the main source of that prosperity. At the same time that we wish to see the iron and steel trade prosperous, we are anxious that no undue burden should be placed upon the users of its important commodities, and it is because we have had this problem carefully scrutinised and examined by the Import Duties Advisory Committee—and in no case have we taken any steps without their advice and their recommendation—that I commend to the House the Order which is now before us. I trust that its results will come up to the expectations we have had in respect not only of the production of these materials, but in the provision of the raw goods for our consuming industries.

8.35 p.m.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

After the speech made by the right hon. Gentleman, any doubt entertained by any hon. Member about the assistance given to the steel industry will certainly have been removed. Throughout his speech the right hon. Gentleman persisted in repeating "artificial assistance." I am not sure that I should characterise as artificial assistance what has been done for the steel industry, in the sense in which artificial assistance has been given to other industries. After all the duties which have been put on between 1932 and 1935, ranging from 10 per cent. to 50 per cent., it would be remarkable if the steel industry had not re-organised itself to some extent and made itself capable of meeting any form of world competition. We ought to express our thanks to my hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), who moved the Amendment to Section 6 of the Finance Bill of 1936 which made possible this discussion to-day. This comparatively early review will enable the House to take a retrospect and to examine exactly what has been done during the last few months.

It is only seven months since this new, double-decker tariff edifice was erected, and now we are pulling down a part of it. Wherever a duty is being decreased it is in the proper order of things that we should support the Minister who dares, in a House of this description, to ask for the decrease. I recall the statement made by the Parliamentary Secretary in the Debate in June, 1936, when he commenced his speech on Clause 6 by saying: What would be the position of this country … if we had not a healthy iron and steel industry?"—[OFFICIAL REPORT, 30th June, 1936; col. 352, Vol. 354.] I invite the House to examine the question from that point of view. I clearly recognise the close relationship between steel and coal. With a healthy steel industry, coal cannot fail to enjoy some of the health and prosperity. Our experience during the past few months, and perhaps within the past few years, has prompted a long series of questions to the Board of Trade and a few criticisms, many of which could be revived, but one cannot enter into a full discussion of the subject to-day. Something can be said about the administration of the past few months until, as the right hon. Gentleman has said, the position has been reached where it is no longer profitable to import pig iron into this country.

Since 1932 there has been a duty of 33⅓ per cent. on pig iron. World output has been increasingly enormously since 1931 to the present moment and so has consumption of steel. Taking the seven major steel-producing countries of the world, the output of pig iron last year was up by 45,000,000 tons. Even comparing 1936 with I938 reveals an increase of output of pig iron of at least 15,000,000 tons. As fast as pig iron production has increased, so has its consumption for steel making. That fact is not peculiar to the last four or five months but is a process which has gone on during the last three, four or five years. I cannot understand why the Board of Trade failed to see that the demand for pig iron throughout the world, would, sooner or later, leave this country hopelessly short, if the duty of 33⅓ per cent. remained. I rather feel that there have been faulty calculations by the Board of Trade, the Import Duties Advisory Committee, the steel trade, or by a combination of those who had it in their hands to lift this duty just at the moment when they felt the need had arisen for cheaper imported raw material, without which, as the President of the Board of Trade said a short time ago, the steel industry in this country would not remain healthy for very long.

The right hon. Gentleman stated that they had been keeping a critical eye upon the steel situation during the past three or four years. The situation confronting us to-day indicates that they have not been very critical in their examination of the situation or this duty of 33⅓ per cent. would not have remained on as long as it has done. After five years of slump there was bound, sooner or later, to be a world recovery. I understand that the Board of Trade are the ears and the eyes of all trade movements in all parts of the world; they should therefore have known exactly what the developments were likely to be. It cannot, in any case, be argued that the Board of Trade are not aware of the Government's rearmament programme. As a result of what has been happening in Germany and Italy, and in all European countries, the consumption of steel has been increasing at an enormous rate for a long period. Why has the removal of this heavy duty been left until this country was beginning to suffer from a shortage of steel? What was the cause of the long delay? If it is unprofitable any longer to import pig iron, the chances are that it was unprofitable many months ago, and that that is why the industry has been faced with a shortage of raw material for a long time.

I am of the opinion that the Board of Trade, or the Import Duties Advisory Committee, or the Iron and Steel Federation, or a combination of them, have tended to let the country down. The right hon. Gentleman now states that the Order is designed to reduce the additional duty on cartel licence quota steel. Therefore, from the date of the operation of the Order, on all the steel imported into this country through the agency of the cartel 10 per cent. will be paid. What will happen to non-cartel steel that may he imported? I understand that the duties to-day vary from 50 per cent. as I he right hon. Gentleman said—

Photo of Mr Walter Runciman Mr Walter Runciman , St Ives

I will answer that question at once. It is a negligible amount. I cannot remember what the exact figure is, but I should think it is not much more than 10,000 tons.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

What will be the duty on non-cartel imports, assuming that there is any non-cartel imported steel?

Photo of Mr Walter Runciman Mr Walter Runciman , St Ives

The various classes have, of course, various duties imposed upon them. Within the Empire there is free entry. That is a matter of very considerable moment. The total amount from the non-cartel countries, to which reference has been made, is somewhere in the region of 10,000 tons. It does not matter very much.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

The point I was about to make was that, as a result of the arrangement embodied in Section 6 of the Finance Act of last year, on cartel steel imported into this country a duty of 20 per cent. would be paid, while non-cartel steel had to bear a duty varying between 33⅓ per cent. and 50 per cent., so that there was an advantage in favour of the cartel of anywhere between 13⅓ per cent. and 30 per cent. in the duty. If the world demand for steel is what we are asked to believe it is, then, obviously, if we put a duty of 50 per cent., or even 33⅓ per cent., on all steel imported except quota steel, the importation will be exceedingly small, because it will be unprofitable to import steel with such a heavy duty. In view of the experience of the past few months, when the quantity of steel imported at this high rate of duty has been so small, I would like to ask the right hon. Gentleman why, now that 10 per cent. is being taken off the quota imports, a similar reduction is not to be made on non-cartel imports, leaving the position exactly as it was under the Finance Act of last year? It seems to me that that is a point with which the Parliamentary Secretary might deal, because, if the shortage of steel is going to continue, and if the output in this country is not going to increase very materially—and I cannot regard that as a likely contingency after the increase that has taken place during the past 12 months—there is bound to be a shortage if demand continues at the present rate plus any excess demand that is likely to be made by the rearmament programme.

Section 6 of the Finance Act of last year made arrangements for a quota import of about 525,000 tons, presumably in 12 months, whereas actually, during 1936, 1,500,000 tons were imported into this country, presumably consisting, with the exception of about 10,000 tons, of quota or cartel steel. If the Parliamentary Secretary has the actual figures, perhaps he will give them to us later, but according to the Board of Trade returns the imports of steel last year were slightly in excess of 1,500,000 tons, whereas the arrangement made in Section 6 of the Finance Act was for 525,000 tons, that being presumably the rock-bottom minimum which could be increased to any quantity. I am assuming, of course, that either these increased imports came in before the licensing system commenced or that the quota has been increased by the international cartel, but the fact that, whereas Section 6 made arrangements for only 525,000 tons, we imported last year 1,500,000 tons, and in 1929 2,800,000 tons, seems to indicate that we have been content to accept, both for purposes of import and export, a quantity considerably less than we really ought to have expected.

The Parliamentary Secretary said on 30th June, during the Debate to which I referred earlier, that not a single consumer should go short, but the President of the Board of Trade has told us that certain people are going short already. He himself told us, in reply to a question on 16th March, that a great many people would like to have more steel than they could get; and so would the Government, said the Parliamentary Secretary. It is no use the hon. Gentleman simply replying that it is due to an increase in world demand, because the world demand has been increasing since 1932, and each year has seen a bigger increase than the previous year. We are, therefore, obliged to conclude that there must have been some very bad calculations at the Board of Trade, or that they had no idea of what the world demand or the demand in this country was likely to be for a considerable time. Recently, the Minister for the Coordination of Defence appealed for a cessation of civil construction, so that the rearmament programme might not be retarded. We know already that several large consuming firms in the country have found during the last 12 or 14 weeks that their stocks were rapidly dwindling, and they have already been warned that they cannot expect the same quantity in 1937 that they had in 1936. Wherever there happens, therefore, to be an increase in trade in those industries which consume steel, there are bound to be shortages in 1937, which might have been avoided if the calculations at the Board of Trade had been better in 1936 and perhaps in 1935.

I have the figures supplied by the President of the Board of Trade with reference to world output as applied to 17 different countries. While last year it could truly be said that the British steel industry did itself justice, inasmuch as its output reached a record—it has, I believe, increased by 1,800,000 tons over the previous year—for the 17 countries named the increase is no less than 22,000,000 tons, so that this increase in output does not apply only to Britain; it is world-wide; and, as fast as they can increase output, consuming industries, apparently, can consume it. We have been told that the Board of Trade and the Iron and Steel Federation were content to preserve their trade of 1934. It may be that, if we can preserve for this country, in good times and in bad, our 1934 trade, that will be a good stroke of business; I do not doubt it for a moment; but if we compare our trade in 1936, when world demand was at its absolute maximum, with our trade in 1929, it looks as though we were making progress rapidly backwards. In 1936 we exported 2,213,000 tons, but in 1929 we exported 4,379,000 tons.

I agree with the remark of the Parliamentary Secretary, when he was chiding the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris), that 1929 is not the beginning and the end of the world. There have been very rapid changes backwards and forwards since 1929. But, when the world demand for this vital industrial commodity was reaching its maximum, we might have expected a wee bit more of European or world trade than we appear to be getting at this moment. To what extent this duty on imports of pig-iron or the duties on imported steel are to blame for the reduced import and export of steel products, I leave the President of the Board of Trade to declare. It certainly is the fact that all over the country there are murmurs of a shortage of steel. I would not make the declaration at this Box that an actual shortage has taken place in any particular department, but I am convinced that there are fears and doubts in the minds of steel consumers that, as the result of what has happened, the delay in removing these duties in the past, this year will see a shortage in all civil construction, and the shortage will be accelerated to the extent that steel may be required for the rearmament programme.

