Orders of the Day — Government Bulk Buying

Part of the debate – in the House of Commons at 12:00 am on 26 May 1949.

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Photo of Mr Evelyn Strachey Mr Evelyn Strachey , Dundee 12:00, 26 May 1949

As I say, we imported 875,000 tons of meat in 1948 against a pre-war import of 1,019,000 tons. The whole of that drop resulted from the fact that the import of Argentine meat dropped by 135,000 tons for reasons which we have gone into a good deal in the House, and for reasons which we naturally deplore. It was a matter of serious concern to us that the Argentine Government failed to fulfil its contract by that amount of meat. The Committee will see that the shortage of meat has not been the result of our policy for purchasing imported meat. The meat shortage in this country is entirely accounted for by the fact that we cannot as yet produce anything like the quantity of meat at home that we were producing before the war. There is roughly about 300,000 tons less meat being produced at home than was being produced before the war. Why is that? It is for two reasons. One is the perfectly necessary concentration in home agriculture on wheat and milk production; and secondly the fact that we cannot as yet provide the same tonnage of feedingstuffs as before the war. Those are the two perfectly obvious reasons why home production of meat cannot be as high as it was before the war.

That brings me to the next great commodity which is bulk bought, namely, cereals. We have heard a good deal from the right hon. Member for Aldershot on the subject of the Canadian wheat agreement. Let us look at what has happened under that long-term contract, which is a good example of a long-term contract and the biggest in tonnage that we have ever entered into. It is a four-year contract. In the first year we bought four-fifths of our entire wheat supply at a price of one dollar 55 cents. That was in the year 1946–47. In the year 1947–48 we also bought the same quantity at one dollar 55 cents. During the whole of those two years the Chicago price of wheat ranged between two dollars and three dollars, and on one occasion it went up to three dollars 18 cents. It is alleged that we bought Canadian wheat during these two years at the whole of that differential below the world price. I would not accept that contention for the reasons which the right hon. Gentleman mentioned, that had that Canadian wheat been on the world market the Chicago price would have been somewhat lower, at any rate, than it was; but when I mentioned those prices which we have paid for the Canadian wheat and what the Chicago price was, I should not have been overstating the case if I had said it was not an extravagant transaction for this country.

I go on to the third year, 1948–49. There we are paying two dollars, which is a higher price—and I think rightly—for the Canadian wheat. The Chicago price during the whole of this crop year, which is now almost finished, has been over two dollars. The margin is narrow there, and I am very glad it is. We are paying rather more for our Canadian wheat and the Chicago price is coming down. I think it is very likely that if the whole of the Canadian crop were on the open market, we should not be buying our wheat from Canada this year at below the world price. Now I come to the last year of this four-year contract, 1949–50. We have already settled that for that year also we shall pay the Canadians two dollars for their wheat.

It is quite true that we have just entered into—if it is ratified and I hope it will be—an international wheat agreement which will fix the maximum price of wheat in the world at one dollar 80 cents. Therefore, we shall, in the last year of the contract, give an advantage of 20 cents a bushel to the Canadians, by buying their wheat at two dollars. We think this is just the way a long-term contract ought to work out. It worked out at a financial advantage to us in the earlier years and it will work out with a distinct financial advantage to the Canadians in the last year; and we shall be doing exactly what we said we would do in the terms of the contract; we shall have regard to the financial advantage which we had in the earlier years. But over and above that, of course, it will give, and has given, to the Canadian producers four years of security for their wheat. That is the great quid pro quo that we have given.

I go on from that to the purchases of cereals mentioned by the right hon. Gentleman the Member for Aldershot. They are not long-term contracts but they are large purchases. We bought Argentine and Russian coarse grains at prices of between £27 and £30 a ton. It is perfectly true that those are high prices. We made no commitment to go on buying at those prices and when we buy our next supplies, which will be fairly soon, we certainly shall not pay anything like those prices. I am perfectly prepared to defend those large purchases of coarse grains as absolutely sound at the time they were made and indeed absolutely essential for agriculture and for the economy of this country. In no other way could we have got the quantity of coarse grains that we have got, which alone has allowed us even to begin the process of rebuilding our livestock industry. Hon. Members opposite really cannot have it both ways. They are always attacking us for failing to buy coarse grains on an adequate scale. Because, even though the price was then high, we did go out over a year ago into the world market and buy at the earliest possible opportunity large quantities of coarse grains, that is precisely why we are now beginning the process of rebuilding our meat and livestock industry.

It is worth while repeating the figures which have been given once before which show the value of these purchases and also demonstrate that the allegation that we are failing to provide the British agricultural industry with coarse grains is simply not the case. Since 1945–46, when we could only import 414,000 tons, we have built up year by year, until this year, 1948–49, when we will have imported 2,282,000 tons of coarse grains. That could not have been done without those big Argentine and Russian purchases which had to be made at that time at what were undoubtedly high prices. That is the justification for them.

A number of smaller points have been made. I will take one of them as an example of the reiterated accusation that our bulk buying of raw materials on a falling market handicaps the British exporter because he pays a higher price for his materials. I entirely agree that that is something which we must watch most closely, and something which we must do something about. [HON. MEMBERS: "Hear, hear."] Yes—and I will give the Committee a good example of what we have done about it.

The material which principally concerns me in my Ministry in this matter is linseed. We were strongly accused of failing to provide the British paint and linoleum industries, for example, with linseed at an economic price. Mr. Beddington Behrens, in his correspondence to "The Times" on that subject, in a letter which appeared on 9th May, said that whereas the United States price for linseed oil was £153 10s. a ton, our price in the United Kingdom was £170 a ton, but he had omitted to notice that the day before we had reduced our price to £150 a ton, so it is now below and not above the American price. This is the third consecutive reduction which has been made in the price of linseed oil, and we are now buying our linseed oil at a cheaper price. We hope to buy the next lot more cheaply still, and we shall pass on the benefit to the manufacturers in this country. It is highly probable that they will be able to get further benefits as supplies of linseed oil become cheaper.

I think I ought to say a word or two about the very remarkable report which has been quoted already in this Committee both by my right hon. Friend the Minister of Supply and my hon. and gallant Friend the Member for North Portsmouth (Major Bruce)—the "Economic Survey of Europe in 1948"—because there the most authoritative and most impartial body we could have, the United Nations organisation, examines most closely and carefully our bulk buying arrangements and passes its considered opinion upon them as to their actual practical effect on the economy of this country. The Commission simply contrasts the way in which other European countries have bought and the prices at which they have bought with the prices at which we have bought, and has come to the conclusion that there has been quite a sharp differential and that we have been able to get our stuff markedly cheaper than other countries have been able to get it, the simple explanation being that which has already been quoted: The explanation of the relatively low prices paid by the United Kingdom for its imports of food and raw materials appears to lie largely in the extensive use which it has made of long-term contracts and bulk purchase agreements covering a large proportion of its purchases. That is the verdict, not of a body engaged in some special pleading for this Government, but of the world authority, and we stand by it. We do believe that these arrangements have been of enormous benefit to the people of this country and to the manufacturers of this country. We see perfectly well the dangers and difficulties of operating in the new conditions. We are well aware of and awake to them, and I have already outlined the methods which we may have to take to avoid these difficulties and dangers.

We are very glad indeed that this subject has been raised in the Committee this afternoon, because it has given us an excellent opportunity to destroy—I will