SURPLUS WOOL PROFITS
LETTING IN LIGHT
BRITISH GOVERNMENT'S SHARE
"COLOSSAL"
SPECIAL COMMITTEE'S
REPORT
CREATES A SENSATION
London papers by the 'English mil which came to hand yesterday contain summaries of the first report •of the Wool, Tops, and Yarns Sub-Committeo of the Standing Committee, on the Investigation of Prices. The report deals with the first stage of tho inquiry, the investigation of wool, and it states that the British Government has made, colossal profits out of the raw material. The report also declares that the release of wool from control was followed by a very great increase in price and in the cost of woollen goods and enhanced profits on the raw material, a share of the extra profit going to tho Government.
The committee also have something to say in their report about- the rejection by the Board of Trade of the scheme for a supply of standard clothing to the British public at reasonable prices; and they add that the Profiteering Act, on which the Government was relying to check unreasonably high .prices, does not appear to have -affected the situation. The terms of reference to the sub-com-mittee were to "investigate the cost of production and distribution of wool, tops, and yarns, at all stages, and the profits arising therefrom." The present report, as stated, deals with the first stage of the inquiry. Sharing ihe Profits. In the course of their report the subcommittee detail the basis on which tho British Government acquired tho whole of the Australasian wool clip. The initial or basis price was fixed at 55 per cent, over the market rates of 191314. In tho ease of Australia this basis rate was fixed at 15id. per lb. average on greasy weight. Tho wool used for British Government purposes was finally taken over at this price. It was agreed that tho wool sold by the British Government for civilian purposes should be disposed of to the best advantage, and that one-half of the _ resultant profits over the basis or minimum price should on the final liquidation be returned to tho Dominion Governments for'distribution among their sheep farmers. "Colossal." - The committee state that Sir Arthur Goldfinch (Director of Eaw Materials) informed them that he was quite unablo to give any informatioiP as to the profits which have in fact been made by tho British Government 011 the Australasian wools, "but it is clear from "the published figures of prices realised in the auction sales—and, indeed, Sir Arthur Goldfinch does not disguise -the fact— that they have, been on a colossal scale." After giving in detail the history of wool control, the sub-committco summarises its findings as follows:—' I.\ That during the war and for five months after,the armistico wool was issued to tho trade by tho Government at prices which were intended to be reasonably sufficient to cover the Government's outlay. 2. That the controlled prices at which the Government was ablo owing to its control to issue the wool were generally lower than the world prices, and, in i'acf, during the greater part of. this period of control British prices were considerably lower than those ruling elsewhere. It is clear that this resulted in enormous savings to the Government in respect of military clothing. Price Increases After Decontrol. 3. That the release of wool from control in April has been followed by a very great increase in prices, and consequently m the cost of woollen goods. The increase of price is most marked in the finer qualities of wool, i.e.; those used for flannel, women's costumes, men's' serge suits, etc. 4. That, consequently, profits on raw wool of all types have been augmented very greatly since the control was removed. 5. That all the Australasian wool passing through tho auctions belonged to the Government, and that, consequently, tho profits due to the difference between the" purchase price and the auction price have accrued to the British Government and the Australasian Governments or growers. C. That from-the information before it the'sub-committee is -unable to arrive at a definite figure indicating the extent of the Government's profits on its transactions in raw wool, but it is clear from> a comparison with tho controlled prices of the war and early armistice period, mid the prices realised at- the auction sales, that these profits must have been on a considerable scale. What Might Have Happened. 7. That the auction prices were determined by world market condition?, and that, consequently; if the Government had not been in the fortunate position of owning tho wool these prices for Australasian wools would merely have increased tho profits of the owners of the wool. . 8. That in the case of tho British wool clip, 1910, of which the prices liavo risen proportionally, the extra profit duo to these increases in prices -has gono to the farmers and merchants.
9. That with a view to protecting Uie British public from the effect of the decontrol of wool and of*its «alo at increasing prices through tlio' auctions, tho Wpol Council, composed of representatives of all branches of the trade and of the trade unions, put forward a standard clothing scheme to supply clothing, for the British public at roasonabls prices; that a majority of the Wool Council recommended a . compulsory scheme, but a minority preferred n voluntary scheme i that Che scheme after considerable delay was rejected by the Board of Trade. The sub-committee understand that it was intended to rely upon tho Profiteering Act to check unreasonably high prices.