I am prepared to admit that the steel industry has, to some extent, responded to the call of the Board of Trade. It has been helped tremendously by the Board of Trade and it would have belied every trust reposed in it if it had not responded by increased output and the preservation of reasonable prices. It may be argued that the price has increased to small consumers. I have no figures that I can quote, and I will not make any statement that I shall have to withdraw. I have, however, seen the prices in 1936 as compared with 1935, 1934, 1933, and 1932, and the increase in price has not been really excessive. I would pay the Steel Federation that compliment. But wherever we establish an organisation such as the Iron and Steel Federation with its Continental connections, it seems to me that nothing short of eternal vigilance will safeguard the nation or consumers of steel.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

They were not very vigilant last year.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

The hon. Member and his party were in office last year and, if anything happened that was anti-national, he ought to have brought it to the notice of the Government.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

I was the only Member who drew attention to this issue and everyone else had forgotten it.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

I am prepared to give the hon. Member credit for having raised the question in Committee on Section 6 of the Finance Act in June but, although this lynx eye descended on this arrangement, he must remember that it was his own Government that established this double-decker tariff, which condoned the arrangement between the Iron and Steel Federation and the Continental cartel. While I recognise that it is a great departure from traditional Tory economics, I am not prepared at any time to declare that no change of any kind must ever take place. I was reared in an industry where individualism brought the industry almost to stark ruin. Not only did wages and profits reach vanishing point but even a Conservative Government had to give it £24,000,000 to tide it over a crisis. This scheme has been approved by the Government. It does not necessarily follow that we should oppose tooth and nail anything that they do but, wherever a combine of this magnitude is established, there needs to be some greater safeguard for the consumer and the nation as a whole than the Import Duties Committee, which apparently has full power to regulate prices in this respect.

The Parliamentary Secretary said that in the last analysis the President of the Board of Trade has absolute control. He has absolute control only to the extent that he can vary the duties. He has no control beyond that, as far as I can see. If this scheme is going to work effectively, is not going to exploit consumers and is not going to rob the nation of its legitimate share of world trade, some body other than the Import Duties Advisory Committee ought to be responsible for the fixation of prices. I would go a step further and say that not only do we need eternal vigilance where you have a huge profit-making combine set up—I cannot describe it in any other way. I do not say that any more disrespectfully about steel than I would about coal, agriculture or any industry or service. The people in the steel industry are in it for the purpose of the profit that they can make for themselves. The more profit they can make, the happier will they be. If there is one moment when we turn our eye to the West and they can increase their profit, they are bound to take advantage of the opportunity, and I would not blame them in existing circumstances. That is why I say we not only require eternal vigilance, but we want some permanent body in existence always to safeguard the interest of the consumers. Neither do we want to see, in the absence of any such arrangement as the one now in existence, a huge superfluity of factories such as we had during the War, when the big boom was on, and then a big slump to follow. I should prefer to see these booms and slumps ironed out by any international organisation that could be brought into existence, as far as that is a possibility.

The hon. Member for South Croydon (Mr. H. G. Williams) ought to know by now that the era of individualism is as dead as mutton. Competition has completely gone by the board. Steel is one unit—it is only a part of an international or European unit. Therefore, the whole of his theories have gone. So long as we have a great combination set up, such as the iron and steel combination, monopoly if you will, knowing that they are in business for the profit that they can derive therefrom and that service rendered to the nation is more or less secondary, we want always to be careful that it is not going to be a question of minimum output and maximum profit. We should prefer maximum output consistent with reasonable wages and reasonable conditions for all those connected with the industry, no boom and no slump but, so far as possible, stability within the industry and the riddance of these duties in the fluctuating situation which has characterised the industry for the past four or five years.

9.3 p.m.

Photo of Sir Lewis Jones Sir Lewis Jones , Swansea West

I am exceedingly sorry that the Debate on this Order comes on late in the evening because, in spite of what the hon. Gentleman has said in his castigation, mixed with praise, of the steel trade, I, with as much knowledge of the steel trade as most people in the House, feel that we have a very good story to tell of the wonderful accomplishment of the trade during the last two or three years. The President of the Board of Trade has reviewed the operation of the various Orders affecting the industry since 1932. The increase in steel output throughout the world has been amazing in the last two or three years, and more amazing still is the increased output in our own country. The year 1936 gave us a record output; in fact, it was prodigious. The year 1929 was the peak year of production. In that year the British iron and steel industry produced an output of about 9,700,000 tons, but in 1932 our steel production had fallen to an output of 5,250,000 tons, and had it not been for the action of the Government by which they changed their national economic policy, I believe, frankly, that the decline in the industry from that day would have been progressive. The hon. Member for Don Valley (Mr. T. Williams) has talked of the lack of foresight of the steel trade and of the Department of the Board of Trade. Had it not been for the policy of the Govern- ment, more of our steel plants would have gone out of operation, and more of them would have been dismantled, and the industry itself would have been so reduced as to render the conduct of the industry well nigh impossible. The policy of the Government served two good purposes. In the first place, it reserved to the industry its domestic market, and at the same time provided for co-operation both at home and abroad.

The industry has been able during the last three or four years so to organise itself, both individually and commercially, as to be able to take lull advantage of the recovery which has taken place in all parts of the world. As a result of the reorganisation which the industry has developed in the last two or three years, an amazing change has taken place in its output. The output last year was 2i times the output of 1932, and 1936 showed an increase in steel output of 1,839,000 tons over and above that of 1935. If one takes the figures of the first few months of this year, or even of the month of February, one finds still further improvement. "The Economist" on Saturday said that the output of steel in this country showed a fall in February over January. As a matter of fact, it was bound to show a fall, because February has three fewer clays than January. The amazing thing is that the output for February of this year, or the average daily output, is a record daily output for the steel trade of this country, in spite of all the talk about the shortage of raw material.

I claim that the recovery of the iron and steel industry has only been possible, in spite of what the hon. Member for Don Valley said, by the great care that the people responsible for the direction of the industry have taken in making every possible provision within the limits of their resources during the period of depression to maintain and improve the productive efficiency of the industry generally. This may be gauged if one watches the relative changes that have taken place. In 1936 there was a 21 per cent. increase in output over 1929, and I would remind the hon. Member for Don Valley that this increase in output was experienced in other parts of the world, but no country in the world producing steel, apart from the newer countries of Russia and Japan, showed such an in- crease of steel output in 1936 over the peak year of 1929 as did Great Britain. It is true that Russia and Japan, countries which had not an old-established industry, showed a much bigger rate of progress, but of all the countries that had established industries, none of them showed such an improved output in 1936 over the peak year of 1929 as did Great Britain.

Much has been said about the lack of foresight in failing to prepare for the big increase in demand which has taken hold of the steel-producing countries. There has been an increasing demand the world over. Let us realise that it is, after all, a natural consequence of the emergence from a long sustained depression during which maintenance, repairs, and replacements for obsolescence where physically possible were naturally suspended not only in this country, but in all parts of the world. These now provide for the industry a stimulus for a huge and an immediate demand in the volume of production. Superimposed upon this demand is this tragic world race in armaments. I ask the House not to run away with the idea that the demand for armaments has a tremendous influence in volume on the need for steel. Rather is it a demand in urgency than in volume, and the urgency of the demand itself has seriously inconvenienced the steel industry, which, naturally, is more desirous of meeting the normal commercial requirements than of making armaments.

That is true of the nations of the world in general, but, as far as our own country is concerned, let us realise that there is a big improvement in all the steel-consuming industries of this country. In fact, there is a pronounced trade development in all steel-consuming industries. Increased business has developed in the steel industry from the building trade. The big blocks of flats which have been built in London and the other large cities of this country, the big public buildings all over London and in the Provinces, the bridge building, the increased railway developments have all resulted in a big increase in the demand for constructional steel. It is computed that last year alone the increase was over 10 per cent. There is a substantial improvement in the engineering industry in this country, and as a result of the improvement in that industry not only has it meant a bigger demand for steel for their own engineering work, but it has resulted in a demand for steel for the extension of their own property. The shipbuilding industry is building more tonnage now than it has for six years. Towards the end of last year the tonnage in the shipbuilding yards was over 1,000,000 tons as compared with less than half that tonnage in the previous 12 months. The motor industry had a record output in 1936 and its development is still progressing at a considerable pace. The Air Ministry has ordered from the steel industry substantial tonnages of constructional steel, and all these are the factors which have contributed to this unprecedented demand for steel in this industry.

In spite of that, there are developments in other directions, the greater use of steel furniture and steel partitions, etc.—new uses in the steel trade—which we shall welcome and be glad to see developed as the demand of the boom period disappears. The hon. Member for Don Valley put some queries about importation, and asked, why this increased importation? There is a substantial increase over and above the tonnage mentioned in Section 6 of the Finance Act, but he will remember that the iron and steel trade in these various years have undertaken to look after the question of the interests of the re-rollers of this country. There has been a definite scheme of co-operation in the industry, and it has been possible to collaborate as between the producers of steel on the one side and the re-rollers on the other. It has been possible to form within the industry a national association for rolled and re-rolled products, and the demand that has come forward from all consuming industries has been such as to increase the pressure not only on those consuming industries, but, as a natural result, on the steel producer himself. It is by arrangement between these two sections of the industry that it has been found possible to increase imports of steel. We know that certain re-rollers are unable to have their entire requirements of steel met, but nobody has been seriously prejudiced, because the normal requirements had been supplied. The trouble has arisen through the shortage of steel, which is world wide, and the result has been that consuming industries have not been able to develop the extent of their industries as they and everybody else would have liked.

Photo of Miss Ellen Wilkinson Miss Ellen Wilkinson , Jarrow

Does the hon. Member not think that that is a serious prejudice of business?

Photo of Sir Lewis Jones Sir Lewis Jones , Swansea West

Certainly. The hon. Lady asks whether I consider it a serious thing that the consuming industry is not able to develop its business. Certainly it is, but that is not peculiar to this country at the present time. The steel shortage is world wide. Incidentally, I would point out that it was legislation produced by the hon. Lady's own party which has so affected the coal industry that we find, in consequence of the quotas, there is a shortage of coal for the steel industry. The present system of quota in the coal industry has operated to the detriment of the steel industry.

Photo of Mr James Griffiths Mr James Griffiths , Llanelly

Will the hon. Member tell me which district is now producing up to its quota? Is it not true that the shortage, whatever it may be, has been met by increased quotas, and that there should be a shortage nowhere?

Photo of Sir Lewis Jones Sir Lewis Jones , Swansea West

The hon. Member is not dealing with the point that I raised. I suggested that, as a result of the operation of legislation of the hon Member's own party, the steel industry and other industries have been short of coal. Whether as a result of further quotas or of greater flexibility in the operation of the quota system steps are to be taken to meet the shortage, which is still serious for the steel industry, time will tell, but the fact remains that a great deal of inconvenience has arisen in consequence of the legislation of the party supported by hon. Members opposite. Once the steel trade realised that the increased pressure was taxing the productive capacity of the steel industry of the country it, of its own accord, approached the Import Duties Advisory Committee with a view to the withdrawal of the duty on pig iron and the reduction of the duty on steel.

I hardly expected this Debate, but I did not expect it to pass without some reference being made to prices. The hon. Member for Don Valley took up two different attitudes. In the first place he suggested that the Federation had kept up good iron prices, and at the same time he asked the President of the Board of Trade to keep a watchful eye for fear that the steel people might run away with profits. He was anxious that everything should be done to increase output, that we should increase our exports and that we should provide fair conditions and good wages for the workpeople, but he had not one good word for the industry in regard to its right to have a fair return for those who efficiently run their industry. I cannot understand why from hon. Members opposite there is always this criticism of price levels. I have often heard from that side of the House during the last five or six years views expressed in favour of a reasonable level of prices. The Trades Union Congress, in its memorandum issued before the last conference, strongly advocated that the first step that should be taken leading to the resuscitation of world trade was the raising of the level of prices. When the Opposition are concerned about the price level for miners' wages they are always loud in their protestations in favour of a rise in the price of coal, in order to provide the miner with a higher wage.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

The hon. Member must not forget that whether we on these benches are speaking for mine workers, steel workers or any other workers we have to ask for prices that will guarantee wages, and if in so doing we ask for something that increases the profits of the employer, that is unavoidable. The only possible way in which we can plead for better wages for our people is to plead for prices which will pay those wages.

