Scrap Leather (Export)

– in the House of Commons at 12:00 am on 18th December 1957.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wills.]

10.32 p.m.

Photo of Mr George Lindgren Mr George Lindgren , Wellingborough

I desire to call to the attention of the Parliamentary Secretary to the Board of Trade an anomaly which arises in the Board's Regulations relating to the export of vegetable tanned leather scrap and chrome leather scrap. I am raising this matter because of a constituency interest, but it is also, in my opinion, one of national importance.

Vegetable tanned leather scrap is waste material of the boot and shoe industry. Until a few years ago it was waste in the real sense of the word and most of it was burned. Now it is the raw material of a valuable, expanding and exporting industry, an industry which saves imports from having to be brought into this country, one of its chief manufacturers being a firm at Higham Ferrers in my constituency, W. W. Chamberlain. Ltd.

The scrap leather is processed into sheets of reconstituted leather fibre board. The leather fibre board is used in the fancy goods industry, but principally in the manufacture of components for the boot and shoe industry—in the manufacture of stiffeners, of insoles, middle soles and through soles in the boot and shoe industry and for bottom soles in slipper manufacture. This saves the import of leather which would otherwise have to be imported for the manufacture of these boot and shoe components.

In addition, it provides a valuable export trade, because these boot and shoe components which are used by our own industry are also exported to America, Canada, South Africa, and to the Continent, to be used by boot and shoe manufacturers in those countries in the same way as they are used by manufacturers here. There is, too, an extensive export trade to the same areas of the full-sized manufactured fibre board. The value of this export trade can be shown by the fact that in the last year alone the exports by Messrs. Chamberlain, the firm in my constituency, were worth well over £100,000. Fifty per cent. of the exports were to America. The leather scrap from the boot and shoe industry in this country costs about £10 per ton. The manufactured fibre board is exported to America at £150-£175 per ton. What we are doing is exporting skill and process time to the tune of about £150 per ton.

Now I come to the real point, with which I hope the Parliamentary Secretary will deal. Vegetable tanned leather scrap, which is the raw material of the new industry, is in short supply. Yet we allow purchasing agents from the Continent and elsewhere abroad to come and buy it here. Because vegetable tanned leather scrap is in short supply here and we allow it to be exported, Messrs. Chamberlain have to go to America to purchase scrap at £22-£25 per ton. The Board of Trade issues an import licence for it.

It is like "Alice in Wonderland". We have a thriving export industry with its raw material in short supply. We allow that raw material to be exported at about £10 per ton, and then we spend precious dollars in order to purchase inferior scrap from America at the rate of £22-£25 per ton.

There is a precedent for what I am about to ask the Parliamentary Secretary to agree to. There is also chrome leather scrap, which is the raw material of the glue manufacturing industry. Because it has been in short supply, we have over a long period had restrictions on its export, and, therefore, the glue manufacturers have the advantage of their raw material being available to them in this country.

I have already raised the subject of the raw material for the new industry in correspondence with the Minister of State, the Board of Trade. On 28th October I received from him a very charming reply full of compliments about the excellent work and success of the firms engaged in this expanding industry. Tonight I ask for something more than compliments for the firms which are working under very great difficulties and are engaged in a very good export trade. They should be given some practical help by the Board of Trade. I hope that the Board of Trade, knowing all the facts, will impose an export restriction on vegetable tanned leather scrap.

10.40 p.m.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

The hon. Member for Wellingborough (Mr. Lindgren) has referred to the letter which my colleague at the Board of Trade sent to him and in which compliments were paid to the firm. Perhaps it is properly my turn to pay compliments to the hon. Member for the courteous and restrained way in which he has raised this matter which is of considerable importance to the firm. He has presented the matter to the House in very reasonable, but at the same time compelling tones.

Having listened to the hon. Member's most interesting speech, I suggest that there are three main points which I must answer. The first is that I must explain the policy of the Government towards export licensing controls. Secondly, I want to deal with the question of the hardship and difficulties which the Chamberlain company is experiencing in buying its raw materials for its Ferrersflex—which is the trade name given to this artificial raw material—through having to buy its raw materials at world prices. Thirdly, there is the point made by the hon. Member about the disparity in the treatment for the purpose of export licensing control of vegetable tanned leather scrap and chrome tanned leather scrap.

Since the end of the war, it has been the policy of successive Governments to abolish export restrictions as soon as possible, both because of the paramount importance of the export trade, and because of the advantage of removing as many obstacles as possible from the path of British exporters. Export licensing control is at present operated mainly to control the export of arms, munitions and other goods of strategic importance. In fact, there are very few export controls left.

In addition to the strategic controls, there are one or two others which I mention in passing to show how limited the range is. There are controls maintained for balance of payment reasons on certain goods of high value, such as diamonds, to prevent the export of capital in the form of goods. Then there is the export control of important works of art to ensure that they remain in this country and, for humane reasons, there is export control on cattle and live horses.