Profiteering Act Unavailing, 10. That, as a matter of fact, tho Profiteering Act does not appear to have affected the situation, save that it has enabled the facts contained in this report to be brought to light. 11. That tho standard clothing schemo depended for a portion of its Favings to tho public on tho issue of wool at the controlled prices, nt which it had in fact been issued for five months following tho armistice and prior to the reopening of the auction sales,_ and that si/ice tho date of the resumption of. tho auctions more than sufficient wool (450,000 bales in all) has becn_ issued nt these controlled prices to provido all tho raw material necessary for Hie purposes of the scheme for I' 2 months, although it is but fair to point out that during the war a severe system of rationing was necessary. Privately held stocks were taken over by the Government, and the trade was entirely denuded of necessary civilian stocks by April 1, 191!). Extra Profits in the Trade. 12. That the wools distributed at tho controlled prices were, in tho absenco of tho standard clothing schemo, used for general trade purposes, and that such distribution has not had the corresponding effect in tho direction .of keeping down tho prices of clothing to tho public, but that some part at least of. tho difference between the fixed issue prices and tho greatly increased auction values of wool has remained in tho hands of ono or other branch of tho trade. Why Prices are High. 13. That of tho causes "which hr,vo contributed to tho present high prices of wcol the following may bo enumerated as the most important:-* Undoubtedly tho domand to-day is greatly in excess of supply, and transport delay accentuate? tho difficulties. The cessation of wool 6alcs in Australia and their concentration almost wholly ■ in England has fooused tho competition of tho world's
purchasers, while at tho samo time insufficient quantities of the qualities of wool most in demand have been offered. That machinery capacity to-day is unable to capo with tho unprecedented demands which are made on it, and producors whoso output is sold for many months ahead often quote high prices, partly in order to cover themselves in a market which continues to rise, and partly to deter customers from placing | orders for future delivery. So persistent is the demand, however, that the high prices quoted have been willingly paid; that the demand has concentrated itself on the finer qualities, and that it has been suggested to tho sub-committeo that if the public had been able to spread its demand moro equally among the various qualities, the prices of '.ho finer qualities might have been less. That when prices wero beginning to ease in London tho auctions were thrown fully open to foreign competition. _ At the end of the report are given tables of prices of various descriptions of wool. These-show that the average price per pound, on clean scoured basis, of -Gi's quality, Australasian wool, was 281 d. in July, 1914; the Government ipsuo price. April-November, 1919, was G2-G6d.; and the auction price in London in December, 1919, was 1101 d. On the other hand, a typical low crossbred wool, 40 s quality, which stood at l-l-'d._in July, 1914, was issued, Aprils oveniber, at 281-30 kl., and made in London, in December, only 28Jd. ' The Board of Trade Explains. Tho publication of the report appears to have created a considerable stir, and the Board of Trade apparently found it desirab'/) to place its side of the matter before the public. Tho points ox cluer interest to the overseas dominions were as follow:— . ~ "One cause of high prices was that certain industries vere not started until the level of prices was far above tho ordinary, 60 that receipts might cover a sudden decline. It could not be said that there was any profiteering on tho part of our colonies in. regard,to wool. Australia was ready during the war to let us have wool below the market value, but she stipulated that any of the supply sold by the Government should be at current prices, and tho Government got half tho profit for guaranteeing the price. "It was denied that the Government were holding wool for export, and thus contributing to the maintenance of high prices; all tho stocks would be about exhausted by the end of November next. In all calculations as to prices it must be remembered that there are two wool prices, that for the, ordinary, used for cloths to make suits up to five guineas, and the superfine, employed for the cloth in sui,ts up to 'ten or fifteen guineas. There was a world shortage of this' second class of wool, and the advance in price was steady and marked. The finest cloths were in great demand in America as well as here, and the large amount of money which people had to 6pend probably accounted for this! . "The Government could not have used the wool purcfiased from Australia to cheapen civilian clothing,. Tho fesue ..price of the wool was a sort of rough .J guess at what would be the market price at the time, and in order to give a feeling of security to the industry it. was necessary to guarantee that the wool should continue to be issued at that price for a certain time." -
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Dominion, Volume 13, Issue 143, 12 March 1920, Page 8
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1,816SURPLUS WOOL PROFITS Dominion, Volume 13, Issue 143, 12 March 1920, Page 8
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