Photo of Sir Lewis Jones Sir Lewis Jones , Swansea West

The hon. Member has said just what I wanted him to say. I must have been saying the same thing in a much more clumsy way. The hon. Member and his colleagues are always advocating higher prices for coal under the coal control scheme, in order to provide higher wages for the miners. That is perfectly sound, and I have supported it on every possible occasion. In the steel trade we say quite frankly, and I think the House generally agrees, that the essence of confidence in industry is a stable price level. The steel industry all along has definitely set its policy in the direction of maintaining a proper price level for the industry. The steel industry does not exercise the theoretical power which it has to fix its own prices. I notice that the right hon. Member for Hillsborough (Mr. Alexander) shows surprise by a facial expression. It is a fact that while, theoretically, associations of steel makers retain the right to fix their own prices, yet before any price is fixed in the industry, an independent audit takes place. The right hon. Member laughs again. We do have our audits clone honestly in our industry, and when these audits take place by a reputable firm, like Peat's, a report is made to an independent chairman. After that report has been submitted to the independent chairman, the industry then has to satisfy the Import Duties Advisory Committee.

To-day many sections of the industry are selling their product below the cost of production. Let us look at the Board of Trade index figures. If we take the Board of Trade Gazette figure of 100 for 1930, we find that the price of steel is 112.6 for February, 1937, while the price of coal is 117.7. If the ascertainment of the price level made by the Board of Trade, in which 37 items are brought in for the purpose of computation, shows that the steel price is 112.6, it cannot be said that the steel trade has run away with the prices. One hon. Member opposite is closely associated with the steel industry, and he knows perfectly well that the wages of the people in the steel trade are based on the ascertained prices. He will, if he has the information with him, supply to his own colleagues information as to the comparatively low level of prices and their incidence on the level of wages. If the House wants to give the industry the credit they deserve, then it must, after a study of the question of prices, come to a realisation that we have not run away with profits. A stringent hold is being kept on the price level, because the steel trade knows that after the next two or three years, after the boom is over, we have to face the slump. The steel trade is organised to control the slump just as it is controlling prices at the present moment. The House will be surprised to know possibly that since 1932 our raw materials have gone up by 50 per cent. The effect of that on a number of the products of the industry is an increase in cost of anything from 20 to 25 per cent. In spite of that we have maintained our price index figure at 12½ per cent.

Not only has the steel trade for the purpose of controlling its own price level exercised its control within its own industry, but it has endeavoured to control the prices of the raw materials it buys and to control the prices of the consumers of its own steel. As a result of its organisation there is at present a com- plete understanding between the producer of scrap, the producer of pig iron, the producer of coal right to the re-roller. The American and German technical journals which have studied the operation of the tariff system in this country say without exception that the steel industry here has been able to control prices. Even the "Economist," a paper by no means friendly to the steel industry, on Saturday last published this: As the demand for steel is increasing there is some danger that the federation, with the best intention in the world, may be unable indefinitely to prevent prices from getting out of hand. For the moment the federation is keeping its hand on prices, and, whatever the fears of the "Economist" may be, it pays the complimant to the industry of saying that it has up to now stopped prices running away.

The hon. Member for Don Valley referred to the loss of our export trade, and anyone connected with the industry must feel a certain amount of regret that our export figures are so disappointing. For 1936 we exported 107,000 tons less than in 1935. Our exports went down to about half what they were in 1929. He suggested that some organisation should exist to fix prices in order that we might regain our export trade or see that we did not lose any more. At present the United Kingdom is exporting twice as much steel as the United States of America. We are practically fulfilling our quota under the international cartel. Not only has the export trade of Britain fallen, but also that of the principal steel exporting countries of the world. Their export trade has fallen since 1913 by 33 per cent. The export trade of the world in iron and steel is down and ours in particular. There is a good reason for it.

Belgium took from us in 1929 166,000 tons. Last year she took 29,000 tons. France in 1929 took 130,000 tons and last year 22,000 tons. Italy took 91,000 tons in 1929 and last year 20,000. Japan, one of the newest iron and steel countries, bought from us in 1929 157,000 tons and last year 20,615 tons. Even the United States purchased from us in 1929 91,000 tons; in 1935 it was only 20,000 tons. The two outstanding instances of a reduction in purchases from this country are India and Australia. India in 1913 was buying 860,872 tons of steel; in 1929 the figure was 614,000; last year it was down to 281,000. Australia in 1929 bought 423,000 tons; last year that was down to 158,000.

I do not apologise to the House for repeating these figures. They explain to a considerable extent the fall in our export trade, because that fall is in those countries which have developed considerably their own iron and steel trade in the last few years. Not only have they developed their iron and steel trade to meet their own requirements, but they have a surplus production which competes with us in the export markets of the world. I want to assure the House that the iron and steel trade has during the last few years set up a wonderful system of control of prices. Its weakness is in its strength. The difficulty which the industry is up against is the difficulty of being able to purchase in the world market either pig iron or scrap. In this country there has been a maximum price for scrap in the neighbourhood of 70s. New York is asking for that scrap at a price of something about 100s.

Great Britain has no doubt suffered in the markets of the world in the last few months by the stringent control which it has exercised on its price level. That the position is going to be difficult in the next few years there can be no doubt. The increased demand for armaments is going to put on the industry an additional strain. The steel industry is straining every possible nerve to meet its obligations not only to its own consumers but also to the Government of the day. It would pay the British steel maker much better to meet the export market demands, where available, than to sell his product in this country, because at present Continental and American prices are considerably higher than British prices, and it would be possible to-day for the British steel producer, even with the export market that is available, to get substantially higher prices for his product than he gets in his own market.

9.35 p.m.

Photo of Mr James Walker Mr James Walker , Motherwell

I welcome this Debate because it gives the House an opportunity of examining a scheme which was put into force by the Government and has been operated by the iron and steel industry. It is a scheme which, up to the present, in spite of much criticism, has given a tremendous amount of satisfaction. The only thing I would say to the President of the Board of Trade is that when he opens his statement by saying that the iron and steel industry has occupied the time of the House a great deal, he is slightly exaggerating the position. The iron and steel industry was never discussed prior to 1929. If it had been discussed as often as the coal industry, or the agricultural industry, or other industries I could mention, it might have been better for the whole of our industries to-day. At any rate, those of us who are attached to the industry have to admit that the scheme contained in Section 6 of the Finance Act of last year has been of great benefit to the industry. I listened to the hon. Member for Don Valley (Mr. T. Williams) speaking at great length on this question. He reminded me of the old tag: I do not love thee, Dr. Fell,The reason why I cannot tell;But this I know, an l know full well,I do not love thee, Dr. Fell. One of the things for which we on these benches have been asking is organisation in industry, and while I would like to see the iron and steel industry fully and completely organised under State ownership, I am bound to admit that the organisational side of socialism, even under capitalism, can be of benefit to the workers in an industry. One of the great fears has been that the monopoly, so-called, given to the iron and steel industry would mean that prices would rise. I state quite frankly that the workers in the iron and steel industry did expect prices to rise and were looking forward to it, because their wages have always been regulated by the realised price of steel. But since these tariffs went on they have been disappointed, and all that they have obtained in the way of increased wages during that period is a matter of 2½ per cent. If we were expecting and desirous of obtaining increased wages through increased prices and have been disappointed, surely the people who are opposing this scheme on the ground that it will raise prices ought to be delighted. If the side which expected increases did not get them, surely the side that has been bemoaning the fact that increases in prices would take place, ought to be frank and generous enough and say that the scheme has worked better than they thought it would.

All political economists have been confounded, and the reason is not far to seek. If you can by a system of regulation, even by agreement with a foreign cartel, control and stabilise an industry so that factories and works are running full time, they will be able to produce at a lower cost than if they were working half time. But the unfortunate thing about capitalist individual economics in the past has been that at a time when they could afford to sell their product at the lowest possible prices, because their works were going full, that was the time of the highest prices, and, at the opposite end, when the works were running half time and they needed higher prices because of higher costs, that was the time when under the individualist system, so beloved by many hon. Members opposite, you got the lowest prices. I admit that some of my hon. Friends have never recoevred from the fact that they used to be associated with hon. Members below the Gangway.

If we take the question of prices in this industry in the month of January of this year, when the audit took place—a joint audit, the auditor being paid by workmen and employers—the average realised price for the preceding three months was only 1s. 5d. a ton higher than the three months ending May, 1935. If we go back to the boom year of 1929 and compare the whole of that year with the average for these three months of this year, we find that the increase is 2S. 6d. per ton. What becomes then of all this outcry about regulations? I also know that meetings have taken place at Geneva where the coal industry of this country would only be too delighted if international arrangements could be made to regulate output and prices in that industry. I should be delighted to see it. Last year our output was up to 11,250,000 tons. The hon. Member for Don Valley said that he would like to see maximum outputs and minimum profits. Surely that is a maximum output; I do not know about the profits, as I am not on that side of the business. But that is an increase of over 45 per cent. on pre-War, and it is an increase of over 20 per cent. as compared with 1929.

The burden of my complaint with the iron and steel federation is not the complaint that is being put forward to-night, but a complaint that we have still capacity in this country for the production of iron and steel which could be used for the benefit of the steel users of this country and the benefit of the working classes. I look at the West of Scotland—I hope the hon. Member for Jarrow (Miss Wilkinson) will forgive me if I do not mention the case of Jarrow this evening; I hope she will not think I have no interest in Jarrow, but I leave that to her. In the West of Scotland, at a place where in pre-War days and during the War there were 108 blast furnaces in operation and from which they exported pig iron, there are now only about a dozen working, and there is a large number standing idle which, by the expenditure of capital, could be modernised and brought into use for the production of pig iron to help the steel industry of this country. The works at Wishaw is also standing idle; there is a blast furnace there to which is attached a modern cement plant which has never turned a wheel.

I want hon. Members to understand that the problems of the iron and steel industry did not start yesterday, as some people think, or even in 1932. The works I am mentioning were closed down in 1921, they have never reopened since and nothing has been done to assist them. I wish to call the attention of the President of the Board of Trade to the fact that these works are standing idle and that this year there will be imported into the West of Scotland at least 250,000 tons of pig iron from India and other places. That would be unnecessary if there were better organisation. No doubt we shall have from the Minister the reply that the Federation is doing all it can, but I say that it is not doing all it can. The Import Duties Advisory Committee is not pushing it hard enough. There is no need to worry about the question of prices, for prices will take care of themselves under the control machinery that has been set up.

