S DOCUMENT 13 THE PROPERTY OP HIS BRITAMTTO MAJESTY':8 GOVERNMENT) S E C R E T
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C,.P. (47) 139 28th April, 1947. CABINET OC^ALj.
ALLOCATIONS TO INDUSTRY Note by the Secretary to the Cabinet 1.
At the Cabinet * s meeting this - morning ( C M . (47) both
Conclusions, Minute 1) reference was made to the proposed
allocations of coal to industry during the period 1st June to
31st October, 1947.
2.
By the Prime Minister's direction I circulate, for the information of the Cabinet, a memorandum on this subject which was submitted to the Fuel Committee by the President of the Board of Trade (Annex I ) .
The proposals put forward in this memorandum were considered by the Fuel Committee on 21st April.
The Committee then -approved the proposal in paragraph 9 of the memorandu, viz. that industries should receive, from 1st June to 31 at October, 1947, for consumption and stocking, the amount of coal which they consumed in the same period of 1946.
The President of the Board of Trade was authorised to inform both sides of industry of this decision, and to make an announcement in Parliament on the subject at the earliest possible date. 3.
I also circulate (Annex II) the text of the statement which the President of the Board of Trade was proposing to make in pursuance of that decision. (Signed)
Cabinet Office, 28th April, NORMAN BROOK 17th i,?ril, 1947.../
CABINET FDEL COMMITTEE COAL EOR INDUSTRY DURING- THE SUMMER Memorandum by the President of the Board of Trade. 1 . At the meeting of the Fuel Committee on the 2nd April (F.C.(47)
19th Meeting Conclusion 3) it pas agreed that the allocation of coal to
industry until the end of flay should be increased by 100,000 tons a week
at the expense of stock-building for power stations and domestic and
miscellaneous consumption. Following on this decision the basic coal
allocation to industry in general has been increased, as from the
Igth April, from 33 z per cent, to 50 per cent, while supplements from the
regional pools, which are now rather smaller than before, are being
reviewed in the light of the increase in the basic allocation.
2,, The arrangements described above will continue until the end of
May. It is ncv/ necessary to decide, urgently, what arrangements shall
be made for the distribution of coal to industry In the five remaining
months of the summer period in order (a) that industry may know where it
stands for the remainder of the summer period and may make its plans
accordingly; and (b) that re-progr waning of-coal allocations to
individual firms on a summer basis (allocations on a summer basis come
into effect normally on the 1st May), taking into account whatever cut
it is necessary to ieipose, can be put in hand without fr.il at the end of
this month with a view to their coming into effect on the 1st June.
3- As requested at the meeting of the Fuel Committee on the 7th March
(F.C.(47) 11th Meeting Conclusion 3(2)), I have considered what revised
scheme for the allocation of coal to industry would be necessary on the
assumption that the allocation for consumption in the summer months would
be 17.6 million tons cf coal compared witti estimated requirements of 26.2
These ere the figures upon which the Committee agreed at
million tonstheir meeting on the 7th March when the coal budget for the suiimer months
was approved (p.0.(47) 11th Meeting Conclusion 3(l)) and which I announced
during the Debate on the Economic Situation,, Whatever arrangements are
adopted must depend very largely on the size of the deficit on which we
are to base our plans. It is quite clear that if we are to plan on the
basis of a. deficit as large as one third, it will be necessary to
discriminate widely between industries and between firms and elaborate
administnative arrangements both at the centre and in the region will be
required in order to give effect to the necessary priorities. It is
difficult to see how a scheme of this complexity could be put into effect
by the 1st June. On the other hand, If the deficit were comparatively
small, a far simpler scheme, the deta.ils of which could be settled
comparatively quickly, would meet the oo.se. It is, in any event, vital
that a decision should be reached urgently on what assumptions regarding
supplies for industry we are now- to plan the allocation arra.ngem.ents after
the end of May and for the remainder of the summer period.
