Orders of the Day — Cotton Industry

Part of the debate – in the House of Commons at 12:00 am on 28th June 1962.

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Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby 12:00 am, 28th June 1962

I beg to move,

That this House notes the conclusions of the Estimates Committee (in their Fourth Report 1961–62) that failing a speedy and satisfactory solution to the related problems of imports, marketing and fuller use of plant and machinery, much of the expenditure incurred under the Cotton Industry Act, 1959, will have been to no purpose, and calls upon Her Majesty's Government to take positive steps without delay to promote the stability and prosperity of this important industry. As the Motion refers to the Report of the Estimates Committee, I wish, first, sincerely to thank that Committee for making such a thorough inquiry into the operation of the Cotton Industry Act, 1959. It is reassuring to read in paragraph 16 that the terms of the Act have been carefully interpreted and efficiently administered, because large sums of public money were, and still are, involved. Both the Cotton Board and the Board of Trade have deserved the thanks of the industry and the House for their part in a very difficult operation.

It is, however, disturbing to note that the Committee felt obliged to go out of its way to record its "conviction"—an emphatic word to use—that failing a speedy and satisfactory solution to the problems of the industry, much of the expenditure incurred will have been to no purpose. In other words, £10 million to £15 million of public money is in danger of being wasted.

The Committee's Report was signed on 3rd May. How much nearer are we today towards finding a speedy and satisfactory solution to the related problems of imports, marketing and the fuller use of plant and machinery? No nearer at all, not a bit. There are only ten days left before the closing date for applications for re-equipment grants. In paragraph 20, the Estimates Committee drew attention to the disappointing rate of applications which was due, so it was told by witnesses, to the crisis of confidence in the industry. It has got worse since then.

Both sides of the industry are deeply moved. Feeling is running high. Protests, memoranda, resolutions and telegrams have been showered upon hon. Members on both sides of the House and cotton textile workers have been pouring into London to demonstrate their anxiety. Employers are making no secret of their loss of faith in the Government. A feeling of despair is creeping over the cotton industry. More mills are closing down or going on short time and in many cases the official Ministry of Labour figures of unemployment are quite misleading because of the thousands of married women who have lately lost jobs in the cotton industry and who do not appear on the register. What is their feeling about this extremely worrying state of affairs? For months the industry has been feeling that the rug was being pulled from under its feet. Distrust of the Government has been growing and the culminating point was the statement to the House by the President of the Board of Trade on 6th June.

To get to the bottom of this upsurge of discontent we have to go back to 1959, although the beginnings go back further still. The year 1959 was the year of stocktaking, the year of fresh hope and renewed confidence. Why has all that gone sour within three short years? What has gone wrong and who, if anyone, is at fault? Let us look for a moment at the aims of the 1959 Act. They were fully set out in the White Paper at the time and the concluding paragraphs ask for the co-operation of both sides of the industry with the Cotton Board to achieve a definite objective of national importance, namely, a compact, up-to-date and efficient cotton industry". This was to be done, first, by eliminating what was called excess capacity, machinery idle, or underused, or never likely to be wanted again, and, secondly, by replacing out-of-date machinery by modern equipment. Although a great deal had been done—more, perhaps, than is generally realised—in that direction before the 1959 scheme, this further encouragement to bring the industry up to date was every bit as important as getting rid of excess capacity.

As the White Paper stressed at the time, all this was voluntary. No one was compelled either to scrap or reequip, but substantial financial inducements were given, the 1959 Act enabled the Government to pay two-thirds of the compensation for scrapping machinery. The remaining one-third was to be met by compulsory levies on the firms remaining in business. This was all conditional upon displaced workers also being compensated on terms agreed between the employers and the unions and financed by compulsory levies on the firms in the several sections of the industry concerned.

Re-equipment grants up to one-quarter of the cost may be made by the Board of Trade. Here, it is appropriate to ask how the industry has responded to these desires for cutting it down to size. How far have we got towards achieving the compact, up-to-date and efficient cotton industry which was the aim of the 1959 scheme? How much has been scrapped? How much is being re-equipped? Paragraph 12 of the 1959 White Paper says: Opinions vary about the extent of the excess capacity". But estimates were made then which were taken by the Government as the broad preliminary assumptions upon which their proposals were to be based. These were as follows: in the spinning section, an estimated extra capacity of 50 per cent.; actually scrapped, 48 per cent.; in the doubling section, an estimated extra capacity of 60 per cent.; actually scrapped, 34 per cent.; in the weaving section, an estimated extra capacity of 30 per cent.; actually scrapped, 38 per cent.