What is needed is the organisation of supply. Let it be remembered that the people who gave the expert advice about the plant that should have been set up in the North East Coast, estimated that the total capacity of this country was 10½ million tons. We have now passed that figure by 1,000,000 tons, so that the experts are out of it. I am not blaming in a wholesale fashion the people who are in the industry, for the people who are running the iron and steel industry to-day are just as capable and as efficient as the men who are running any other industry; but I claim that because the Government have not been strong enough in putting down the individualism that is still rampant in the industry, we have not had the best results as far as production is concerned. The same firm of experts declared a few years ago, that the plant, the situation and the layout of Mossend was the best in the country, and that if there was to be any development in the West of Scotland, apart from the development suggested near the docks, Mossend was the best place for it. What happened? The Bank of England which had become the owners through the firm's overdrafts, of the Mossend steel works, sold it at a scrap price to a rival firm, and the works has been pulled down. According to a Press notice which I saw last week, the scrap merchants have bought the works at Wishaw, and two other places in order to pull them down and sell them for scrap.

That is happening in an area which is registered under the Special Areas Act and in which there are thousands of iron and steel workers idle. I want the President of the Board of Trade to take up that matter with the Iron and Steel Federation and with the Committee in order to have the position in Scotland examined, because people who know the position there know that it is well suited for the production of the heavy iron and steel industry, with the shipbuilding and engineering that takes place there. To-day we have the spectacle of coalmasters selling coal because they are doing a little better by selling it as coal than they would by making it into coke. Unless we get the coke, we cannot get a proper output from the blast furnaces. I know of cases where steel-masters who own coalpits and who could produce coke do not do so because it is more to their advantage to sell coal and to buy the coke from other places. The whole position as far as coke is concerned ought to be considered. It has to be allied to the blast furnaces, and the blast furnaces have to be allied to the steel industry. They must not be allowed to continue as they are at the moment. Vertical industries must be built up, for that is the only solution to this problem.

I do not look forward to the future in any gloomy way, because I have always felt that the world has been starved of steel ever since the War finished. Let it be remembered that during the War we were making steel not for creating productive capacity, but for destroying productive capacity. All over the world it was used for that purpose. Owing to the financial position of the world, when the War ended the iron and steel industry did not meet with any demand for its products, and for years it was in a Slough of Despond in every steel-producing country of the world. There is no doubt that to-day there is a "boom" in steel all over the world.

I have heard it said that it is not tariffs that have helped Britain, but that objection is merely puerile. There is no doubt—and every Free Trader must recognise it—that tariffs enabled the Iron and Steel Trades Federation to make a bargain with the cartel, which was washing it out not only in Britain, but in the Colonies and the neutral markets of the world. If they had washed out the iron and steel industry, do hon. Members imagine that the cartel would have continued to sell steel to us at a low price? Having destroyed our only method of competing with them, they would have charged us any price they wanted. That would have been the result of free and unfettered competition, and we would have suffered for it in the long run. We now have the trade organ. We want greater and more effective control from the Government. [An HON. MEMBER: "We have the united front now."] Yes, we have the united front. We can get a united front on the things that matter to the people of this country. The hon. Member who made that interruption is just as much opposed to Government ownership of the iron and steel industry as hon. Members below the Gangway. They are more united than he and I will ever be. They are united in the defence of private interests and private profit. On every kind of vested interest you will find a united front—more often between the hon. Member and them than between me and them.

I appeal to the President of the Board of Trade to go further into the question of the productive capacity of this country. Those of us who know something about the trade are convinced that the more plant can be erected in order to cope with the situation and the more the present plant can be utilised and extended, the more it will be to the benefit of the working people not only in the iron and steel industry, but in the coal industry and many ancillary industries. It will be to their advantage if better organisation is attained, and it can only be attained if the Government take the matter more firmly in hand.

9.57 p.m.

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

We have heard some very interesting speeches during the last three-quarters of an hour and, undoubtedly, a similarity of outlook was indicated in the speeches of the hon. Member for West Swansea (Mr. L. Jones) and the hon. Member for Motherwell (Mr. Walker). They both, naturally, stood up for the iron and steel industry, and one notices the fact, more and more, that in this House now we have Members speaking not so much for towns or districts or divisions, as for particular interests. That is the inevitable result of a tariff policy. It may be good or it may be bad, but it is not surprising.

Photo of Sir Lewis Jones Sir Lewis Jones , Swansea West

I am sure the hon. Baronet does not want to be unkind. He does not suggest that the hob. Member opposite and I were speaking on behalf of any interest other than that of the industry generally.

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

I certainly do not want to be unkind, and I was only stating the fact that the hon. Members to whom I referred were speaking in the interests of the industry with which they are associated. I think the hon. Member for West Swansea is a very worthy and capable representative of that particular industry. But, after all, the main job of the House of Commons is to deal with these economic problems as they come before us in the widest sense. We are the jury of the nation, and we have to weigh up the various considerations presented to us as they affect the general interest.

I think that many hon. Members will agree with me that the policy of the Government in regard to this industry has combined the worst evils of Protection and Free Trade. I have heard hon. Members during the last six years making closely-reasoned speeches on the advantages of a secure market and self- sufficiency and independence of the foreigner, on the benefit of giving security to the workpeople in the industry and on the importance, especially in case of war, of making this country independent of foreign supplies. On the other hand, a policy of Free Trade would, at any rate, have the advantage of enabling industries to supply a world market. The policy followed by the right hon. Gentleman the President of the Board of Trade in this case is not surprising, because I think he himself would admit that he was at one time a convinced Free Trader. On the other hand, he is now a practising Protectionist, and perhaps it is natural that we should find the two policies working at one and the same time under his guidance. Perhaps it is because he is not a convinced Protectionist, that the Protectionist machine has not had sufficiently full play to satisfy the hon. Member for South Croydon (Mr. H. G. Williams). I have looked up a very good and closely-reasoned speech made by the right hon. Gentleman, not in those years gone by when he was a Free Trader, but after he had joined the National Government and had become President of the Board of Trade. Speaking in this House in December, 1931, on this subject, he pointed out: In July there were engaged in the heavy trades 188,000 individuals, and in the using trades 1,825,000 individuals…If we did anything blindly or unwisely for the benefit of those who are in the heavy trades and endangered anyone in those various industries, anyone engaged in the using trades the net advantage to this country would be less than nothing. We should actually be harming our country and lowering the total output of our industries. He added: We are discovering that those who are the producers of steel are much more vocal than the users of steel."—-[OFFCIAL, REPORT, 9th December, 1931; cols. 2003–04, Vol. 260.] I think that applies to-day. The producers of steel are very well organised, are very powerful and have very able representatives to state their case. On the other hand, a hundred and one industries are suffering from a steel shortage, and are faced with great difficulty. They are not as well organised and not nearly as vocal as the producers. I want the House to consider this Order having regard to all sides of industry and as it affects the community as a whole. I am constantly getting letters from all parts of the country about the shortage of steel, and in the various trade papers there are frequent complaints about the difficulty of obtaining supplies. Take the case of constructional steel for building. I am informed by constructional engineers that many important contracts are, at the moment, held up because of the shortage of supplies. The shipbuilding industry is in difficulties from the same cause. Manufacturers of motor cars are finding it difficult to obtain their requirements. Reference has already been made to the fact that the Sheffield cutlery trade is finding great difficulty in carrying out contracts and there are hundreds of other industries throughout the length and breadth of the land which are dependent, not only for their export but for their home trade, on abundant supplies of steel at reasonable prices.

The right hon. Gentleman may probably ask why should I object to the Order, since it is a proposal to reduce the duty. It is something after six years to see a downward instead of an upward trend in one of these duties, and one ought to be thankful for small mercies. It may be said that I should not attack this Order when, at long last, we find a step being taken in our direction. This is a reduction, but this lower duty is only to go to a privileged few. I want to press that if the Government are satisfied that a duty of 33⅓ per cent. is not justifiable, they should take it off, or reduce it to 10 per cent. automatically, without consideration for this interest or that. We admit that we did not see concealed in this complicated and skilfully drafted Section of the Finance Act the hidden hand to give what, after all, is quite new in our Parliamentary procedure, a privilege to a private organisation. I was surprised at the hon. Gentleman above the Gangway, who has now left the Chamber and who claims to be a Socialist, rejoicing that this privileged position should be given to a combination of privileged private companies. They are allowed under the Act of Parliament to import iron and steel from abroad at a lower rate than I am or than is any hon. Member on this side or that side of the House. If we wanted iron and steel with which to start an industry, we should have to pay, not 20 per cent., but 33⅓ per cent. and in some cases a very much higher rate still.

That is what we dislike about this particular Order. It continues and per- petuates a vicious principle which is apparently going to be part of our permanent legislation. Who are these people who are to decide, not only the price, but how much steel is to be allowed to come in to meet the requirements of our industry? There are four countries concerned—France, Belgium, Luxemburg, and Germany. It is described in the White Paper as an Entente Internationale. It is a combination of industries spread quite over Western Europe. I will not read the names of the French group; they might puzzle the reporters in the Gallery, because they are very difficult to pronounce, but I will read the name in the German Group—the "Stahlwerks-Verband Aktiengesellschaft." Does the right hon. Gentleman think it desirable, at a time like this, when there is a steel shortage and when there is this competition for steel for armament purposes, that this country should have to go, hat in hand, to Germany, under the Nazi Commission, for supplies to meet our requirements? Is it to be supposed, when the right hon. Gentleman told us, with his usual frankness, that we are two months behind in our supplies, Germany being short of supplies herself, that she should be anxious to let us have our requirements for our industries, shipbuilding and the various other trades that are running short of steel?

The right hon. Gentleman is a very skilful negotiator of trade agreements, and he has been travelling about. He went over to America, but we have never yet learned the results of his interesting conference with the President of the United States. We have not heard yet what took place in that secret debate, though I am sure the right hon. Gentleman was trying to do a deal in the interests of British industry. Are the United States going to be allowed to come into this deal? Are they to be allowed to send us the goods which we so badly require, at the same rate of duty as Germany, Luxemburg, Belgium and France. The right hon. Gentleman said that the amount coming into this country was almost negligible. Is not that due to the fact that there is a duty of over 33⅓ per cent. on all imports from the United States of America? If this market was open, could not the industries short of supplies make some deal to get them? I think we are entitled, before passing this Order, to have a clear statement why the privilege given to these four countries in Western Europe is not given to the friendly countries of the United States and to Sweden, which are able and willing to help us.

I could raise many other problems that come up under the working of this Order. My hon. Friend the Member for Barnstaple (Mr. Acland) has a case, which I hope he will state to the House, in reference to the supply of steel wire for rope making. Here is a case of very unfair working of the interlocking of industry under the organisation and auspices of the various industries linked up with the production of steel. I know that the Parliamentary Secretary to the Board of Trade has been supplied with all the figures and facts connected with this industry, but before we pass this Order, which does admit the need of a reduction of the duty on iron and steel products, we should be satisfied that there is a case for not making it general, and if we are not satisfied that it should not be made general we should press the Government to do away with the whole system of quotas and privileges which Section 6 of the Finance Act provides. As the first step to providing the using industries with the supplies of which they are so seriously short, we should apply that lower rate of duty on imports of iron and steel.