4. I consider thai a cut of one-third in industria.1 consumption would
be disastrous. It far exceeds the reduction in industry's consumption of
coal in the past few months as disclosed by the returns issued by the
Ministry of Fuel and Power,. In no week of the crisis did consumption fall­
by so much; and over the whole period since the beginning of February it
is unlikely that industry has been denied more than 2 million tons of coal
in all. Even this reduction will cost us, at a moderate estimate, £100
million in exports; it has a.lrea.dy reduced the supply of steel to the
lowest level since the depression of the early thirties; and nearly every important raw material, including chemicals, paper, textile yarns, and building materials, has suffered severely. The recent cut in the clothing ration, for example, does no more than offset the anticipated loss of output to the end of April and will not prevent an equally drastic reduction in exports. 5. A reduction in the average consumption of industry as a whole
by one-third coming on top of the present dislocation and shortages,
would be a. much more serious affair. More than half the coal
-consumed by industry is needed to make basic materials such as steel,
chemicals, paper, cement, textile yarns, etc., and the requirements
of .the finishing industries are comparatively modest. By cutting'
industrial coal consumption, therefore, we should be starving industry
of raw materials and ensuring thai not only the basic industries but
also a.ll subsequent stages of manufa.ctu.re will suffer. It is not
difficult to predict how the cut would fall on the main coal­
consuming industries.
It would probably imply a. slump in the output
of steel to an annual rate of about 9 million ingot tons as compared
with. 12.7 million Ingot tons achieved in 1946 when there was an acute
It would involve a reduction of one­
cvei-all shortage of steel.
third or more in the output of basic chemicals such a.s alkali,
sulphuric field and soda ash leading to bottlenecks over a wide field.,
In the textile industries we should be faced with the complete
abandonment of cur expert trade and all hope-of maintaining the
clothing ration even at its present level would pass away. There
would be a grave shortage of all kinds of paper and packing
materials. 0. drastic curtailment in the production of building
materials, a. famine in pottery and many other household goods, and
0. complete disorganisation of the engineering industry through
shortages of materials and components. Even the food-processing
industries could not v/holly escape.
6. At ail costs, therefore, we must avoid submitting industry
to so large a cut, which would not only cause widespread
unemployment over the summer but would also, because of the
disturbance to supplies of materials and components, create just
that dislocation in industry in the winter months thai the building
up of stocks is intended to avoid, Wo should seek to preserve a
proper balance between the level of activity in summer and winter
rather than divide the year arbitrarily and concentrate the cut
cn the first half.
7. Since the estimate of 89 million tons of coal as the probable
supply this summer was approved by the Fuel Committee there have
been certain favourable factors that would justify a mere hopeful
It y/as expected at that time that the
view of coal supplies.
number of miners at the beginning of May would have fallen to
680,000 and thai the reduction v/ould still be in progress. Instead
we are fahrly certain to start the new coai year with 710,000
miners (of whom a slightly higher proportion will be face workers)
and there is a reasonable prospect thai this number will continue
It means that if manpower
to increa.se rather than diminish.
remains at 710,000 wo may obtain nearly 5 per cent more coaJL over
the summer than we had anticipated,- and it also implies a much
more hopeful position next winter.
.8* Because of the increase in manpower, we should now be able to reckon on, say, an a.dditional L million tons of coal over the summer, unless other things have changed for the worse. We a.re also likely to end the coal year with at least half a million more tons of coal than we previously assumed. These two circumstances together should reduce the deficit of 8.6 million tons to 4 million tons 9* In the light of these more favourable prospects, I propose that we should revise the coal budget so as to allow industry to receive for consumption and stocks the amount of coal which it consumed last summer. The requirements of industry in the budget are put a t 26*2 m i l l i o n t o n s f o r consumption and 1 , 8 m i l l i o n t o n s f o r
s t o c k i n g and i f my p r o p o s a l i s accepted i n d u s t r y w i l l b e a l l o c a t e d
24.3 m i l l i o n t o n s or 86,8 J of r e q u i r e m e n t s p l u s s t o c k i n g up a l l o w a n c e .