Export licensing control is also maintained on ferrous and non-ferrous scrap and the reason for that is that the free international trade in ferrous and nonferrous scrap is distorted through the imposition by other Governments of export restrictions and taxes or import duties on the unwrought metals which do not also apply to the scrap. Export of some of these scraps would in any event have to be restricted under the strategic controls which I have mentioned.

The great majority of controls, imposed to conserve scarce materials, including dollar-costing materials, have already been removed and, for the reasons I have already given, the remaining supply controls are kept under constant review and are being abolished or reduced as quickly as circumstances will permit. To consider re-imposing such a raw material control is a step which we would contemplate only in the event of very difficult circumstances. That is our general policy of export controls, particularly those relating to raw materials.

I now turn to the history of the company, and it would not be out of place to repeat some of the compliments already paid to a company which has shown great initiative and enterprise. It has developed an entirely new line which has caught on, which is a valuable export and which has been using up scrap material from other manufactures. Having said that, I remind the House that the company has done very well for itself as well as for everybody else.

Photo of Mr George Lindgren Mr George Lindgren , Wellingborough

That is why it is in business.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

Certainly, and I am very glad to be able to place on record the success story of this company. I have been studying the Stock Exchange Year Book and, as this is a public company, I shall not give anything away which is not publicly available. The company was floated only some eleven years ago and yet its ordinary share capital has since been increased by 50 per cent. by two successive issues of bonus shares, one in March, 1954, and the second in July, 1955. This increase in the capital has not affected the rate of dividend, which was maintained at 30 per cent. from 1947–48 to 1952–53 and has been maintained at 35 per cent. since then on the increased capital. Those who got in on the "ground floor" have made a very good investment indeed.

As I say, one must commend the enterprise of the company in producing Ferrersflex, which is such a useful material for many purposes and which is in such strong demand abroad. I should like to say again that the export trade of the company is most valuable, and I confirm the figures quoted by the hon. Member. At the same time, we must remember what the company is getting for this material, and I do not think that any extravagant claims for meeting the so-called hardship would be justified in this case.

As the hon. Member quoted, the company is selling the finished product at about £150-£175 per ton to the U.S.A., f.o.b. British ports, and is paying only something like £10-£12 per ton for its raw material—

Mr. Errol:

—in this country—so that there is really no case for imposing export controls to conserve the supply of scrap for this one firm. To do so would certainly be completely counter to the policy I have outlined.

It is said by the hon. Member that the material is in short supply. I wonder whether that is really the case. What is happening is that the scrap which is generated in this country is moving into world markets and the people who have the scrap are receiving world prices in return. It may be that the firm has had to import scrap from America temporarily because it did not want to be short of it from English supplies. It is no hardship, I feel, for the firm to be paying world prices. If it is currently paying £20 per ton from the United States, it would surely be far better off to pay, say, £15 a ton to the British producers of scrap, who would then be quite happy to sell to Chamberlain's rather than export it to the Continent at about £12 per ton.

It is just possible that the person responsible for buying the scrap on behalf of Chamberlain's was squeezed, in that he thought he would go on paying very little for his scrap and then the scrap suppliers found that they could get better prices on the Continent. As a result of the ensuing shortage, a panic importation of inferior American scrap had to be made. That is speculation on my part, because I was not aware of this point until the hon. Gentleman raised it, but I would hazard a guess that that is the proper explanation of the apparent absurdity of exporting scrap at £10 per ton and having to import it from America at £21 per ton.

Even if there is such a shortage, and even if it is necessary to import scrap at £21 per ton, a handsome profit is being made on this imported raw material, because it is being sent back to America at between £150 and £175 per ton; so it would still be worth while importing a little dollar scrap to increase the output of this valuable export material.

One other factor which, I am sure, the hon. Member will appreciate is that the company is virtually the only firm in England using the vegetable tanned leather scrap. If we were to impose an export licensing control, it would mean that the home market for such scrap would be limited to only one substantial purchaser, and any advantage which that purchaser—the firm mentioned by the hon. Member—obtained from the control would, therefore, inevitably be at the expense of the tanners, the footwear manufacturers and the makers of leather goods in this country, who would be getting lower prices for their scrap than they could otherwise obtain. They surely are entitled to world prices for their scrap and it is no hardship in this case for Chamberlain's to buy their raw material at world prices in the same way as most other manufacturers in this country have to do.

There is one final point, the disparity of treatment between vegetable tanned leather scrap and chrome tanned leather scrap. I do not think it may be assumed that the export licensing control on chrome tanned leather scrap will remain for ever, particularly in view of what I outlined at the beginning of my remarks. We are studying the position carefully, and that control will be removed at the appropriate time together with the control on the export of other glue-making materials. I hope that, when the constituents of the hon. Gentleman have had an opportunity to study my remarks, they will agree that, in present circum- stances, there is no case for the Government to reimpose the export control which the hon. Gentleman desires.

Question put and agreed to.

Adjourned accordingly at nine minutes to Eleven o'clock.