10.15 p.m.

Photo of Mr Charles Peat Mr Charles Peat , Darlington

This Debate so far must be very gratifying to the steel industry. We have had a review of the operations of the industry in the last two years and the speeches must be regarded as most favourable to it. I am glad that the hon. Member for Motherwell (Mr. Walker) took the line he did. I do not agree with his Socialism, but I like to think that we are in a position in this House, when we are discussing an industry, to forget our smaller attachments and the partisan spirit which sometimes occupy us, and to deal with the subject on a national basis. That is the spirit which has run through the Debate so far. The hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris) suggested that by reducing tariffs throughout the world we might cure the present shortage of steel. The answer to his suggestion is partly to be found in the most-favoured-nation clause, which makes it impossible for us to make any distinctions between the nations with whom we have treaties.

This Debate has proceeded on the assumption that there is an acute world shortage of steel. I do not believe that a reduction in tariffs will materially increase the amount of steel which will come into this country. The hon. Baronet said we were now going to the German Government, a nasty Nazi Government, cap in hand, asking them for steel. What does he expect us to do if we want steel? We have to buy it. There is no question of going cap in hand to anyone. There is a world shortage and a shortage in this country, and we have to try to buy from the markets of the world. I wonder whether hon. Members appreciate that the consumption of steel in this country in 1931 was 4,245,000 tons. In 1936 it was 7,200,000 tons, a tremendous increase which shows the enormous resilience in an industry which in those few years, with a bad start, could manage to increase production to that point. I wonder whether hon. Members appreciate that in 1931, 26.7 per cent. of this consumption represented the importation of semi-finished steel, and that in 1936 the percentage had dropped to 7.2. We had to face not only a steep increase in our production, but a steep increase in our consumption, unaided by what I suggest we should be in a position to look for, namely, a certain help from imported steel.

There is no shortage of steel equipment in this country. In fact, the steel plant is capable of producing another 1,000,000 tons per annum. What we are short of is raw material. We are short of a certain amount of pig iron producing plant. One of the main items in the list of raw materials of which we are short is ore. Our greatest difficulty has arisen from the unexpected curtailment of our supplies of ore from Spain. We have been rather criticised as not being sufficiently all-knowing, but I do not think that the steel industry or the Government or the Board of Trade could have foreseen the trouble which has happened in Spain, and that that would reduce our supplies of iron ore by 1,000,000 tons at one fell swoop. Another raw material of which we are short is coking coal. One is apt to think there is any amount of coking coal in this country, which has only to be put through the coke ovens to be turned into metallurgical coke, but there is definitely a shortage of coking coat, and that is partly due to the fact that we have made arrangements for the export of coking coal to foreign countries. That is a matter which the Government and the Board of Trade will have to look into, because if we can have our own supplies of coking coal we can be self-supporting.

With regard to blast furnaces, the hon. Member for Motherwell said there was in this country a great deal of idle plant which should be brought into operation. In my opinion there is not so much idle plant which could be brought into operation without some sort of subsidy; and I know that Members of this House, particularly the Opposition, are not in favour of subsidies. It is all very well to say "Do not worry about prices," but we have to worry about costs and without very serious consideration one cannot patch up old blast furnaces and put them into blast quite regardless of cost, because that would not help the industry, but I can inform the House that by the end of 1937 the pig iron producing capacity of this country will be entirely revived. The steel industry is making great strides in that direction, and I am told on the highest authority that the position will be put completely right.

From considerations of idle plant one turns, naturally, to expansion. The industry is controlling its expansion with the greatest care. The hon. Member for Don Valley (Mr. T. Williams) said he did not want to have a superfluity of factories—it is a picturesque phrase which I was glad to hear from his lips—so that when the slump comes, although I do not admit there is going to be a slump, we shall have superfluous factories on our hands and the men and boys working in them once more in the doldrums of depression and unemployment. The industry, managing its own business, has controlled its expansion, and where it is expanding vigorously, as it has been for some years past, it is expanding in the right way and the economic way.

If we are to go outside that sphere and to think where we can put down steel plant in the distressed areas, that raises a different question. The Members of this House, as they have indicated in Debate, have great sympathy with the distressed areas, and we are anxious to do all we can to help them to start new industries and to revive old industries, but if we are going to think of the expansion of the steel industry in terms of dealing with the distressed areas we must expect a great deal of competition from those areas. The hon. Lady the Member for Jarrow (Miss Wilkinson) will certainly not find herself alone in stressing the claims of Jarrow. There are many thousands of men unemployed in Sunderland and many thousands unemployed in Middlesbrough, round the very centre of the steel industry, and I dare say appeals would come from other parts of the country. Do not let us be carried away by the excellent work done by the hon. Lady in making this a political issue, so that the word "Jarrow" stands by itself. If one looks at it from that point of view, there are other distressed towns which require attention, perhaps even more than Jarrow.

May I say one word about prices? I know that this ground has been covered carefully, and that the hon. Member for Don Valley has patted the industry on the back for its price policy. The prices of the main engineering commodities, that is, ship-plates, angles, sections, and joists, and things that are used in heavy engineering, shipbuilding, bridge building, and house building, have increased by only 10 per cent. since 1933. Taking all steel products, there has been an increase of only 14½ per cent., even in the face of the increased cost of steel and of raw materials used in steel making by from 25 per cent. to 30 per cent. On this point I would sound a note of warning. The steel industry is regarded as being very prosperous at the present moment and transactions on the Stock Exchange lend colour to the impression that the shares are very valuable, at the present range of prices. Hon. Members may think that too. The industry, however, has to sell ahead for a considerable period while the prices of its raw material and its cost are going against it. I do not want to stress that point very much, but I would sound the note of warning that the present stringent prices of the steel industry do not leave it in the prosperous condition in which many people think that it is.

Lastly, on the question of prices, let me stress a remark which was made by the hon. Member for Motherwell. The be-all and end-all of the price situation, and of the complaints which are made here to- night from consumers of steel are all negatived and made to look insignificant by one glance at the situation which would exist to-day if the steel industry had not had Protection and been put on its feet, and given that revivifying power which it has used so splendidly. Consumers, small or great, would have been powerless in the hands of foreign importers, who would have been in a position to charge them any prices they liked. That is our great fight to-day in the steel industry. We are fighting not only for the prices in this country. It is not much fun for the steel maker to sell his steel at about £2 per ton less than the price at which it could be imported in this country. It requires great self-sacrifice and a considerable amount of self-control, but we are fighting for our prices and, as has been said, the prices of the export trade. We are finding it very difficult to prevent our friends abroad putting on prices to a level which we believe would be disastrous in the long run. That is why we are controlling prices. We believe that if we can control prices and control expansion, we shall be able to maintain the prosperity and to avoid the slump which is always taken for granted.

Some people, and most fairly well-informed people, believe that the present level of steel consumption in the world can not only be maintained, but can be increased, if we can so settle our world affairs that the world is allowed to develop and evolve its trade in peace. Given a peaceful world with some sense of security, I do not think that that is the limit; I think that we have not even nearly reached the saturation point of steel in the national life of this country. Therefore, I think that this control of prices is the most important thing that we can have.

Let me, in conjunction with others who have spoken, congratulate those who are responsible for the reorganisation of the steel trade, and pay my tribute to Sir Andrew Duncan, who is managing and controlling its affairs with extraordinary success. I think that members appreciate the work that he is doing, and also the fact that the iron and steel industry is still maintaining its individualistic character. Whether my hon. Friend the Member for South Croydon (Mr. H. G. Williams) or hon. Gentlemen opposite dispute it or not, I believe it to be a fact that the most healthy form of individual competition still exists in the iron and steel industry to-day. The more efficient you are, the better position you are in to earn a profit, and profits, whether you like them or not, are the measure of efficiency in industry. While that condition exists, and it certainly does exist in the steel industry to-day, you may have a fixed price, but the man who can produce his steel at the lowest cost gets the biggest profit on that particular price, and so efficiency and individualism still function in the iron and steel industry.

Obviously, in industries organised as this one is, there must be hard cases, there must be consumers who will say, "I have not had my steel; I have been waiting for my steel; I have had to discharge my men and keep my works idle for a short time or a long time." You cannot start the enormous evolution of an industry which has taken place in the iron and steel industry without having rough and difficult places to which you have to attend, but I can assure the House that difficulties and injustices which may be brought to the attention, not only of hon. Members, but through them to the attention of the iron and steel industry, will receive the most careful and considerate attention, because it is the object of any industry organised like that of iron and steel to have its consumers and customers content, and that, I hope, will be one of the results which will come from this Debate. I have felt that the Debate on this Order, which is not going to be divided against, has been more or less like a sham fight, but I hope that the Debate will assure Members of the House that the iron and steel industry, with its reorganisation, control of prices, and expansion, is doing its duty by the House and fulfilling its obligations to the country.

10.34 p.m.

Photo of Miss Ellen Wilkinson Miss Ellen Wilkinson , Jarrow

I would like to congratulate the previous speaker on the high level to which he has taken the Debate. We have seldom listened to such moderate and courteous arguments. I agree that so far the President of the Board of Trade has had a pretty good defence. Our quarrel is not so much with the actual steelmakers, who have acted according to their nature and the needs of their industry; our quarrel is a quarrel with the Government, with those people who represent, or should represent, the people of this country and hold the balance between producers and consumers. The one thing on which we have never had a satisfactory reply from the Government is the question of want. We are faced at this moment with an acute shortage. It is not fair to dismiss it as though it were merely that someone could not get a parcel of steel for an urgent order, or something like that. The trade papers are filled with authoritative statements regarding the shortage of steel. I will quote from the Iron and Steel Exchange: In the pig iron market shortage of material is unrelieved. Business in the semi-finished steel departments has been on a small scale since most of the British works are reluctant to accept fresh commitments as their output is earmarked for two or three months. It has proved difficult to relieve the position by increasing imports, and consumers have become alarmed at the prospects of the scarcity becoming accentuated later on. This is from the "Ironmonger": Acute scarcity of steel is still the chief concern of the markets. The whole market is in a state of disorganisation. There is a similar remark, though more strongly put, in the "Economist" of 13th March. This is from the weekly report of the London Iron and Steel Exchange: Most of the producing works have sold their production for the first half of this year, and it is difficult to place new business. The hon. Member for West Swansea (Mr. L. Jones) tried to evade the question by saying that it was not a question of rearmament and that that was at most a question of 12½ per cent. He said it was the natural consequence of getting out of the depression. If it is 12½ per cent. rearmament now, it is 12½ per cent. increase in payment before the Government have really started spending this £1,500,000,000. What it is going to be like when the demand gets into full swing it is not difficult to imagine.