Those f i g u r e s r e f e r t o t h e s i x months May t o October and w i l l have t o b e
a d j u s t e d t o a f i v e monthly b a s i s s i n c e we have a l r e a d y agreed upon
A d j u s t m e n t s w i l l be n e c e s s a r y i n o r d e r t o a l l o w f o r
a l l o c a t i o n s f o r Hay.
savings t h r o u g h o i l c o n v e r s i o n and p r o v i s i o n must be made f o r t h e needs
It is
of f a c t o r i e s t h a t have ceme i n t o o p e r a t i o n s i n c e l a s t summer.
hoped t h a t t h o s e a d j u s t m e n t s w i l l be s e l f - b a l a n c i n g .
I should w i s h t o
announce t o i n d u s t r y , a s scon a s p o s s i b l e , t h a t t h i s was t o bo t h e b a s i s
of a l l o c a t i o n over the summer months and t h a t f i r m s would b e expected id
accumulate a s t o c k e q u a l t o 3 w e e k s w i n t e r r e q u i r e m e n t s by t h e end of
October.
Firms would, however, be f r e e t o use t h e c o a l d e l i v e r e d t o them
as t h e y chose j and i t would be mo.de a b u n d a n t l y c l e a r t h a t s t o c k s
accumulated from t h e d e l i v e r i e s promised would n o t he t o k e n i n t o account
(up t o a l i m i t of, say 6-8 weeks) In £rawing t h e w i n t e r a l l o c a t i o n s .
I f we c a n augment s u p p l i e s of c o a l , e i t h e r because p r o d u c t i o n i s i n
excess of t h e e s t i m a t e o r from imports o r t h r o u g h s a v i n g s i n o t h e r
d i r e c t i o n s - we could make arrangements f o r s u p p l e m e n t a r y d e l i v e i m e s t c
i n d u s t r y e i t h e r t o f a c i l i t a t e s t o c k i n g o r t o meet t h e i n c r e a s e d needs of
the b a s i c i n d u s t r i e s .
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10. These p r o p o s a l s do not i n v o l v e any amendment t o t h e o t h e r items on
the c o a l budget p r o v i d i n g s t o c k b u i l d i n g a t t h e -power s t a t i o n s i s not
c o n c e n t r a t e d on t h e e a r l y p a r t o f ' t h e summer r a t h e r t h a n s p r e a d I n t h e
normal way o v e r t h e summer p e r i o d .
The M i n i s t e r of F u e l and power had
expressed h i s a l a r m i n F . 0 . ( 4 7 ) 68 a t t h e postponement of s t o c k b u i l d i r r ;
a t t h e power s t a t i o n s u n t i l dune and emphasised t h e danger t h a t t h i s may
p r e v e n t t h e achievement of t h e October t a r g e t of L.!Ij5 m i l l i o n t o n s .
T.
do not t h i n k t h a t we should be swayed by t h e s e f e a r s i n t o a p o l i c y of
c u t t i n g i n d u s t r i a l consumption more s e v e r e l y .
S t o c k s a t t h e power
s t a t i o n s have already r e a c h e d 1 . 8 m i l l i o n t o n s and i f d e l i v e r i e s reach,
the planned r a t e of 558,COO t o n s per week, s t o c k s w i l l c o n t i n u e t o
increa.se.
Requirements f o r consumption i n t h e summer months o r e put a t
450,000 t o n s p e r week I n t h e c o a l budget upon which we a g r e e d l a s t month
and s t o c k b u i l d i n g should absorb not much more t h a n 1 0 0 , 0 0 0 t o n s p e r week
i f s t o c k s a r e t o r e a c h t h e planned t o t a l o f 4 - 2 5 m i l l i o n t o n s by
October.
Thus t h e summer r a t e of d e l i v e r y need not a v e r a g e more t h a n
the r a t e planned f o r A p r i l and May i f t h e budget f i g u r e s a r e t o be
achieved.