The total compensation for this was £15¾ million, of which the Government's share was £10½ million. In the spinning and weaving sections the response was fully up to estimate. In the weaving section it was higher than the estimate. The short-fall in the doubling section was not as bad as it looks on the face of it, because of the very much smaller number of spindles involved. Therefore, I think that we can say justly and fairly that the industry did what was expected of it in this respect.

What about re-equipment? How far have we got in bringing the industry up to date? This is more difficult to say, because the last day for applications for re-equipment grants is ten days ahead, 8th July. The Estimates Committee gave figures up to the end of April. The total value of applications at that time was £43 million. That was said to be disappointing. By 1st June it had risen to £51 million. I have no doubt that the President of the Board of Trade will tell us later today what the present position is. In April, applications seemed to be running at the rate of £500,000 a week. More recently, they appear to have been running at the rate of £1 million a week. If so, that is encouraging.

On this summary I think that the House can say that the industry did what the 1959 scheme asked it to do. The industry did not let the Government down. Have the Government let the industry down? The almost unanimous verdict of both sides of the industry at this moment is, "Yes". We on these benches endorse that verdict. The indictment goes back well before 1959. Time and again we on this side warned the Government of the dangerous conditions ahead. Years ago we saw what was coming.

My right hon. Friend the Member for Huyton (Mr. H. Wilson) was asked by the main union concerned to prepare a plan to meet the situation which it foresaw and which came upon the industry all too swiftly. Had the Government bestirred themselves in 1955, or even in 1957, subsequent events could have been less serious. But the Government let things drift until the Prime Minister threw out a lifeline on the eve of the last General Election. That was the White Paper of May, 1959, and the Cotton Industry Act which followed.

The Government then gave the industry a lead and an inducement to contract. Public money and the good faith of the Government were pledged to the achievement of a compact, up-to-date and efficient cotton industry. I shall keep on repeating the objectives set out in the 1959 White Paper. The industry responded and played its part, though everyone knew all the time that whatever the industry did it would be unable to withstand the competition of low-cost Asian imports.

Now, in 1962, the Government have accepted a ceiling on those very imports at a level which events have proved does not leave a big enough market to keep our smaller industry fully active. That is the charge we make. The Government misled the industry into believing that, once the 1959 concentration scheme became fully effective, the Government would protect its reasonable interests. The Government have failed to do that. Instead, they are now forcing further contraction without openly admitting it and without compensation.

There is a pungent letter in The Times of 14th June from a Mr. Gartside on this very point. He says: A Government policy which sponsors this complete dissipation of both public and private money in re-equipping an industry at a level of activity it has no intention of maintaining is highly reprehensible and is to be condemned. What the cotton industry needed was a period of stability which would have given it time to consolidate itself and brace itself for the challenges ahead. We know that the real solution to the difficulties of our cotton industry is to widen and expand the opportunities of trade between Asia and the West. The long-term plans to achieve this should proceed with all speed. We fully support the Government's intention to accept the Geneva arrangement, because implicit in that arrangement is the very desirable objective of opening up wider channels for Asian textiles to come to Europe and America.

We are already taking our share. We are already taking a much higher percentage of domestic production from low-cost countries than any other Western country. The Government should now strongly urge other participants in the Geneva talks to accept fully and speedily their obligations to liberalise their import policies and relieve the United Kingdom of the heavy strain of importing over 500 million square yards of cotton piece goods a year for home consumption.

The Americans took the initiative in the Geneva talks. What are they doing now to show the way? The news we hear is that they are moving rather in the opposite direction. There is the strongest obligation resting on the United States to point the way to the objectives of the Geneva arrangement. As it is, no other country can remotely compare with what we are doing to absorb the growing output of the textile industries of these Asian countries, particularly those of the Commonwealth. We know that they are in desperate need of foreign currency and capital goods. We know that they are so eager to earn them by their own toil and skill.

The whole of the richer industrialised Western world has a plain duty to facilitate this expansion of trade. The strain of trying to do it alone has brought our own cotton industry near to breaking point. Other countries must share this duty with us and do it quickly and liberally. The Geneva arrangement also contains provision for speedy action against new inroads into our home market from non-Commonwealth sources with whom we have no restraint agreements. We hope that the Government will not hesitate to use them if the occasion arises.

In the Brussels negotiations with the European Economic Community the Government have a clear duty to bring home to other members of the Community our desire to see the new, stronger and richer European Economic Community liberalise its import policies towards low-cost textiles. The present members of E.E.C. are doing remarkably little in that direction. Whether the news this morning offers better hope that accommodation can be made for an expanded export trade with Europe from Asian countries, I am not sure. But these are the longer-term remedies for the present difficulties which we should like to see shortened in time very drastically indeed. We must press on with that. Meanwhile, we are faced with immediate problems. I turn now to how they should be met.