Previous speakers have pointed out that the depression in the steel trade started in 1921, and that from then down to the last two or three years nothing very much was done by the Government. The industry was allowed to stew in its own juice. Three years ago the Government started to reorganise it, and gave it tariffs to the fantastic amount of 50 per cent. Obviously the Government had in mind that rearmament was, at any rate, in the wind. They knew, therefore, that the expansion was going to be pretty large. I, therefore, blame the Government in that, while giving tremendous privileges to the trade, with high tariffs and all the rest of it, they did not say at the same time that it must be willing to expand its production very greatly. It seems to me not playing fair when we raise the question of reorganisation and the putting down of Bessemer steel plants, to say, "If we had known two years ago, we should have seen that it was necessary to have these plants, but we did not know."

Surely, the Government ought to have known. They were the only people who could know because only they knew why they were having the last General Election. It was that they were, in the words of their leader, going to re-arm. They knew that the capacity level of the industry, as it was then, as has been admitted by previous speakers, could not possibly, with the increase in the normal demand for steel that was bound to come with the revival of trade, meet such an extraordinary demand. I really cannot see, nor did the President of the Board of Trade ever attempt to justify in the eyes of this country the fact, why, when he has been saying for two years that it was unnecessary or impossible, and such like negative phrases, to have new steel-producing plant in this country, he now has to take panic measures almost to try to get imports into this country. I never have maintained, I would say in reply to the hon. Gentleman the Member for Darlington (Mr. Peat), that iron and steel plants are a charitable means of relieving distress. That is absurd, but new iron and steel plants are an obvious method of relieving the appalling shortage in that industry and relieving trades, which, at a moment of national emergency, are dependent upon a doubtful foreign supply. I suggest that hon. Gentlemen opposite cannot have the argument both ways. If they want to take, as they have consistently, the theory that as much as possible must be produced in this country irrespective of its effect upon our export trade, and have killed the export trade—and the coal and shipbuilding trades in the northern districts a re the most devastated in this country— then, at least they cannot turn round and say they will do nothing to fill that vacuum by providing the works which can make at least some of the things that otherwise they are importing from abroad. They cannot have it both ways. That is the whole of our contention.

I am willing to agree that there has been a certain amount of price limitation, but seeing that we are only at the beginning of this expansion, some of the firms seems to have done pretty well already. Baldwin's, which made £190,000 profit in 1932, made £620,000 profit in 1936; the English Steel Corporation, which made £198,000 in 1932, made £1,059,000 in 1936; the Lancashire Steel Corporation, which made £98,000 in 1932, made £548,000 in 1936; Dorman Long, in Cleveland, who made £166,000 in 1932, made £1,128,000 in 1936, and the South Bank, which made £49,000 in 1932, made £217,000 in 1936. These are an earnest of the joys to come. This is only at the beginning. I doubt also whether the Government realise how much, even on their own showing, there is a feeling that they have managed iron and steel very badly indeed, and that they have been over-influenced by the strong representation of the Iron and Steel Trade Federation that, if they expand largely now, they may be placed in a slump after five years.

I think that the previous speaker contradicted himself in his argument. He first said that he did not believe in a slump, because he did not think there was any necessity for a slump; then he went on to say that a slump was inevitable and, therefore, if they expanded too widely they would be faced later with surplus plant and surplus labour again. If this thing had been rationally done, there would be no necessity for a slump. If there is to be a slump, it will be a general slump, and we see no reason why, in the meantime, the British workers who are now unemployed should not have the advantage of the high wages available in the making of steel, instead of the Government saving that the steel must be brought from abroad. I cannot understand that argument from a Conservative Government, but I can understand it from the party below the Gangway. It is another case of trying to have the argument both ways.

Do the Government see any hope that this cut in duty is going to achieve its purpose? It seems to me, and to people much more capable of knowing the details of the industry than I can do, that the cartel is taking advantage of the inability of the British steel makers to meet their home demand to exercise pressure and, as the Minister for the Co-ordination of Defence said, no British consumer is to have the advantage of the cut. We cannot on this side alter the nature of the steel makers or the demand for individualism which they seem to think is a thing of beauty. I do not see where individualism comes in when you are controlling raw material, controlling your markets and controlling your international arrangements. To talk about the beauty of individualism in these circumstances, it seems to me that the use of words means nothing.

Is it too late to do anything to remedy things? In all sorts of ways the Government are letting us down by living from hand to mouth. They do not tell us the truth about things. I have listened to all the armaments debates, and one gets all the time soothing bed-time stories, anything that will do in place of an adequate explanation. Then we read the other side of the question in the trade Press, and we see how risky the whole thing is. We remember the 10 years after the last War, when the people who were responsible for the mistakes which cost millions of lives spent their time in writing their own memoirs or in writing each other's biographies, in order to point out where the mistakes were made. It gives us the horrors to think what is happening now.

I do not know if there is any possibility of appealing to the Government, but I do know about the idle steel works at Jarrow and the idle works at Dowlais. We see all these things dotted up and down the country, and then we hear from the eloquent advocate of the steel industry that everything is really all for the best, and that there are only little things wrong here and there. That is not good enough, and I do not believe that it is going down with any section of the country, not even with the Government's own supporters. They want something more definite. The Government's foreign policy has made iron and steel a matter of life and death. The Government had not the foresight to see that it could control the iron ore supply from Spain, they let 1,000,000 tons go to Germany. There is nothing this Government seems to get any grip of, except telling soothing tales. I urge the Government to come to the House with some definite plan for bringing the iron and steel industry up to date.

10.51 p.m.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

It was interesting to see how much more the hon. Lady appealed to us when she abandoned her notes and really let herself go. One of the dreadful dangers we all suffer from in this House is that of getting overtrained, too much midnight oil, instead of speaking out of a full heart and a full mind. Perhaps my main claim to take some part in this Debate is the fact that I was the one to raise the issue on Clause 6 of the Finance Bill last year. As an ardent protectionist I was perturbed when I saw that the manufacturers and importers were going to be the same persons. As a sequel, we had the White Paper explaining the arrangement. During that Debate I described an imaginary constituent, and two days later I had a letter from a man in Croydon saying, "I am your imaginary constituent," and he described his difficulties in getting supplies of iron and steel. It is only fair to the Iron and Steel Federation to say that all the cases that came to me as a result of the matter I raised last year were looked into, some by direct communication with the federation and some by indirect communication with the Board of Trade, and in every case but one all those concerned expressed themselves as completely satisfied. In the one case I am not satisfied whether the man should have been satisfied or not. I must admit that the consumers have had no substantial ground of grievance since.

I find myself in considerable agreement with the hon. Lady who has just sat down. Why is there a shortage of steel in this country to-day? I go back to 26th April, 1932, when there came into operation the first additional duties made under the Import Duties Act. The Advisory Committee made a stupid recommendation, which the Government have no option but to follow, giving the industry three months protection pending reorganisation. Everybody sat back and did nothing—as though the industry could be reorganised in three months. At the end of two months the Committee dis- covered they had made a mistake and gave the industry another three months protection, making six months in all. Again everybody sat back and did nothing. We come then to October, 1932, when they began to realise that they had made a mess of the job.

I am sorry to criticise the Committee, because they have no right of speech in this House except indirectly through the Board of Trade or the Chancellor of the Exchequer, but to a large extent they rule our economic policy. I think it much better that it should be done that way than in the way tariffs have developed in America, but that is no reason why we should regard everything the Import Duties Advisory Committee says as inspired. The Advisory Committee then gave the industry two years protection. The real truth of the matter is that for two-and-a-half years the iron and steel industry has never had any certainty in regard to industrial protection, and I am going to say that if they had been given straight forward Protection without any qualifications in April, 1932, the productive capacity of the industry would be substantially greater than it is to-day. There is a shortage of iron ore. Hon. Members opposite will not contradict that

Photo of Mr James Griffiths Mr James Griffiths , Llanelly

Why should we contradict you?

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

You have been contradicting other things this evening.

Photo of Mr James Ede Mr James Ede , South Shields

We try to be polite to you.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

It does not matter whether hon. Members opposite are polite or not; it makes no difference. I think it is tragic that at this moment the output of the industry is held up not primarily for the reasons mentioned by the hon. Member for Motherwell (Mr. Walker), whose speech I thoroughly enjoyed. He suggested that the reasons were a shortage of coke, a shortage of pig iron or alternately a shortage of scrap. There is also a shortage of iron ore. It is true that there is a civil war going on in Spain and hon. Members opposite are backing the party which are not in control of the iron ore deposits, which, apparently, are going to Germany instead of coming here.

Photo of Mr James Griffiths Mr James Griffiths , Llanelly

They are in the control of the side you are backing.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

I am taking no sides because it is not my war. My occupation is to keep out of other people's wars. It may be the occupation of hon. Members opposite to stick their noses into everybody's war, but, meanwhile, at any rate we are not getting iron ore from Spain. I do not know whether it is the fault of the Government or of the Advisory Committee, but from 1932 to 1934 there has not been any development of coke ovens and blast furnaces and steel works, and our own iron ore fields. People have been leaving places like Cleveland, where there is the possibility for a substantial increase in output. The skill and experience in that area has been scattered during a period of depression. It happens that the branch of the Personal Service League in my constituency three years ago adopted the Cleveland division of Yorkshire, and during that period they have been sending them thousands of garments and pairs of boots to help the unemployed iron ore workers, who gradually have been scattered throughout the country instead of producing iron ore. My criticism relating to the period of 1932 and 1934 is a criticism of His Majesty's Government in this direction. I think they have been far too defeatist. Their vision as to the capacity of this country has been limited. There is no limit to our capacity to consume except our capacity to produce. There is no limit to the home market. There has been the delusive idea that there is a limit. There is no limit.

Photo of Mr Albert Alexander Mr Albert Alexander , Sheffield, Hillsborough

It is only tariffists who believe that there is a limit.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

I have never said that, and I am supposed to believe in a tariff. I always thought that it was the Co-operative Society which had false ideas of that sort.

Photo of Mr Albert Alexander Mr Albert Alexander , Sheffield, Hillsborough

That shows that the hon. Member is wrong again.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

I think the Government are right in bringing this forward to-night, because it is absurd, at the moment when our productive capacity is insufficient to our needs, to impose a duty on what comes from abroad. The protectionist theory of tariffs, as far as prices are concerned, has always been that if one is capable of producing a sufficient supply inside the tariff wall, prices in general will not rise, but if one is not in that position, prices will rise. The circumstances are such that we cannot supply our own needs by our own productive capacity, and in those circumstances obviously the sensible thing to do is to suspend the duty for the time being. I think there is some point in the criticism made by one hon. Member that we have the curious anomaly that supplies coming from some sources are to be subject to a duty at the full rate, whereas those coming from other sources will be dutiable at the rate of 10 per cent.

I do not see how that can be justified. The only thing to do is entirely to suspend the duty in respect of the classes of steel concerned. I do not think it would make any practical difference at the moment, but constitutionally it would make a good deal of difference. It ought not to be the case that because supplies may happen to come from some part of the world which is outside the cartel system, those supplies should be subject to a duty of 33⅓, whereas if the steel goods come from a part of the world which is controlled by the cartel, they should be dutiable at the rate of 10 per cent. only. The plain logic of the circumstances of the moment demands that the additional duty should be suspended in respect of all those classes of steel, irrespective of their origin.