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1 1 . No doubt t h e r e a r e d a n g e r s i n r e v i s i n g t h e e s t i m a t e s i n t h e way
suggested.
But I n v i e w o f t h e g r a v e d i s l o c a t i o n , unemployment and l o s s
of output and e x p o r t s t h a t ,are c e r t a d n e v e r a t lea.st t h e n e x t 12 months
from a r e d u c t i o n a s l a r g e a s t h a t p r e v i o u s l y e n v i s a g e d (33'sfi), I f e e l
t h a t wo should t a k e t h e c a l c u l a t e d r i s k o f l i m i t i n g t h e c u t on i n d u s t r y
over t h e summer as I have p r o p o s e d .
I f i t should t u r n out a s t h e summer p r o c e e d s t h a t o u r e s t i m a t e s
have been t o o o p t i m i s t i c some f u r t h e r c u t c o u l d then b e imposed.
This:
would be f a r b e t t e r t h a n making t h e c u t now, d i s l o c a t i n g t h e whole of
our i n d u s t r y t o a r u i n o u s e x t e n t and t h e n f i n d i n g t h a t t h e r e was a
surplus cf c o a l .
I i n v i t e my c o l l e a g u e s , t h e r e f o r e , t o a g r e e t o t h e propo.sa.1 iii
12.
paragraph 9 and t h a t I should make a p u b l i c announcement t o t h i s e f f e c t
as soon a s p o s s i b l e .
E . S . C
Board o f T r a d e ,
Millbank,
S.W.1.
17th A p r i l ,
1947.
ANNEX II ' SUMMER SUPPLIES OP COAL TO INDUSTRY Draft of proposed Statement in the House of Commons by the
President of the Board, of Trade
The Government have carefully considered what supplies of coal can be allocated to industry over the summer months from the 1st June onwards.
The full stock-building programme to power stations, gas works and other consumers as already announced must he carried out.
While the manpower position in the mining industry has shown improvement since the statement I made during the Debate on the Economic Situation on the 10th March, there is a clear risk in planning allocations to industry at a higher level; than I then indicated, in view of the uncertainty which must remain concerning output 'during the summer.
On the other hand, the Government cannot fail to be impressed by the fact that supplies at such a level would cause not only great industrial dislocation during the summer but also create shortages of materials and components which must seriously prejudice the operation of industry throughout next "winter. Pollowing consultation With both sides of industry,
therefore, the Government have decided that supplies of coal to
each industry between the 1st June and the 31st October shall be
planned at a level equal to consumption during the summer of last
year, subject to appropriate adjustments for oil conversion.
In general, this will mean that supplies to individual firms will
be based on the same rate of consumption as last summer.
It
will be for firms to build up, from the deliveries they receive,
s stock sufficient to meet three weeks' winter requirements by the
end of October.
If larger stocks are accumulated, these will
not be taken into account in framing the winter allocations.
If firms fail to accumulate a three weeks' stock, the winter allocations will nevertheless "be based on the assumption that such a stock is, in fact, held. It must be appreciated that in estimating supplies for industry at this level a considerable risk is deliberately being taken and that the success of this endeavour to avoid the grave results of cutting down industrial activity during the whole of the summer must depend both on the maintenance of a high'rate of put put of coal and upon the full co-operation of industrial undertakings in effecting all possible economies and in building up stocks for the winter.
If we start next winter with insufficient stocks, we expose ourselves to even greater difficulties than we experienced last winter, and firms must make it their individual responsibility to lay aside for the winter a sufficient stock out of current deliveries. C P . (h7) ino The attached paper C P . (hi) 1d0 is circulated in connection with Item 1 on the Agenda for the meeting of the Cabinet to be held tomorrow, TUESDAY, 29TH APRIL, 19hl, at 11.0 a.m. Cabinet Office, S . W . 1 . ,
- i 28th April, 1947.
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