The Government have announced the acceptance of an offer through the Government of Hong Kong to continue until the end of 1965 the present ceilings on their exports of cotton piece goods and made-up goods for retention in this country, in addition to limit-yarn exports, the present rates—that is to say, the ceiling of 185 million sq. yds. of cloth and made-up goods from Hong Kong alone. If India and Pakistan fall in with this arrangement, India will have a ceiling of 195 million sq. yds. and Pakistan 42 million sq. yds., making a total of 422 million sq. yds.

These are the current ceilings, which were due to expire at the end of this year and then be subject to renewal or modification. Those ceilings are 45 million sq. yds. higher than the 1959 ceilings, fixed at the time of the White Paper on cotton industry reorganisation. The lower 1959 ceilings were those in regard to which the industry had to make its decisions about scrapping and re-equipping. The 1959 ceilings were the background to the White Paper. When they were increased soon afterwards, the success of the concentration scheme was impaired.

A marginal increase though it may seem to be, the extra 45 million sq. yds. cannot be brushed off as being only 3 per cent. of the total quantity of cloth consumed in this country. It is 3 per cent. added to 25 per cent. of our total consumption already taken up by imports.

The President of the Board of Trade said on 6th June: … there is no case for going back to the 1959 levels …".—[OFFICIAL REPORT, 6th June, 1962; Vol. 661, c. 470.] We believe that there is, and both sides of the industry are certain that there is. The President of the Board of Trade should recall the circumstances in which the ceilings were increased and tell us whether the conditions upon which they were increased justify retaining the higher levels subsequently accepted.

We believe that the Government have made a mistake in accepting the offer of Hong Kong to stabilise the present ceilings for the next three years. We ask the Government to reopen the matter and press for acceptance of the 1959 ceilings for Hong Kong, India and Pakistan. That is the first step to take. It would give a little extra room for home production in the home market.

But there are two things to say about it. The President of the Board of Trade may say that the present level of imports is below the 1959 ceiling. That may be because things are slack just now. But when the upturn comes in the three-year cycles which are so customary in this industry, the limits, whatever they are, will be just as important to us as they are to the countries from which we import these goods. They are all equally important to us. The fact that the present levels are below the ceilings is not a material point against restoring the 1959 ceilings.

But the second and more material question is, of course, the effect on the interests of Hong Kong, India, and Pakistan of going back to the 1959 levels. How serious would it be to them? We have read recently of the heavy strain put on the whole resources of Hong Kong by the flood of refugees from China. The population of Hong Kong is going up and up. Hong Kong has a problem of people. The solution there appears to be in more and more industrialisation.

Mr. Claude Burgess, the Colonial Secretary there, is reported in The Times of 14th June to have expressed apprehension at the prospect of cutting back the opportunities for Hong Kong to export to other countries. Mr. Burgess said: Not from choice but from necessity we are a manufacturing, commercial community. Indeed, the prosperity of our industry provides the reason why the world does not have an additional million refugees on its conscience. In a further comment, he said: … the stifling of our exports would transform this dynamic community into an international pauper and create conditions in which massive wholesale relief would be the only remedy. We have to take careful note of the plight of a member of the Commonwealth. The President of the Board of Trade referred to these figures in justification for setting aside the objections of the industry here in favour of the higher ceilings that he was prepared to accept.

We understand, too, that India has exceptional difficulties at present. The Commonwealth Relations Minister has just been there. India has a serious balance of payments problem at present. It is true, of course, that it would be very much more damaging to the economy of India if we stopped drinking tea than if we stopped importing Indian textiles, because her exports of tea are very much more important to her than her exports of cotton textiles. Nevertheless, even a little is of importance to a country which is seeking a stronger external position. Pakistan is engaged in a tough struggle for economic viability.

These factors must carry weight with us very heavily indeed in our consideration of the matter. We on this side of the House are the last people who would wish to do anything to harm any part of the Commonwealth, least of all those countries on low living standards which are working hard to improve conditions. There has to be, however, mutual understanding of our respective difficulties. They have theirs; we have ours. We must try to find the point of mutual tolerance.

I see possible harm to the Commonwealth in two directions unless we can get acceptance of some lower levels of imports from those concerned. Our own textile industry can be discouraged beyond recovery. We may be damaging our competitiveness in European and other markets by destroying confidence at home. That is one danger. It would be a bad thing for the Commonwealth as well as this country if our own textile industry lingered, declined and died.

The other is that, unfortunately and regrettably, feelings of bitterness against our Commonwealth friends are showing themselves in much of the reading that has been sent to us in the last few days.