It was on those grounds that I raised the issue on the Finance Bill last year. It is a dangerous principle to discriminate, in respect of the duty that is imposed, between the persons who happen to be the importers in this country. I say that without the slightest disrespect to the British Iron and Steel Federation, which I think has done its difficult job exceedingly well. I am not criticising the Federation, but I am challenging the political principle that it might be right for me, for example, to import certain goods at a duty of 10 per cent. and for the hon. and gallant Member in front of me to import the same articles at a duty of 33⅓ per cent. That introduces into the tariff system a dangerous principle, and, while thinking that the Government are entirely right in doing what they are doing as far as existing circumstances are concerned, I urge them to be very careful to see that what they are doing is not regarded as establishing a new differentiation principle in our protective policy.

11.4 p.m.

Photo of Mr Richard Acland Mr Richard Acland , Barnstaple

I support the suggestions contained in the last part of the speech of the hon. Member for South Croydon (Mr. H. G. Williams). I feel that in this connection there is a real danger of the public and the Government being exploited. It is very difficult for private Members to obtain any reliable information about the steel trade in its many ramifications, but I wish to offer some information to the House, and I hope it will not be treated with contempt, because I offered certain information in the Debate last November which was, I think, rather summarily dismissed by the Parliamentary Secretary. Referring to steel, other than cartel agreement steel, which was imported, I suggested that it was bought outright at the Continental price and was then resold by the Federation at the British price, and that as a result of those transactions the Federation was making a profit of some 10s. a ton. The Parliamentary Secretary, in reply, said: There is no truth in the suggestion that the British Steel Federation make a profit of 10s. or any other figure. The idea that an intermediate profit is gained by the federation … is a myth of the hon. Gentleman's own creation. … The specific point put … was that steel was bought at a Continental price and resold in this country at an English price. I have made inquiries … and the suggestion is completely not in accordance with the facts."—[OFFKIAL REPORT, 24th November, 1936; cols. 373 and 374, Vol. 318.] So vigorous was the Parliamentary Secretary's denunciation that an hon. Member in front of me turned round to me and said "Another mare's nest." It was not long however before the hon. Gentleman, with proper courtesy—and I should like to pay my tribute to him for it—gave me private information on which I asked him a question and in reply to that question he said he was glad to modify and amplify the information previously given, and that 300 tons of semi-manufactured steel had been bought by the federation at fixed prices to meeet actual or anticipated shortages. I should have thought that "fixed prices" would be the Continental price which I suggested. All this material we were told, had been sold to members of the federation sometimes at a loss, sometimes at a profit. Up to the present the transaction, he said, had resulted in a profit of 2s. 5½d. I was wrong as to the amount of the profit when I said it was 10s. but the Minister, with all his resources of information, was wrong as to the fact and I was right.

My fear is that this 10 per cent. is simply to be added to the profits which the federation will be able to make on these transactions. The House should know how complete is the federation's control of this trade. We have heard about the wonderful work of reorganisation which they have done. I would ask the Minister whether any reorganisation has taken place outside of price-fixing? Has much been done to reduce and coordinate transport costs? I put a question to the Minister a little while ago asking whether anything had been done in that direction and no answer could then be given except that this was one of the matters into which the Import Duties Advisory Committee was inquiring. I would emphasise how complete is the price control in the hands of the federation or rather in the hands of the many lesser federations which control the different branches into which the industry is divided. There was a guarantee in a letter written by the Federation that supplies of this cheap steel, imported at the 20 per cent., which will now be 10 per cent., would be freely available to members outside the Federation on equal terms. I suggest that there are no outsiders to-day. Nobody can maintain his position outside the Federation which controls that branch of the industry. All members of any branch are asked to sign an undertaking not to buy raw material abroad. They must buy their raw material according to a price list. The price list is subject to a rebate of 25 per cent. which is forfeited for the breach of any rule by anybody in the association. Throughout the industry the larger manufacturers are bound together by interlocking directorates and other devices so as to control the whole production from billets to rods, to wire, and to wire rope, by one organisation. If you do not toe the line, you very quickly find your supplies of wire, if you are a rope manufacturer, cut off. Throughout this branch of the industry those who produce in excess of their quota shall pay a fine of 15 per cent. and those who produce less than their quota shall receive a compensation of 10 per cent., and what happens to the other 5 per cent. nobody seems to know.

But this is the most amazing thing of all, and I would ask the hon. Member for Darlington (Mr. Peat) whether he really contends that in this branch of the industry there is still to-day real competition. We have heard so often from the Minister for the Co-ordination of Defence about tenders received by the Government, how they go through them and accept the lowest, and all the rest of it. On 2nd February, 1937, the Federation of Wire Rope Manufacturers sent this circular to all its members: We have to notify you of the following decision to which we shall be glad if you will give effect forthwith: … (b) Air Ministry, Admiralty, and War Office: That in future all tenders to the above Government Departments should be forwarded unsealed to this office so that we may check the prices. … Is that the healthy competition which is said to be going on in the industry? The fine for failing to act in accordance herewith shall be such as the Executive Committee shall decide.16th February, 1937. It has been arranged for interested members to quote 9s. 9d. per 100 feet. Will you kindly quote accordingly and send your completed tender to us in an unsealed envelope. Is that the healthy competition? On 11th March, 1937, it was discovered that a member of the Rope Manufacturers' Federation had accepted at £15 6s. 5d. an order which on the Federation basis worked out at £18 10s. 10d., so he was fined £5 5s.

Photo of Mr Charles Peat Mr Charles Peat , Darlington

The hon. Member accepts, I presume, that these associations work under a fixed price. Does he believe that prices should not be fixed for Admiralty contracts in the same way as they are for ordinary consumers?

Photo of Mr Richard Acland Mr Richard Acland , Barnstaple

Healthy competition must have an entirely new meaning in the last two years. I always understood that it meant that manufacturers made themselves as efficient as possible, that the one most efficient tendered the lowest price, and got the most of the orders. That was the idea behind it all, but now we all tender the same price, and the quotas which we may produce have been decided for us, not by the small men, but have been imposed by the big bullies of the industry. The industries producing 50 per cent. of the output decide the quotas arbitrarily. Anybody who produces more is fined 15 per cent., and anybody who produces less is rewarded 10 per cent., and the 5 per cent. goes somewhere.

Photo of Mr Charles Peat Mr Charles Peat , Darlington

The hon. Member ought not to make statements which are untrue. In the industry with which I am closely connected I have had considerable experience in the fixing of quotas, and they are not fixed in an arbitrary manner. It is a shame that that should go out as a fact. Prices are fixed on a definite, accepted production for years. They have been agreed by the whole industry and in exceptional cases they are brought before a committee for special consideration. If the hon. Member is referring to some particular industry such as the wire rope industry, I have no knowledge of it, but I am speaking on behalf of the heavy steel industry, and I do not want the hon. Member's statement to cover the steel industry as a whole, because it is not true.

Photo of Mr Richard Acland Mr Richard Acland , Barnstaple

I accept entirely the last part of the interruption. I do not want my statement to cover the industry as a whole because I am basing my facts on information which applies to one small corner of it. My point is that what is true in one corner may be true of the whole. There is no reason why it should not become true to-morrow. Large firms which have done this successfully in one small corner of the industry have power to do it throughout. We have this to-day in regard to wire rope. On the occasion of the other Debate we had the same information in regard to boiler tubes. The circumstances were the same. Prices were fixed and firms were told they must accept them. The profits, the hon. Member says, depend on efficiency. That is so, but the price is fixed at a figure which will bring in the less efficient firms. We are told we are working now to capacity; therefore, in the more efficient firms the profits must be very handsome. Under the Order now before us the federation can charge what prices they like and their "ceiling" is the foreign price plus 33⅓ per cent. I agree that that is not universal because there is now no source of foreign supply whatever the price. Comparing the figures given by the Minister with the Trade Returns, 35,000 tons of non-cartel steel came into this country under this 33⅓ per cent. tariff. It is difficult to work out the figures and compare them with the White Paper, but that is how it appears to me. The "ceiling" price is the foreign price plus 33⅓ per cent. over considerable ranges of the industry.

Photo of Mr Charles Peat Mr Charles Peat , Darlington

The hon. Gentleman makes challenging statements which are not true. If he says that the price fixed by the Steel Association has as its "ceiling" the highest price of Continental material, and that the British price is plus 33⅓ per. cent., it is the most gross misstatement of fact I have ever heard in this House. At the present time the price is lower than the Continental price. The prices which are fixed by the association and agreed to by the federation are maximum prices and they cannot be overstepped.

Photo of Mr Richard Acland Mr Richard Acland , Barnstaple

I think the word "ceiling" is a term which means the highest altitude to which an aeroplane can go and not necessarily the height to which it does go. I agree that the Federation may not put the price to the highest to which theoretically it can go. There is a shortage in many cases, but that shortage will not be affected by the Measure we are passing, because the articles of which there is a shortage are outside the cartel agreement. Galvanised steel wire is a case in point, brought to my notice by the information which I have here, in which it is impossible to get quota certificates because galvanised steel wire is outside the cartel agreement. I think one can sum it up in this way: We have a shortage now and we have erected a barrier to prevent the arrival in this country of the things of which we are short. In that barrier we have a locked gate with 33⅓ per cent. marked on it. By the side of the gate there is a stile marked 20 per cent. The proposal before the House is to change the stile from 20 per cent. to 10 per cent. Our suggestion is, Unlock the gate.

11.21 p.m.

Photo of Mr Edward Burgin Mr Edward Burgin , Luton

My right hon. Friend the President of the Board of Trade has no reason to be other than extremely satisfied with the course which this Debate has taken to-day. The Order, presented for the purpose of reducing the duty on iron and steel products from 20 to 10 per cent., is one which under most conditions would command univer- sal assent, and, with the exception of one or two observations by hon. Members, I find myself very largely in agreement with the general consensus of opinion which has been expressed from all parts of the House. The hon. Member for Barnstaple (Mr. Acland) has made a number of false deductions from some information in his possession relating to one particular association. He spoke of price control. When ton. Members look into the iron and steel industry a little more closely they will find that one of the things for which they have most to be thankful is that the British Iron and Steel Federation have exercised a stringent and rigorous price control. Had there been no cartel arrangement, had this market been a free market, had this country competed with other consuming countries for such supplies as there were, prices would have sky-rocketed and consumers would have been very badly off indeed. As the hon. Member for Darlington (Mr. Peat), who has an almost unrivalled knowledge of the steel industry from within, said, the Continental steel maker is obtaining a pound gold per ton more for his supplies to all countries other than Britain, and the object of reducing the duty from 20 to 10 per cent. is to provide some greater inducement to furnish more to this market than has been available with that duty on.

Something was said about healthy competition. The hon. Member for Barnstaple seemed to think that because a large number of people quoted the same price in tenders that showed that, in fact, there was no competition and that there must be something sinister underneath. I hope hon. Members will turn to the Air Services Appropriation Account, which was ordered by the House to be printed on 29th January, 1937, and is supplied through the Stationery Office. Contracts for the supply and erection of steel work for 38 hangars amounting to over £500,000, were allotted to nine firms. Forty-one firms tendered, of whom 40, including the nine, quoted identical prices, the remaining tenderer quoting a higher price. It was felt that the uniform tendering was the result of a price arrangement, and at an interview with the representatives of the engineering industry the Air Ministry explained the difficulty of certifying that the price was fair and reasonable and asked the industry to disclose their production costs. The industry offered full liberty to the Ministry, on completion of any contract, to examine the costs of production, and the Ministry availed itself of this offer. Two companies were selected who had a great reputation for efficiency. The examination of the records showed that the prices quoted were fair and reasonable and that this might be taken as true of the other firms.

The Comptroller and Auditor-General says that the whole question of steel prices has been under consideration by the Contracts Co-ordinating Committee, which has been in touch, on the one hand with the representative committee of the steel industry, and on the other with the advisory committee, and they are satisfied that the prices quoted are justified. The House will appreciate what the consuming industries in this country have secured from the cartel arrangement. From the working of Section 6 of the Finance Act, 1936, in a period when prices were hardening throughout the world, the consuming interests in this country have had a knowledgeable Iron and Steel Federation in touch with the industry and maintaining prices considerably below the market prices in other countries. They have kept the supplies of steel within the land available to consumers, instead of allowing our manufacturers to export it, and to secure higher prices from other countries.

Photo of Mr George Garro-Jones Mr George Garro-Jones , Aberdeen North

I apologise for interrupting the hon. Gentleman, but I am very anxious on this point. The Air Ministry say that they chose two firms with a representation for efficiency and that they found that the prices were fair and reasonable. What is happening in those firms which are not efficient? Are they subsisting on their losses, or are the firms who are making an excessive profit making up the losses of the inefficient firms? Can we have some explanation on the point?

Photo of Mr Edward Burgin Mr Edward Burgin , Luton

Yes, Sir, immediately. The efficient firms are making profits, and the less efficient firms are making less profits. As usual, the hon. Member for Don Valley (Mr. T. Williams) made a most admirable and well-informed speech, with very little of which I have any comment to make. He referred to the figures of imports of steel and suggested that 1,500,000 tons were coming into this country, and that that meant, presumably, a great deal more than he was aware of came from the cartel countries. In case any hon. Member is under that impression, I would remind him that the figure includes a large number of products such as pig iron, ferro-alloys, ferrules, screws, bolts, nuts and a large number of articles made of iron and steel which come under the broad heading of iron and steel products for the Trade and Navigation Accounts, and which are completely outside any cartel arrangements. Hon. Members will understand that in the first year of the cartel, the permitted imports were 670,000 tons, and 525,000 tons in the second year. Over and above the cartel's permitted imports, there were imported 275,000 tons in the period under review. Of the 1,500,000 tons, something under 900,000 tons was cartel steel, and the remainder was a large miscellaneous collection of different articles many of which are not covered by that arrangement at all.

A point raised by the hon. Member for South-West Bethnal Green (Sir P. Harris) was in regard to the steel that comes from non-cartel countries. The hon. Member for Darlington mentioned the Most-Favoured-Nation Clause. We dealt with that matter when Clause 6 of the Finance Bill of 1936 was before the House. The position is that under the cartel agreement, at the time of the imposition of anything approaching a quota, it was agreed that all countries with which we had Most-Favoured-Nation treaties should be entitled to import, under the Most-Favoured-Nation Clause, goods to the full extent of their imports in the basic year, 1934, and that arrangement applies. The non-cartel countries, after this Order has been approved by the House, will be entitled, under the Most-Favoured-Nation rule, to import at the lower rate of duty, namely, 10 per cent., up to the full extent of their import in 1934; there is no reason, in the present circumstances, to imagine that any of them is in a position to import more. I hope that that disposes of the suggestion that the United States is on some more favourable basis as the hon. Baronet suggested.

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

I am glad that the position has been made clear, but I think the hon. Gentleman will admit that in 1934 imports were comparatively small, and that, if America were in a position to supply any amount over the 1934 quota, such imports would pay, not 10 per cent., but 33⅓ per cent.

Photo of Mr Edward Burgin Mr Edward Burgin , Luton

That is correct; if the basic year is to be so treated as to come outside the Most-Favoured-Nation Clause, the position would be as the hon. Baronet sugggests; but in fact—and I can only deal with the realist basis of facts as we know them—that position does not arise at all.

We were asked by the hon. Member for Barnstaple whether the Federation had done anything with regard to organisation beyond prices. Good gracious me, what a question! The Federation has had to organise the machinery of the cartel agreement, safeguarding the export trade for a period of five years—the period of the agreement; and the regulation and control of the forces inside the industry in the interests of consumers. It has centralised and co-ordinated research; it has taken steps to inaugurate economical transport, and to arrange for the distribution of semi-finished and finished products; it has regulated the schemes for the purchase of scrap in this country and has made international arrangements for the purpose of acquiring scrap from abroad. Even this is only a resumé of some of the more important functions that occur to one at short notice. It would be an entire delusion to imagine that the British Iron and Steel Federation has not done tremendous work within the framework of the industry in bringing about measures of reorganisation. It is literally true to say that the British iron and steel industry is very different from what it was before the formation of the British Iron and Steel Federation.

We listened with great interest to the speech of the hon. Member for Motherwell (Mr. Walker), who spoke with great knowledge of the industry and put many home truths with considerable emphasis and force. Apart from a rhetorical flourish or so as to the devastating character of vested interests, I can subscribe willingly to the whole of his speech.

There is just one point that I shall mention to the House before I ask them to decide on this Order. Reference has been made to an alleged lack of foresight, and to the apparent inconsistency between an admitted shortage of steel and, apparently, some productive capacity not fully used. The hon. Member for Jarrow (Miss Wilkinson) failed to appreciate the dearth of raw material. Let the House not be under any delusion as to this raw material point. In 1913 the percentage of scrap in weight of ingot steel produced was something like 20 per cent. The tendency of the industry has been to swing over to this process. The 20 per cent. of scrap increased immensely. It went up from 20 in 1913 to 60 in 1922, and 65 per cent. in 1933. The method of making steel from the use of pig iron had changed over largely to the use of scrap, and in 1931 our imports of scrap were something like 96,000 tons. By 1935 they were just on 500,000 tons and in 1936 they were 1,000,000 tons. During the whole of that time that the industry had been using this scrap and had been making steel by this process pig iron had progressively gone down in production, coke had been less made, coke ovens had not been built, blast furnaces had gone out of use and there were difficulties in dealing with coke-oven gas.

When the prices of scrap rose to impossible levels and the industry was thrown back on the use of pig iron again, it found to some extent that its blast furnaces wanted modernising, its coke was not available, its iron ore supplies had been largely stopped through the troubles in Spain and there were difficulties in the take-off of the coke oven gas. It is no one single factor. It is a complete change in the supply of the essential raw material. The whole proof of this shortage comes back not to a failure to plan your productive capacities, but to difficulties caused by a multitude of conditions. The British iron and steel industry had no control over the supply of raw material. The price of steel is now relatively down though the price of the ingredients has gone up. I end as I began by saying that the industry, and consumers, have cause to be thankful that there is price control. I ask the House to give us this Order.

Photo of Miss Ellen Wilkinson Miss Ellen Wilkinson , Jarrow

Before the hon. Gentleman sits down after that poetic ending, will he deal with the question: If the Government knew that they were going to re-arm why did they not prepare by getting raw material, as Germany did?

Photo of Mr Edward Burgin Mr Edward Burgin , Luton

The hon. Lady is still under the delusion that the re-armament programme has seriously interfered with the supply of steel. That has only just begun. The shortage of iron and steel would have occurred independently of the rearmament programme.

Photo of Mr Edward Williams Mr Edward Williams , Ogmore

Why was not action taken by the Government to prevent the coal owners undercutting to drive out of commission batteries of coke ovens?

11.39 p.m.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

Will the hon. Gentleman amplify the answer he gave to my hon. and gallant Friend with regard to the costings system? He was asked, if you take two of the most efficient firms and it was then decided that the price that they are getting gives them no more than a reasonable and fair profit, how does that work when it is applied to less efficient firms? The hon. Gentleman's reply was that it was just the same, only the less efficient firms made less profit. One would have thought that if that were so, the less efficient firms that were making on that price sufficient profits to make it pay should continue to go on and work for that less measure of profits. The argument would then seem to run in this way. That firms that were able to produce cheaper and to get that price would be making a larger profit than that made by the less efficient firms. Therefore, it is difficult to see why they are not making more than a reasonable and fair profit, if they are getting it in the same way. I do not know whether the attention of the hon. Gentleman has been called at any time to a letter in the "Times" on the 8th of this month from a gentleman entitled to speak on these matters—Mr. S. F. Mendl, who was a member during the War of the Government's Advisory Committee on contract prices. I would like to know whether the attention of the hon. Gentleman has been drawn to the last sentence of the letter, which says: My experience in two Government Departments during the War convinces me that no scrutiny of costings can be trusted to prevent large firms benefiting largely from increased turnover when they are allowed a percentage on profits which is only just enough to keep many small businesses in existence. That is very much the point that my hon. Friend was making, and I cannot say that the point was sufficiently met in the somewhat curt and perhaps evasive reply that was given.

11.53 p.m.

Photo of Captain Euan Wallace Captain Euan Wallace , Hornsey

I beg to move, That the Irish Free State (Special Duties) (No. 1) Order, 1937, dated the twenty-fifth day of February, nineteen hundred and thirty-seven, made by the Treasury under the Irish Free State (Special Duties) Act, 1932, a copy of which was presented to this House on the said twenty-fifth day of February, nineteen hundred and thirty-seven, be approved. This Order has to be confirmed by this House within 28 days—that is, before we rise for Easter. It is an Order made with the object of carrying out our part of the bargain in the Irish Free State commercial arrangement of February, 1937. It is a renewal for another year of a similar arrangement in 1936, with a certain number of minor modifications in details. The Irish Free State is allowed to switch over from fat cattle to store. We give the Free State a 5 per cent. increase in their bacon quota; we get in exchange a complete removal of their emergency duties on sugar and sugar products. I do not think that there is anything in the Order to which anybody in any quarter of the House will object. I shall be delighted to answer questions, but I think that at this time of the night this is an Order which will be accepted in every part of the House without a long discussion.

Question put, and agreed to.

Resolved, That the Irish Free State (Special Duties) (No. 1) Order, 1937, dated the twenty-fifth day of February, nineteen hundred and thirty-seven, made by the Treasury under the Irish Free State (Special Duties) Act, 1932, a copy of which was presented to this House on the said twenty-fifth day of February, nineteen hundred and thirty-seven, be approved.